Impact Pricing Podcast

Ep121: The Key Role CFOs Play in Making Profitable Pricing Decisions with Steve Rosvold

 

Steve Rosvold is the founder at CFO.University, a global professional development community dedicated to growing finance leaders by providing tools and learning opportunities suited to individual needs. Its focus is on delivering practical, convenient, performance enhancing learning, economically. Its community is made up of Member-Scholars, Companies, and Trusted Advisors committed to the development of finance leaders. 

In this episode, Steve shares what CFO University hopes to help CFOs in terms of value-based pricing and not just setting the margin, and tapping its influence on the entire company to give more value to the organization. 

Why you have to check out today’s podcast:

  • Find out about CFO University and the education they provide around value-based pricing for CFOs so they become more creative and innovative in providing a more positive influence on pricing to the company 
  • Learn how Sales, Marketing, and Finance can create a cooperative and collaborative dynamic that boosts value to the company 
  • Find out where CFOs can find opportunity to learn more value in discrete products and product portfolios that work 

         

Learn the language of your sales and marketing teams and use that to help define what they need, and go out and get the data for that.

Steve Rosvold

     

Topics Covered:

02:17 – What do CFOs generally think about Pricing 

03:30 – CFOs’ reaction to an article published about value-based pricing 

04:53 – The hard work that goes into educating CFOs about value-based pricing 

05:54 – The reason why CFOs don’t emphasize pricing 

08:20 – Learning how to test the value rather than just setting the margin 

09:32 – How the cost part is the CFOs domain in the past 

11:04 – The whole strength of the CFO 

13:16 – What CFOs do a really good job of 

14:46 – Creating a collaborative effort among Sales, Marketing, and Finance 

17:13 – Not doing it the way they should be doing it 

18:32 – What scares people of the CFO 

20:26 – Where CFOs have to learn more about value in pricing 

21:56 – Steve’s pricing advice that will impact your business 

23:27 – When do financial transformation takes place 

     

Key Takeaways: 

“We’re frankly learning about how to test the value, rather than set the margin.” – Steve Rosvold 

I think that whole customer journey, the Finance teams can help a lot with the data they have, and help influence and really give insight to the marketing, the pricing, and marketing teams.” – Steve Rosvold 

“There’s been a kind of a contentious dynamic where it really should be very cooperative and collaborative. And then if we get to that point, now we’ve got this super power being created between Finance and Sales, and Marketing that boost value in companies.”  – Steve Rosvold 

“The whole idea of looking at net present values and future cash flows, we’re great at that, but that’s the big picture, looking at other companies. When it comes to these discrete products that we’re selling, and trying to put a portfolio of products together that works, I think CFOs aren’t very strong in that generally. And there’s an opportunity there.” – Steve Rosvold 

“Transformation takes place when value goes up, and costs go down. It’s two levers and both have to happen. So, we’re really forcing Finance people to really get on the value side of things, whether that’s products or their services or systems or whatever.” – Steve Rosvold 

      

People/Resources Mentioned: 

        

Connect with Steve Rosvold: 

      

Connect with Mark Stiving: 

            

Full Interview Transcript

(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)

Steve Rosvold   

Learn the language of your sales and marketing teams and use that to help define what they need, and go out and get the data for that. 

[Intro] 

Mark Stiving   

Today’s podcast is sponsored by Jennings Executive Search; I had a great conversation with Jon Jennings about the skills needed in different pricing roles. He and I think a lot of like, if you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing Pricing people; save that three times fast. 

Mark Stiving   

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the financial relationship between them. I’m Mark Stiving. Today, our guest is Steve Rosvold, and here are three things you want to learn about Steve before we start. He started out as an accountant, but he quickly moved into finance where the big bucks are, working his way up to a CFO. 17 years ago, he started and still runs a company that coaches CFOs and small to mid-size companies. Four years ago, he started CFO University, a new way to help CFOs grow. Oh, and by the way, he loves cycling and once rode 275 miles in one day. My butt hurts thinking about that. Welcome, Steve.  

Steve Rosvold  

It’s great to be on your show. Mark, thank you for that. The big bucks, okay, I like that. I’m going to go look right at my bank account right now. Make sure that’s all still there. But it’s great to be on the show.  

Mark Stiving   

Oh, good. Glad to hear that. I almost always ask the question, how did you get into pricing. But I really can’t do that to you because you’re not in pricing. Instead, what I want to do is talk about CFOs today, and I want to learn more about them and how they think. And hopefully, you can share that with us. Before you met me, how did you think CFOs thought about pricing? 

