Three reasons accountants make great CEOs
When I founded FloQast, I started meeting fellow software entrepreneurs. As I got to know them, I realized there is a common thread across the group — they have one of two backgrounds: product or business development.
Software engineers are able to hack together great products for sweat equity, get adoption, and then have VCs throw money at them to build a business. Business development people know how to raise money to build a product based on market feedback and then raise more money to build a business.
I’m an accountant.
Fortunately, I decided to build software that helps with the month-end close process, so I had deep domain knowledge. But I also had an advantage that is misunderstood and underestimated: broad financial and operational knowledge from my days as an auditor and accountant.
I started out as an auditor at EY, which gave me a detailed understanding of how companies operate. Most people don’t realize auditors dig as deep into the company’s processes as much as the numbers. During my time at EY, I wanted to learn as much as possible. If you look for it, you can learn so much about how to build and run a business through the processes and the numbers. The breadth of business knowledge accumulated during my time at EY has come into play countless times as a CEO. I remember an early employee regularly asking, “How do you know that”? Oftentimes my answer was, “I learned it on XYZ client.”
Then I got to spend time at Cornerstone OnDemand, which I helped through an IPO. I joined a year before the IPO — we had 95 employees, with five in accounting. I ended up there for three years as we scaled from those five in accounting to over 50 as a public company. I was fortunate enough to work on a variety of projects and also learned so much about how to build and run a business.
As accountants, we have access to more information than anybody else at the company. There is knowledge in that information. For example, let’s say I want to learn about opening an office. What does it cost to set up an office? Oh, let me fire up those expenses and see what we bought to do that. Now I can learn all about leasehold improvements and check the contract to see how we negotiated that. What did we spend on desks? How much were servers? What’s with these overages from the subcontractor? All of that information is available to us. And I would dig deep to learn as much as possible.
All of this knowledge has served me well in building FloQast. Fundraising was a struggle and I had a massive learning curve. The rest? Not too much of a struggle honestly. In thinking through all of this, I realized CEOs coming from the accounting background have three main advantages:
1. We understand the business cold
I love metrics a lot. VCs are used to stumping entrepreneurs with questions about metrics, financials and so on. But they met their match with me. Most partners aren’t metrics experts. They hire associates for that. But partners know more than enough to be dangerous.
But at FloQast, we live and breathe metrics. We’ve even created our own metrics that we think better reflect our specific business and help us drive strategy.
The WARPD analysis was developed at FloQast and is one of our secret weapons. Nobody knows what a WARPD analysis is. Google it.
2. We operate like we’ll be audited (which we will)
I understand regulations and they scare me to death. I know that if we are successful, everything will be audited. Why does this matter? I know what we can or cannot do when there are ethical gray areas. Can I lease furniture from my brother's company and pay him way too much because I don’t want to run a procurement process? No, that’s called a related-party transaction and will be audited. The board will find out.
I had a client go to white collar prison for options-pricing fraud. We follow the laws to a T with our options pool. It terrifies me.
The point here is that an investor can rest assured that an accountant CEO will be ethical and do what’s right. It’s ingrained in us from our audit days.
3. We’re prudent with cash
Most of us got into accounting for the least inspiring reason possible — financial stability. We appreciate a stable job having some money in the bank.
Since I am an entrepreneur, I’m inherently more open to taking risk than the average accountant. But I still have that desire for financial stability to help me sleep at night. I certainly spend money, but I spend every dollar with intention and make sure we don’t run out of money.