In this episode of Finance for Founders, Salvatore Tirabassi, Founder and Managing Director of CFO Pro+Analytics, breaks down how founders without a financial background should think about forecasting, customer acquisition cost ratios, payback periods, and the moment a growing business actually needs a fractional CFO.
Table of Contents
Host: Salvatore, what’s the most rewarding part of being a CFO?
Salvatore Tirabassi: The most rewarding part for me is working directly with the founder-owner and helping them recognize real, practical ways they could change some of the things they’re doing to have immediate impact in their business. I’m all about quick wins, and there are always opportunities to get quick wins that eventually aggregate and build up to something much bigger and better. Founders are very appreciative of the quick impact.
Host: Equity or debt — what’s your go-to for scaling a business?
Salvatore Tirabassi: It all depends. I have a gourmet knife manufacturer I work with now, and we did an asset-backed lending facility, and now we’re going to go out and raise equity, so in that case it’s both. But for founder-owned businesses looking to scale, it’s ultimately a strategic and personal decision for the founders, because with equity you’re going to change the dynamics of how the business is governed, whereas with debt you can kind of maintain the governance with the founder.
There’s also the practical reality of what’s available. For smaller emerging companies, depending on the type of business they’re in — especially if you’re looking for small facilities in the US — there are more options for talking to people and getting in front of potential investors pretty quickly. Equity usually needs to be a bit more structured and takes a lot more time.
Host: What’s one financial mistake businesses make that keeps you up at night?
Salvatore Tirabassi: I would say that a majority of the businesses I get involved with that are founder-owned and operated don’t have as good of an understanding of the relationship between their profitability and cash flow — and the cash flow down to the weekly level matters to some of these businesses. That can be stressful for them, and it’s something I have to really think about and help them get out in front of. Weekly cash flow management — in situations where it’s required — is common for bootstrapped businesses.
Host: What is a must-have skill for future CFOs?
Salvatore Tirabassi: One hundred percent, they need to have a fundamental understanding of data models, the world of analytics, how to understand data repositories, how to have clean data, what the methods are for doing that, and then how to connect those repositories of data to financial information and financial data so they can make much more sophisticated decisions on behalf of their clients or the businesses they’re in. I don’t see how you can get away from that in this day and age — it’s critical.
One of the reasons I really point to data models and data repositories is because they are often messy, and the CFO is in a position of leadership that can help drive the necessary changes required to get those data repositories into a condition and quality usable by the rest of the organization, and to establish that as a priority so it actually happens.
One of the issues I see is that data wrangling, data gathering, and holding is often viewed as an IT responsibility. But IT has a lot of competing priorities — they need to change CRM workflows, update different systems the organization is using — and the data used for decision-making, which in my opinion should always flow through finance, can get left on the back burner because it’s viewed as an internal resource and requirement. It’s not customer-facing, it’s not immediately bringing in new revenue, so it can get forgotten about or deprioritized. That’s where the CFO can make a difference, because the CFO is in a leadership position to say, “Hey, this stuff is really important — we need to elevate where it sits on the priority queue.” Once you get a hold of all that information, it really starts to turn on a flywheel and allows the business to do some really great things.
Host: You’ve had an impressive career. Can you share the key moments that shaped your journey and how you found yourself in the world of startups and scaling business?
Salvatore Tirabassi: When I graduated from business school and an engineering graduate program, I went right into venture capital. It was 1999 — I’m old enough to have experienced the internet bubble bursting. I showed up for work in August of 1999, and by March of 2000 it was a complete mess in the market. I was working for a fund doing emerging internet-related businesses. It was the early days where everything was being built from scratch — there was no concept of a Wix or a GoDaddy to develop a website in 30 minutes, no AI to do that.
What was interesting about that time was that I walked in thinking, “This is the big wave,” but it ended up being the big pullback from the wave. It happened in 2000, lasted about a year of basically No Man’s Land, and I ended up going from trying to grow businesses to basically trying to save them, because the capital sources all ran for the hills. So I ended up doing some restructurings and buying some businesses that were being left behind without any investor support. We got a few really good deals done, then the market loosened up again and we did some more growth deals.