Steve Rosvold   

I think certainly in the past, and frankly, when I was at the last CFO job seven or eight years ago, it’s cost-plus, it’s looking at the margin. CFOs have been focused on the cost side of the business and the margin side of the business. They look at the top line, but only in relation to the margin. And I think when we first met not long ago, the whole idea of value pricing is really interesting. And it’s something that CFOs as they travel through having a more valuable contribution to their companies or having to understand pricing from more of a perspective than just cost-plus, or an hourly rate, or even fixed rate. That’s what really attracted me to your work at Impact Pricing, because you really preach the value of pricing and how to increase it. And I think that’s a great place for CFOs to start adding and increasing their value to the company.  

Mark Stiving 

Well, I certainly agree with that, of course. We published an article on CFO University on your site two, three weeks ago now? Something like that? Have you heard anything different from CFOs? Have they gotten excited? They said, hey, this is a way I want to think in the future. 

Steve Rosvold 

I think almost totally; it’s been a positive. Where the hard part comes in is how do we do this value-based pricing? How do I have an influence on that? And how do I create that value for the company? It had very positive but the question that remains for the CFO is, and you hit it on the head, we’re very focused on cost, we maybe don’t understand value well enough when it comes to pricing products and services. That’s where the quandary for us is, we want to get there. We’re not sure how. That’s why I’m so excited to have you as part of one of our contributors at CFO University because you can teach so much to our members in the CFO community at large. Very popular article, people, they want to create that value and help companies influence in a positive way. It was really, really positive from its acceptance. Now, there’s the big education piece; how do we get there?  

Mark Stiving   

Yeah, I find it interesting, because I think CFOs are such an ideal place for pricing to penetrate a company, because of all the influence that CFOs tend to have. And because they care about margin. And so, it’s just a fantastic place. But I never thought about it. I guess that’s not true. I did think about it a little bit, but I never realized how hard it would be to get CFOs to adopt this. And I think if you can get them excited, then we can find a way to educate them.  

Steve Rosvold   

Yeah, I think so, too. And that’s going to be a process. And, as you point out in the article and our conversations, the concept we know where CFOs spend their time and where we spend our time in putting together balance sheets and income statements is very fixed, very firm is the end-result a lot of times. Breaking away from this concept of having a finite result is also, I think, helping us. It will help us get into the concept of creating value whether you have to have more optionality. You have to take some more risks. You have to do more experimentation, and I’m not the expert; you’re going to be the expert in that. But I think some of those shackles that hold us back from being really creative and innovative, we have to take off those shackles when it comes to having more of an influence, a more of a positive influence on pricing.  

Mark Stiving  

Do you think that’s the reason why CFOs don’t do pricing or don’t emphasize pricing today? And by that, I mean, the risk-aversion?  

Steve Rosvold   

No, I don’t think it’s risk aversion. I think it’s been left, so, sales and marketing side, I don’t think and a couple of things, sales and marketing have been kind of the creators of products they have tended to be what can we sell this at some kind of. CFOs had let them have their way in that. And the CFO looked at more from a margin standpoint. They’ve said, okay, if we can make a 30% margin on this, our overheads are X, we can get a return for our shareholders, that’s fine. They’ve kind of got to a point where they’ve used a financial equation to say, okay, that margin works for us that price is fine. And I think that’s what you’re exposing the potential to say, let’s not look at the margin, let’s look at the price; maybe the margin should be 45%. I think that’s one area where the CFOs have in their past as a control function as a governance function as a recording function, all those things that are a bit more historical, and a bit more A plus B or one plus two equals three. That’s that, and I don’t think pricing has that same concept. I think some is breaking those shackles, but I would say one thing, there are some companies, I’m familiar with that, and I don’t think you’d agree with this, either, they have their CFO has approved the prices. There are cases wherein a real control environment, and they’re doing it from the standpoint of, are we making the margin we can make, not from getting the value we should, but are we making the margin we can? There are places, but I don’t think we’re approaching it from the right position.  

Mark Stiving   

Yeah, I don’t think it hurts to have a CFO say, yes, this is okay pricing. As long as in their mind, their rule is, are we making a decent enough margin? But not, is this the lowest price we can go to? It has to be at least X or 20% margin or whatever the number is going to be? Or why would we be in this business? But what I think often happens is the CFO says, okay, we need 50 points a margin, our investors expect 50 points a margin, and they tell the entire company, we need 50 points a margin? Well, that just becomes the plus in our cost-plus because I don’t have to think about my pricing anymore. I know what my price is going to be, it’s going to be 50 points a margin, and I don’t think it’s nefarious, a cost-plus is the right way to do pricing. I think it’s just we need 50 points a margin; we tell the company that, and that’s how the company behaves. Does that make sense to you?  

