Beyond the numbers: What a CFO learned about presenting to a board

Delivering a “State of the Business” update is an art—here’s how Palvi Mehta fined-tuned it over countless board meetings

Palvi Mehta still remembers the first time she presented to a board of directors. It was early in her career, and Mehta was CFO of a venture-backed telecommunications startup. In slide after slide, she dutifully went through the company’s financials, shining a spotlight on key figures in the income statement, balance sheet and cash position.

When she finished, and the board began discussing the state of the business, she was surprised: the conversation made almost no reference to what she had just presented. “Very little of what they were interested had to do with a snapshot of a moment in time,” Mehta says.

The meeting proved educational for Mehta, as she quickly processed a couple of valuable lessons. “Talking to the board is not about presenting a series of numbers,” she says. “It’s about telling a story. And people don’t necessarily know how to do that.”

What’s more, like any storyteller, she was supposed to understand her audience. But Mehta had failed to build any kind of rapport with her board ahead of that first meeting. As a result, she had no sense of what her board members cared about.

Mehta has since had a storied career as CFO at multiple Seattle-area startups. Over a dozen or so years—and some 100 board presentations—she has mastered the art of telling the “State of the Business” story.

Mehta, who currently serves as CFO of Pioneer Square Labs, a startup “studio” and venture fund, recently sat down with Silicon Valley Bank to talk about communicating effectively with her boards.

Going back to that first meeting, you said it was not about basic numbers. How did you realize that updating board members on the business required you to tell a story?

The raw numbers were probably the least interesting part. They could just read those on their own. What was interesting to them were figures like revenue per user, the contract pipeline and how that related to the rate of growth. It was hard for them to get that color from slides.

As I started working with them more, I was able to understand what was relevant. They cared about the impact of new products and of discounts we offered on margins. They cared a lot about the number of customers, since it’s an industry with few but large customers. Were we in a contract? What kind of commitments had we received? It was a lot about trends and projections. What does your expense makeup going forward look like? How much is in sales? How much is in G&A versus R&D? Your bookings per productive salesperson give you a picture of both your efficiency and your growth. And having a historical context of whether we were trending positively or negatively was vital.

So did you change your approach immediately?

I wouldn't say it was an epiphany right after the first meeting. But pretty quickly, I stopped presenting financials. I would just email them. My slides were built around trends and charts and relied heavily on visuals. It's much easier for people to digest visual information. I also spent the time to tease out trends so board members can get their heads around something in a very easy and quick way.

The foundational piece is describing the whys behind important trends, but not all trends. Some trends aren't that interesting. You may not need to call out something that hasn’t changed. You want to draw the board’s attention to the things that are most relevant in that quarter or that changed either positively or negatively. You need to make sure they don't have to go dig for that information. Get right to the meat of whatever matters this quarter or this year.

Are there certain ways to present data that you would avoid—some way in which the numbers you are presenting don’t make it easy to draw the right conclusions?

Yes. A lot of people show cumulative customers, for example, rather than new customers. If you ever look at a chart of cumulative customers, it's always going to be up into the right. You can present that to a board and everyone will go, "Oh great." But in reality, if you chart the number of new customers that you're adding every quarter, it may not look so good. It’s a much better way to highlight whether your customer acquisition has gone flat or is declining.

Forcing board members to draw conclusions is never great. Either they're going to come up with the wrong one, or they may feel you're not highlighting a potential problem.

What do you do to prepare the board members for what’s coming?

Too many times, people make the mistake of sending materials out the day before. And many times board members are traveling or don’t have time, and they end up reading the information at the board meeting. The last thing you want them to do is to spend the time going down a rabbit hole in the board meeting when they could have easily addressed something with you in advance.