That was a very informative experience very early on, where I was able to look at growth and also difficult, problematic situations and figure out how to deal with both. There are different techniques and ways you can approach problems given how they’re presented to you — whether it’s a straight-up growth opportunity or a workout — and being able to do both gave me a lot of good experience I could carry forward.
Host: How would you compare the landscape now versus 1999, from an operator standpoint?
Salvatore Tirabassi: From an operator standpoint, what’s really amazing now is that there are so many more tools, and the distributed labor available worldwide — accessible through different platforms and employment services — allows you to take advantage of all that. Combined with remote working methods that allow companies to perform without having to be in office because of what happened during COVID, it creates a tremendous amount of flexibility for operators to do things efficiently and less expensively. It gives them more opportunity to try and fail quickly so they can pivot and figure out exactly how their business model is going to work. That is way different than it used to be.
To give you an example: I have a client with really just one person in it. The guy straddles between information systems, development, and connecting data and developing app workflows in the CRM. He leverages Zapier to connect all kinds of data together. If I have a conversation with him and I’m wondering, “Is the data from the call center system being connected to the CRM for a specific thing I’m interested in analyzing?” — he handles all that, and a lot of those data connections are made through Zapier. Back in ’99, you would have had two or three people building databases and figuring out how to get the data flows to work, and things would take much longer. You couldn’t iterate as quickly. Eventually when that company scales to a certain level, Zapier may not work anymore, but they get to figure it all out and actually make money along the way. Then when they need to go down a different path, they’ve got a whole system that works that they can leverage into a more robust version. They can take baby steps along the way with tools like that.
Host: For founders without a financial background, what’s the first thing they need to understand about managing finances during the scaling phase?
Salvatore Tirabassi: The first thing they really need to understand is how a sophisticated financial forecast can be their best friend during scaling. I always recommend doing monthly forecasts — monthly, with yearly summaries — because when you’re in that scaling phase you need granularity in the number of days you’re looking at from period to period, where you can effectively make decisions. That unit of time tends to work.
I mentioned earlier that weekly cash flow forecasting can be directly related to the financial model. That matters more for companies trying to manage their receivables and payables and make sure they can pay everything and have the business turn on itself week to week.
But the main thing is the sophisticated financial forecast with drivers in it — the ability for an entrepreneur to sit in a room with their team, change drivers, and understand how it affects the business. They can do quick reaction, sanity checks about whether the assumptions they’ve made make any sense given what they most recently learned. They’re always learning things as they go along, so you’ve got to be able to turn those dials and see how it impacts the future.
Host: Are you sometimes shocked or surprised when you work with startups that don’t have any of these things — a forecast, a cash flow forecast, the basics?
Salvatore Tirabassi: I’m not surprised. I would be surprised though if they didn’t have some version of it that’s just kind of working for them — that would be very surprising, although I have encountered it. I’ve been involved in a couple of extremely messy situations that were pretty surprising, where an entrepreneur got that far out over their skis without good information and data. But the more sophisticated stuff — no, I’m not surprised they don’t have it. My whole methodology and my company CFO Pro+Analytics is basically that we bring that level of sophistication down to the emerging-growth level for operators who don’t have big backing behind them. We help them use these tools they normally might not have access to for a long time.
Host: Would you say your model is more targeted toward bootstrapped companies?
Salvatore Tirabassi: I’ve been doing this for a little less than a year and I’ve got seven clients now. I get new requests for proposal every month. What I’ve found is that most of my clients except for one are entrepreneur-owned and operated, and they range from $3 million to $50 million in revenue. I do have one with professional investors involved, but more commonly with these initial clients I’ve picked up, they’ve been founder-owned and operated. Some have gotten to that range without a CFO — they have a fuller accounting team, but they’re missing the sophistication and the ability to take data and drive it through the finance function. If you go down to the smaller revenue companies, it’s changing out bookkeepers, putting in financial controls, financial forecasting, strategy meetings with the founders — it’s all that type of work.
