Here's how Square's outgoing CFO, Sarah Friar, exercised financial discipline to grow the $32 billion company 40% each quarter (2024)

That boss was Jack Dorsey, who is CEO of both Square and Twitter.

During her tenure at Square, Friar has taken a good stab at earning that title. After joining in 2012, she took Square public and has seen its share price and valuation balloon. The firm's market cap is currently $32 billion (£24 billion).

Friar will leave Square in December to head up Nextdoor, a neighbourhood social networking service headquartered in San Francisco. Perhaps unsurprisingly, given Square's stellar year, the firm's stock price fell on the news.

In the third quarter of 2018,Square posted revenue of $814 million (£617 million), up around 47% year on year. It narrowed its losses too, and is getting closer to profitability, with losses down to $9 million from $15 million the prior year.

Business Insider spoke to Sarah Friar at the beginning of this year about how Square has kept growing at such a rapid pace.

According to Friar, it all comes down to discipline.

You can read our January interview with her below.

Square has carefully managed its growth by avoiding over-expansion

Square's chief executive Jack Dorsey sometimes has his hands full running his other company Twitter, whose share price has gone in the opposite direction to Square’s. It's been a particularly strong 2017 for Square, which has posted around 40% revenue growth during the last two quarters.

Part of the firm's success is down to its considered approach to expansion. The company was founded in 2009, but its payment service is only available to small businesses in five markets: The US, Canada, Australia, the UK, and Japan.

Square launched in the UK in March last year, offering both its physical plug-in card reader, and an API for merchants to accept online payments. It doesn't offer other US services here, such as its Square Capital small business loans, or food delivery service Caviar. Nor has it applied for a banking licence in Europe.

Friar describes this as "staging" — choosing not to be the first mover, but timing your expansion into a market before you are too late.

"You need to be clear in your mind about whether there's a first mover advantage or is there a disadvantage of being 'late' to a market," she said. "Right now our focus in the UK is how to build out that base of sellers here. When we look at the UK market, we see all the same hallmarks as in the US. A massive percentage of businesses don't accept credit and debit cards, and that has the dual cost of [them] missing sales and cash not being free."

"When I look at Square, we should be doing all that stuff globally," Friar added. "It's just a question of staging."

For now Square is solely focused on merchants. Friar pointed to the Welsh town of Holywell, which partnered with Square when banks shut down their branches, cutting consumers off from cash. Since most merchants don't accept cards in Holywell, that meant a big downturn in business. The town's mayor credited the Square partnership with a "turnaround" in the town's fortunes.

Square didn't share UK-specific numbers, but it has more than 2 million sellers worldwide.

Friar was hired after a 2.5 hour breakfast meeting discussing her childhood

There's little trace of an accent now, but Friar grew up in Northern Ireland through the Irish conflict. She lived close to Strabane, occasionally described as the most bombed town in Europe. ("It's a goodie, if you look it up on Wikipedia.")

After reading materials science at Oxford, she went into management consultancy, and then banking. Working at Goldman Sachs through the financial crisis led her to question the banking system and she switched to her first job at Silicon Valley, joining the financial team at Salesforce.

Friar found the "hypergrowth" atmosphere at Salesforce in 2011 chaotic but ultimately useful.

She said:

"A private company recently asked my advice on the background for a good CFO, and I said, try to find someone who's experienced chaos. I mean that in a good way. The chaos that comes from hypergrowth at scale — it’s like every half hour some new thing is happening that you have to grab hold of and take ideas to being operationalised. Those 1.5 years I spent at Salesforce were great training in how to live in a chaotic hypergrowth environment."

She stuck around for a year before being headhunted for the CFO role at Square. Her first interview with Jack Dorsey was her first taste of his unconventional management approach.

"Jack and I went for our first meeting, having breakfast on a Sunday morning," Friar recalled. "It was in the Blue Bottle [Cafe] across from my old office. What was supposed to be a one hour meeting — I think two-and-a-half hours later, I don't think we had fully gotten out of childhood.

"Jack has a really interesting way of interviewing, because he wants to know who you are as a person. He's like, 'Tell me about yourself.' And you say, 'Well, I work at Salesforce.' And he says, 'No, no, tell me about yourself. Where did you grow up?'"

Dorsey was fascinated by Friar's experiences with the Irish conflict. Her childhood has, she said, come to inform her thinking at Square.

"That civil unrest is driven because at least one group has nothing to lose, because they're so economically challenged," she said.

Square, she said, gives "economic empowerment" — though she also knows this sounds a little corny.

"Startups can come across as up their own bums — that's such a Northern Irish thing to say," she said, laughing. "It's like no, really, that's such a ridiculous thing to say. But if you talk to Jack, you walk away, and think this man really cares deeply, about small businesses, about communities."

When you have a part-time CEO, you need to be extremely disciplined

Friar and Dorsey share the same end goal for Square, but the two have quite different management approaches. Then there's the added hurdle that Dorsey spends the mornings at Twitter, and the afternoons at Square. He's also unconventional, recently completing a 10-day meditation that required total silence — even Friar wasn't allowed to contact him.

According to Friar, Dorsey sticks to what he's good at — big vision, design, and then "getting out of the way."

A good example of Dorsey visioning, said Friar, was how Square's Cash app came about. The app lets people in the US send money without connecting to a bank account. The whole concept came about because Dorsey believed there was a need among the "underbanked" population in the US, who don't have access to normal financial services.

"Every once in the while, there's a major trend he sees," said Friar. "Our Cash app is a great example, where he said 'I believe there's something happening around the more consumer side of financing, there's more utility that can be offered to [underbanked] individuals.' Jack will see that vision, and adds tremendous value there."

Friar does not described herself as a visionary and, like many "doers," dislikes meditation — though she's promised Dorsey she'll try at least twice a month. While studying at Oxford university, Friar was a rower, taking the seven seat in a team of eight. There's an apt parallel here: the seven seat sits behind the rower who sets the pace, and conveys that pace to the rest of the team.

"Our balance with one another is that if Jack can see the vision, then he will push to me and the rest of the team to really execute," Friar said. "Part of that is — how do you break down a vision into tactics that allow you to really operationalise things? If you're going to build a big company, you can't stick things together with band-aid and duct tape, you need to make sure internally there’s a lot of discipline."

She said translating Dorsey's vision into something tangible sometimes meant pushing people to hit ambitious targets:

"Some of it is setting targets — how do you take a vision and turn that into topline goals that really press people into going beyond what feels possible? It goes back to being the best CFO in the world. If you look at Square, we're a company that in 2017 will do approximately $1 billion in adjusted revenue, the midpoint of our guidance is around the $970 million range. And we're still growing at over 40%. Last quarter we grew 45% year over year. If you looked at the funnel of public companies doing $1 billion in revenue and growing over 40%, there's only six listed outside China, of which Square is one."

That kind of growth puts Square in a similar category to Tesla, Facebook, and Nvidia.

"It's totally rarefied air," said Friar.

Apart from setting ruthless financial goals, Friar has to be strict about spending money within Square.

One example is avoiding the "peanut butter spread" problem.

"That's where we have $100, so everyone gets $1," Friar explained. "That's horrible resource allocation. For most startups, one person will get $75, another person $25, then you'll cut off the other things.

"That's always a tough conversation. That's where if the CFO is hyper popular in your company, you probably have the wrong CFO. You work to be respected, not liked. If you drive yourself on being liked, you won’t make the tough decisions."