We had the opportunity to be on a fascinating podcast called “CFO Talks.” Transcript below.
CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. What a pleasure it is today to have James Vanreusel, who joins us from San Francisco. Vanreusel is a Belgian name, it sounds very South African as well. He’s the founder and CEO of Vanreusel Ventures, a CFO and corporate consultancy based in San Francisco, mainly focusing on servicing companies in the tech, healthcare and space areas, with a focus on maximising impact and exit. We’ll get into that in a minute. Prior to that, he spent many years in New York and California in the finance sector before venturing off to form his own company. James has a Master of Business Studies from the University of Kent’s Canterbury Business School and an MBA from Rice University in Houston, Texas. He’s also a CFA Charterholder, he’s fluent in Dutch and English, and he’s got a good working knowledge of French, and that certainly helps in dealing across borders. James is also the author of the book, The Number One Key to Creating a Thriving Business. First of all, James, welcome, it’s great to have you on, you’re talking to us from San Francisco, correct?
JAMES VANREUSEL: That is correct, and I am very excited to be on.
CIARAN RYAN: It’s good to have you on CFO Talks. We’re also joined by Nicolaas van Wyk, who is the CEO of the South African Institute of Business Accountants. Welcome, Nicolaas.
NICOLAAS VAN WYK: Hi Ciaran, hi James, it’s nice to be here, I’m looking forward to the conversation.
CIARAN RYAN: James, I’m keen to hear from you, why you left the corporate world to set up your own CFO consultancy. Now, you did that in 2014, maybe explain what was the background to that and how’s it been going since then?
JAMES VANREUSEL: So the background to that, my background originally was I’ve worked on Wall Street for about eight years and I grew a little bit tired of the rat race, and I was really interested in ESG finance, which is a hot topic now, but back then it was not. So I was looking around and I met an entrepreneur who ran a microfinance network in the Pacific. So I worked for him for about five years as his full-time CFO, and I think from him, I got a little bit the entrepreneurial bug and I started educating myself in that arena, in leadership, in how to be an independent trader. Then I got married and moved from New York, from Manhattan to San Francisco and San Francisco, of course, is the land of Silicon Valley and entrepreneurship. So I jumped straight into my own business and within three days of landing in San Francisco, I got an email from the largest investor in the microfinance network saying, hey, can you take a look at one of our companies that’s based in San Francisco. So I did that and they immediately hired me on, so they were my first client. So it was pretty much a seamless transition.
CIARAN RYAN: So you hit the ground running back in 2014 and since then, has it been easy going or has it been challenging? How would you describe it?
JAMES VANREUSEL: I think running your own company is very challenging. There’s definitely a switch that happens, when you’re the CFO you’re the number two guy at the company. When you’re the founder or a business owner, you’re the number one person, and all of a sudden, you’ve got all these responsibilities on your shoulders. Initially it was just me, so I was an independent trader, but then I realised pretty quickly that I couldn’t take any vacation because all my clients wanted me all the time, and so that’s when I started hiring staff and that’s a whole other ball game, having to meet payroll every month and worrying about clients and churn and revenues. I love learning, so it’s been a great learning experience, but there have been challenges along the way as the company has grown.
CIARAN RYAN: It sounds a bit like what we would call here, this CFO gun for hire phenomenon. We’ve seen a lot more of that happening in South Africa. Is that happening in the States as well?
JAMES VANREUSEL: Yes, it is. I’ve done quite a bit of competitive analysis in the San Francisco market and it is different from other states in the US but basically, there are two types of corporations, you’ve got similar to what I do, you’ve got the corporate finance, CFO advisory firms, and we’re a little bit special, we don’t do any accounting or tax. Most of the ones are full stack financial consulting firms, so they’ll do bookkeeping, accounting, tax, CFO. We add onto that and do a lot of higher end corporate finance work as well, corporate development work. Then you’ve got firms that hire in partnership, so they bring on CFOs who become partners of the firm. So you’ll have a firm that has maybe 20 partner CFOs working for them and each one individually goes out and works. Whereas these other firms, including my firm, we work in teams. So when we work with companies, it’s not just, here’s a CFO. We’ll have a CFO, we’ll have, a financial analyst, we’ll have a financial ops person and whoever else is needed, but the benefit of doing that is things happen a lot faster. So if there’s a little bit of a fix it situation or a turnaround, you can get it done in a couple of months. Also, the pricing is lower because in reality, especially in the start-up scene, you don’t need a CFO full time. We aim for the 80/20 rule, so if I’m the CFO, I try to work about 20% of the hours and then the rest of my team are working 80% of the hours, but they also have a much lower fee that is charged to the client. So the overall monthly fee stays a lot lower than if you were just hiring a single CFO.
