In this video, Rachel Go chats with Anthony Domenici, CFO and Co-founder of BASECAMP Consulting Group. Rachel and Anthony discuss how he found his footing during the Covid-19 pandemic thanks to help from a friend, his accounting advice for brands, the major red flags he sees in business financials, and more.

Transcript below.

Anthony’s background

Rachel Andrea Go: Just to kick off, can you share a little bit about your background and how it led to where you are today?

Anthony Domenici: Sure, yeah. I mean, my background kind of started in private equity, sort of investment accounting and treasury. So, I guess I started in accounting, but most of my background is really analytical and finance related. And, you know,

I think I transitioned into being more of an operator during the downturn. You know, the environment—the economic environment and the cultural environment in, like, a private equity firm during that time was pretty intense, and I had an opportunity to go to a counter-cyclical company and I felt like that was a good option for me to kind of be able to really focus on one company and dig into more operational things. And, you know, I think in some sense that’s true for me. I really enjoy being an operator and kind of having an impact on companies more directly. But most of my background is really kind of in large companies, like, billion dollar-revenue companies.

I did start my CFA Charter when I worked in private equity and I finished it some years later. I kind of got stuck on level two for a little bit and took a couple years off and then finished it later when I got married. You know, I worked in real estate and I worked at public companies, but I think my more recent history is working with small companies, start-up scaling companies, and I kind of did that by going into California cannabis in 2019.

And, you know, I went from a large company to effectively being CFO. You know, I was the “head of finance” or whatever you want to call it, but I ran the accounting and finance for a small company in cannabis in California. And I think that was just really like a mind-blowing experience for me, just being in charge of everything and, you know, building the plane while you’re flying it, but also in an industry that things are very difficult, culturally very difficult, just, logistically very difficult and, like, practically, like, banking and all the things that kind of went with that was…I don’t know. It was a really kind of transformative experience for me, because I felt like I really got, like, beaten down quite a bit and I sort of had to build myself back up when I came out of it and that really kind of led to me starting this company, which I don’t know if I would have been able to do having not gone through that, kind of coming from this place where you work, you know, on a very, you know, narrow sliver of things.

I mean, I was running enterprise finance for, like, a three billion-dollar company, running, you know—leading the budget for multiple divisions and working with division, you know, finance leads and accounting teams and things like that. So, it was really slow-moving, big-picture things. And then you kind of go into this, like, tornado where you really have to make an impact quickly and start moving things quickly. So, it just was a really change in dynamic of way of thinking, the amount of, like, stress I thought maybe I was under was a lot different.

You know, I think those big, corporate environments are pretty…pretty casual for the most part. I mean, there are things that happen that are, you know, can be intense, but, like, on a daily basis, it’s not like that. So, I don’t know. I think that—that’s kind of generally my background. I mean, it’s a lot of, you know, accounting, treasury, finance, a lot of analytics and Excel work, I do a lot of modeling, which I really enjoyed. And then I kind of was just really looking for more and pushed myself into this crazy cannabis world and, you know, I guess I got what I asked for, that’s for sure.

I was working at Young’s Market company, [an] alcohol distributor, and I was getting recruited quite a bit. I would get a lot of phone calls from recruiters trying to, you know, bring people from the alcohol industry into cannabis, and there was a lot of money that had rushed in, you know, at that time. So, they needed professionals to come in and kind of bring more structure because it was—you know, a startup’s hard enough, but, like, in this weird kind of, like, legacy-medical-hybrid transition, I think it was pretty chaotic.

The regulations weren’t very clear, but then they were very regulated. So, they wanted people from regulated industries — alcohol’s sort of similar in that way, but I said no to a lot before I decided to go. And, I mean, there’s some other things that happened that kind of pushed me to that decision. I mean, I was working for some pretty high-level executives from large, you know, corporations that had been brought into that company — so, like, Diageo and Dr. Pepper and kind of really large beverage company executives that I was—I felt like I was really learning from.

And when I ended up leaving, they—all of those people basically were gone. So, I kind of felt like, well, I needed to make a move to keep on a path that I wanted to be on and…I don’t know. Eventually, I got a call that I felt like made sense, even though it probably didn’t really work out the way I thought it would. But I thought it was sort of the best opportunity at the time to go after something that—I was really hungry, like, you know, and I wanted to find a situation that was going to give me a good opportunity to learn a lot and I felt like that one was.

How uncertainty gave birth to opportunity

Rachel Andrea Go: Amazing. Well, I’d love to hear what led you to start BASECAMP.

