Eliminating Operational Inefficiencies with Hanan Aharoni of Operative

Summary

Podcast Summary: Eliminating Operational Inefficiencies with Hanan Haroni of Operative

Podcast: Run the Numbers
Host: CJ Gustafson
Guest: Hanan Haroni, CFO of Operative
Date: March 6, 2025

---

Episode Overview

This episode of Run the Numbers dives deep into the practical realities of eliminating operational inefficiencies—especially in the context of M&A, rapid scaling, and private equity (PE) environments. Hanan Haroni, whose rise from corporate controller to CFO at Operative positions him as both a survivor and leader through organizational complexity, shares experiences and actionable insights for CFOs and startup operators looking to achieve operational excellence. Key themes include recognizing bottlenecks, transforming processes post-acquisition, fortifying culture and leadership structure, building resilient tech and finance stacks, and navigating the unique pressure of PE ownership.

---

Core Discussion Points & Insights

1. The Challenges of Scaling and M&A Integration

Recognizing Growing Pains

• As companies scale—from $5M to $100M in revenue—processes and systems must evolve, or inefficiencies and silos arise.
• Quote:
  “Processes and systems that fit when the company was, let’s say, $5 million in revenue are not the same when you're $100 million. You need to adjust.” (Hanan Haroni, 08:37)

Identifying Organizational Paralysis

• Signs include slowed decision-making, lack of empowerment, and staff waiting for top-down direction.
• Quote:
  “People are just afraid to make decisions… they’re waiting for guidance from above… it’s never a good thing.” (Hanan Haroni, 09:51)

The M&A Playbook – Breaking Silos and Integration

• Large acquisitions require a deliberate one-team approach: unified leadership, org chart, and clear processes company-wide.
• Three pillars to integration:
  1. Top-Notch Finance Team – For data insight and inefficiency identification.
  2. Digital Transformation – Consolidate systems for seamless information flow.
  3. Unified Processes – From procurement to recruitment, removing confusion and inefficiency.
• Example:
  Operative had to unify 10 different accounting systems across 10 countries and 30 entities, leading to more streamlined data in real-time instead of waiting a month post-quarter.
  “We had 10 different accounting systems… it took a month after the quarter-end just to understand what happened… [now] we close the quarter, have a flash in a day, and real-time KPIs.” (Hanan Haroni, 13:13)

Timestamp: 08:22–15:46

---

2. Culture and Leadership: The Soft Side of Efficiency

Unified Vision and Culture Post-M&A

• Neglecting culture can doom even financially great acquisitions; integration must happen at the leadership team to set the example.
• Quote:
  “Culture is very, very critical… even if you have a perfect fit in terms of financials, business, tech… culture can determine the success.” (Hanan Haroni, 19:26)

Importance of Over-Communication

• Vision and execution need constant articulation; people only absorb the message when you’re tired of repeating it.
• “People start to hear what you’re saying when you get tired of saying it.” (Hanan Haroni, 25:05)

Vision vs. Execution

• Frameworks like OKRs (Objectives & Key Results) help operationalize strategy.
• Quote:
  “Vision without execution is just hallucination… Execution is 90% of the work.” (Hanan Haroni, 22:19)

Timestamp: 19:20–25:34

---

3. Operational Excellence: Cost Optimization and Resource Allocation

Where to Start with Cost Optimization

• Begin with your why: cash flow needs, covenant pressure, profitability, etc.
• Drill down P&L by business unit and product; often, the biggest surprises are at the granular level.
• Use benchmarks (industry & historical) to ground conversations but don’t treat them as gospel.

Nothing Is Untouchable—but Be Smart

• All costs should be reviewed objectively, but exercise caution not to “optimize” customer-facing investments to the detriment of growth.
• Quote:
  “Nothing’s off the table… ignore all biases and relationships, put the facts on the table.” (Hanan Haroni, 28:02)

Benchmarks: Debate Starters, Not Dictators

• Benchmarks help cut through subjective narratives and facilitate discussions, but deliberate deviation is sometimes warranted.
• “It facilitates discussion. Doesn’t mean you need to hit 100% [of the benchmarks].” (Hanan Haroni, 29:52)

Reallocation of Spend—Not Just Cutting

• Efficiency isn’t just about reductions; sometimes, you uncover underinvestment in profitable areas.
• Quote:
  “Efficiency means shifting one thing to another bucket… hopefully getting a more positive impact.” (CJ, 40:36)

Balancing Expense Reduction and Innovation

• Focus cuts on inefficiencies, not critical growth levers.
• Be ready to course-correct swiftly as unintended consequences surface.
• Quote:
  “You could get something wrong… the key is to track it and course-correct fast.” (Hanan Haroni, 32:33)

Mitigation Planning (Pre-mortems)

• Planning for what can go wrong ensures smoother transitions.
• Weekly progress review with leadership drives commitment and creative problem-solving.

Timestamp: 25:34–42:57

---

4. Private Equity (PE) Environment: Constraints and Execution

Why PE Mindset is Different from VC

• In PE, every portfolio company is expected to succeed; there are no “write-offs” as in VC.
• PE typically uses substantial leverage; debt covenants must be closely managed.
• Quote:
  “PE: Every investment must succeed… you need to balance growth, profit, and cash… no funding rounds… it forces operational excellence.” (Hanan Haroni, 43:12)

Debt and Covenants: CFO’s Responsibility

• Plan for paying down debt with realistic (not just best-case) scenarios.
• The CFO—not the PE partner—is on the hook for monitoring and communicating risks around debt covenants.
• Quote:
  “It’s solely on the CFO and the company… It’s your responsibility to track it.” (Hanan Haroni, 48:33)

Tips for VC-to-PE Transition

• Mindset shift from “growth at all costs” to balancing growth and profit.
• PE will fund acquisitions, not ongoing operations.

Being ‘Always Ready’ for Exit

• “You never know when an exit will come… have due diligence lists ready and update them regularly.” (Hanan Haroni, 51:01)

Timestamp: 42:57–53:00

---

5. Lightning Round: Lessons, Mistakes, and Tools

Mistakes and Lessons

• Pay attention to details (Excel formula errors can drive costly decisions).
• Move quickly on underperformers; “If there is doubt, there’s no doubt.” (53:11)
• Speak up and act fast—analysis paralysis can be more dangerous than wrong decisions.

Advice to Young Self

• “Don’t be afraid, speak up, move fast… better to take 10 fast decisions and be wrong on three than wait for perfection.” (Hanan Haroni, 55:19)
• Have support at home (“Happy wife, happy life.”)

Finance Tech Stack at Operative

• NetSuite (ERP), Salesforce (CRM), OpenEHR (Professional Services), Concur (Expense), Carta (Equity), Power BI (Visualization)—interconnected for real-time data.

Craziest Expense Story

• Massive delayed expense submissions and flight neck pillows.

