The full recording is available at the link: https://bit.ly/4emZpFr Understanding numbers, evaluating achievements Oleksii Gerashchenko: Often, non-financial managers face difficulties when they reach a certain level but then stop because they don’t work with finance. They believe that finance is a big responsibility and that it’s better to stay in an area where such skills are not required. In this context, the question arises: what can be done to overcome this barrier? How can one develop financial skills to feel more confident in their role? Nataliia Tadeieva: For business, it is important to understand numbers and speak a universal language that allows us to evaluate achievements. This includes metrics that help us check whether we are moving in the right direction, at what speed, and whether that speed is adequate. All these indicators need to be measured in some way. And it is important to note that this applies not only to the finance function but also to HR, marketing, sales, logistics — everything can be evaluated in financial terms. Any management decision can be digitized with a certain degree of probability. At some point, business starts demanding that you meet financial commitments. These financial commitments are usually the consequence of your management decisions. If a manager seeks growth, sooner or later they will have to master the language of finance. Evaluating financial decisions Oleksii Gerashchenko: Practically any management decision can be evaluated with a certain degree of probability. However, there are situations where this is difficult — for example, in marketing and advertising. To accurately assess the effectiveness of an advertising campaign, you need to compare the results with what would have happened without it. This means you have to “go back” and model a situation in which the campaign did not take place. This is difficult because we cannot experience two parallel scenarios at the same time. How can we deal with such situations? Can we evaluate them with some degree of probability? Nataliia Tadeieva: Scenario analysis helps evaluate the effectiveness of a marketing budget depending on each of the drivers into which we invest our resources. This relates to the theory of constraints, where resources are allocated to one direction. The drivers of a financial model are strategically important indicators that are highly sensitive to changes in the environment and have a dramatic impact on the key indicator — usually net profit. For example, a certain event may either definitely happen (100% probability) or definitely not happen (0% probability). A probability of 90% or 50% indicates less sensitive drivers than in the case of an event with two clear possibilities — either yes or no. Oleksii Gerashchenko: Risk management consists of taking even a low-probability event and developing a plan of action in advance in case it occurs. "Opaqueness" of financial data Oleksii Gerashchenko: Regarding the finance function in Ukrainian business, the main problem is that businesses are often quite closed off. They operate in some kind of "boxes," and when you ask about finance, companies often reply that they will not show anything. In developed financial markets, companies are used to disclosing their finances. This is closely linked to market development: when companies share information, they form a common environment, shared terminology, and a reporting format. Unfortunately, in Ukraine, companies have different understandings of finance, leading to ambiguity in terms. The lack of a common language often makes cooperation difficult. Differences in business approaches: capitalization and dividends Oleksii Gerashchenko: Recently I worked on a case with a Ukrainian tour operator operating in Europe. In this company, 50% of the partners are based in Ukraine, and 50% are Ukrainians living in Europe. This creates differences in business approaches: the European partners suggest creating a new structure, combining products into a holding company, and selling it in 2030 for a certain amount. This kind of thinking — focused on business valuation — is more typical of the Western approach. In Ukraine, by contrast, the focus is usually on dividends. For example, imagine you buy an apartment to rent out. If your focus is on rental income, you are thinking about dividends. If your focus is on the price of the apartment and its potential resale value, then you have a different approach. These differences in focus strongly influence decision-making. A focus on capitalization leads to a different attitude toward dividends, because it’s important to understand how much you can take out without reducing the potential value of the business. Finance for startups Oleksii Gerashchenko: A startup is an idea and a hypothesis test. If the hypothesis is confirmed, the startup turns into a business. Losses are normal for a startup; if it becomes profitable, it is no longer a startup — it’s a business. Ukrainian startup founders often want to receive dividends just six months after launching a project, which is not always realistic. For example, Amazon only became profitable in its 16th year, constantly reinvesting and changing its business model. Today, in the field of artificial intelligence, money is also being spent not on dividends but on achieving leadership. Well-known companies typically need 5–10 years to reach profitability, but in Ukraine, investors are not ready to wait that long. They expect faster results — for example, profitability by the end of the year or the next. This is more characteristic of our reality. Nataliia Tadeieva: Angel investing is a case where an investor has enough capital to diversify their portfolio. They fund businesses and do not need to be sure of their success, because this is not their only source of income. The investor consciously accepts the risk: out of ten invested startups, nine may go bankrupt, but one covers all costs. For example, out of 70 registered projects, only 30% reach the next stage, and even fewer become successful. But the statistics work in the investor’s favor. In Ukraine, this culture practically does not exist. Only 2–3 people are ready to invest according to this paradigm. Startups, however, need exactly this approach: the investor puts in money not to receive steady passive income (like rent) or to quickly buy luxury cars. The investor is ready to put money at risk of losing it. Therefore, startups do not have a requirement of 30% annual returns. If an owner or investor sets such a condition from the very beginning, it is a warning sign. It is better not to work with such a partner, because it contradicts the nature of startups. In addition, alongside angel investors, accelerators, grant programs, and venture funds are emerging to help startups survive in the current environment. But it is important to remember: the investor does not expect immediate returns. They believe in the idea and the team, evaluate who will implement the project, and invest in a creative founder, even if they do not understand the industry itself. When receiving the first or second round of investment, the founder’s task is as follows: to make management decisions so that the money works for the startup’s growth, not for serving their own ambitions. In Ukraine, many companies receive international funding at hackathons and accelerators. However, the culture of long-term, angel‑type thinking remains in short supply. Oleksii Gerashchenko: A mature finance function is not critically necessary for a startup. It emerges as the business grows. Because financial management is about systemization. And systemization, in turn, brings discipline but can also create constraints. For example, if you decide to go to bed at 10 p.m. and wake up at 6 a.m., that creates a routine that might cause you to miss interesting events. The same goes for a startup: there are many experiments and the need to adapt, so systemization is not a priority. Financial management is a long process. Setting up management systems often takes years, because to move from point A to point B, you need to implement various procedures. For a startup, this makes no sense, as it may undergo many transformations in a short time, constantly adapting to new challenges. Nataliia Tadeieva: It is better to have a bad financial plan than no plan at all. By implementing it, you will be able to see the result and understand that the plan is ineffective, and therefore you can change it. When you act without a plan, you cannot track what went wrong. Speaking about a financial goal that needs to be broken down, it is worth considering many factors, including the perspective from which we are looking. For example, if an owner sets a goal of reaching $5 million in 5 years, we can try to distribute this over the entire period. However, I do not support the idea of setting a financial goal for such a long term. I believe that strategic goals for 5 years — such as market positioning and audience knowledge — are more appropriate. But I recommend setting financial goals for one year. Financial vs. non-financial thinking Oleksii Gerashchenko: There is a paradox in the development of financial and non-financial thinking. Typically, non-financial people start with cash flow and then expand their knowledge, potentially moving on to building financial models. However, in reality, the correct financial steps should begin with the balance sheet. Why don’t people do this? It is related to our everyday psychology: we do not live with the balance sheet in mind.