When Matt Hagel was at BarkBox, a subscription company making monthly home deliveries of pet treats and toys, a marketing executive suggested lowering customer acquisition costs (CAC) by replacing the company's ad agency with additional in-house staff.

From a metrics standpoint, the suggestion made sense. The company included agency costs but not marketing staff in its CAC definition; removing the expense would tighten the ratio between lifetime customer value (LTV) and CAC, which Hagel calls the "golden metric" for any recurring revenue company. 

But he nixed the idea. "At the end of the day, cash is king, and the money is still going out the door," Hagel said in a CFO Thought Leader podcast. "It's important to look at how we're defining that metric. Does the definition really drive the business in the direction we want?"

Defining your metrics and getting aligned on their meaning is a crucial step for decision-making, said Hagel, now CFO of Freshly, a direct-to-consumer subscription meal delivery company. 

At BarkBox, Hagel brought together a cross-functional team to write a data dictionary to help ensure the leadership and finance team members understood the same thing when they looked at the company's metrics, both financial and non-financial. 

"The project included people from finance, data, product and engineering, and marketing to make sure we had a clear glossary of terms," he said. 

At the time, the company was using five versions of CAC, and the version that was being used impacted the decisions that were made. One version included media spend; another, agency fees; another, creative assets, discounts, and the customer acquisition team. "Which version do you use?" he said. "How you define all this matters to the output and how you make decisions." 

Venture preference

Hagel moved from BarkBox to Freshly in 2017. Both are venture-backed, consumer-facing software-as-a-service (SaaS) companies, a niche that appealed to Hagel after starting his career as a public auditor before moving to operations at Sony Music, where, as a senior accountant, he worked on consolidation and financial reporting.

"The music industry for me was very alluring," he said. "It was the only time in my career I had my own office. While I was sitting there, I thought, 'Why did I work so hard on my career to have a typical nine-to-six job?' I just wasn't as challenged, so I did get that itch to jump over to venture-backed companies."

Hagel moved to AppNexus, a cloud-based advertising platform, in 2011, where his duties expanded alongside the company's growth. 

"You needed to wear a lot of hats," he said. "There was the accounting side, but I was also running financial reporting and eventually got into treasury, tax, and, for a short bit, interim controller."

In 2012, he jumped to another start-up, financial planning company LearnVest, as controller, and again expanded his role as it grew.

"At any venture-backed company," he said, "you're typically the first in-house finance hire. You need to grow the team not only in finance and accounting but [in other areas]. They typically say, ‘We're on a purchase order and you need to press the payroll button, so you might as well run HR, and if you're doing HR, you have to do the equity agreements and run the cap table, so you might as well oversee legal.'"

Charting the outbreak

Hagel is helping Freshly manage operations through the pandemic. As a food provider, Freshly was deemed an essential business, which enabled it to maintain staff and even add a factory in Arizona in April to help meet increased demand.

"Our constraint is capacity," he said. "Almost every meal we make is sold. In March [and] early April, we didn't have the opportunity to actually see an uptick in revenue because we couldn't produce more, but we saw order rates among our current customers increase."

Nestlé, the multinational food conglomerate, invested in the company during its last capital raise, and has helped it boost productivity.

"I've dealt with other strategic investment arms, but Nestlé, among all that I've worked with, has truly been a strategic partner," he said. "It helped us design our facilities and worked with us on R&D."

To help the company align its growth with demand, Hagel said, his team closely monitored how the virus spread across the country and saw customer retention and other metrics line up geographically with the outbreak, suggesting a business uptick wherever there was a case uptick. 

"We applied some of these learnings [from our metrics analyses] to say, 'Hey, where should we be further acquiring customers?'" he said. "What [metropolitan areas] made the most sense? You can see with California, Florida, and Arizona, the COVID-19 cases are going up, and you can see slightly higher demand." 

Ensuring supply

Hagel credits the FP&A and procurement teams with helping the company make product shifts in advance of supply chain disruptions. 

"At the beginning of COVID, there were just so many unknowns," he said. "We went through over 100 of our top inventory items, and asked what our backstop inventory was, and what the appropriate level is to make sure we can survive any hiccup." 

The teams closely analyzed commodity markets and identified two risk areas: beef and pork. 

"In early March, you weren't seeing too much [price] volatility, but as we got into April, animal-based protein processing facilities were being hit hard," he said.

He bought several licenses from protein market research firm Urner Barry to help his team forecast supply and get ahead of disruptions. 

"We [told] our culinary team we were seeing [beef and pork] costs spike," he said. "What can we do with our menu to ensure our customers still have a ton of variety?"

In response, the company replaced some pork dishes with turkey dishes. "The team doubled down in its research and helped them get ahead of the shortages," he said.