‘I always say my whole life has been focused on numbers and finance and accounting.’
CIARAN RYAN: Tell us a little bit about yourself. You’re Belgian but were you born and you grew up in the United States, how did you come to be there?
JAMES VANREUSEL: Yes, I was born in Belgium, in Brussels. My father is Belgian, my mother is English, she’s from London. I grew up until I was 18 in Belgium, going to a Belgian school, speaking Dutch, and then I got the itch to move out and I went to university in England. I followed my brother to the University of Kent in Canterbury, which was a great experience. I did an undergrad in mathematics and accountancy, and then I was really interested in the international business side because Canterbury is known as the gateway into Europe. So I did a Master’s of Business Studies there with a focus on the international side of business. While I was there, some of my best friends were Americans, so I really wanted to come to the states as well, and so the idea of going to business school was really appealing to me in the States. So I went to a university called Rice University in Houston, Texas, which is a private university down there, and I did a two-year MBA with a focus on finance. I always say my whole life has been focused on numbers and finance and accounting. That was really my entryway into the US and that’s something that I really wanted to make happen.
CIARAN RYAN: I’m just trying to detect your accent, it sounds like it could be a bit English, it doesn’t sound American, although there is the odd twang. I guess having moved around it’s become a bit of a mystery to people, they’re always asking you, where are you from, and maybe Australia comes up as one of the…are you Australian.
JAMES VANREUSEL: Yes, I have had just about everything, but I used to have a very nice English accent and it’s just become a potpourri of, as you said, moving around. But I’ve had New Zealand, Australia, I’ve had Boston, I’ve had South Africa. Usually, it’s the less people know the more extreme it gets, the guesses, but nobody ever guesses Belgium.
CIARAN RYAN: I wouldn’t guess that from your accent, no. Nicolaas, did you want to jump in there. James has been talking about this phenomenon of the CFO, the freelancer, and we’re seen this in South Africa, and what is motivating that, it does seem to be something that’s accelerating in the last few years. What’s your comment on that?
NICOLAAS VAN WYK: I’ve got a few questions, I’m so excited to speak with James. But we’ve also been seeing in South Africa now after the lockdown that there is a shift in how companies work with CFOs. They are now tending to become more contractual, more freelancing, and that also now suddenly makes them available for the mid-tier market, which we’re really excited about because there’s so much skills and knowledge at the CFO level that we really want to see them share with the mid-tier market. Economies need to be revitalised and changed, and we need those skills. So I saw that James had a platform called Ask a CFO, and I think that this is what intrigued me, why we wanted this conversation with him. So I would love to hear more about that and whether he makes his services available for only the top tier companies or also mid-tier, and what advice can he give to CFOs who need now to decide, do they send out their CVs, maybe find a corporate job again or is it more lucrative to go on your own and become an outsource CFO?
CIARAN RYAN: James, do you want to jump in there, tell us about the Ask a CFO and then some of these other questions we can pick them up one by one.