Timestamp: 53:00–58:21

---

Notable Quotes & Timestamps

• On Scaling Pains:
  “You start to see inefficiencies… people rowing in different directions, moving slower, or not moving at all—meaning there's paralysis within the company.”
  — Hanan Haroni (08:37)

• On Post-Acquisition Integration:
  “You have to break the silo. It starts from the top—one leadership team, clear organizational chart, repeatable processes.”
  — Hanan Haroni (10:53)

• On Culture:
  “Culture is very, very critical… even if you have a perfect fit in terms of financials… culture can determine the success of the acquisition.”
  — Hanan Haroni (19:26)

• On Execution:
  “Vision without execution is just hallucination.”
  — Hanan Haroni (22:19)

• On Cost Optimization:
  “Nothing’s off the table… ignore all biases and relationships, put the facts on the table.”
  — Hanan Haroni (28:02)

• On PE Mentality:
  “PE: Every investment must succeed… you need to balance growth, profit, and cash… no funding rounds… it forces operational excellence.”
  — Hanan Haroni (43:12)

• On Exit Readiness:
  “You never know when an exit will come… have due diligence lists ready and update them regularly.”
  — Hanan Haroni (51:01)

---

Final Thoughts

This episode is a playbook for finance leaders tasked with transforming growing or acquired organizations into lean, decisive, and data-driven companies. From upgrading your tech stack to unifying global processes and culture, the episode provides a candid look at the real work behind operational excellence—especially under the scrutiny of private equity investors. Hanan’s journey offers both strategic and tactical guidance for anyone hoping to “run the numbers” and run the business better.

Transcript

[CJ]

Can you talk about how this happens with M and A? If I understand correctly, you've done a number of acquisitions.

[Hanan Haroni]

You should pay attention, especially on large acquisition in terms of creating one leadership team, making sure that you have it throughout the organization, that you have a management team and organizational chart that makes sense, that empowers people, and that enables the company to move fast basically and resolve bottlenecks. And I found useful three things it.

[Podcast Host]

The process is this thing on.

[Hanan Haroni]

Yesterday'S price is not today's price.

[Podcast Host]

Welcome back to the Run the Numbers podcast. What follows is an excellent conversation I had with my buddy Hanan Haroni of Operative Talk about a glow up. This guy went from Corporate Controller to Director of Finance to VP of Finance to SVP Head of Finance. My goodness, this doesn't happen all the way to Chief Financial Officer.

[Hanan Haroni]

Whoa.

[Podcast Host]

Congrats to him. You love to see that path and we go deep into operating within a private equity environment. Constraints, folks. How do you deal with constraints and still get that top line growth while protecting that ebitda, that ebitdarf he takes us through the mindset of a private equity cfo different than a growth at all costs. Hate that buzzword VC cfo who would know what to do with a dollar free cash flow if it hit him in the face? That is me. And you talk about debt covenants. How do you manage those? This guy is a bright thinker and he's seen a couple pitches as a private equity cfo. So if you're looking to sharpen your pencil on operational efficiencies and you're saying I want to get more efficient, but I don't even know where to start. What costs are untouchable? Which should I go after first? This is a masterclass in private equity operations. All this much, much more.

[Hanan Haroni]

After a short word from our sponsors, here's a question.

[Sponsor Representative]

Do you feel like you're wasting time and energy on contract renewals or tracking shadow IT spend or oh, this is a bad one explaining rising software costs to the board. Truth is, traditional spend management is broken.

[Podcast Host]

That's where Tropic comes in.

[Sponsor Representative]

Tropic is an intelligent spend management solution that consolidates your spend data and processes into one unified offering, enabling insights and decisive action. It doesn't just show you where the.

[Podcast Host]

Problems are, it helps you solve them.

[Sponsor Representative]

From spotting hidden optimization opportunities like duplicative spend to automating those painful procurement workflows to get to give you the best market data that turns every vendor negotiation in your favor. I'm a Tropic customer myself.

[Podcast Host]

I've been using them for over a.

[Sponsor Representative]

Year and I love their price checks. They allow me to see if I'm getting a fair market deal instantly. And I'm proud to say that I am no longer using my email as our company's contract repository. I've got every document and renewal neatly organized in my Tropic portal. Isn't it time to turn spend management into your competitive advantage? Visit TropicApp IO MostlyMetrics see what's possible when intelligence drives your decisions.

[Podcast Host]

TropicApp IO MostlyMetrics what does the future hold for business? Ask nine experts and you'll get 10 answers. Bull Market Bear market Rates will rise, rates will fall. Can someone please just invent a crystal ball already? Until then, over 40,000 businesses have future.

[CJ]

Proofed their companies with NetSuite by Oracle.

[Podcast Host]

The number one cloud ERP bring accounting, financial management, inventory, HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. Whether you're closing the books in days, not weeks, you're spending less time looking backwards and more time on what's next. If you listen to this podcast, you'll know I ask CFOs all the time to rep their tech stacks and I would say almost every one of them use NetSuite. And that's what I would use too. Whether you're a company earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities. Speaking of opportunity, download the CFO's Guide to AI and Machine Learning at netsuite.com metrics. The guide is free to you. That is netsuite.com metrics. Oh yeah, it's netsuite.com metrics. Please guys, I really need this. Does your revenue recognition process feel like.

[CJ]

A total guessing game? Step right up and pick a card. Any card. You're not alone.

[Podcast Host]

Revenue account is getting more complex, especially with subscription models, usage based billing and evolving compliance standards, Right Rev is here to help you gain control over your revenue accounting. Right Rev automates the revenue recognition process from end to end. Whether it's multi element arrangements, subscription renewals or complex usage based contracts, Right Rev takes care of it all. That means fewer spreadsheets, fewer errors and more time for your team to focus on growth. Customers like Snowflake, Wow Logic Monitor and Epicore chose Right Rev to manage their high volume and complex revenue accounting CFOs can see the bigger picture faster without being held up by their team's reporting nightmares. You know me, I'm a business model fanatic. And don't get me wrong, I love all the evolutions. We've got self serve revenue, usage based revenue, and now even success based revenue, you name it. But that doesn't make it any easier for us being counters on the back.

[CJ]

End to keep score.

[Podcast Host]

Right. Rev is like a cheat code for.

[CJ]

Staying ahead of revenue complexities.

[Podcast Host]

So you're ready to transform your revenue accounting. Visit right. Rev.com to schedule a demo. That's right, Rev.com and tell them your boy, CJ Sarah. Right Rev. Modern revenue recognition simplified. Oh yeah.

[CJ]

Hanan, thanks for joining me on the show today.

[Hanan Haroni]

Yeah, thanks for having me, cj. And I want to say I really enjoy listening to your podcast. You really nailed the concept and it's a great one listening to so many different views and perspective of finance people. So really kudos.

[CJ]

That means a lot because I do the easy work of just asking questions and then it's the guests like you that make it fun for people to listen to. I was doing some research on your bio. It reminded me in a small way of the CEO of Amex. So the CEO of Amex has been there for 40 years and he's had about 18 different positions on his rise, basically from a managerial position to the CEO. And just for the benefit of listeners, because I was looking at your LinkedIn profile.

[Podcast Host]

So you started at Operative as the.

[CJ]

Corporate controller in May of 2014 over in Jerusalem. You're doing that for two years and one month. Then you got promoted to Director of Finance for one year and two months, then VP of Finance. It looks like you moved over to New York too. And you're doing that for five years, nine months, SVP of Finance, one year.

[Podcast Host]

Five months and now Chief Financial Officer.

[CJ]

You've been in that position for one year now. I, you, I almost never do like a breakdown of, you know, a timeline or a bio, but I don't know if I've had a guest who, who has had a come up like that at one company.

