Steve Keaveney is CFO of Flourish Software Inc., an Atlanta-based company that provides enterprise supply chain and inventory management software built for the cannabis, cannabidiol (CBD) and hemp industries. Customers include entities across the industries’ supply chains—cultivators, manufacturers of products based on these substances, distributors and retailers, which can either be independent or vertically integrated, operating in either one or multiple states. Flourish captures and centralizes business data, automates processes and provides advanced analytics and reporting that helps customers grow their businesses.
Since joining Flourish in 2019, Keaveney has worked hand in hand with CEO Colton Griffin to ensure there is enough capital to fund the company’s own continued growth, including closing four different fundraising events. We asked Keaveney what it’s like working for a company within such fast-growing sectors and what CFOs of other industries can take away from that.
Is being CFO of Flourish different—or similar—to other companies you’ve worked for?
The first objective of any CFO is to manage cash and be responsible for predicting cash shortfalls and potential cash issues in the future. With any business, managing cash in my view is paramount, but in our particular business, it’s also very strategic.
We’re at the intersection of a fast-growing SaaS software industry and a fast-growing cannabis industry, and there’s a lot of investor focus on both spaces. As there are a lot of opportunities for potential investors and potential partners, we’re presented with companies that we can potentially acquire on a weekly, if not daily basis. We’re presented with a lot more opportunity than if we were running a traditional manufacturing business, so we really spend a lot of time focusing on our business strategy.
My role in the company also involves working with the CEO to make sure we are really thinking through these different strategic opportunities that present themselves. We need to always try to keep the company focused on achieving its goals while ensuring that we don’t miss out or pass up good opportunities.
How have you worked hand in hand with the CEO to ensure there is enough capital to fund the company’s continued growth?
In the software industry, where Flourish operates, the challenge is always managing growth versus cash burn or cash investment in the business. When software companies invest in sales and marketing, it increases their revenue growth rate, but it also burns through cash. The biggest challenge in the software industry is to manage the investment, sales and marketing with your revenue growth rate to make sure they are actually increasing both the revenue growth rate and profitability.
There’s a specific metric that is used in SaaS software companies called the Rule of 40—making sure the revenue growth rate multiplied by the EBITA profitability margin is at least 40 percent. In other industries, companies manage cash flow by either increasing revenue or decreasing cost of goods, but it’s a different mentality for software companies. If you are running a software business and you are making profits, revenue growth is the paramount objective.
How are you managing cash flow? What can other CFOs learn from this?
When employing the Rule of 40 in your accounting, you need to have very well-defined sales and marketing processes to achieve predictable quarterly increases in revenue. Once you have that, you can add fuel to the fire by investing in additional sales and marketing resources to increase revenue growth rate. But the first step is to get a firm basis in sales and marketing operations and procedures, so your team is set up for success.