JAMES VANREUSEL: Ask a CFO was really born from just conversations I have with clients, where sometimes they just pick my brain and I’ll spend half an hour to an hour answering questions that they have. So what I’ve done is basically take those questions and have a business partner in the UK ask them to me, I answer them and then make it publicly available, because I typically get very similar questions every month, and so it’s just easier having them public. So that’s how Ask a CFO was born and every time I have a conversation and there’s a new question, I think, okay, well, let’s do that one because that’s a really good one. So the size of companies that we work with is really across the board, we have gone as low as $500,000 in revenue, which is very small. Typically, at that level, you just want to have a good accounting team, you just want to have clean books. But there’s nothing like having a senior advisor as well, who is just giving you the best-in-class advice. I think, Nicolaas, as you were saying, smaller companies need to be set up properly, and I always say, all’s well, that begins well. If you can set up the company well at the beginning, you will avoid a lot of pain later on. A lot of the engagements we have is going back and fixing companies that were never set up properly and when the accounting is off. We don’t do the accounting, but we support that and help it. You can’t raise money, you can’t get sold, you just can’t do anything until that’s fixed. So then there’s a rush to get it fixed and it’s more expensive than if you really started off with clean books. Typically, I will bring in an outsourced accounting firm as well for these smaller companies. So we’ll do the FP&A, the modelling, the forecasting, the budgeting, but then we’ll have an outsourced accounting firm as well that is also a fraction of a full-time accountant that similarly works in a team. So they’ll have a staff accountant, an accounting manager, a senior manager, and so the senior manager might spend one hour a month just checking everything at the end of the month. So it’s all very cost efficient and cost effective. So that’s $500 000, the lowest. The sweet spot for us is typically somewhere between $2 Million and $10 million, above $10 million you start looking at should we bring in a full-time CFO and we help with hiring the finance and accounting team as well, because we always see the scaling step function…people ask me, when’s the right time to hire someone, and I always say, [unclear] too big. Then you hire someone, and the pain goes down and then there’s more pain and you hire another person. But typically, after $10 million, you start considering maybe a VP of finance, they may be a CFO, but I would say definitely after $30 million. One of the areas that we provide services in as well is the whole interim or acting CFO, where somebody has had a CFO and they left and they’re looking for another one, which can take between easily three to six months, if not longer. So that is a very different engagement where it might just be the CFO alone that goes in and helps run the company.
NICOLAAS VAN WYK: I would love to invite James to do a webinar with our members and share this information. I’ve often seen and I don’t know why it happens, it’s just the way it is, things develop faster in the States and if you really want a nice business idea, it’s easy enough, you just go and see what they do and you bring it to South Africa because you’ll be five years ahead of your time. But what we’ve seen in our local market is that companies are trying to outsource their finance department to their traditional accounting firm. But I think the missing element is that we didn’t have the CFO partnering with that traditional accounting firm and that’s surely something that we’ll be investigating more and encouraging our members to do, because I think that is the right model. SAIBA looks after all types of accountants, the entry level accountant, the mid-tier, as well as the finance director, CFO. We registered a designation for them, and something that we’ve seen is that unique skill set that CFOs can contribute, seeing that they are more in a management field. Maybe just James’s view on what is the best route to become a CFO. There’s the traditional accounting route, or at least in South Africa, I don’t know about the States or Europe, some people do an accounting degree and honours, and then add an MBA. Others take an engineering route or more of a scientific route. What is your experience, James, what makes for the best CFO?
‘I always say a good CFO has a great controller behind him or her.’
CIARAN RYAN: James, did you start off with an accounting foundation or did you come to accounting through a different route?
JAMES VANREUSEL: What I see here is two types of CFOs. Like you said, there’s the person who has the accounting background. I studied accountancy in my undergraduate degree and then, you mentioned I’m a CFA Charterholder, and about 40% of that three-year degree is accounting as well. So I’ve taken a lot of accounting, but I’m still not an accounting expert. The CFOs with accounting backgrounds typically have ten years of public accountancy behind them at some of the big firms, like KPMG, PricewaterhouseCoopers, Deloitte. Then the other type are the ones who come from investment banking backgrounds, who are much more finance focused. I include myself in that group. I think you do get a different type of CFO, whereas I am very focused on the forecasting, modelling, cash, systems and processes, how do you scale, the leadership, investor relations for VC-backed companies or public companies. Whereas I feel like the CFOs who have a more accountancy background or audit background, which is very helpful, don’t focus on those areas as much or are not as comfortable in those areas, and similarly I’m not as comfortable on the accounting area. I always say a good CFO has a great controller behind him or her. So I always make sure that I have a very strong accountant or accounting team behind me because when it comes to accounting, the magic number is always zero, zero errors, zero days late on deadlines, and it’s just a different mindset.
