FP&A Week Highlights - Balancing Profitability and Growth

The delicate balance between profitability and growth is a tightrope walk that all FP&A teams must navigate. In the recent October edition of FP&A Week, that’s what we discussed.

We were lucky enough to be joined by:

Nicolas Britz
VP of Finance, Intercom

Kristen Young

Head of Strategic Finance and FP&A, Grammarly

AJ Ljubich

VP of FP&A, Datadog

The full webinar is available to watch at this link, but we’ve pulled out some of the highlights and summarized (paraphrased in some cases) answers from the panel below.

How have you been dealing with market twists and turns over the past few years?

AJ: It’s been hard to pinpoint what ‘normal’ is. We’ve been deep-cohorting our customers to risk-assess different behavior patterns that might play out and give us confidence as we move forward. We’ve also done a lot of scenarios - as all FP&A teams do - but even more than usual. We’ve also just learned to be more flexible.

Kristen: A lot has changed in the world of AI, which is the area we’ve played in for over a decade. Many companies are coming into the fold so every day, things are changing. We’ve had to be very agile in terms of how we’re developing products. We’ve also had to better articulate the value we’re providing to customers. We check in regularly with different parts of the business to ensure we’re ready to pivot quickly if we need to.

Nicolas: During these crazy times, we focus on three things: visibility, flexibility, and focus. We have to have the tools to see what’s happening in real time - cohorting is really important, as AJ said. Flexibility - making sure that we’re not expending resources on the wrong projects, and when we see changes we know what to do. And then focus is important in keeping the business pointed in the right direction.

What are the ‘North star’ metrics that you use to measure business performance and health?

The panel split out metrics into two tiers:

Tier 1
Revenue/ARR growth year over year, non-GAAP, EBIT margin, cashflow margin, ‘rule of 40’

Tier 2
Forward-looking metrics - net-new ARR, new logo growth, expansion rates, efficiency metrics like CAC payback.

How do you ensure you’re aligned with non-finance stakeholders?

Nicolas: Top-level exec alignment is essential. Up-front work with the exec team goes an extremely long way to ensuring successful collaboration. 

AJ: Consistency is key - the more you build a regular cadence of communication, the easier conversations become. It’s important to have an open dialogue. Context is also key - lead with data, analytics, and the ‘why’ - starting with a ‘no’ never goes down well. 

Standardizing templates also helps a lot to get things out to the business fast, but you’ll need to personalize the delivery based on the department/specific person you’re talking to.

What’s your relationship like with sales & marketing? How deep do you dive into their operations?

Kristen: Our biggest expenses are around sales and marketing. We were growing rapidly, so there’s a lot of investment required there to scale, but we work very closely to ensure that that investment is used efficiently. For that reason the relationship is close.

‍Nicolas: Sales and marketing is critical to driving growth, so it’s not an area you want to short-change. But we do have a visibility responsibility, so we make sure our partners know what’s happening as quickly as possible so they can be driving and tuning. 

If we see growth moving in one direction, we want to understand which channels/products/activities are driving it. 

How far out do you recommend setting revenue and profit goals?

Nicholas: We split this into three different plans. First we have a very detailed understanding of the quarter to come with quotas and targets, for the year to come we’ll go into a little less detail but we’ll still have a good idea of what we think is going to happen, and then finally we have a 4-5 year plan that is more ‘aspirational’.

Kristen: We do long-range planning with multiple scenarios that take into account macro-economic factors and competition. It helps people gain an understanding of the reasoning behind the investments that we’re making, so that’s super helpful.

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Want to watch the full session? There's plenty more that the panel cover - it’s available here, as is the rest of the content from FP&A Week.