[Hanan Haroni]

Yeah, well, I didn't plan to, but it was a hell of a ride. So, you know, we started as a smaller company. We did a lot of grew organically, grew inorganically, you know, bought a lot of companies and sort of the role also grew and I moved sort of up the chain mostly in terms of how the company scaled. Right. And what are you doing and your responsibilities. But yeah, a year ago Officially promoted after I sort of managed finance for a few years, officially promoted to the cfo. So it was a hell of a ride. Still is, but very, very excited about it.

[CJ]

Well, congrats, because I think there are a lot of listeners out there who want to become a cfo, and they look at it like, look, there could be either a CFO where I am now, or they may look to bring someone from the outside. Is there a path for me to make it at the company I'm at? So it's. I think it's encouraging to people to see that, that it is still possible. It's not like a company is always going to, you know, yank somebody from the outside.

[Hanan Haroni]

Yeah, I mean, I think it's great. Giving opportunity from the inside. It's something. I also try to do it with my team. And, you know, sometimes you need someone from outside, a fresh perspective, but a lot of the times you have a lot of hidden talent within the organization, and it's great given that, you know, the people inside that worked hard, know the company and so on, the opportunity to scale up and succeed.

[CJ]

So that's awesome. And one of the reasons why I'm excited to talk to you today is it feels like you're a beacon of efficiency over at Operative, and I want to learn from the best. And so what we're going to hit on are growing pains, optimizing costs and operating in a PE environment. So you ready to hop in?

[Hanan Haroni]

Yeah. Yeah, let's do it.

[Podcast Host]

Well, when a company hits that glass.

[CJ]

Ceiling where the processes no longer fit the size, and this is something that I've experienced every stop of the way, what are some of the common signals like, use the cfo. When do you say to yourself, I think we're bumping up against the wall here?

[Hanan Haroni]

I think it can happen organically and inorganically. Meaning, you know, processes and system that fit with the company was, let's say, 5 million in revenue are not the same processes in system when you're 100 million. Right. So you need to adjust. And sometimes inorganically, it's even more the same because you're actually acquiring companies. You're creating silos, and you need to know how to consolidate them. So you're starting to see, I think, inefficiencies, you know, people rowing in different directions, people moving slower than they should be or not moving at all, meaning there's paralysis throughout the company and lack of empowerment and silos. And I saw it in a few cases, you know, and it's really starting to slow down the Company in terms of growth and in terms of initiatives. So you really have to tackle that head on. And it could work for a small company. I mean, a CEO, that is a founder, usually on a small company, could take all decision from strategic, you know, what's the strategy, the tactical decisions, even improving, like finance expenses and financial, small financial expenses. But when the company scales up, it's no fit. Right. And you need to change and completely break down the silos.

[CJ]

Can you say more about that word, paralysis? Because I had like a visceral reaction to it. I think I've seen it myself.

[Hanan Haroni]

Yeah, I mean, you notice it when you see people just afraid to take decisions. Right. They're waiting for guidance from above. They're waiting for the CEO or the leadership team just to tell them what to do. And it's never a good thing. People need to feel empowered and to feel, to move fast. Sometimes you'll take the wrong decision, but you can't wait for someone from above telling you what to do. And sometimes when a company grows, and again, especially on acquisition, when, when the company's been acquired or you're acquiring companies and it's done at different silos, especially on global companies, you're not sitting in the same physical location together. You can really feel it that the pace is slowing down and people are confused about what's the ultimate goal is.

[CJ]

I liken it to like basketball. It's like you had these players in the court who had the confidence to take shots and then they get to this stage where they feel like, you know, there are a lot of people in the crowd now or maybe the coach is being hard on me, like I'm afraid to square up and let the ball go.

[Hanan Haroni]

Yeah, that's a great analogy.

[Podcast Host]

Can you, can you talk about how.

[CJ]

This happens with M and A? If I understand correctly, you've done a number of acquisitions.

[Hanan Haroni]

Yeah, we did quite a few acquisitions. And I think, you know, once you acquire a company, naturally you're bringing in different processes, different systems, different people, perspective and strategy. Right. And I think you have to break. You have to break the silo. And from my perspective, it starts from the top, meaning you need to create one leadership team. It doesn't have to be all the time, you know, and it depends on the size of the acquisition. If it's very, very small, you can just stuck them in and continue. But basically you should pay attention, especially on large acquisition, in terms of creating one leadership team, making sure that you have it throughout the organization that you have a management team and organizational chart. That makes sense, that empowers people, that enables the company to move fast basically and resolve bottlenecks. And I found useful three things in the process. One is having a top notch finance team. So once you have a top notch finance team that enables you to get the data, understand the situation, identify the inefficiencies, that's a big part of the way to identify. Second of all, what I call digital transformation, but it's basically your tech stack in terms of what are your system, your underlying system, you need to consolidate them because otherwise there's no flow of information in the company. And the third is just have unified, clear and repeated processes. It can't be a situation when one person, if he wants to buy, I mean to get a monitor, right? Then there's one process and if someone wants to buy or get a monitor in a different location, it's completely different process and it's not efficient, it creates confusion, right? So processes throughout the company, from recruitment to backfill to procurement process has to be unified. And I can give you an example of that. I mean, in the past we did quite a few acquisitions. We got to a stage, we operated, we had offices in 10 different locations, 10 different countries, and we had 30 entities in the group. And that's not the tricky part. The tricky part was that we had 10 different accounting systems across, right? So 10 different countries, 10 different accounting systems, two CRMs and a lot of other bespoke or dispersed solution in terms of development products, professional services and so on. So you can imagine we had very hard time understanding our data. It actually took us almost a month after the quarter end just to understand what happened in the quarter before. Not to talk about real time data, right? That, that was a big, big issue. So we just embarked on a journey. It took more than two years, eventually with the digital transformation, but we did those three things. One, consolidated all systems. We basically implemented a set of systems starting from erp, but then an agile system, an equity system, a professional services system, one CRM and so on, and connected them all. That created really significant benefit in terms of how we see the data and how fast can we get the data. Second of all, we just restructured finance. I sort of broke the current finance and created the new service centers. So instead of operating 10 different locations in terms of accounting teams, all responsible for revenue and collection and billing and tax and so on, just created one service centers. Now we have one global team doing billing, one global team doing collection, and the same for revenue recognition and FP&A. And that basically Created with the system implementation. It really shifted the company in terms of how we analyze data, how we get data, how we created KPIs. So from 30 days, just understanding the past quarter, now we close the quarter, we have a flash in a day and we will have real time KPIs across the board. And the third thing is just creating the processes we created procurement processes, hiring processes that are aligned to the 30 entities we had. So everyone are on the same basically page at the same direction and know what to do. So that's a, that's a massive sort of shift and I think it's essential when you have so many silos.

[Podcast Host]

30 entities is no joke.

[CJ]

And I kind of feel like if you're not in finance, I just want to make this real. For, for listeners there is kind of this temptation to be like, I mean the back office people will figure out how to close the books. Like I know it's 10 systems. We're kind of like tough shit, they'll figure it out. It won't be fun, but eventually we'll get there. What you called out Hanan, is that there's a real business impact to not that data at your fingertips to make decisions.

[Hanan Haroni]

Yeah, exactly. Because you're basically flying half blind. I mean by the time the management team, the CEO, the board wants to get, you know, to a strategic decision, you don't understand the result, you don't have results for the past four months. Right. So you can't really understand where the company is facing. So it's really, it's not just a finance issue, it's a, it's a whole company issue, it's a board issue, It's a management issue. Right? You have to fix it and it starts within finance, but you have to spread it across all the organization.