CIARAN RYAN: When you were studying your MBA and your Master of Business Studies, what was your intention then? Did you imagine yourself going down to Wall Street and having a career there in finance, maybe with a securities firm, or did you imagine that you would end up somehow in the accounting space or an allied part of the accounting industry?
JAMES VANREUSEL: Yeah, I think when I was still in England, I thought I was going to end up in the accounting industry. But then when I went to the US, I was a lot more focused, and I think it had to do with the business school I was at, in corporate finance, corporations, investment banking, in those areas. So there was definitely a switch there. I think when you’re in business school, they will teach you one or two classes in accounting only, but you can do a lot of accounting and finance, a lot of courses in finance. So there’s definitely a push at the business school level in the US to focus on finance and maybe England is more focused on accounting. I’m not sure but that was my experience.
CIARAN RYAN: If we could just pivot for a minute here to general economic conditions, give us a sense of business conditions in the United States in the first part of 2021, we’re coming up to the halfway point. Is there a recovery, which we’re reading about, is that fairly self-evident from your observation point and the companies and the clients that you’re dealing with, are they optimistic or are they still pretty shocked from what happened in the last year?
JAMES VANREUSEL: I would say they’re quite optimistic, business has definitely come back quite a lot, there is a lot of capital floating around here in the Bay Area and there’s been quite a big inflow of potential clients. So I think that’s been very positive and I think it’s also been buoyed by some of the venture capital firms that back in February, March of 2020 said, watch out, stop spending money, bringing everything in, and it slowed things down considerably here. Then back in January, February of this year, they actually said, watch out, business is going to come back a lot faster than you think, so get ready. If you need to hire, maybe start the processes already, ahead of everybody else, so that you can jump ahead of other companies. So a lot of people listen to some of these very influential VC firms or PE firms as to what to do.
CIARAN RYAN: I see one of the areas that you specialise in is space. I guess when we’re talking about space, it will be a bit foreign to the South African mind, but you’re talking here about NASA and SpaceX and that kind of thing, and the supporting industries around space and shuttles and all that kind of thing. Is that correct?
JAMES VANREUSEL: Yeah, I worked for about just over a year and a half for a space company here in the US that had partnerships with some of the biggest governmental players around the world, some of the big private companies as well. So I learned a lot about space, about hardware and software in the space arena, and meeting some of the big FAANG companies as well that are dabbling in that area. This company was really focused on satellite imagery, and it was very interesting. This was one of those companies that was in between CFOs and needed an acting CFO, so there was a lot of exciting work to do there.
CIARAN RYAN: Does it help to have some specialisations, like you’re in healthcare, you’re in tech, you’re in the space area, does it help to be specialised or must you be able to cross the fence into all kinds of different sectors with relative ease?
JAMES VANREUSEL: I believe as a CFO that 80% of the work is the same, whichever sector you’re in. Maybe there are one or two sectors where that’s different, but in general, I feel like it’s finance, it’s accounting, it’s the same. But then having a little bit of background into, have you ever done hardware versus software, versus retail versus manufacturing, there is a little bit of a learning curve because, as I said before, you’re trying to lead as well, and so you sit on the exec teams with the CEO and the head of sales and the head of legal, in the space area, the head of space services and the head of marketing, and so understanding what drives them in that industry is important as well. So it’s not just the finance and the accounting, it’s also how does the industry work. So 20% is industry specific but you can learn that. I think anybody who is young and dynamic and full of energy, at any age, wants that.
CIARAN RYAN: I want to pick up on that question that Nicolaas asked a little earlier, advice for aspiring CFOs, somebody who’s starting their career, aiming for the top, what advice would you give?
JAMES VANREUSEL: Is this somebody who wants to be the CFO of a public company or somebody who wants to be an outsource CFO for large companies or…?
‘CFOs will sometimes have imposter syndrome because there’s just so much to know.’
CIARAN RYAN: I think the outsource CFO comes later. I think most CFOs are first of all in the corporate environment, then they venture off on their own. So that’s kind of the traditional route that we encounter here in South Africa.
