José María León Cabrera, Editor and Co-Founder of digital news site GK in Ecuador, shares his experiences of why a Chief Financial Officer is vital to any independent media organisation seeking to be viable.
A Spanish translation of this post is available here.
When journalists – at least in Latin America – decide it’s time to build their own independent media outlet, they forget a key piece for their success: a financial officer. They’re usually determined, tenacious and talented editors and reporters – who know nothing about handling a business. GK was no exception to that. So when the company started growing, the lack of a proper financial foundation turned from a growth spur into a jump into the abyss.
Why we hired a CFO
It was the last quarter of 2019, Ecuador had been hit by a financial crisis and the largest protests in 15 years had left the country divided, angered and broke. By that time, GK had sold a TV show to a major national network. It meant hundreds of thousands dollars in billings – but no profits, only heavy losses. Costs had been wrongly assessed, and payment timeframes by the client were not taken into consideration.
As the crisis deepened, we undertook dramatic changes. We made necessary tough changes on our managerial team and brought in our current CFO, whose profile and job description and selection process we designed and undertook with the essential assistance of MDIF’s Media Advisory Services.
Her first task was to put the house in order and then keep a tight grip on costs, define a clear cost structure and correctly assess profit margins for GK. (She installed a dashboard that allows us to watch the financial situation on a daily basis.)
In the past year and a half, results have been evident.
GK finished 2020, a pandemic year, with a 10% net margin. The previous year the company carried heavy losses.
There have been valuable lessons in this process:
- Media founders tend to underestimate the need of a CFO from the inception of the company. This is a mistake that will take a toll on the company’s operations, prevent its growth and, potentially, even hurt it lethally.
- Financials should be considered a fundamental part of an independent media company: content, tech and finance should be the holy trinity when designing and planning a new venture.
- The absence of a CFO in an independent media company should be corrected as soon as possible.
- Engaging in a growth process without a CFO will eventually backfire and put the whole existence of the organisation at risk.
- Costs and profit margins should be tightly watched on at least a weekly basis (create a dashboard for this).
- Tight cost control by a CFO who is able to challenge and say no to founding partners is a safety net for the company.
- This, with proper content and tech, will lead to profit and business model consolidation.
- If you don’t have a CFO, get one.
- Watch costs and profits on a daily or weekly basis.
- If you’re overruling your CFO when they say no, you’re getting into trouble. Stop doing it.
- Generate a company culture where employees understand the financial situation and their role in making it grow.
This article is part of our series, ‘25 things we’ve learned’, marking MDIF’s 25th anniversary.