Host: How do you communicate to founders that this is a need their company requires? Some have grown to $16 million without a fractional CFO.
Salvatore Tirabassi: Most of them, when they show up, have already sensed they have a need. The way I describe it: they wake up one day and they want to know what’s going to happen in the next 90 days, and they don’t really know. They have some idea, but they really want to know — with numbers in front of them — if this happens, will this happen? If this other thing happens, will that happen? What’s going to put me in the danger zone? Those are the things that keep them up at night, and that’s generally where the conversation starts. They have a specific problem and they need someone with the techniques and capabilities to not just make tools for them, but to really explain what’s going on and give them a point of view on how to navigate what’s in front of them.
I met one fractional CFO who’d been doing this for 18 years, and he told me something really interesting. He said, “In my experience, the words ‘founder’ and ‘CFO’ are not used in the same sentence soon enough.” I agree with that. A lot of the situations I come into could be pretty dramatically different if founders had invested some money in this type of service earlier on.
I had one situation where I was asked to provide a proposal, and the founder was sort of operating in the background. It was very clear to me he just didn’t see value in any of this. They were running a SKU-based inventory beverage business, and they showed me their financial model. Someone had built them a pretty sophisticated financial model, and then they didn’t want to pay that person anymore, so they started hard-coding and making all kinds of changes to it. They had no idea what the forecast was going to do. I gave them a proposal and a price, and I knew it wasn’t going to go anywhere. To me, I was like, “You’re in a working capital-driven business where you’re tying up a bunch of capital in inventory, and you don’t have a forecast down to the weekly level where you can make decisions about how much inventory to bring in, when to start discounting to push money out the door, and how to balance high-value inventory and stuff you’ve just got to get rid of.” I was already 10 steps down the chess board.
In that instance, taking on the service just seemed like an added expense. My view was, well, yeah, it’s an added expense, but if it prevents you from missing payroll, it’s going to be totally worth it. Don’t view it as a cost center — you have to view it as a profit and cash flow driver, which is essential to being successful in your business. It’s as important as marketing and the sales team.
Host: Customer acquisition cost and LTV are often not well understood. Can you break these down in a way that resonates with non-tech founders?
Salvatore Tirabassi: This is where the tangible — sales and marketing — meets the not-as-tangible CFO services that are also a growth driver. If you’re in a bootstrapped environment or founder-run business and you’ve grown, you’re going to have some concept of your customer acquisition cost, but you may not have the granularity to say how that CAC changes across different channels. That’s where CFO services really help — it gives you much more detail about how CAC works in your business across different channels, salespeople, and client types.
I look at CAC two ways generally — and obviously it can be bespoke for any business. I look at marketing spend related to the amount of booked revenues you bring in as your marketing customer acquisition cost. Then on top of that, I add in fully loaded selling costs — sales management overhead, commissions, all of it — to get a fully loaded customer acquisition cost to conversion.
If I do it in order: marketing to response — your cost per lead. Then marketing to sale — your marketing cost to sale. Then marketing plus selling cost to the sale — the fully loaded cost. Those three things give you the ability to monitor how each spending area is performing, and they become very direct inputs into the financial forecast. You can go into the forecast and say, “If I spent another $100,000 a month on this marketing channel, how would that flow through and create more sales for me?”
You can take that methodology to a spreadsheet and pretty easily start to figure it out. Sometimes you get into timing issues — “I’m spending money today, but my sales cycle is 90 days, so the lead came from marketing I spent 60 days ago.” Those complications and nuances we figure out as we go.
Host: How would you recommend founders approach balancing CAC and LTV? Are there specific benchmarks or ratios they should aim for?
Salvatore Tirabassi: When I think about customer acquisition — and this varies slightly depending on your business model — a lot of businesses these days are trying to be subscription-based or recurring revenue. The way I look at it is it’s an upside-down wedding cake. In order to produce a return on equity at the bottom of the cake — that’s the distributions and cash flow available to the owners — your customer acquisition return, revenue to customer acquisition spend, needs to be very large in order to have enough cash flowing through the different layers of the cake: revenue, cost of sales, operating expense, any interest or debt service.