JAMES VANREUSEL: I think, and I have talked to some people about this, CFOs will sometimes have imposter syndrome because there’s just so much to know, because you are the expert in accounting, modelling, forecasting, investor relations, M&A, and it’s nearly impossible to know everything. Typically, you are the head of people operations and IT and security. So I would say be an expert in one area and then know how to lead, know how to hire correctly, know how to lead your team and your functional area. Then also, know how to work with the CEO. Typically, a CEO, or this is what they say in the Bay Area, a CEO has three responsibilities, which is hit your sales number, hire your exec team correctly and don’t run out of cash. So making sure that you don’t run out of cash, focus on the fundraising, equity/debt is really important as well. Then when it comes to the other areas, just learning how companies operate, so spending time with the head of engineering, the head of sales, understanding how legal works, how contracts work, how systems and processes work, it’s all very important. So I think that you do want to be a sponge and having strong mentors as well is really important. So I think the advice is just become really good at the area that is your background, so mine is really finance, and then make sure that your team that you’ve hired makes up for your weaknesses or just your skill set deficiencies because your responsibilities will change as you move up the career ladder. This has just jumped into my mind, the one thing that I do a lot with my team at my company right now that you don’t get as you move up the corporate ladder until you’re at the top is, is what I call working above the waterline. So above the waterline, you’ve got the board of directors, the CEO, the exec team, below the waterline you’ve got all the VPs and the directors and the associates. Only when you’re above the waterline do you look at the whole company and the strategy and you know how to communicate with the board, and that is usually the one thing that’ll differentiate somebody who can keep moving up, to somebody who stays stuck.
CIARAN RYAN: Interesting viewpoints there. So the ability to move up and down on the organisational chart, if that’s the correct way to describe it. Another point here that I wanted to raise with you, there are some things that you’re not going to learn in school, and I’m interested in the fact that you come from not a particularly accounting background, you came more from a business MBA, a Master of Business Studies background, but are there some things that you’re going to learn through experience only, that you’re not going to learn in these technical oriented colleges and academia and university?
JAMES VANREUSEL: I would say that the first thing that I learned on Wall Street was communication and sales, both of which you don’t really learn in school, and how to be bold and aggressive. That was a real challenge in my first year working. When I was working at a small tech investment bank, it was well known to be very, very aggressive. It was very challenging, how do you communicate with some of the pretty famous big hedge fund managers and analysts in a very short, condensed way that keeps them interested. How do you pluck up the courage to pick up the phone instead of emailing. How do you sell without selling, how do you learn to ask a lot of questions and build relationships first, before asking for the order. So things like that that have absolutely nothing to do with spreadsheets and balancing the books and doing numbers, I think was my biggest learning curve during the first few years out of school.
CIARAN RYAN: It’s interesting you say that because the CFO South Africa designation, which the South African Institute of Business Accountants has registered, it recognises these competencies, these skills that are picked up in the non-traditional route, you talk about communication and team leadership, and a lot of it is how do you manage a team, how do you guide the strategy, how do you guide the CEO and give him the right information that he requires. None of this, of course, you’re going to learn in accounting schools. Would you agree with that?
JAMES VANREUSEL: I agree and what I see a lot of as well with analysts or accountants, they prefer to hide behind their laptops and don’t like to come out and talk to people. It’s scary and you really have to force them to come out of their shell.
CIARAN RYAN: Nicolaas, have got any questions you want to fire off? I’ve got a few more questions I’d like to pose to James, just more personal ones, but anything there that you had on your mind?
NICOLAAS VAN WYK: No, I totally agree with James, his analysis of the relationship between the CFO and the CEO. Then SAIBA’s mission to focus on those things that you don’t learn in accounting school. We just went through a very bad period with the state capture process, and I think that’s because we focus too much on the [unclear], so it’s something that we’ll be definitely rolling out more and more to our members.
‘It’s usually that you see the CEO and the CFO who go to jail, nobody else in the company does.’