Steve Rosvold   

I think that is a formula in a lot of companies. The CFO said, we need this, and then for a sales department, that becomes a benchmark. And if they have a great product, and it’s an easy sale, that’s great for the salespeople. They’re going to make their commissions and sell a bunch more product at a margin that it makes it easy for them to get that extra 15 or 20 points. That’s hard work. I think you really hit the nail on the head that once we’ve established that, this is the minimum margin that becomes the margin. We have to make this, and I think that’s what we have to break away from that; we’re frankly learning about how to test the value rather than set this margin. That’s the part that is really exciting, I think, for us.  

Mark Stiving   

I want to come back to that in just a second. But I want to take this conversation in a completely different direction for just a second. And that is, the margin has two sides to it. There’s a revenue side and a cost side. How involved do CFOs get in cost management and in cost reduction initiatives?  

Steve Rosvold  

And I think that’s been a big focus. When I talk about how they feel, that’s what they can control the most, that’s been their bread and butter for years and years, understanding the cost side. That becomes the focus, and that’s part of the problem, if they look at, hey, I want, we need to increase margin, 20% they go and say we got to reduce costs 10%. Well, maybe that margin come out of the top line, not the cost side. I think you hit the nail on the head there too, that CFOs in general, that’s our domain. The cost part has been our domain in the past. And that’s really from a control aspect, making sure that the costs stay in line, they’re really good at it. CFOs are really good at that. The peril of really learning about value-based pricing and all the lessons that you are teaching perfectionists. 

Mark Stiving  

It’s interesting. And I’m thinking out loud with you, Steve. So, don’t hold this against me. But it’s interesting to me that I would bet CFOs aren’t experts at reducing costs, either. And I say that in the following sense. They can’t go to the manufacturing and floor and say, oh, we need to replace this machine with that machine cause it’s going to take costs out. Instead, they go to operations and say, we didn’t take a 20% of our costs, how are we going to do it? And they expect them to do the work. But they’re monitoring, pushing, trying to make sure it happens. 

Steve Rosvold   

I would push back a little bit on that Mark, you’re right, the technical parts, we don’t know. But as far as understand the cost structure of being able to show people what that cost structure looks like, I think CFOs are really good at that. That doesn’t mean that they don’t need help to get those savings. It’s not going to be in troubled times. So early on in COVID there was mandates. We have to cut costs, 20% are not going to make it through six months. There were some mandates, but normally, and we certainly teach this at CFO University, that it’s a collaboration, what the CFOs are doing, and their teams are shining bright lights on the cost structure, and hopefully the revenue side as well. But let’s say it’s a cost structure, and able to work with the operations team and the marketing teams, even the human resource team and say, how does this fit in to what we’re producing the value that companies creating? Our enterprise values X, here’s the resources we’re using for this, how do we make that work? I think where the CFO adds the value, isn’t that they know where to get the new machine, they’re able to explain where the cost structure is. And in a way, if they’re good, they’re able to explain the cost structure in a way that those other departments are able to say, hey, we can have savings here, here and here. The details, you’re right, that’s going to be left in the different departments. But the whole strength of the CFO is being able to communicate that in a way that those people can make the right decisions and help along the way.  

Mark Stiving  

That was an absolutely fabulous answer. Because what I wanted to do with whatever answer you were going to give me to say, could we then take that and apply it to pricing to the revenue side, instead of just the cost side? Instead of saying finance people have to be the experts in the details? Can they understand and explain the structure to the rest of the company at a level or at a point that says, oh, yeah, we’re not doing this well enough. Or we could be improving there. Things like watching ASP trends. Things like watching segments, and which customers pay us a lot of money, which customers don’t pay us much. And why does that happen? And what industries are really effective for us? And where’s our win-loss ratio relative to all these things? Now, these are awesome things for pricing people, business people to understand, and I think finance could drive those.  

Steve Rosvold 

You know, I think we and I think you’re right. And I think in the past, there’s a closer relationship on the vendor side, frequently to a CFO than the customer side. And that’s the shift that I think we’re seeing more is all the data on invoicing and receivables and purchase orders and even getting involved in the sales funnel, understanding what’s working, what’s not. One thing CFOs do a really good job of is collecting data, we can get better at then using that data to analyze things and that’s I think what you’re hitting on, Mark is that how can we supply information on customers who pay on time customers who are troubled accounts, customers who order, you know, twice during the month when this happens? And once during the month when this happens? You know, how do we help our sales and marketing teams, you know, understand the behavior of our customers so that they can then take the right action, whether it’s a pricing action, or maybe even a volume action. You know, they have the tools to do that. So, I think that whole customer journey, the finance teams can help a lot with the data they have, and help influence and really give insight to the marketing, the pricing, and marketing teams.  

