Corporate Finance Strategies

Debt vs Equity, does Debt to Equity tell the whole picture? As investors, we need to measure how well a company invests to grow. Companies have two options, beyond internal (free cash flow). Debt or equity. Understanding these options can significantly influence a company's financial structure and growth trajectory. 𝗗𝗲𝗯𝘁 involves borrowing money that must be repaid over time, usually with interest. It includes instruments like bank loans, bonds, and credit lines. Debt financing is advantageous because interest payments are tax-deductible and it doesn’t dilute ownership. However, it requires regular repayments that can strain cash flow, and excessive debt can lead to increased risk of bankruptcy. 𝗘𝗾𝘂𝗶𝘁𝘆 represents ownership in a company, acquired through instruments like stocks. Equity financing allows companies to raise capital without incurring debt. The main advantages include no obligation for repayment and no interest expenses, which is beneficial during cash flow downturns. However, issuing equity can dilute current shareholders’ stakes and might lead to conflicting interests among investors. 𝗧𝘆𝗽𝗲𝘀 𝗼𝗳 𝗗𝗲𝗯𝘁: 1. 𝗦𝗲𝗰𝘂𝗿𝗲𝗱 𝗗𝗲𝗯𝘁: Backed by collateral, offering lower risk and interest rates. Think bonds or bank loans     2. 𝗨𝗻𝘀𝗲𝗰𝘂𝗿𝗲𝗱 𝗗𝗲𝗯𝘁: Based on creditworthiness, typically carrying higher interest rates. Think lines of credit or commercial paper. 𝗧𝘆𝗽𝗲𝘀 𝗼𝗳 𝗘𝗾𝘂𝗶𝘁𝘆: 1. 𝗖𝗼𝗺𝗺𝗼𝗻 𝗘𝗾𝘂𝗶𝘁𝘆: Provides voting rights and dividends, subject to business performance.     2. 𝗣𝗿𝗲𝗳𝗲𝗿𝗿𝗲𝗱 𝗘𝗾𝘂𝗶𝘁𝘆: Often carries no voting rights, but provides fixed dividends. 𝗠𝗲𝗮𝘀𝘂𝗿𝗶𝗻𝗴 𝗗𝗲𝗯𝘁: 1. 𝗗𝗲𝗯𝘁-𝘁𝗼-𝗘𝗾𝘂𝗶𝘁𝘆 𝗥𝗮𝘁𝗶𝗼: Indicates the proportion of debt to shareholder equity, look for ratios < 1.0     2. 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗖𝗼𝘃𝗲𝗿𝗮𝗴𝗲 𝗥𝗮𝘁𝗶𝗼: Shows how easily a company can pay interest on its outstanding. Ideal > 3x     𝗠𝗲𝗮𝘀𝘂𝗿𝗶𝗻𝗴 𝗘𝗾𝘂𝗶𝘁𝘆: 1. 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗘𝗾𝘂𝗶𝘁𝘆 (𝗥𝗢𝗘): Measures how well a company leverages its equity to grow profits. Look for > 15%.     2. 𝗣𝗿𝗶𝗰𝗲-𝘁𝗼-𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗥𝗮𝘁𝗶𝗼 (𝗣/𝗘): Helps evaluate if a stock price accurately reflects the company's earnings prospects. The higher the better. So, to summarize: Don’t let some ratio decide whether a company has too much debt. Reason from first principles. What’s the 𝘳𝘪𝘴𝘬 created by all this debt? Is this risk comfortably manageable given the company’s cash generating power? Or is equity a better option for the company? *** P.S. Want to grow as an investor? Join our FREE Nuggets emails to receive six weekly knowledge nuggets every Tuesday. Join here (it's free) → https://lnkd.in/gxbjyspK

How can finance teams be “strategic” when we’re buried in reports, inconsistent data, and last-minute requests? Here’s my playbook to drive real impact (from a 3x CFO): I call this framework the Strategic Finance Hierarchy of Needs (looking at you, Maslow). The idea is simple. You can’t be strategic if you’re stuck fixing broken data and chasing reports. So we have to build an unmovable foundation first. Here’s how it works: *Level 1*: Get your data in order Messy, inconsistent data keeps finance reactive. Invest in automation and governance so you’re working with a single source of truth. *Level 2*: Streamline reporting If leadership can’t get timely, accurate reports, they won’t trust finance’s insights. Make sure your reporting is fast, accurate, and decision-ready. *Level 3*: Get future-focused Once you’ve conquered historical data, shift to forecasting, scenario planning, and guiding the business on what’s next. Finance moves from reporting the past to shaping the future. *Level 4*: Lead with strategy At the top, finance becomes a true business partner — translating numbers into action and driving high-impact decisions. The best CFOs don’t just react; they influence what happens next. Where are you on this pyramid?