[CJ]

Hey, thanks for listening.

[Podcast Host]

We'll be right back after a word from our sponsors. Ready to plan confidently, close faster and report with accuracy. Here's what sets Planful apart. Imagine purpose built solutions for every department from FP&A to accounting, marketing to HR, all with built in financial intelligence. It's easy to implement Planful in just weeks with minimal IT involvement, enabling seamless collaboration across your organization's key financial workflows. Best of all, Planful grows with you. Its unmatched scalability ensures that no matter how fast your business expands, Planful can keep up. See why over 1500 customers worldwide choose Planful as their flexible, user friendly, end to end financial performance management platform. Visit planful.com metrics to see how you can elevate your team this year with Planful they will hook you up. It is planful.com metric metrics tell me boy cj sing planful.com metrics well, if you've listened to this podcast before, you.

[CJ]

Definitely know that I think it's cool to be a fan of business.

[Podcast Host]

I'm obsessed with researching how the best.

[CJ]

Companies operate and specifically how they manage their money.

[Podcast Host]

And I've learned that a company's financial stack can make the difference between world domination and obscurity. That's why I want to tell you about Brex. Because I want you to rule the world. Brex is an impressive financial services and software company that has grown immensely since.

[CJ]

It was founded in 2017.

[Podcast Host]

In just the last year alone, Brex accelerated customer acquisition by 50% with 91% growth in enterprise customers. And there's good reason that over 30,000 companies from startups to enterprises have flocked to Brex. Brex offers the world's smartest corporate card on a full stack global platform that is everything CFOs need to to manage.

[CJ]

Their finances on an elite level.

[Podcast Host]

Plus, they offer modern banking and treasury as well as intuitive expenses in accounting, automation, bill pay and travel.

[Sponsor Representative]

Wow.

[Podcast Host]

It's all on the roster whenever you need it. Brex grows with you. CFOs tell me all the time that Brex makes it easy to control spend before it happens, automate annoying tasks and optimize their finances. Because, listen, at the end of the day, Brex helps them make every dollar count. So if you're a fan of smart businesses too, check out [e-mail] metrics. That's Brex.com metrics.

[CJ]

Trust isn't earned, it's demanded. Whether you're a startup founder navigating your first audit or a seasoned security professional scaling your GRC program, proving your commitment to security has never been more critical or complex. That's where Vanta comes in.

[Podcast Host]

Businesses use Vanta to establish establish trust by automating compliance needs across over 35 frameworks like SoC2 and ISO 27001, centralized security workflows, complete questionnaires up to five times faster, and proactively manage vendor risk. Vanta not only saves you time, it can also save you money. A new IDC white paper found that Vanta customers achieve $535,000 per year in beneficial profits, and the platform pays for itself in just three months. Join over 9,000 global companies like Atlassian Quora, the Factory, who use Vanta to.

[CJ]

Manage risk improve security in real time.

[Podcast Host]

For a Limited time, our audience gets $1,000 off Vanta at v a n-t a.com metrics. That's v a n-t a.commetics for $1,000 off. That's awesome. And maybe we could talk a bit.

[CJ]

About the importance of having a clear org chart. What's the play there and why is that important for team culture?

[Hanan Haroni]

Yeah, I mean, I think you touched on the word culture. I think first of all, culture is really underestimated or sometimes ignored even when you're doing an acquisition. Because we as finance people, we usually look at the numbers, right? We look at spreadsheet, we look at the business case, the financial case and so on. And even if you have a perfect fit in terms of financials, in terms of the business fit, in terms of technological product fit, culture is very, very critical. And again, it's underestimated almost all the time and it can determine the success of the acquisition. And you need to be really proactive about it. First of all, I think again, like we discussed, it's, it starts from the management team. I do believe you need to create an integrated management team and again depends on the size of the acquisition, right? But eventually you don't have to do it day one if you think, you know, the company should run for a few cycles on its own, but basically, eventually I do believe it's a, it's a better approach to consolidate the team and it also gives a message to the rest of the employees in the acquired company to say you're part of the team. Right? We, we took your executive, your top management and we integrated them into one company, one management team and doing it across the org chart and really creates one vision, which is the next step. You need to create a vision, a clear vision to what's the strategy, what's the ultimate goal. And sometimes you even need to create new, aside from new processes, new ceremonies, stories, symbols to reflect that there's one vision and one new culture. I mean one of the most important thing I think is building trust. So it's face to face time, social activities, you know, you're bringing in two companies or more than that. They really, you know, had different processes, goals and strategy. And sometimes with all kinds of mechanism like earn out and some there's suspicion between the two companies. Is it really the same goal? You know, are those looking for just want to sort of liquidate and take the IP and so on. So it's really important to create trust between them. And I can give you another small example. I mean in the Past I was part of an acquisition that everything was well thought through. I mean, the business case was great, the financial case was great. Even the integration of the management team was, was well thought through. But after integrating, we noticed, you know, things are not going well. Right. And it took a year or two to actually bring the two companies together. And retrospectively, it was mostly about the culture. One company was focused just on profit and one company was focus just on growing at all cost. And the combination of the two, without creating first a very, very defined and clear goal and vision and going the extra mile towards one another really, you know, set back the integration to hit.

[CJ]

On that vision piece. A quote that you'd given me, and I'm going to shamelessly steal it, is vision without execution is just hallucination. Can you unpack that for us?

[Hanan Haroni]

Yeah, I mean, first of all, it's not my quote, so I also like it very much and I won't take the credit for it, but I love it and I think it's. I'm a strong believer in it. And the reason I think it means, first of all, you need to define the strategy. Strategy is number one, right? You need the ultimate goal, what you're trying to achieve, but then it's not enough. I mean, if you have a great strategy and you don't communicate it, there's no way you're gonna hit the strategy. But even if you communicate it, if you don't have a very detailed plan on timeline, focal points, milestones to how to get there, you know, there's really low chances you're going to meet that because you really have to be, you know, persistent on achieving it and defining it and then defining the steps towards it. So I think the execution is 90% of the work. I mean, 10%, the strategy is super critical and important, but 90% is the execution. And there are a few frameworks to how to get it done. For example, okr, which are objective and key results. You know, you can define the objective, what the key results you need to hit to get there to. There are a few others. But basically the ultimate goal is to communicate, to track, to measure constantly the plan, right? And again, communicate, communicate, communicate. And then rigorously just track it and see you're on track and course correct if needed. I mean, you won't get it right day one, but you need to course correct pretty fast. And one other emphasis there is, I've noticed some companies think that it's not the management team or the leadership team to actually be responsible for execution. They think they're mostly responsible for setting the strategy with the CEO, with the board and so on. And then the people below, the managers below will execute. I'm saying it's a hard. No, I mean the LT should be all over execution. That's their main job and they should constantly track it. So basically the same the phrase saying, you know, if you have the perfect strategy, but you don't have a detailed execution plan, it's just wishful thinking.

[CJ]

We had spoken to Adam Sawicki, CFO of Rippling. One of my favorite quotes from that is there are a lot of books out there written, written on strategy, but not many on execution. And I think it's so true. I think it's a lot easier, quote unquote, to come up with this big grand strategy. But like, where the rubber hits the road is people actually, you know, picking up a row and actually, you know, moving the water next to them.

