In the world of venture capital, Jürgen Ingels' name rings a bell. Jürgen is not only co-founder and Managing Partner of Smartfin, a venture capital fund that invests in growing European technology companies, but also a director of several companies. What do you think are the skills a good CFO should have? And which management skills and key figures make the difference for him?
The power of the 'compound effect'
In his most recent book '50 lessons for entrepreneurs'(published by LannooCampus) Jürgen Ingels refers to the power of the 'compound effect': “I have been convinced for some time that most successful entrepreneurs work that little bit extra to make a difference. Business or personal success is not (only) the result of luck or chance, but of the combined ('compound') effect of small, smart choices that you apply consistently over time. For example, if you get to work a few hours extra early every morning to be able to work undisturbed, this gives you a significant advantage over your competitors on a weekly basis. During my student days I enjoyed the nightlife immensely, but between classes and cafe visits I systematically opened my courses.
Convince managers through one A4 chart
As Managing Partner, Jürgen is constantly looking for the best way to inform and convince internal and external stakeholders as clearly and efficiently as possible. He explains: “To make it easy for my pool of non-finance educated managers – in 23 different countries – to understand how their performance contributes to the organization, I developed a contribution model chart that indicates status at a glance. Without an expensive ERP system, but purely on the basis of a time registration system and analytical accounting. The strength of this model lies in the direct link between added value and EBITDA. My managers are now well able to identify the drivers of their business and adjust them where necessary. I also used the model to raise fresh working capital in the US.”
CFOs and operational knowledge
The lack of a good assessment of business drivers is often a pain point for finance professionals. According to Jürgen, this is partly due to the lack of operational experience: “A CFO who wants to make a difference looks beyond the numbers, compliance and legal aspects. Ideally, he or she also has the necessary operational experience, with insight into how a sales pipeline converts into cash and what the effect is on working capital. I think it is essential that a finance colleague knows the link between, for example, added value, contribution, cash flow, P&L and balance sheet.”
Essential key figures
Which key figures make the difference for Jürgen? He explains: “I mention cash flow as the first core element. I am a big believer in healthy cash flow within an organization. In other words: how much cash do you generate and burn each month? What does your business deliver and what costs (taxes, loans,…) have to be paid?”
“As a second key figure I mention the conversion of the sales pipeline. Get rid of over-optimism about sales leads and expected orders, but go for a realistic approach. It always takes much more time and effort than expected to get a customer to sign a sales contract. Resolutely tackle possible bottlenecks.”
“And as a third element I refer to overall expenses, because many companies tend to work through a budget to determine a budget. However, an annual budget increase of x percent often pushes departments on the accelerator to incur so many costs, which has a negative effect on the overall costs. I advocate a zero-based budgeting approach every year, moving away from traditional budgeting plans and decisions.”
A good CFO excels by…
What are important qualities of a good CFO for Jürgen? He sums up a few: “Sufficient operational experience and knowledge, experience with fundraising and common sense are three qualities that I value highly. For a CFO, by the way, “less is more” applies when reporting figures and recommendations. So no lavish PowerPoint presentation of a hundred slides, but focus on the essential KPIs that make the difference for the organization operationally and strategically.”
“In addition, I also want a CFO who does not count himself rich and who uses scenario building to create a dynamic model with internal and external variables that interact and trigger all colleagues involved to go the extra mile.”
Reading tip Jürgen Ingels
In addition to being an author, Jürgen Ingels himself is also a passionate reader. One of his reading tips is Tom Rath 's book "Eat Move Sleep: How Small Choices Lead to Big Changes." “I have read this book countless times and have given it as a gift to friends and colleagues. Based on personal experiences, the author tells how small choices in terms of sleep, nutrition and exercise have a major impact on one's own health. He talks about the health IQ and the power of everyday small decisions that can lead to a healthier and more productive life. In these corona times - in which physical and mental well-being is more central than ever - I invite everyone to read this book."
Curious about Jürgen Ingels' vision on the importance of good interaction between CEO and CFO and the importance of finance key figures? Listen to our podcast ' CEO Series: Jürgen Ingels' now.