A big enterprise purchase order just landed.... Now comes the dangerous decision. Finance it with debt or raise more equity? Purchase order financing seems like the perfect solution: • Non-dilutive capital (existing investors keep their percentage) • Faster than equity rounds • Specifically designed for scaling production BUT… If that enterprise client cancels their order due to an issue, you're suddenly facing catastrophic debt with no revenue to cover it. Unlike equity investors who only succeed when you succeed, lenders simply want their money back. Period. Raising, while dilutive, funds expansion much more linearly and can still be mindful of both excessive dilution and existential debt risk. For early-stage companies, we recommend keeping debt under 20% of your capital stack. As you mature with predictable revenues, that percentage can gradually increase. Remember: Debt must be repaid regardless of customer behavior. Choose your financing strategy accordingly.

The best FP&A professionals I know focus on 5 things: 1. Forecast accuracy. A key role of FP&A is to predict financial outcomes. Accuracy in these predictions is vital. It builds credibility and trust in the FP&A team and provides valuable insights for other departments. When FP&A teams accurately forecast financial trends, the entire company can make more informed decisions about budgets, investments, and growth strategies. 2. Time outside finance. Daily interactions with departments outside finance are important. These can be status updates or sharing a new insight. FP&A teams must not work in isolation but actively seek out and contribute to the broader business strategy. Regular communication builds a collaborative environment. When financial insights are shared as stories and feedback is received, it leads to more aligned and effective business strategies. 3. Automation. FP&A teams must add automation. When you let software handle repetitive tasks like report generation, you can save tons of valuable time. Use this time for deeper financial analysis, forecasting future trends, and forming strong partnerships with other business areas. Automation is about saving your intellect for more strategic work. 4. Strategic advisory. Think beyond traditional reporting. . . FP&A teams can become strategic business partners. Get into the broader business context and work closely with the CFO and Board to influence strategic decisions. By playing a more advisory role, you can impact the company's revenue. 5. The 'why' behind numbers. Think of yourself like detectives—form a theory about what might be causing a trend and then dive into the data to test the hypothesis. This way, you can uncover the real factors affecting financial outcomes and lead your company to profitable decisions. Get started. 🦒

CMOs call marketing an engine for growth. CFOs call it a primary lever of enterprise value creation. One speaks in brand equity, customer acquisition, engagement, and monetization.  The other speaks in margins and profitability. When these departments don’t align,  ↳ Investments get slashed,  ↳ Performance stalls,  ↳ Growth suffers. But when marketing and finance work with UNIFIED language and data.   Companies make smarter investments. Here are four key metrics that help CMOs and CFOs speak the same language: 1. Customer Acquisition Cost (CAC) Formula: Total marketing spend ÷ New customers acquired CFOs ask, “How much are we spending per new customer? Can we lower it?” CMOs ask, “Which channels bring most efficiency, can we shift our budget?” CFOs want cost control, CMOs want better-performing channels.  ↳ Tracking CAC aligns both executives. 2. Customer Lifetime Value (LTV) Formula: (Avg. Purchase Value × Purchase Frequency × Margin Rate × Activity Rate) CFOs ask, “Are we making enough long-term revenue to justify CAC?” CMOs ask, “Should we increase LTV through engagement or monetization?” A CFO sees it as profitability over time, A CMO sees opportunities. ↳ Higher LTV justifies marketing investment. 3. Cash Payback Period Formula: CAC ÷ Gross Margin per Customer per Month CEOs ask, “How long before we earn back what we spent?” CMOs ask, “Which channels pay back fastest?” CFOs want liquidity, CMOs want reinvestment speed. ↳ A shorter payback period means faster growth cycles and less financial risk. 4. LTV:CAC Formula: Customer Lifetime Value ÷ Customer Acquisition Cost. CFOs ask: "Our financial plan requires a 3x ROI in 3 years-can you deliver?" CMOs ask: "Should I optimize for faster payback or a 3-year LTV:CAC target?" CFOs want financial justification, CMOs want strategic growth. ↳ A shared LTV:CAC view aligns investment decisions. CFOs and CMOs don’t need to agree on everything,  but they do need to align on the data that drives GROWTH. Start with blended performance, Then look at leading indicators for Paid. The last thing you want is debating attribution with a CEO or investor, When you're not even aligned on the core metrics above. Don't manage marketing as an expense,  Manage it as an investment. Track the right numbers, speak the same language, and watch your business grow. Which of these metrics does your company focus on the most? Drop a comment below. * * * I talk about the real mechanics of growth, data, and execution. If that’s what you care about, let’s connect.

