By way of introduction, I am OnlyCFO…which is an anonymous alias I use to write about finance stuff for tech companies. What started as a joke on Twitter turned into a weekly finance newsletter. And the folks at Topline asked if I would write about how CFOs think about approving budget for new deals.

The best way to sell to the CFO and get a deal signed is to understand the CFO (and company) objectives. Lots of deals get killed by the CFO (or other leaders) because of a lack of understanding of what is important to the CFO. 

I put all spend into 4 buckets:

Revenue Growth vs Efficiency

In theory, the CFO should follow the Rule of X when making decisions for the annual operating plan and department budgets.

Rule of X = (Growth Rate * Multiplier) + FCF Margin

Based on the Rule of X, CFOs are primarily concerned about the balance of two things:

The multiplier in this equation is also very important. While CFOs have to balance between revenue growth and profitability, the relative importance between these two variables can be very different depending on the company and overall environment.

For example, the relative importance of growth today is a lot different than in 2021 (2.5x today versus 10x+ in 2021).

The relative importance of growth vs profitability can also depend on the CFO. While a CFO should theoretically follow the Rule of X weighting that maximizes valuation, some CFOs won’t follow it. For example:

Also, the relative importance of growth vs efficiency is stage/company specific. A hot AI company growing quickly is focused heavily on growth. While a slow growing company that has to manage cash burn is focused a lot on efficiency.

This is the stuff required so that your company doesn’t end up on the front page of a newspaper - cybersecurity, financial audits, legal, etc. The relative importance of this factor also changes between companies and stage of company.

It’s about acceptable levels of risk. If you are small then you care a bit less about some of this stuff. For example, you probably don’t need a financial statement audit if you have <$5M of revenue.

“What is the likelihood of an issue and then what is the potential impact?”

Every tool that doesn’t fit neatly into one of the above categories is a nice-to-have or what I am referring to as “candy”. Salespeople will always pitch that their tool fits into one of the above categories, but some tools will fit much cleaner than others…

Make sure your story is clean and doesn’t feel like BS. CFOs go into these conversations assuming the cost savings or revenue growth promises are BS, so it’s your job to convince them why they are not.

I have killed a lot of deals because the sales rep promises of revenue of cost savings feel stupid and unsubstantiated.

These are the questions I want my budget owner to be able to answer (hint: I don’t want to talk to salespeople): 

There are lots of opinions about pricing models, but a CFO just wants transparent pricing at a good price that can be accurately forecasted. You can do this with any pricing model if it makes sense for the tool.

Many AI products are pitching themselves as human replacements to justify a high price.

If you spend $150K on a human and I can replace that for 60% of their cost then that is a good deal. And it’s coming from existing budget!

AI stuff is becoming mainstream in 2025 so pricing a tool based on value today won’t work for very long. The price of AI tools will move toward the floor of alternatives. Don’t get greedy in pricing based only on value because you will lose the CFO’s trust. The pricing ceiling with AI will move toward the floor very quickly.

CFOs are checking with their network and other resources to make sure they get the best deal possible. CFOs have a lot more visibility into pricing today. The last thing a CFO wants is to feel like they are not getting a good deal.

Sales Folks: CFOs, more than anyone, want to feel like they got a win if they are involved in the negotiations. Make sure there is something for them.

Be extremely cautious with multi-year commits. Things change so fast that it often isn’t worth the risk. I tell folks to wait at least until the second year of using any software before committing more than 12 months. A lot can go wrong.

All else being equal, CFOs want shorter contract term lengths to reduce risk. While there may be lost discounts with shorter contract terms, the lost optionality might be even greater as new tools are developed that are much better and/or significantly less expensive.

Sales Folks: Don’t overly incentive and push sales reps to close multi-year deals. Getting pulled into the conversation is OK, but pushing it can cause more issues than it solves.

I always try to negotiate these out and if the vendor refuses then I will just send an opt-out notice immediately after the contract is signed.

A side benefit of sending the cancellation notice right after signing is that the vendor engages with you early for the renewal every time, which helps get more discounts.

Sales Folks: seems like an easy win for the customer so just give it to them. Builds trust.

Annual upfront is typical for enterprise SaaS and I have historically been just fine with that (makes my accounts payable team’s life easier), but if it’s a high dollar amount then I will push for shorter payment terms. Gives me leverage as well if the software or implementation isn’t going well…

Sales Folks: Deals are almost never killed over this. Usually just a last minute ask after it’s already decided they will sign the contract.

This discussion has been around a long time, but with AI advancements this threat has more teeth today.

To be clear, I do not want to be in the business of building and maintaining all of my software needs like a CRM. But…if the price is crazy for what we need or the tool is for a low impact area, then you better believe I am now considering building internally.

Sales Folks: If you are one of those tools, then you better have strong reasons why I shouldn’t. Hint…I don’t want to continually dedicate R&D resources to maintain this stuff

The CFO’s trust.

The #1 thing that makes a purchase approval easy is my trust of the internal buyer. The #2 thing is my trust of the seller and their company.

I DO NOT want to get on sales calls about purchasing software. I want my leaders (budget owners) to do that diligence themselves. If I trust them then I will mostly let them run the show. If I don’t trust them…then I am much more involved.

CFOs quickly find out who is lazy (or lacks experience) and hasn’t done much analysis/diligence. We push back hard, make them look at alternatives, ask other people, etc.

Sales Folks: Your job is to help equip your champions to earn the trust of their leaders and CFO. Spend extra time with those who are less experienced, new to a company, or may not have the trust of their CFO. Because they are the ones who need to earn trust to get the purchase approved.

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This Made Us Think: Curated by Kyler Verney.

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