EP 021 - Masterclass on Strategy with Alex Small, Head of Strategy & Operations, Central at Stripe

Strategy of Finance

In this conversation, Alex Small shares his background and journey in the finance and tech industry. He discusses his professional role from being a systems administrator to Head of Strategy and the importance of systems thinking in finance. Alex also talks about his experience at Zendesk and ClickUp, highlighting their positioning in the market. He explores the trade-off between profitability and growth in SaaS businesses and the key metrics to track in the industry. This part of the conversation covers key metrics for understanding business performance, and the comparison between SaaS and Payment's transaction-based business models. Further, in the Masterclass on Strategy, Alex discusses the role of strategy in business, differentiating good strategy from bad strategy, the challenges and considerations of strategy, the influence of data and technology on strategy, building a strategy team, the importance of internal mobility, and managing multiple roles and businesses. Additionally, Alex discusses the importance of professional relationships, the need to eliminate distractions and focus on tasks, his definition of success, his approach to leadership, and his perspective on career regrets.

Takeaways

- Systems thinking is crucial in finance to understand the interconnections between different aspects of a business.

- Promotions and success in a career often require a combination of hard work, competitive advantage, and strong relationships with business partners.

- Positioning in the market is essential for companies to differentiate themselves and find their niche.

- SaaS businesses face the challenge of balancing profitability and growth, with many prioritizing growth to stay competitive.

- CAC payback is a critical metric in SaaS, indicating how long it takes to recoup the cost of acquiring a customer. Key metrics for understanding business performance include customer lifetime value, CAC payback, and the ratio of customer lifetime value to CAC payback.

- SaaS and transaction-based business models have their own advantages and challenges, with SaaS offering strong margins and transaction-based models having a larger total addressable market (TAM).

- Strategy should connect operations or finance to strategy, and it is important for all teams to be strategic, not just those with 'strategy' in their title.

- Good strategy is comprehensive, actionable, and communicable, and it should accomplish something for the business.

- Data and technology play a crucial role in shaping strategy by providing competitive research and enabling benchmarking and analysis.

- When building a strategy team, consider internal mobility and the need for diverse perspectives and deep strategic experience.

- Internal mobility helps increase tenure and allows for iterative learning and growth within the company.

- Capabilities for a strategy team include a deep understanding of the business, the ability to connect different areas of strategy, and the skills to leverage data and technology effectively.

- Managing multiple roles and businesses requires prioritization, passion, and the ability to focus and work efficiently.

- Building great relationships is crucial for success in business and can lead to valuable partnerships and opportunities.

- Eliminating distractions and maintaining focus is key to productivity and achieving goals.

- Effective leadership involves building strong relationships based on trust, respect, and accountability.

Chapters

Introduction and Background

Journey and Key Milestones

Role as a Systems Administrator

Promotions and Success Factors

Positioning of Zendesk

Positioning of ClickUp

Profitability vs Growth

SaaS Metrics

Key Metrics for Understanding Business Performance

Comparing SaaS and Transaction-based Business Models

The Role of Strategy in Business

The Challenges and Considerations of Strategy

Differentiating Good Strategy from Bad Strategy

The Role of Strategy Leaders

The Influence of Data and Technology on Strategy

Building a Strategy Team: Internal vs. External Hires

The Importance of Internal Mobility

Capabilities and Considerations for Building a Strategy Team

Managing Multiple Roles and Businesses

The Power of Professional Relationships

Starve Your Distractions and Feed Your Focus

Defining Success and Future Goals

Approach to Leadership

No Regrets in Career

Lightning Round

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Quotes

“Strategy, operations, and finance need to come together to make a business successful.”

“If you work twice as hard, you get promoted twice as fast.”

“The only reason a SaaS business would have a lack of profitability is because they're very inefficient or they don't have a product that people like, or they're just investing a lot in growth.”

“Every business unit, every team should be strategic.”

“So as a strategic finance partner, an FP&A partner, most managers will gauge your performance based on what your business partners say about you.”

“To be very successful in business, there has to be an element of sharp elbows.”

“It's almost maybe in my mind, more of a fallacy of, is anyone actually gonna get to the 30% EBITDA margin? I think they will, as soon as they are willing to slow down the growth rate.”

“CAC payback is probably the single best descriptor of putting money into the business and the go-to-market engine.”

“Customer lifetime value, CAC payback, and then the ratio of customer lifetime value to CAC payback are a kind of suite of three metrics that are incredibly valuable in understanding the business.”

“I'm very partial to rule of 40… It's like, how profitable are you as a business and how fast are you growing as a business? It's very difficult to do both very well.”

“It is kind of easy to have good margins in SaaS. It is very hard to have good margins in payments.”

“TAM is actually a challenge for SaaS businesses.”

“Strategy is good when it accomplishes something for the business and it's bad when it doesn't.”

“A well-formed strategy is one that is comprehensive and actionable and communicable.”

“There's an interesting reality in business that the more skills you try to cram into one individual, the more expensive that individual is going to be, the more rare they're going to be or the worse that they're going to be at all of those things.”

“All of those professional relationships that you build are your capital. Those are the basis for your future success, whether it's in the company you're at or whether it's in your future entrepreneurial pursuits.”

“I want people to be afraid of how much they love me.”

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Where to find Alex Small:

LinkedIn: https://www.linkedin.com/in/alex-small-37482b98/

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Where to find Stripe:

LinkedIn: https://www.linkedin.com/company/stripe/

Twitter: https://twitter.com/stripe

Website: https://stripe.com/

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Where to find Rohit:

LinkedIn: https://www.linkedin.com/in/rohitagarwal001/

Twitter: https://twitter.com/podcast_SoF

Email: [e-mail]

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Sponsor:

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