Anthony Domenici: Well, I think the pandemic sort of had a lot to do with it. A colleague of mine that I started a company with—we met at Young Market company and we had always talked about, like, owning your own business, and his name’s Ken Young, he’s very entrepreneurial, always has an idea and a business plan, and, like, always trying to—is always thinking of things. And we had talked about, like, that we want to always do this, and we both kind of went into cannabis at the same time as well. So, you know, I came out of my first experience and I was—this is basically, the pandemic happened, like, two weeks later or something, like, it was very at the same time.

So, you know, I’m trying to…maybe a month later, but I was trying to—you know, “What’s my next role? I don’t know.” I was doing some consulting through a recruiter. And then that project ended and then the next project was going to come, and then they canceled it. And then they brought it back and they canceled it. And it was just, like, all this crazy swirl happening, and there was really no full-time roles for anyone, like, no one’s gonna hire a high-level finance person at that time. But their businesses were going through a lot of turmoil. So, you had, you know—they’re being shut off and then the next month, they’re ramping up. And, you know, the online boom sort of happened, so, there’s this bull whip effect on inventory and cash flow. So, I ended up just finding a lot of modeling projects. And I was consulting with Ken’s company that he was working for, and, you know, we’re out trying to help them sell that company during that time, which was also insane, you know.

There was a lot happening. There was a lot of, like, protests, and it just was a very, really tumultuous time. And, you know, I don’t think I ever would have, like, quit my job and started a company; I wasn’t really in that mindset. But it sort of was like—I basically called Ken and I said I wanted to start this, it’s now or never kind of thing. The universe is basically creating a situation where we can do this, and I was already kind of consulting and in this sort of, like — I don’t know the right word I’m trying to think of — but I was already in this sort of, like, ambiguous path of “I don’t know what I’m gonna do, but I need to keep making money.” So, I’m already taking, like, random projects and, like, doing, you know, random things.

So, that’s basically what led us to start is, you know, I kind of called him up and I’m like, “We should do this now.” And he said “Great. I have a brand, I have everything.” He built the brand, he built the website for us, he kind of did all of that side of things, and I started trying to get clients kind of immediately while we were still trying to sell his company that he was working for. So, we really kind of, like, formed the company in, like, the summer of 2020, but it really kind of got going towards Q4. He—we finally sold his company. He quit, like, the next day basically — or resigned as an intern CEO — and then we kind of hit the ground running. So, I really found that having him with me full time made a big difference.

And we were able to really ramp up a lot quicker and replace our incomes pretty fast. I mean, within, like, 90 days, we were already looking for someone to come help us because we had too much work. So it—I don’t know, it just sort of…it was something that was in the back of our minds. We had gone through these kind of crazy experiences. Our original thought was really like, “Well, we still want to see what’s going on with cannabis, but we don’t really want to work for one company. Let’s work for 10 companies and then we can diversify our risk a little bit.” But we ended up really kind of going into all the other brands that we loved.

I mean, the other thing is, we just really love working with brands. I love working with a company that I can, like, buy, wear, you know, eat, drink whatever. We love that and we wanted to create a company that sort of reflected that, so we created, like, a, you know, consulting firm that’s almost like a lifestyle brand in itself that kind of looks back at the brand that we want to work with. So, it sort of just happened, and the universe felt like it pushed me towards it and we just went with it, I guess. But we took it—we definitely took a big leap of faith to go after it.

BASECAMP’s edge for CPG brands

Rachel Andrea Go: Cool. You mentioned modeling and kind of how you help different brands. Can you share more about the most interesting or the most helpful things that BASECAMP does for CPG brands?

Anthony Domenici: I mean, there’s a couple of things, really. One, I mean, accounting — I think there’s a sort of accounting service push at the moment to really, like, leverage technology and sort of commoditize accounting, especially, like, outsourced bookkeeping. And I think that that sort of works at some level, like if early on or you have a very simple business like a service business or something that’s not, you know, huge or complicated, you can go with that type of approach. But I think CPG is really a lot more complicated.

Most—when it comes to, you know, the baseline accounting, if you’re— most people are on QuickBooks Online, they’re doing some sort of light manufacturing, they’re, like, buying packaging around materials, they have a co-packer or a command, and then they get finished goods. So, QuickBooks doesn’t really handle that very well. So, the inventory and cost of goods are usually a mess. And then omnichannel sales also—you know, they have a tendency to…I don’t know.