[Hanan Haroni]

Yeah, I mean, I completely agree. I would even take it to more extreme and say, even if you have a mediocre strategy, but you have the great plan, you probably do better than have a great strategy and no execution. Execution plan.

[CJ]

Do you think it's important to recommunicate the org's overall vision and strategy and how you're going to execute upon it post any acquisition you do like, do you have to do a refresher with the company to hit that home and over communicate it?

[Hanan Haroni]

I, I think you always over communicate rather than under communicate. I think it's super important. Again, especially when two companies come together or you're doing a transformation or anything that causes alarm, you know, it, you have to over communicate. You know, just communicate, communicate, communicate. It's really super important. I like the saying, people start to hear what you're saying when you get tired of saying it. So only when you repeat it so many times then people actually started to say, okay, you know, it's probably has.

[CJ]

Something in it that's really good. I want to transition to talk about operational excellence. I know you've been a part of a couple different financial transformations and you know, 10 years at operative, you've seen all different types of macro environments. Somewhere you're pushing to grow harder than others. When you are trying to optimize costs, how do you decide where to start?

[Hanan Haroni]

Yeah, it's a very good question. So I think, I think first of all, you know, you need to define the end goal. Why are you doing it? What, what are you trying to solve for? Because there's a few different perspectives. I mean, are you trying to Solve for cash flow issues. There's not enough cash in the business to, to fund itself internally. Are you trying to solve for a covenant issue? You're about to break covenants, are you afraid of it? Are you trying to solve this profitability like increasing the valuation of the company overall? Because that drives different urgency and different extent of how you do it. But I would say you need to identify inefficiencies. And the way I like to do it is basically first of all look at the pnl, look at the cash flow, look at your financials, but take it a step down. Look at the business units or departments and the products, if you have several products and the combination of those two will actually surprise you what you can find out. Maybe on a company level it seems great, but when you're looking at the product level, a product that is on maintenance mode is actually, you're investing too much in it and it's losing money. And a product is basically responsible to all of your profits you're under investing and maybe it can explain the churn you're incurring there. Right. So that's a very critical point I think, to actually go down to the base level and see what happens. Right. I like to compare it to industry benchmark and historical trends, meaning look at it over time, over past three, five years and compare it to industry benchmark which kind of facilitate the discussion on it and I think are great to just like are valuable in driving decisions. You don't have to make them 100% of the time, but it kind of drives honest discussion. So I think, you know, when you're doing it, everything's on the table. You should review everything from headcount to non headcount, you know, from marketing to a jar to offices to leadership team to all employees. But when you take this approach, you actually, you actually identify the inefficiencies and it's pretty clear once you do it over time and comparing to benchmark, where are the areas you need to focus on?

[CJ]

You say everything's on the table. I agree in theory. But is there anything that you deem untouchable when you sit down and look at costs?

[Hanan Haroni]

No, I don't think it's untouchable. I think you need to review everything. Obviously when there are customer related spend like you know, your sales team, right. Or customer support and so on, you need to be a bit more careful that you're not cutting too much or you're not optimizing too much because then you could potentially, you know, it could have a Long term implications of increase, insure and reducing customer satisfaction. But nothing's off the table. I think you should, you should review everything. You, you should apply objective judgment to it. Like ignore all the biases and relationship you have with the company and everything. Just look at it objectively and see where can you identify the inefficiencies.

[CJ]

I like that you called out having biases because as much as finance people like to think that they don't have any, there are certain people, either you get, you know, more positive energy from either working from or you believe in what they're building or you kind of see where it's going over time or hope to see where it's going over time. Can you just speak to that?

[Hanan Haroni]

Yeah, I mean we're all human, right? It's the human nature. Sometimes it connects more to a certain person than the other. And you know, we can talk about it more. But I think once you give the transparency to people and demand sort of accountability for that and ignore all relationship you have, just put the facts on the table like this is our financial, this is the story. This is where we need to get to. This actually drives a great discussion and an honest discussion and when you compare it with historical trends and benchmark and so on, it actually reduce all the tension of, you know, are you seeking me specifically? And so on. No, just be transparent. I'm doing it with everyone and have the same process across the board and then it eliminates all the potentially personal kind of attributes to.

[CJ]

Sounds like you use benchmarks and I don't know if this is the right word. You're not using them as a crutch, but you're using them as maybe a platform to start, start the conversation off of.

[Hanan Haroni]

Yeah, exactly. I think industry benchmark are great, industry benchmark are great, but you're not supposed to hit 100 of them. That, that's my view. I mean, it's facilitating the discussion. So when you want to get down to brass tacks and cut the PS sometimes, right, because people have stories and they'll tell you it's, it can't be done and so on and so forth. But when you're actually comparing yourself to industry benchmark, you can really drive the discussion. You can really say, okay, if you're claiming you're super efficient, but we're 2x of an industry benchmark, why is that? Maybe there are specific case that, okay, it's fine, you know, we identify the root cause and we're willing to do it because we want to invest more, want to Accelerate the product into market. We're having like more delivery, you know, project and, and that drives down profitability. Right. It could be good discussions, but comparing it to benchmark actually says, okay, you know, there's something objective here. It facilitates discussion. It doesn't mean you need to know your business. You need to know what you're focusing on, what's not relevant. But when you do that, it actually again, it gets down to breast text. Let's talk business. Let's see what exactly are we missing and what are the drivers and how can we fix it together.

[CJ]

Do you ever have department leaders actually use benchmarks against you? Like let's say a product leader says, look, I'm actually understaffed, I should really have five more people on my team.

[Hanan Haroni]

Yeah, sometimes. Sometimes. But I'm usually good at finding another reason why. But no, I mean, you know, sometimes it is the case. Right. Sometimes I can tell you an example, you know, when we're looking at P and upper product, I like to do that and you find out that, wow, you know, I thought it's a great product. It's very, very efficient. Right. Maybe too efficient. Right. And it drives most of the profit in the company or in this like segment. Sometimes there you need to increase the investment if you see it's underinvested. So definitely drive the discussion. Sometimes just reallocation of funds. Right. You find one product that you invest in too much in the other one. But I mean it's not just to cut cost. Right. It's actually, see you're operating correctly and in some areas, sometimes you need to increase the spend. So benchmark, yeah. Are a great tool to start facilitating cost discussion, but also a great tool to understand maybe you're under investing in something, you should invest more and maybe that's the root cause of, you know, higher churn that you anticipated and so on. So it's a great tool overall. But again you don't have to meet it 100% of the time or all the benchmark. It's more just getting understanding, starting the discussion.

[Podcast Host]

Well, let's hit on that.

[CJ]

How do you strike a balance between optimizing expenses but you know, also preserving innovation because you know that's why we're here, right? To innovate and to build a product.

[Sponsor Representative]

People want to buy.