Mark Stiving   

I think that’s absolutely true. Now, compare and contrast. But don’t you hate that question? Would you compare and contrast these two? But compare and contrast the answer you just gave me with what they really do with the cost side? Because isn’t it the exact same thing?  

Steve Rosvold  

It should be. And I can say this from experience, so shame on me. But the cost side is just it’s been in the DNA for the finance people. Whereas thinking about customers has been in the purview. And if you think about a sales and marketing team (this is maybe my perception) but I think it’s very few. Sales and marketing team, a lot of companies have a lot of power. Then they should, they’re facing the customer, purchasing and procurement. The vendors are like, hey, we have to live with them, we’re going to try to base things as cheap, not but our customers are golden. There’s, I think, a little bit of this sense that the sales and marketing teams need to be left alone to do their own thing on the cost side. I think that that kind of attitude, which is an old attitude that needs to be broken down, creates this dynamic where they’re just, it’s harder to get involved with the sales and marketing teams, whereas it has to be just the opposite. We have to be really willing to partner with those sales, marketing folks help with the information, what do they need, go ask him. How can we help you with this? One of the ways you think about sales and marketing and I think a lot of it comes to credit and things like that. Your salespeople want to sell on credit terms. All the Finance team is trying to protect, and they don’t want bad debt. There’s that, there’s a little bit of that. You don’t have that on the purchase side normally, because you’re the ones getting the terms of the purchase side. There’s that credit risk that all has become contentious between sales and finance. And that’s a place where that friction comes up. The sales people want better terms, they’re rooting for the customer, they’re trying to help the customer and the finance people are trying to prevent credit losses and working capital crunches. There’s been a contentious dynamic there, where it really should be a very cooperative and collaborative. Then if we get to that point, now we’ve got this super power being created, I think, between finance and sales, and marketing that you’re really boosting value in companies.  

Mark Stiving 

Yeah. I want to go back when I said compare and contrast, here’s exactly what I was thinking. I want you to address this one directly. And that is, you describe the pricing side, as how finance should collect data, analyze it, and present it back in a way that says, hey, here’s how we make sense of our markets. But isn’t that exactly what they do on the cost side, where they’re collecting data, analyzing it, presenting it back to the company and say, here’s how we make sense of our cost structures? 

Steve Rosvold   

No doubt. The comparative piece that you’re talking about, we don’t do it the way we should be doing it. I agree with you that the way we do it on the on the cost side is much more date and then we can get into the cracks of everything and who’s taking discounts? Or should we be taking discounts on all that’s on the vendor side. We just don’t have, in my experiences, we haven’t had the same focus. Now, I think that’s changing, Mark. I think in your example, people, your articles, they’re just being eaten up by finance people because they find it such an area of potential growth and value for them. I think we’re moving towards that where the comparative things will be much more equal. Whereas right now, they’re still a little bit unbalanced between the procurement side and the sales side.  

Mark Stiving   

Yeah. And I wasn’t trying to imply they were doing pricing well, yet. It was really just the concept of it’s all about collecting and analyzing and presenting data and information. The other thing I find fascinating, is that you think marketing and sales have a lot of power. And by the way they do, they absolutely do. But I got to tell you and most companies I’ve ever been involved with, everybody’s terrified of the CFO.  

Steve Rosvold   

But terrified because of power. I’m not sure maybe they’re probably. Yeah, I think but that we and there’s a control function that I think CFOs will never have that. There’ll be the chief control officer, as well as some other things. I think that’s what scares people is they’re going to limit people from taking risk. That’s the part that scares people. They also get to be in some situations that the hatchet person right but big cost changes need to happen and it’s kind of left on the CFO. There’s that history of they give the tough love. There I got to watch out for him. But I think that the collaboration part is where if we look at it from both sides, what the CFO skills are and what the teams have all that data, all that analytic capabilities. There’s a gentleman, Andrew Codd; if I had introduced Andrew Codd, he runs a data analytics team if I haven’t. And he works with custom. He works with sales teams on customer success and new programs. He’s a finance guy, he’s in the controller area for Dell. And it is fascinating how he partners with his sales team. There are pockets where we’re breaking out and creating this really great collaboration, where people are now coming to him, salespeople are coming to Andrew and saying, hey, can you do this for me? Can you do this for me? Instead of running when the comptroller shows up, or the CFO shows up, they’re running towards Andrew. So, there’s hope there, there’s hope.  

