652: Exposing Gross Margin’s Hidden Levers | Jeff Nichols, CFO, UJET

In 2016, when Jeff Nichols had been a senior member of Glassdoor’s FP&A team for 2 years, he and other members of the finance team were confronting the nagging truth that the firm’s path to going public wasn’t getting any shorter. The online job recruitment firm’s efforts to grow its profit margins had met only mild success, while its cash burn rate was inching upward. According to Nichols, Glassdoor’s path to going public was further complicated due to the unique characteristics of its business model. Points of comparison between Glassdoor and top recruitment rivals such as LinkedIn and Indeed offered few insights due to the firm’s unique approach, making Glassdoor’s story more challenging for management to tell. To help remove the firm’s storytelling obstacles and address its meager margin growth, Nichols says, the firm’s finance team began asking, “How do we get the business to perform over the long term in a way that would actually make for a compelling story?” To help answer this question, Nichols reports, Glassdoor first had to widen its lens and search for points of comparison with SaaS companies, ad tech firms, and other companies beyond the traditional recruitment realm in order to identify competitive attributes that aligned with those offered by Glassdoor. At the same time, this broader comparison helped to magnify certain weaknesses in Glassdoor’s model. “What we were lacking was retention. Most SaaS companies are focused on net dollar expansion or gross dollar expansion, and we just didn’t have it,” explains Nichols, who says that another challenge that quickly came into view involved small and medium-size businesses. “The way in which we went about SMB sales was just not efficient—it was very labor- and cost-intensive,” comments Nichols, who—having played a central role in helping to broaden the company’s strategic view—was soon helping to put a restructuring in motion. Says Nichols: “We reprioritized. We made some new investments that we had not made before, but at the same time we curtailed some costs and refocused what we were actually doing.” Ultimately, Glassdoor’s path led not to an IPO but to a sale, when in 2018 Recruit Holdings, a large Japanese human resources company, paid $1.2 billion for the company. Having been valued by investors only 2 years previously at around $860 million, Glassdoor had a story that had no doubt become more compelling. Looking back, Nichols’ cites his part in helping the company to widen its lens: “All of this was a directional change for the company. I feel that I brought something to the organization that it really needed, which was an honest, objective look at ‘here’s what’s going on in the business, and here’s how it appears to its peers.’” –Jack Sweeney