In different types of businesses, if you have a CAC ratio — revenue to marketing — above 3x, so $3 of revenue coming in for every dollar of ad spend or marketing spend, you generally should have a model that can work. If you get to 2x, can you make it work? Sure, depending on all your other costs. 4x, 5x, 6x — you have an incredible amount of room. Those are the types of businesses you can scale, especially if they’re recurring revenue, just on the back of the revenues coming in, because your paybacks are so tight. Three is a rule of thumb. I’ve seen that work in eCommerce, consumer recurring revenue services, and SaaS-type businesses.
Host: What about CAC payback period — what’s an ideal CAC payback period?
Salvatore Tirabassi: One day — that’s ideal. I’m kidding. That’s when you’re printing money. The ideal is a balance of working capital and how well capitalized you are. If you’re not well capitalized, can you afford paybacks that are 90 days, 60 days? It depends on how much working capital you have to cycle more money back into the marketing and keep the gear turning. If you have a lot of working capital, you can potentially deal with six- or nine-month paybacks.
The thing to keep in mind as a founder is what you really want to identify is the marketing that gets you the shortest paybacks, then keep investing in those until you stretch to a level that’s manageable but is forcing you to find a new channel that can get you back into a tighter payback period. The more heavily you invest in a channel, the wider the CAC is going to get — when you discover the gold mine, it only has a certain depth. Then you have to spend a little more, the CAC gets spread out, and you need to find another channel where you can spend little and get a lot.
If you’ve got a channel with a really nice payback, really analyze and study it, and keep investing to force it to expand the CAC to a level that’s still manageable for you. That’s when you know you’re really maximizing the channel — spreading into it carefully and methodically. Then when you feel you’ve tapped that out, you move to the next one. Ideally, you’re working multiples of these simultaneously.
Host: Could you give an example of a channel you discovered where you had to research a little more deeply to get a better understanding?
Salvatore Tirabassi: Take a direct-to-consumer products business carrying inventory and selling digitally, with maybe one or two brick-and-mortar retail channels. Digitally, you can compare your return on ad spend for Google. Within Google, you’ve got multiple layers — different types of keywords targeting different customer personas. Each one is essentially a channel. You can say, “One persona I go after on Google is young moms with young children. Another is women becoming empty nesters.” Each persona has a channel that’s potentially trying to target them, and you keep figuring out how to get more of that persona to respond.
Within Google, you’ve got multiple channels because you’re creating channels based on the targeting. Then you’ve got a totally other channel — you could go to Meta and use some of their black-box algorithms and say, “I discovered these client types respond to my ads. Find me look-alike audiences.” Now you’re in a totally different channel asking Meta to find you those types of clients.
Then, say they’re selling some sort of houseware product and they get a relationship with a Walgreens or Boots — a wholesale relationship into a retail channel. That becomes a whole other channel. They have to figure out how that plays with their overall margins, because when you sell through a wholesaler you’re getting lower margins than going direct to consumer. You’ve got a ready-made sales channel accepting your product, but you have to give them inventory — using your working capital — and take a haircut on your margin. That introduces a different type of CAC analysis. So those are three different channels right there.
Host: Beyond CAC and LTV, what are the most important metrics a scaling business and its founders should be on the lookout for?
Salvatore Tirabassi: I would say it’s looking at their cash flow conversion on a monthly basis. That’s a really important place to pay attention, because you’re doing all this work on the CAC and acquiring customers, and then you want to see the cash flow through your income statement and all the way through to your P&L — especially if you have heavy working capital requirements. That’s ultimately the capital you’re going to use to either raise more capital or reinvest in the marketing funnel. Start from up there, then go all the way to the bottom of that upside-down wedding cake and see what’s happening there. If it doesn’t make sense — what’s going on in between that’s causing it to not be where we think it should be — that’s where you dig in.
Salvatore Tirabassi is a fractional CFO and founder of CFO Pro+Analytics, helping founder-owned and family businesses build the financial infrastructure to grow, delegate, and exit on their terms.
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