[Hanan Haroni]

Yeah, I think it's a great question. So I mean, I think at first focus on the inefficiencies, meaning you shouldn't cut in places that undermine your growth. Right. For the long term. So focus on the inefficiencies you won't get it right 1% of the time, especially when you're doing a big transformation or significant cost cutting. Right. I mean, no matter how much you plan, and you should plan in advance, and it should take even months for a big transformation, but you probably get something wrong. And the key here is to just track it and course correct, fast, take a decision after that. That's course correct. And if you see something falling between the cracks, right, that's number one. I mean, you could also, and you should just de risk it by planning carefully in advance. So build a mitigation plan. It's a whole cycle with the management team on how to do it. But invoke feedback, build a mitigation plan, see what could fall between the cracks. Plan, plan for it. And if you can do it while you're doing a structural change, meaning it's not just cost cutting, it's actually you're transforming the business, meaning breaking down silos, for example, unifying teams. Right. That makes it even more efficient. So you're actually not damaging your growth, you're improving it. Because then you're focusing on the right thing, you're removing all the inefficiencies and you're setting the right priorities. The focus priorities on what you should do. That's a very important point in my view. You can't continue the same if you're reducing headcount. You cannot continue the same and expecting people to do exactly the same because there are less people now. Right. So you need to really focus on what's important, what's the 20% that actually drives 80% of the value to the company. And eventually it's just reallocating better the funds and the resources to get a better ROI altogether.

[CJ]

And I'm glad you brought that up because I do feel like companies sometimes do get into this diminishing return, growth loop or lack of growth, where they're like, ah, we need more revenue, like this isn't going as planned. Let's, let's cut costs.

[Podcast Host]

But you end up cutting costs that.

[CJ]

Would fund the innovation. So you end up actually exacerbating the problem because you should have invested more to begin with.

[Hanan Haroni]

Exactly. I think you need to identify, but again, have an objective view what's working, what's not. If something isn't working, you know, just cut it. But if something has, even if it's a bet, but it could have high returns, you should set a budget for it and go and try fail fast. You know, as, as you said, because then you Actually can test a lot of things, what's working, what's not. But you shouldn't get to a point that you know you're going to damage the growth. I mean growth is, is very, very important. Naturally is number one, it grows. I mean it drives also profit, right? So you should make sure that you're just making the company more efficient, leaner, meaner and so on. But you're not cutting to the point that you're risking the business. Business.

[CJ]

Hanan, you mentioned forming a mitigation plan.

[Podcast Host]

What's that?

[CJ]

Can you make it real for us? Is that like a post mortem of what could go wrong?

[Hanan Haroni]

Yeah, it's a, it's a pre mortem.

[CJ]

Right, yeah, sorry, pre mortem. There we go.

[Hanan Haroni]

But yeah, I just emphasized because I think it's, the planning is very, very important, right. So usually, and we can talk for a second how I think, you know, you should do it basically when you're planning such an event. But obviously each one can have its own version of it. I think first of all, with the leadership team, it's very, you need to be very transparent. You need to be very transparent on what you're doing. Why are we doing it? They're part of the journey, right? So you need to explain to them why are we solving it and what are we trying to solve for. Basically I, I call it sort of transparency in exchange for accountability. Meaning I'm giving you like all the transparency but demanding in exchange. Accountability, meaning it's not the CFO role, it's not my task to, to cut cost or optimize the business. It's everyone. We're the leadership team. It's everyone, responsibility, each one in its own area and together as a company, right? And as leaders. So I think that's number one. And once you explain to them what's the end target and why are we doing it, I think you need to set specific targets, basically. Specific targets on a company level and on a product level, department level. Because let's say you need to cut 10 million, right? No one will tell you. Volunteer. Yeah, I can cut 10 million out of my department department. So. And you never hear that, right? So A, because people think are, are actually efficient, right? They think the departments are efficient. And B, because if you can operate without like 5 or 10 million, why didn't you do it already? So you'll never hear that. So I like to come, you know, with the, like we discussed with the benchmark, historical performances, so on, but then start an actual discussion with each team leader and you know, basically I like to do it on a weekly basis, meaning I think it drives a lot of action. Because if you just say we need to optimize, you know, the company or spend and let's let, we need to do it in two months time, execute it and let's meet in two months, nothing will happen. So you have, you have to have the cadence of a weekly discussion with them and it progresses the thinking. It actually forces them to think about it week over week because they can come week one and say, okay, I didn't get the chance to think about it. But when you have a recurring meeting every week in the, in the schedule, preferably with the CEO as well, then you know, it's really forceful in terms of, really important in how you drive it and drive action. And by the way, some of the mechanism could be if it's significant transformation, zero based budgeting, meaning it's not just incremental. You actually build from scratch your organization and then just slot the people you think are most suitable. It actually discovers a lot of inefficiencies in things you do. But eventually to your point, I mean, you know, we need to get to a plan, plan across the organization, every department and then together with the leadership team, what's the ultimate plan? What could go wrong? You know, actually raise a template of concerns like, you know, with names. Right. If, if you're doing that, what could be the implication? What are we missing? And eventually sign off as the management team. I think then you have to bring it down a level. Meaning I wouldn't do it from start because it could create some panic, especially when you're doing significant transformation. But when you're getting down a level with the, with the management below it really they're closer to the ground, to the operation. So it really gives you a lot of feedback on, okay, is your plan good or we need to tweak it or we need to change it. So this communication across the board I think is very, very powerful and it creates a plan that you can actually, you did a few cycles on it with the leadership point with team with the management below and you feel pretty comfortable. It's sustainable for the long run.

[CJ]

How do you avoid scaring people though? I mean not just the people below the leaders, but, but the leaders themselves.

[Hanan Haroni]

Yeah, I mean to the leadership team, I think they're adults. Right. So they should get it. Some of the, some of the businesses sometimes optimize cost or do transformation when you have to. Right. And that how you, you do not scare them is basically show them the reality, right, like get down to brass Tax, like why are we doing it and what's the situation if we're not going to do it? And I think eventually they'll get it. They'll get it if you provide transparency. And if they're saying it's not just them, you're doing it across the organization. That's why I think it's important to do it in your organization, in every organization, because it's not a bespoke. Like we're actually looking at everything across the board and how you do not scare. Aside from that and the entire company, the management and so on, it's show them the vision, show them what happens after that. We actually could be able to invest more in areas we can grow more. So it's not saying we're actually damaging the potential growth of the company. It's the opposite. We're making the company more efficient and focusing on what we need and where we need to invest. So it's not like you're reducing investment across the board. Sort of reallocation of funds to say okay, maybe you know, those things are not creating ROI and we can use the same resources and funds and so on to actually invest in things that will make a difference and drive and also to the people involved, sometimes there's a lot of, you know, promotion involved and so on and additional responsibility. So it's actually you should show them the benefit and rally them around the vision.

[CJ]

I think what's important to call out is that reallocation is sometimes glossed over. People think that efficiency means cutting, but it could just mean shifting one thing to another bucket like net, you're net neutral and you're hopefully getting a more positive impact out of it.

[Hanan Haroni]

Exactly. And this could be very powerful. I mean again we had a few situation when you're actually getting down to a product level, to department level, they're saying okay, I'm okay with continuing with the same spend, but we're under investing significant something that is important and wasting too much money on something that doesn't really have a tam. So why are we doing it? And then just reallocate that. So that's a perfect example.

[CJ]

If we're being real, about 75% of cost of tech companies walk on two feet. Other than headcount, what are the first areas that you usually go to that are notorious for being inefficient?