Basically, I think having really clean bookkeeping for CPG is difficult. So, having somebody that knows how to handle it and you can trust your books—I hear a lot of people say when they end up signing up with us is, “I have a bookkeeper, I have accounting, but I don’t think I can trust my books. It doesn’t make sense — like, the numbers don’t make sense. And I don’t have what I need to make decisions.” So, at some point, things start to ramp up quickly and go well, and then you need to have data and make quick decisions, and if you don’t have that—I think that that’s one of the main things we really try to do is provide sort of a baseline of, you know, detailed and correct information so you can understand what’s going on in your business. You understand the leverage of your business.

The other thing that happens that we do quite a bit of is financial modeling around essentially working capital and cash flow. So, cash flowing a scaling CPG business is difficult. Most people need money, whether that’s debt or equity. So, a lot of sort of the things we go through are, “Well, let’s sort of take a look at your business. We’ll go through this exercise of modeling, which helps you understand all the strategic levers.” Then, we’ll kind of basically get to a place where, like, “Okay, here are your goals that you’re projecting for, whatever, the next three years. In order to meet those goals, you need X amount of cash. But now that we know what the Delta is, how are we going to get that and what are the tools that we can use to get that?” So that’s kind of a—more on, like, the CFO side.

So, we do—the three main areas are, you know, accounting, practical CFO, and then modeling, and they all kind of fit together. So, once we start working with somebody, we tend to kind of run through that a little bit. Most people want to start with bookkeeping and we end up sort of leaning in with CFO a little bit after that and then end up doing some modeling eventually as well, just kind of naturally. So I think, as you’re trying to grow a CPG company, those are really—the accounting and then the forward-looking projections and the cash are all very, very, you know, top of mind at all times.

Anthony’s accounting recommendations for brands

Rachel Andrea Go: Great! Can you tell me a little bit more about the timing of when consumer brands should start working with an accountant or a bookkeeper? Is there a “good, better, best” situation there?

Anthony Domenici: I mean, from day one, in my opinion—I mean, you can start with cash basis if you’re not really selling a lot initially. But once you start to sell, I would definitely go to accrual and have somebody that knows what they’re doing. If you know what you’re doing for a little while, it’s fine, but at some point—you know, very quickly, a founder doing accounting doesn’t make sense. It’s not the best use of their time, they end up spending a lot more time doing it than they should, and then there’s always the question, is it right? Are you doing things correctly?

So, I mean, I think the best approach would be to sign up with somebody that knows what they’re doing with CPG as early as possible. But, at minimum, once you start selling, I would definitely move towards that. And again, it’s just not the best use of your time. Having the right information is critical and having it, you know, things done quickly and correctly is, I think, paramount.

Rachel Andrea Go: I know BASECAMP has a fractional CFO service. So, when should brands consider hiring a fractional CFO instead of a full-time CFO?

Anthony Domenici: Well, I think it sort of depends on the situation. You know, there’s—the reason most brands would hire a fractional CFO is they can’t really afford a full-time one. So, somebody that’s good, that knows what they’re doing, they’re sort of, like — in my mind, sort of like two stages, right? There’s somebody that maybe is, like, retired and doesn’t necessarily need a salary and maybe they’ll work for equity and they can be sort of a co-founder or a business partner in your business. I think that’s an interesting approach to have somebody that really is more, like, full-time invested in what you’re doing, but that’s hard to find.

And, you know, it’s also just a matter of, like, fit. So, you know, who are the other founders, what kind of company — there’s a lot of variables, right? So, I think at some point, pretty early on, it really depends on, I guess, if you have current investors that can help you with strategic finance or if you have someone on your team that understands enough to kind of get the ball rolling. But I would say, as early as you’re thinking about raising capital, really, or if, you know, you’re able to self-fund the company, you could probably wait a little bit. But really, it depends on the capabilities of the founders. So, if you need someone to help you figure out your cash flow in the business, how much capital, when to raise it, you know, understanding the profitability, the economics of the business, a strategic thought partner.

So, it could be, you know, it could be pre-revenue. I mean I’m working with companies that are pre-revenue because they have a really strong, like, product mind and they understand certain things really well, but they need someone to help them kind of think through all the other pieces. So, it could be, you know, in some cases, as early as, you know, day one. And I think it just really has to come down to what makes sense for the company and the person. If you feel like you’re, I don’t know, struggling making decisions or just need someone to talk to with sort of, like, that financial mindset, you know, it could be day one.