Mark Stiving   

Two thoughts. I posted an article on LinkedIn recently; it was about CFOs. And I actually got pushback from a bunch of CFO, several CFOs. And they were saying, oh, we already do this. We already watch value; we understand value. And so maybe they dealt with to the level that I believe they should, but totally okay. I’m okay with the pushback. I just thought it was interesting that says, yeah, we’re doing some of that today.  

Steve Rosvold  

Well, can I comment on that real quick, Mark?  

Mark Stiving   

Of course! 

Steve Rosvold  

Because if you say, Steve, you don’t recognize value, I want to reach out and punch you in the face. Because I do see value. If I’m looking at another company and looking at value, I can see what I don’t think the value you’re talking about is individual discrete prices for specific products and services that I agree with. And maybe if you aggregate that, that’s the value of a company. But I think when it comes to buying and, we have a lot of background, and you know this from your MBAs, I mean, you’ve got MBAs, PhDs, but the whole idea of looking at net present values and future cash flows. We’re great at that, but that’s the big picture, looking at other companies when it comes to these discrete products that we’re selling, and trying to put a portfolio of products together that works. That’s where I think that’s the value. And I’m kind of putting words in your mouth. That’s the value you’re looking at. I think CFOs aren’t very strong in that generally. And there’s an opportunity there. But when it comes to valuing a business that you know, that type of thing, that’s where I think people be offended if they say you don’t understand value.  

Mark Stiving  

think the word value has tons and tons of meaning. And so, we got it; we have to define them. Yeah, absolutely. All right, Steve, we are running out of time. But I am going to ask you the final question, even though you’re not a pricing expert. So, what is one piece of pricing advice you would give our listeners that you think could have a big impact on their business? 

Steve Rosvold   

Well, remember, I told you, I wouldn’t answer any question for you that you asked, I could have an answer to. But I happen to have an answer to this one. I’m going to look at; I’m going to speak to my audience. In your audience’s, hopefully, they can reap something out of this too. But I think from financial teams, learning to speak in the commercial language of their sales and marketing teams so that they can understand their needs, and go out and be present, but the sales and marketing, learn about what’s important to the sales and marketing teams, because you need to learn about what’s important to your customers. Using that to help understand what they need. Then we can get the data to help formulate insights against that, and really help our sales and marketing team and create more of a collaborative relationship, that creates more value for the company, and more value for the salespeople, if they’re getting commissions, or whatever it is, they’re more value for everyone. So, it’s really a big win. Learn the language of your sales and marketing teams and use that to help define what they need, and go out and get the data for that.  

Mark Stiving   

Yeah, if you think about the role of the CFO, and they’re trying to manage the company’s financial outcomes. We do a good job with the cost side. If we took the time to learn how we could help sales and marketing and product development, too, by the way. But how can we help these companies or these departments be more successful, then the whole company will be and we’re going to look great.  

Steve Rosvold   

I agree with you. The one last thing if I get squeezed out of your time here, but this whole finance transformation, one of the key aspects that we’re teaching people is don’t just look at the cost side of your financial transformation. Transformation takes place when value goes up and costs go down. It’s two levers, and both have to happen. We’re really forcing finance people to really get on the value side of things, whether that’s products or their services or systems or whatever, but it’s really an important area. We’re going to really enjoy learning a lot more from you, Mark, over the coming years.  

Mark Stiving  

Excellent, Steve. Thank you so much for your time today. If anybody wants to contact you, how can they do that?  

Steve Rosvold  

You know, our website is www.CFO.University. It’s really simple, and I’m Steve Rosvold with that URL on the back so they can email me; it’s great, I’m easy to find on LinkedIn. But visit our website www.CFO.University.  

Mark Stiving   

Perfectly done. You were the first company that I saw could get a dot university URL. I thought that was really neat.  

Steve Rosvold  

No credit for that. That was my marketing guy, but thank you.  

Mark Stiving   

That’s okay. We went out and got impactpricing.university because of it.  

Steve Rosvold  

All right.  

Mark Stiving  

All right, Episode 121 is all done. Thank you for listening. If you enjoyed this, would you please leave us a rating and a review? And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me at mark@impactpricing.com. Now, go make an impact! 

Mark Stiving 

Thanks again to Jennings Executive Search for sponsoring our podcasts. If you’re looking to hire someone in Pricing, I suggest you contact someone who knows Pricing people. Contact Jennings Executive Search. 

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