Also, you should always be socializing anything important, that you need a key decision on in advance of the board meeting. With a budget, for example, if there's going to be a discussion, you don't want it to blow up during the board meeting. You want to know three weeks in advance that some members may be very concerned about growth and think we should be adding more fuel to the fire and hiring more sales reps. And you want to know that another board member, while they're really concerned about growth, they're also concerned about cash and are not comfortable with the level of spend you have on the sales side. Being able to flesh that out in advance so you know what the reservations are going to be, you know what the questions are going to be, and so you are prepared.

Do you handle things differently if you have bad news to report, compared to good news?

If you don't have good news, it should not be a surprise. The management team should have reached out to the board in advance so they aren't blindsided. Make sure that as a management team, you have discussed that in advance and people understand what the outcomes could be. You want to have a strategy around next steps. You want a consistent voice amongst the management team, because otherwise, it really seems like you don’t have your act together.

Presenting information to the board without a plan for addressing problematic things, that’s just not a very responsible management team.

Your advice about communicating with the board early and often suggests the relationship with individual directors extends beyond the boardroom. Is that right?

I think it's essential for CFOs to build a rapport with each of their board members outside of the boardroom and outside of the boardroom context. If there’s any lesson that I would give myself over and over again, it's that one. Make the time and effort to connect with the board members who are going to be relevant to the areas that you're managing.

A lot of the time, it's really asking them at a board meeting or via email saying, "Hey, I'd really like to sync with you every month," or, "Can we set up a time to talk a week before the board meeting? I want to run some ideas by you.” And really trying to have them help be your partner around whatever issue you are facing. It's hard for them to be a partner if the first time they hear about some issue is at the board meeting.

Are there some of those relationships that have served you particularly well in your career?

I would say a couple that stand out. Early on in my career, I had a board member who had been a prior CFO and then went on to be the CEO of a large public company. He was a great advocate and a great mentor because he had walked in my shoes before.

Similarly, I had another board member that was the CFO at a different company before. I used that person as a sounding board as we were going through an M&A transaction. I was able to pick up the phone and say, "Here are some of the terms that they're thinking about. How do you think about them? How would you approach them?"

These experienced CFOs were great partners because they understood what that role looks like, and they had been in those shoes and could provide excellent guidance.

"Get right to the meat of whatever matters this quarter or this year."

What’s an example of the guidance they could provide?

We had this distinct conversation on whether we needed to add headcount to our sales team and add sales territories. Our sales productivity metrics were declining at the time. And, I was not an advocate of adding a lot of new sales territories until we really understood what was driving the decline. Were we making bad hiring decisions? Were we not training our salespeople? Was there something from our product market fit perspective that we needed to understand better? Were we not selling to the right buyer?

One of our board members kept saying, "Now's the time to grow.” Another board member who I knew really well and who came from more of a data-driven financial background would make the opposite point: "Why would we put more money right now into this until we really better understand whether we’re throwing good money after bad." He was repeating a lot of what I said. But coming from within the board, it has a different lens to it.

That must not have been the only time you encountered conflicting opinions in a board meeting. As you think about presenting to a board, what do you need to learn about points of view and even the backgrounds of your directors?

There are different types of board members. There are strategic board members that may come from industry or may come from strategic partners or that understand the business well. There are financially driven board members that could be from venture or private equity. And even within venture and private equity, there are really two different types of investors. Understanding private equity metrics is very important. They care about internal rate of return and other financial metrics because their funds are measured on those. A venture investor may have a much longer time frame and time horizon and is at the end of the day really looking at their overall return.

People tend to think finance is all about numbers. But from what you describe, there are quite a few “people” skills that you need as you think about talking to your board. Right?

When you're working with boards, the most important thing is integrity. And, integrity comes from transparency, from being reliable and consistent, from them knowing that they can come to you and understand the health of the business. It's a relationship that requires trust.

You also need to have the right communication skills to do it well.

The CFO's role can sometimes be to raise things that maybe others don't want to highlight. You can do it privately because you want to make sure that everyone's on the same page or you can do it at the board meeting. You build trust when they know you're providing relevant information that's accurate and that you're going to present not just the good but also be candid about where there are areas where things could be better.