Contracting financials

Rachel Andrea Go: Thinking back on the last year, what was the most interesting evolution in CPG finance that you noticed in 2023?

Anthony Domenici: Well, I think the biggest thing for me, which may have started a little bit earlier than the beginning of this last year, was…there was, I don’t know, call it a 10-year ramp up of sort of CPG, you know, like, unicorn…I don’t know. People trying to basically grow at all costs and exit as fast as possible. And there was a lot of money, you know, similar to cannabis, you know, five, six, seven years ago, a lot of money rushing in, thinking, you know, that’s sort of like a cash grab to ramp up brands, sell them to a strategic, and everyone’s gonna retire early. I think that reality sort of shifted quite a bit in, you know, probably in 2022 but really in 2023, where the amount of money that was available was a lot less, it’s a lot harder to get.

You somehow need to be growing and be profitable at the same time, which, for CPG and especially, like, food is very difficult. So, I think the dynamic of, like, “I need all the revenue I can get to grow as fast as possible,” changed where it was more, like, “Well, what makes the most sense? What are my most profitable products and channels? And where should I be focusing my time and money?” And I think that dynamic is continued into 2024, and I’m kind of, you know, curious to see how that will change. You know, I read about these funds getting ready to come back in. I think there’s a lot of money on the sideline and…I don’t know. I think that dynamic of just really focusing on a path to profitability, it might even mean saying no to things.

I mean, I’ve worked with brands that had opportunities to go into a retailer but they literally would just lose money the whole time and they just said no because it didn’t make sense; they would go out of business. So, I think that’s really been the toughest dynamic in 2023 is, how do you kind of survive on the cash you have? “Get more in” is a lot more difficult. People are spending a lot more time doing that, and then focusing on the most strategic and best ways to be selling their products. So, really, it comes down to, like, contribution, margin—like, gross margin contribution margins.

And that, again, goes back to having good accounting, I mean, having accounting that you can actually understand. Like, sure, you have an idea of what it should be but what is actually happening? And I think it’s important to be measuring those results to make sure what you think is happening is actually happening. And then when you’re going to—you have a finite amount of working capital, [so] where am I going to use that and get the most return on it?

There was also this pendulum of, like, everybody is, like, direct-to-consumer in eCommerce, and it’s sort of coming back to more retail focused. But, you know, a brand that really grew 100% on direct-to-consumer going into retail is a really tough transition — the economics, the cash flow is a lot different, the chargebacks, the marketing fees — it’s just a completely different animal. So, I don’t know. I think…. Anyway, it’s just—in general, it’s a lot tougher, and it’s—yeah, you’re right. People are a lot more discerning when they’re making Investments and what are—the trends are a little bit different and, you know, it’s more difficult.

Small mistakes in bookkeeping can be costly

Rachel Andrea Go: What are some common red flags you see when you do financial reports or modeling for brands?

Anthony Domenici: You know, I think it really is just mistakes, or treating things incorrectly, you know, “Should something be in COGS or not be in cost of goods?” A lot of times, the balance sheet can be kind of a black hole. There’s accounts in there that, you know, people don’t really understand what are in there or things are just not accounted for properly. So, you know, I—inventory is always a problem, and costs of goods sold. Not having a tool I think. Having a really complex business that scaled, you know, into a few million in revenue but not having an inventory tool can be a red flag just because, if someone that is part of that company that—it’s not super tight and very, very organized, that could be a very big mess.

And, you know, there’s—a lot of times, there’s some sort of hybrid of, like, cash and accrual happening where some things are just being expensed or put on the balance sheet as they happen and some are not, and so, do you really have all of your liabilities on your balance sheet? Maybe not, sometimes. I think we’ve seen that where, you know, equipment is not fully accounted for properly and there’s a loan associated with the equipment, but what they’re doing is, the loan payment on the equipment is actually going into, like, the fixed asset account. And there’s always kind of, like, funky things that could be happening.

So, I think, you know, the biggest red flag is just messy accounting, really, I guess if you want to put it simply. So, having to clean those things up sometimes can be a little stressful for the founder because they’re sort of realizing, “Well, maybe I’ve been making decisions on data that wasn’t right.” And now, you know, I think—also, there’s a little bit of, like, I think an ego thing of, like, well, you know, you kind of have to face the music a little bit of, you know, that. It wasn’t being done right, and you have to sort of admit that to yourself, I guess. So, I mean, that—it tends to go back to accounting.