[Hanan Haroni]

So I mean obviously as you mentioned is headcount. Right. And everything's on the table. But B, I think is by the way on headcount, sometimes you need to go deeper, meaning it's even analyzing the span of control. Right. Like, you know, if someone's managing 15 people, it's not efficient. Maybe you need to bring more people. But if they're managing one person, you know, it's probably not efficient as well. Well, so you should really look into your organization, the span of control and how many layers of management you have and so on. But on the other, the non headcount, I think it's again, it's across the board. But I usually look at the metrics and I try to compare it, for example, you know, GNA ratio compared to revenue and others to identify what are the departments that are sort of off benchmark. And then you can look deeper into it and it's everything. You know, you can do it per office. Maybe you have two locations, two offices in the same location. You know, maybe you consolidate them. Right. Maybe it's okay to invest. Right. But you just need to be to proactively take the decision. So I think again, like we discussed, everything's on the table and using historical trends actually help you to see if we operated much more efficiently two years ago and nothing changed. So why are we operating less efficiently? Right, let's dig into that and see. So there's no perfect answer, but and just be objective about everything, test everything, try and use benchmark and historical trends. I think it provides a lot of value and use the people, you know, you bring it into the conversation to actually hear different views. Because sometimes, you know, at the leadership teams, there's, there's some views, but when you actually talk to the people on the ground, you get different perspectives.

[CJ]

That's great. And we've had a couple of terms come up like bandwidth constraints, allocation. How does operating in a private equity environment impact how you think about, you know, allocating resources? What constraints do you have or how does it shape your mindset?

[Hanan Haroni]

Yeah, I think it's a very different environment from, let's say, vc. Right. Venture capital. I mean, their model, the business model is usually they can invest in 10 companies, right. And they know eight of them either will be shut down or no significant returns. Right. But the one or two that actually makes it could be enormous and compensate for the entire portfolio. Right. That's the VC model. In a PE model, every investment must succeed. Maybe it's not 1% in reality that every investment will succeed, but that's the business model. I mean, they're not anticipating investment and investing, you know, sometimes hundreds of millions and more in companies and expecting them to fail. So and, and a lot of the acquisitions basically are a lot of the portfolio investment is they need some kind of transformation or change to continue to unblock potential. So it actually accelerates the normal course of business. You need to create value pretty fast, take fast decisions. It creates a lot of value. And you usually have a time frame, usually it's between three and five years but sometimes they sell a company after two months and sometimes after 10 years. But normally you have a time frame that you need to work into extending accelerate the value. A few other attributes. I think it's leverage transaction. Usually when a PE buys a company they take a debt and eventually the company needs to fund it and there's no funding runs meaning it's not like a VC that you do in another funding run. And growth is everything. You need to balance between profit and growing the business and you need to balance between making sure you have enough cash operationally and making sure you have enough cash to pay the loan and the interest. So that's, that's a very delicate balance between all of that and you need to pay attention to it especially as the CFO or the finance person responsible for that. And in addition to that it's also a multi acquisition environment meaning usually you buy a company as the platform and then you do an add on acquisition. So you have to have your processes, systems and everything in place to absorb those acquisition because otherwise it's becoming a mess. And from my experience at least one of the main objectives or guidelines is like the rule of 40. So the rule of 40 for those who don't know, it's basically the combination of growth in revenue year over year plus your profitability margin and the combination of the two. If it's above 40 it means you're, I mean you're supposed to grow nicely and have a nice profit. Right. So it means you're operating in an excellence and if you're below that statistically your valuation will be much lower. So the rule of 40 is sort of the guidance in terms of what you need to achieve and exceed. And in general it's a very high pace environment. Right. But it has specific attributes that you just kind of discussed that you need to pay attention and have the company ready for it.

[CJ]

I really like how you called out that in private equity is generally no more funding rounds like you got to play with with the team you got and the balance sheet you got. Can you speak to how debt impacts the moves you make and how you oper?

[Hanan Haroni]

Yeah. So I mean usually a PE transaction is leverage, right? So you have debt that you need to manage some of the benefit. I mean, from a PE perspective it's derisk the investment because they're expecting between 2 and 3x usually on investment after a few years and that we paid at 1x. Right. So that allows them to distributed the funds across more portfolio companies and de risk the investment. But also from the company perspective of shareholders, it has benefits because it minimizes dilution of the existing shareholders and it forces the company to be operationally efficient. Many because you have to balance the debt, you don't have funding runs. Right. And you need to make sure you have enough cash. Operationally you have to focus not just on growing, but also on, on EB and on profitability and cash generation. So it really forces the company to be efficient. And aside from that you have, you have other benefits like tax shield. But the big risk is the constraints it puts on investment flexibility. Meaning you have to serve the debt. And nowadays, you know, that is very expensive. Right. So you have to make sure you're planning for it. And it's the CFO ultimate responsibility to balance the debt amounts, meaning it has to strike a balance between allow operational flexibility and have the benefits of the leverage. Right. And in my perspective as a cfo, when you, when you're even doing the initial transaction with a PE and taking the debt, you have to be very deliberate about the amount of debt you're taking. Plan ahead, you know, see what is the, what is the plan, what are the covenants, what is the interest and principal payments over the next few years and plan for it. Build a scenario that is not the high case scenario because you want to build some downside protection. And once you have that, you sort of reverse engineer, okay, you know, what's my plan, what I'm supposed to hit from a cash perspective or from covenant perspective and just ensure you have enough headrooms. And if you need to loosen the covenants or reduce the amount of debt, you have to do it on day one because otherwise you could encounter a very bad situation to CFOs which is either you're about to break covenants or you don't have enough cash to operate the company or repay the debt. So you have to plan ahead for it.

[CJ]

Is managing the covenants chiefly the CFO's job or the private equity firm's job. Who's who, who's levering you up?

[Hanan Haroni]

From my experience, it's solely on the CFO and the company. Naturally you're collaborating with them, right. And the strategy and sometimes when you need to maybe structure new covenants and so on, you're doing it together. But ultimately, you know, they're expecting you to manage the debt, so you need to raise the flag when a significant issue comes. Right. And you, you're foreseeing, okay, something went wrong and you need to restructure it on or negotiate better covenants and so on. But it's your responsibility to track it. It's not a, it's not a nice situation if you come to the board and say, you know, we missed covenants and we're basically at default on the loan. Right. Or we're about to do it in a quarter. Right. You have to plan in advance and manage it. It's your responsibility eventually.

[CJ]

Any tips for a VP of finance or a CFO who's operated on the VC front where they're burning cash and have never operated with covenants before and then moving over and actually having to consider debt? Any, any high level tips for someone trying to break in there?

[Hanan Haroni]

Yeah, I mean, I think it's a natural progress eventually, right. For a company, for example, to be funded by VCs like we were in the past, and then be bought by a PE because you're becoming more mature, I think you need to be prepared that you have. The main thing here is understanding it's not growth at all cost. Yeah, it's definitely about growing the company. That's number one. But you have to do it and balance also profitability. So it's a different mindset and you can do the adjustment, but you just have to be deliberate about it, thinking, okay, now I really need to also look at my P and L, look at my cost, maybe something that makes sense as a vc because I know there's another round and we're investing heavily in marketing now I need to fund it internally. You know, I can't go to the PE and say, give me more money after six months because I need to fund operationally. PEs will give you money most of the time for additional acquisitions, but not to run the internal business unless there is something very specifically that demands it. But you just need to shift a bit the mindset and say, okay, I'm focusing on both fronts, growing the business but also operationally to be excellent.