Unlocking Growth Potential: How to Win CFOs Over to Marketing & Ecommerce Investments   As someone who has been a CEO & a CMO – I have learned the true value in ensuring my CFO is a strategic partner from ideation to execution. This has meant collaborating on the strategy, creating alignment on key success metrics, driving business performance & ultimately mitigating risk. I also found it critical to be transparent & meet together very often. -->Yet just 22% of CMOs say their partnership with CFOs is “truly collaborative" according to study from the CMO Council & KPMG --> @ 27% say a deeper collaboration would be possible if there was more partnership on metrics & goals and cited incentives and timetables alignment as critical factors Given the above statistics, I suggested at our annual BOD planning session for CommerceNext – let's have a panel with CFOs and really delve into how & why the CMO + CFO partnership is critical to any business seeking to drive value creation.   So I was thrilled to have this come to fruition & have the opportunity to spend time with Alex G. Goldelman - CFO UNIQLO, Susan Colton Weisel - CFO Brooklinen and Alex Brocklehurst - SVP & CFO Tapestry at CommerceNext. Here were our collective 8 takeaways: 1. Ensure alignment on the Long-term vision & goals from a financial, brand & customer vantage point. 2. Establish a framework for decision making around current goals & new initiatives. 3. Set up a formal meeting cadence to review plans & allow for a lot of informal discussions outside of those meetings. Investing in your relationship is paramount to success for both parties & the overall company. 4. Realize you are both tasked with value creation & the more each function can bring the other earlier into the planning process the better. 5. Embrace the test-learn-optimize approach & ensure you are aligned on what success looks like at each stage. Your CFO knows that not every initiative will deliver perfect results or add incrementality but they also know you can’t deliver the long-term results the board, the street etc. are seeking without taking some level of risk. 6. Invite your marketing team to the earnings call to help them build their financial acumen + provide an opportunity for a key finance team member to answer questions later that day. 7. Acknowledge that not every incremental dollar is created equal. So invest the time in analysis and shared language to ensure there is alignment. 8. Favorite metrics: LTV, incremental sales & margins and total shareholder return. #CommerceNext #Valuecreation #Partnership #collaboration

Great question from one of our investors. I thought I would share. What do you think of his question and my answer? From Investor: Hi Matt, A question I've never heard asked before in the world of syndication investing. I understand it couldn't be done with properties being purchased for many tens of millions of dollars, but say for properties being bought for $5-10 million does it make sense to raise the capital to buy the property outright without a loan? Maybe I'm missing one or several points of the whole purpose of investing with leverage. I guess you can buy more properties with the same of capital when using a loan. Thanks, ___________________________ What I wrote back: Glad to hear from you, and I hope you are well. Great question, here are my thoughts... Equity is WAY more expensive than Debt, but it can be more patient. Said another way, an equity investment would expect to make 15% or more once the deal is done, while a lender would only want 6 or maybe 7% on their money on a long-term deal. But debt almost always needs monthly payments, while equity can defer monthly payments in exchange for a higher yield.  So, if you we doing a big renovation project that won't have revenue for a long time, equity is a better fit because you don't have revenue to service your debt (most any debt provider will want monthly payments). An example of these types of deals would be our big value-add deals, like DC15 or new construction like DC18. Once you've completed the renovation plan and stabilized the asset, you can refinance that property with the new revenue you've created. So lots of equity, or even buying a property all cash, is a good conservative play when you are creating a large bump in asset value. On the other hand, if our project is cash positive day 1, like the hotel deal we have out right now, you want to go mostly debt because your cost of capital is less and your deal can afford it. Putting in too much equity on a deal like that would simply cause investors to get diluted and reduce their returns. I've rarely seen a scenario where you would do all debt or all equity long term. They both carry their benefits and risk profiles, so a good blend of both is almost always the answer. I hope that helps, and great question!

Here's why it feels like you're speaking Greek to your CFO: → You aren't correlating between brand investments and financial outcomes → Making your case compelling to CFOs. At Lifesight, here's how we're helping marketers speak to their CFOs: 1/ Direct revenue impact: → Measure the immediate sales lift from brand campaigns → Show how branding translates to tangible financial results 2/ Future market predictor: → Use 'share of search' to forecast market share growth → Demo your brand's potential for future sales 3/ The baseline boost: → Use Marketing Mix Modeling to reveal brand's underlying strength → Show how your brand contributes to sales, even without active campaigns 4/ Lifetime value enhancer: → Prove how your brand increases Customer Lifetime Value → Showcase the long-term financial benefits of brand loyalty 5/ Acquisition cost reducer: → Demo how a strong brand lowers Customer Acquisition Costs → Highlight the efficiency of your marketing spend 6/ Loyalty metrics: → Showcase improved repeat purchase rates and reduced churn → Prove your brand builds a stable, profitable customer base A few pro tips: → Include share of voice, Net Promoter Score, and price sensitivity → Paint a comprehensive picture of your brand's financial impact Ready to make your CFO a brand believer? Reach out to Lifesight today. We'll help you: → Track these crucial metrics with precision and consistency → Present brand value in terms that resonate with financial decision-makers → Transform your brand into a well-known financial asset Don't let communication barriers hinder your brand's potential. Lifesight can help you build a metric framework that turns brand value into budget approval. #brandmetrics #cfocommunication #marketingroi #lifesight