CIARAN RYAN: You’re just breaking up there a bit, Nicolaas, but just for James’s benefit, the state capture is the corruption involving government officials and private sector counterparts, there’s a whole commission of inquiry going on into that in South Africa at the moment. Nicolaas’s point I think is well made that we focus too much on the technical aspects, but what about the ethics and the basics of doing business, and those qualities that are supposed to be instilled in us, integrity, honesty, and trustworthiness and so on.
JAMES VANREUSEL: For a CFO that is one of the biggest things there is, is to be above reproach. I work with multiple companies and so over the years, I have my signature and name on so many financial documents and audits and everything that I have to make sure that they’re clean and I have to make sure that I’m working with auditors and outside vendors and people inside the company who are completely trustworthy because at the end of the day, you never know what can happen, but you are responsible, your signature is on there, and it’s usually that you see the CEO and the CFO who go to jail, nobody else in the company does. So you just have to be above reproach and if something happens you have to have some kind of an audit trail or a paper trail saying why you did things.
You also typically team up with the head of legal inside your company, or if they’re outsourced, to ensure that you’re covered, that you are not doing anything wrong. So that is a big relationship to have.
CIARAN RYAN: Okay, a couple of final questions here, what do you do in your downtime? Tell us about your personal life. You’re in the Bay Area, so there are a lot of fun things to do.
JAMES VANREUSEL: Yeah, there are a lot of fun things to do. I’m married, I have four-year-old twins, a boy and a girl, who keep me very busy. I love playing tennis and I play tennis for a pretty big tennis club here. I played tennis in college. We’re practicing right now for the season, so that’s something I’m really looking forward to, and then at the end of September we typically go to nationals in Las Vegas every year for the 40-plus team. I’m 40-plus now, it’s not the 18-plus anymore.
CIARAN RYAN: But it’s competitive tennis.
JAMES VANREUSEL: It’s competitive, yes.
CIARAN RYAN: I used to live in Sacramento, so I know the area quite well, up to the Redwood National Park, the Sierra, Nevada and Lake Tahoe and places like that, do you get around there?
JAMES VANREUSEL: We try to, we’ve been trying to do the national parks recently. So we’ve been up to Montana to Glacier National Park and also to Yosemite about six months ago when it was very quiet, which is a great time to go. We’ve been to Pinnacles, which is about two hours south of San Francisco, and we’ve also just been to the Grand Canyon two weeks ago.
CIARAN RYAN: Was that your first time or had you been there before?
JAMES VANREUSEL: It was the first time, it’s very impressive.
CIARAN RYAN: Yes, it’s very impressive, and Hoover Dam.
JAMES VANREUSEL: I haven’t actually seen the Hoover Dam, but I have been close.
CIARAN RYAN: Final question, are there any books that you would recommend? They don’t have to be accounting or technical books, it can be fun, inspirational or something that will guide you on your journey?
JAMES VANREUSEL: I do read a lot of books and I listen to a lot of books on Audible as well. I love fantasy books and Sci-Fi, so that’s my downtime reading. But otherwise, I have just downloaded the new Daniel Kahneman book, which is called Noise: A Flaw in Human Judgement. So I’m going to start reading that this week but that promises to be quite exciting. It’s business psychology.
CIARAN RYAN: It’s been an absolute pleasure to have you on CFO Talks, I think we’re going to leave it at that. Nicolaas, by the way, has signed out, he joined us from Cape Town, and I think his signal was not good for whatever reason, but he’s just sent a message to me and thanks you very much for coming on. His idea of getting you on a webinar and speaking to the SAIBA members I think would be a very exciting one. You brought a few things into the conversation there which are quite novel to both Nicolaas and myself, and this idea that you don’t have to be particularly strong on accounting but because you can hire those skills, you can acquire them somewhere. The fact is that you seem to have a team approach, you’ve got somebody strong on finance, somebody good on the technical aspects of accounting, maybe on tax, and you can put that together and it can be applied to, as you say, a fairly small company, all the way up to quite a large one. I think the way that you do that, we probably need to explore that a little bit.
JAMES VANREUSEL: That sounds great, I’d love to do that.
CIARAN RYAN: We will stay in touch, and I want to thank you very much for coming on and talking to us at CFO Talks. That was James Vanreusel speaking to us from San Francisco.