[CJ]

That's a really great call because you can go back to them and say, listen, we think there's a really great acquisition opportunity. Can we talk about increasing like the revolver size and taking on more debt? But if you're going back to them saying, hey, I need to Hit payroll. That's not a good idea. One more question on operating in a PE environment. Do you have a sense or feel like you're always up for sale or always need to be ready for an exit internally?

[Hanan Haroni]

The short answer, yeah, but let me clarify. I mean, I think you first of all, as a business, right, and it's all the management team, you need to take the right decision for building a long term, healthy company. And what I mean by that is sometimes you could get tempted to say, okay, I think I'm going to be sold in two, three months or in a year. Let's save cost in an unsustainable way and kind of, you know, window dressing the company. Right. I don't think it's the right approach. I think you have to have. Because you never know when the exit will come, right? And also in a due diligence, you know, people, an intelligent buyer will see it right away. So you have to build to create value by creating a long term healthy company and focusing on the right things to do. That's number one. But from a financial perspective, I do think you need to be ready at all times for an exit, which means, you know, when the selling process starts, it's a fast moving train. You know, it's really, really fast. It kind of sucks you completely or absorbs you. So you have to be prepared for that. Because if you're not prepared either, you're slowing down the deal and you don't want to be in a position that you're the one slowing down the deal to the point you can jeopardize it. B, if you're scrambling around to just send figures or financial data, I mean, you risk that it won't be consistent or you didn't have really time to really go over it and build the narrative, understand the narrative. So the buyer could make a whole different interpretation out of it, which is not, you know, the way it was intended to. So I think you need to take the time, build it in advance, be prepared for it. Right. You never know when it's going to come. But I like to work even with the due diligence list saying, okay, those are the things I know are going to be asked, asked for. So let's just prepare in advance. And every quarter closing, we started creating a database and just adding the quarter and the results and so on. So when an exit comes, obviously you still have work to do, but it's much more efficient than Jen just trying to create everything in a week.

[CJ]

I love that. I love that sage advice all Right. I'm going to take you into what we call our long ass lightning round. So the first question I ask all the success, successful guests, what's something you've screwed up in your role before?

[Hanan Haroni]

Yeah. So I think the first one is actually not mine, I swear. But I, I do want to tell it because I think it's, it's important. It shows like the importance of finance and the attention to details. So I know a company which grew pretty significantly year over year. Right. And when they created the budget, it was all rosy and stuff. Right. But it makes sense because, you know, they continued growing year over year and they saw the results, I mean, of the plan result, the budget, and they actually decided to remodel the entire office, re model the entire office and bring furniture and so on, buy fancier furniture and do a complete makeover. And after a month or two, they started to see the results are pretty off from what they expected. And when drilling down, they saw there was an Excel formula error that actually someone multiplied the values month over month and it created millions of additional revenues without any base for it. Right. So at the day the furniture arrived, they needed to cut cost and remove some people and freeze budgets and so on. So you can imagine it's not a nice experience to see it or to experience it. Again, not my story, but I think it's very powerful in showing the importance of attention to detail and how finance really makes it a difference on the decisions. So that's one I think, you know, for me it's mainly earlier in the career just acting faster and non productive people. So there are some people that are actually bad for the team dynamic and bad to the environment and not productive. And you have to act fast on that. I like to say, you know, if there is doubt, there's no doubt. Meaning if you feel it and you know, you get a sense of it, it probably means you already decided and you just need to act faster, fast on it.

[CJ]

I'm there with you. If you could tell your younger self something, knowing what you know today, what would you tell them?

[Hanan Haroni]

You want me to tell you the secret? C.J.

[CJ]

Yeah.

[Hanan Haroni]

Happy wife, happy life.

[CJ]

Amen.

[Hanan Haroni]

Yeah, but, but you know, seriously, I think it's a very demanding job. Right. Process. You know, a career, you have to have your spouse kind of supporting you throughout the journey.

[CJ]

Yeah.

[Hanan Haroni]

Especially when you have kids at home and so on. So I have an amazing wife doing it. But I think you need the support. And professionally, I think just don't be, I would say to my younger self, just don't be afraid, speak up, move fast. Don't be afraid to make mistakes. You know, no matter what the forum is to speak up and take fast, fast decisions. Right. I mean when you're earlier in the career sometimes you're afraid taking fast decision. You want a lot of data, you're waiting for it and so on and sort of get into a situation of analysis paralysis, don't get there. And it's better to take 10 fast decision and be wrong on three of them and course correct. But you're right on seven rather than just wait and wait and take two decisions at the same time even if they're perfect. Right. So in that regards I actually like Amazon's framework of a one way door and two way door. But one way door is basically almost a reversible decision or a decision that are hard to reverse and you need to really pay attention and analyze the so on and spend the time to decide on them. But most of our decision are actually two way door meaning it's very easy to reverse them or course correct. So just take them fast, don't wait to too much data. I mean you need the data but don't wait to 100% accuracy if you can course correct and just, just move fast on that. So that's the main point I would say to my younger self, amazing.

[CJ]

More of a technical one. Can you walk me through your finance software stack? What tools does your team use to get the job done?

[Hanan Haroni]

Yeah, so as I mentioned a few years ago we did a complete transformation exercise and connecting a lot of tools. So Currently we have Netsuite as the ERP Salesforce as the CRM. We have OpenEHR as a professional services software or project management tool. Concur as an expense reimbursement and travel system. We have Carta as an equity tool and we have Power BI as a BI tool, a visualization one that kind of. We have the KPIs and all underlying system connect.

[CJ]

That's a nice stack. I like it.

[Podcast Host]

Last one I got for you.

[CJ]

What's the craziest thing you've ever had someone try to expense?

[Hanan Haroni]

Yeah, so surprisingly I don't have too many crazy stories. I think you know there are all kinds of cases. I mean situations like neck pillows. Right.

[CJ]

For like flights.

[Hanan Haroni]

Yeah. Which can't stand. You know why people would think okay if I have a restful flight I'll probably be more productive in work. Not something I would expense. Right. But that's one. And aside from that I think it's mostly I had one situation with suddenly a salesperson kind of submitted, which I think you have quite a similar story. I heard before, but 60k of expenses for last year travel, right? All together like at once and it's like wow. I mean I didn't expect that. But it's not in budget. But yeah, it was for a complete year. Like five months after the year ended, suddenly submitted all of that.

[CJ]

That happened to me too and I was like, I know how much we're paying you. How are you not feeling this dent of $60,000 in expenses?

[Hanan Haroni]

Exactly. So yeah, but those are the main thing I think overall we have a good governance over it, so not too many crazy stories.

[CJ]

Cool. Hanan this has been a blast. I've learned a ton about efficiencies. I love your management frameworks when it comes to M and A, and this has been a lot of fun. So thanks for covering our time for us.

[Hanan Haroni]

Thanks for having me. It was fun. Thanks again.

[CJ]

Run the Numbers is a mostly LLC production yelling an intro by Fat Joe, artwork by some AI thingamajig podcast and video editing is done by cleancast@cleancast IO. Nothing said on this podcast is intended to be business or investment advice. It's the sole opinion of me, a guy who feeds his dog too much ice cream and has a history of net operating losses.

[Podcast Host]

Lol. If you like this podcast please hit subscribe.

[CJ]

It would mean a lot to me. And also Also check out mostlymetrics.com that's.

[Podcast Host]

My newsletter where I explore business models and financial metrics.

[CJ]

Thanks for riding with me. Share this with your friends.

[Hanan Haroni]

Peace.