And then, you know, I think from there, if you tight, like, cash balances, that becomes pretty intense, like a weekly cash flow forecast can be, you know, expensive for us to run for somebody relatively. But if you’re really managing your cash—well, I don’t know if “expense” is the right word. I mean, it’s—it costs something. And, you know, if you’re thinking about, “I’m trying to manage my cash tightly, but then I have to, you know, pay someone to build it and manage it for me,” that could be the most valuable, you know, dollars that you’re spending when it comes to just understanding the dynamics of your business. So, yeah, I think one red flag is just to have someone’s bank account constantly overdrafting. If they’re riding the nice edge like that, that’s definitely a red flag.

Rachel Andrea Go: Looking back on all of the clients that you’ve helped at BASECAMP, what are some of the more memorable or, say, the bigger challenges that you’ve fixed for clients?

Anthony Domenici: Yeah, I think some of the things that we touched on are just, like, you know, when you come on to a new client, you’re trying to close the books for the current month quickly and get efficient on, like, the ongoing business. But as you start working with someone, you tend to start finding things that aren’t as obvious in their financials. So, I think that can be challenging because you might say, “Oh, here are the things I recommend to clean up your financials.” But then a month or two later, you find another thing that you didn’t find the first time.

So, I think it’s—that’s sort of a challenging situation sometimes where you don’t know the full history, what’s happened, or there might have been several people working on these books over time so you can kind of see how things change from year to year. So it just—and then it becomes a question of, like, well, is it really worth going back and doing a full cleanup on this, or are we going to do, you know, prior-year adjustments in, like, January of this year? Or, there’s sort of, like, a dynamic of cost and benefit to those things. I think that’s really kind of the thing that I think about first.

But, you know, I think a capital raise can be challenging, you know? Sometimes when you’re new or as a fractional resource, you know, getting on investor call can be challenging because you’re not in the business every day. So, I think it’s—that, to me, when those things go well, feel very rewarding and, you know, get me excited about working with clients because I feel like I really have added value. If I get on a call with investors and the call goes well, and then they feel good about me being there and I’m helping the company, I think that’s kind of a really challenging situation sometimes that can really prove your value.

So, I think, you know — I feel like the topics we’ve touched on the whole time are basically all the same. It’s really, you know, like—having the accounting part and then the working capital, raising money, helping somebody get, like, a line of credit or debt can be difficult because, if you present books that aren’t accurate, that’s gonna hurt their chances and opportunities. So, I think kind of, like, making sure that you’re providing sort of like that financial leadership so you can have all of these things presented well for your client I think is, you know, an overarching, challenging situation that, you know, I think we really own every day.

Double down on your most profitable channels to reduce risk

Rachel Andrea Go: So, my last question is, what would your advice be to CPG companies for 2024 healthy financials?

Anthony Domenici: I think kind of going back to some of the things we’ve talked about: really understanding the levers of your business, like, where is your profitability coming from? Where’s the best place to sell your product? So, most profitable, turns the quickest — you don’t want to be selling product that just sits on a shelf. You don’t want to be buying inventory that just sits in your warehouse. So, being—kind of thinking about your cash cycle so that kind of puts all of your working capital metrics into one.

So, you know, if you think about, like, if you’re purchasing raw materials and you have AP, you want to extend that as long as you can. AR? You want to shorten that as much as you can. Inventory days on hand? You want to make that as most efficient as you can. I don’t think you can really—you can’t really—I mean, you probably—there are companies that have really short production cycles that may not make things until they get an order, but you effectively want to shorten your cash conversion as much as you can or make it as positive as you can so you have your working capital turning and then you’re generating more cash flow in your business.

So, yeah, I think you really have to—companies really have to take a hard look, kind of reduce risk. I guess it’s really about reducing risk. So, like, taking a hard look at what they absolutely need, get on a path to profitability, make sure they have good information to make decisions, and then I think working on their cash flow cycle’s also really important, I think. When you get a big order from, like, a big retailer, it’s really exciting. But then there’s some of this panic of, like, “Well, how do I fund the inventory? And then they’re not going to pay me for, like 60 days. So then—and then if it doesn’t go, I’m gonna fall out.” And then, do I—do you get another chance?

So, like, you really have to be ready if you’re gonna make that kind of decision, one, to fund the inventory, fund some trade channel marketing most likely to activate your product in a new account. And then make sure you can, you know, withstand the delay in getting paid. So there’s a lot of—yeah, I think it’s basically the same topics that we’ve talked about. Understanding the cash flow, I think, is probably the biggest thing for 2024.