A career stint inside the corporate development realm at Visa quickly came to mind for CFO Adam Meister when he was asked about the experiences that he believed had shaped his CFO mind-set. Characterizing his time at Visa more as “a detour” than as a straight line along his career- building trajectory, Meister recalls the career chapter as one where he had few direct reports or underlings and yet was tasked with motivating a team.
“You learn a lot about how to motivate and mobilize a team from a position of collaboration–but without a lot of direct authority,” says Meister, who believes that the experience parallels the challenges that many CFOs face today as they step beyond their traditional realm of influence to build new relationships across the enterprise.
“There’s a real power in how you lead by example and how you show value to business owners and peers by helping them to look at and understand the economics of a business,” says Meister.
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CFOTL: What are your top-of-mind metrics?
Meister: A subscription business model has a couple of key components that are always going to be top-of-mind and in focus and that absolutely are the right metrics for us to pay attention to, too. I look at annualized recurring revenue as the best indicator of the health of my business. That’s basically the sum of all contracts that we have under management at any given point in time. Looking at that in aggregate, and the pace of change, gives me a really good view of how we’re growing with new customers, how we’re expanding with existing customers, and how we’re retaining customers. They are the components of that number that trickle out into every aspect of our business.
Another really important metric for us right now, given where we’re at as a company, is the mix of cloud as a percentage of new ARR in the period. We have historically been an installed piece of software on-premise, and we’re seeing a dramatic shift in the industry around us toward data moving to the cloud. We can help to facilitate and provide that. That’s a very important wave for us, strategically, to catch on to. Watching the percentage mix of new ARR we’re adding that comes from our cloud products, versus our licensed products, is incredibly important.
The last metric that I focus on is free cash flow. That’s key because it shows me the overall economics of our business. It also shows me what my group, as it relates to managing working capital, is contributing to the actual performance of the business.
Those are probably the three most important things that I watch. I’d say that ARR and free cash flow are going to be common metrics for any subscription software company or any subscription company, period. And then, because of where we sit, that mix of cloud is also very important. jb