Goldman also focused on improving the forecasting ability of Fortinet’s 45-member finance team. “We worked hard to improve our predictability,” he says. Because Fortinet’s network security products reside on an actual appliance, the company has inventory that has to be carefully managed. “The ability to match up our forecasts with what we order in terms of inventory was very important in terms of predicting our revenue,” he says.
The payoff for such predictability and reliability is investor confidence, says Goldman — “more confidence in providing you with credit or further equity rounds.” Indeed, he notes, promoting confidence among investors and bankers is “a key role of the CFO.”
Forecasting is done quarterly at Fortinet, says Goldman, but “we update our forecast every week.” The weekly exercise is done primarily for internal purposes. “We don’t do it as much for our equity holders or venture investors,” he says. “We do it for ourselves. We do it because it is good business.” Goldman admits that forecasting “is a lot tougher in this environment,” with much of the information available being “short-term.”
As for cost cutting, Goldman is in the enviable position of working for a company that “is still hiring,” not firing. Still, he has seen his share of layoffs over the years, both as a CFO and as a board member on several public and private companies. Layoffs, he says, are always a “tough balancing act to manage,” an act that varies from company to company depending on capital structure and cash position.
But there’s one tactic he considers always to be a mistake. “I’ve heard [it said], when you cut, do it all at once,” says Goldman. But not even the smartest finance professional can reliably predict the bottom of a downturn, he points out, or the possibility of a sudden recovery. Painful as it might be to have repeated layoffs, he says, it is better to “cut the dog’s tail off inch-by-inch” than risk being short of resources when a recovery begins.
By far the most important aspect of managing in an economic crisis, says Goldman, is to recognize it as an opportunity to roll out new products and prepare for an eventual recovery. “Don’t waste a recession,” he says. “You can outflank your competitors during tough times when they are deteriorating. Use this time to invest, expand, take share. Hire great people.”
Goldman says he has no more idea than anyone else when this current recession will end, but he maintains that “it’s a great time to invest in R&D and great sales folks.” Developing new customers and new geographic markets during a downturn are “just good investments,” he says. “You may not get a big return in tough times, but you will get a humongous return when the market comes back.”
Of course, that all comes back to Goldman’s Catch-22: companies can’t capitalize on current conditions if they were already in bad shape when the recession started. “If you don’t have cash,” he says, “all bets are off.”