Metrics Matter

A little over a year ago I published a blog on “Measure what you Manage” and given the New Year, I thought that Key Performance Indicators or KPIs are a good topic to consider revisiting for your organization.


At NSS we believe that metrics really matter. If properly and consistently applied, they provide you real measurements in how you are achieving your goals and objectives.

Key indicators are used to measure day-to-day monitoring, goal setting and for achieving efficiencies operationally. Metrics also change depending on your current priorities.   The importance here is not how many KPIs you are using, but rather that you use the right metrics for the right tasks.

A KPI is a metric, but not every metric is a KPI! How do you go about defining a KPI? Here are some considerations:

  • How many KPIs should you have?
  • How often should you measure?
  • Who will be accountable for the metrics?
  • What benchmark should you use? Make sure you use some industry benchmarks so you can compare yours with the competition.
  • Do the metrics reflect your value drivers?
  • Can they be worked around it and how will you guard against that?

Many of these metrics are in fact non-financial yet they ultimately affect your financials. KPIs should be aligned with your vision, mission and strategy, including short and long term goals. For example, if your company decides that customer satisfaction is going to be the primary focus of improvement this year, you want to clarify how to measure satisfaction and create the criteria in how to achieve customer satisfaction. Make sure to communicate and train your employees and empower them to realize your expectations. Let me give you a sample of customer satisfaction KPIs:

  • Net Promoter Score (NPS) – How many customers like your brand to promote to others?
  • Customer Satisfaction Survey – Internal benchmark to use for future baseline and KPI
  • Customer Response Time – How long does it take to get back to customers and resolve outstanding issues?
  • Customer Acquisition and Retention Rate- measures ability to bring in new customers and of retaining them to generate recurring revenue
  • Conversion Rate – How likely is a customer to make additional purchases
  • External benchmarking comparing to competition

KPIs in midmarket companies are chosen by the executive team. You decide what you are going to measure and how you want them to perform against your value drivers.

Creating KPIs for key value drivers is not difficult per se, where it gets to be challenging is in actually measuring them consistently. It is also assumed that you base your metrics on valid data. Do you have clean data to work from and the tools to measure accurately so that you can gain accurate results? If not, take necessary steps to clean up your data.

Our experience is that many companies who have KPIs, have in fact too many. This creates a danger that the metrics become meaningless over time and employees will find a way to work around them. This brings me to another important point in setting your KPIs. Make sure your employees fully understand the requirements for the KPIs and in how they successfully can achieve them. Develop an incentive plan and recognize and reward positive outcomes. The employees need to fully understand and be empowered in how to affect a metric positively.

Audit your KPIs periodically to make sure they still make sense and that they are still relevant. If a KPI is not being followed, it should be re-examined for its validity. Discuss the relationship between performance and expectations. Think about your processes and intended actions that lead to improved performances. Do not create KPIs in isolation, they all need to be connected and tied back to your strategic intent. It is far better to have a few KPIs that are right and measure the right value drivers in your organization.

The beauty in KPIs, if consistently measured, is that they are quantifiable and measure how well you are achieving your corporate goals and objectives. They also bring accountability and identify the gaps between actual and targeted performance. The KPIs should represent organizational as well as individual factors that lead to improvement. Generally, companies that actively implement KPIs fare better in the market place against competitors. So metrics do matter.

Do you have a KPI story to share, either successful or not? Do you use them at all? Send me your comments. For another take on KPIs, watch my short Rudi/Tuesday video on performance metrics.

Rudi KPI

Happy New Year

Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc. |617-449-7728

Finance your Growth Now?

Is it a Good Time to Finance your Growth?

We think so. Accessing the capital markets for future growth before interest rate increase makes sense.

My dear friend and colleague Debra Drapalla, SVP of the Middle Market Lending Group at Webster Bank shared the following with me. Keep in mind that her middle market lending group focuses on companies with $50-$500M in annual revenue.

“Presently, there is an abundance of capital available in the market by banks which are sitting on large reserves from the Fed’s stimulus programs to thwart the Great Recession.  If a middle market company presents a sound business plan for their financing needs, they should receive very competitive proposals from banks for both interest rates and credit structure. It is definitely a buyer’s market for bank loans during this stage of the economic cycle.”

If your company falls below the $50M revenue range, it can be a daunting task. The smaller your business the harder it gets to access reasonable funding and convince the lender.

According to the Pepperdine Report for Q2 2015 on Private Capital Markets, 61% of companies with $5-$50M in annual revenue will be looking for debt financing from a bank. Of those, 39% are projecting that this will be difficult.

PepperdineAccessing the right-sized capital at the right time is a balancing act and requires adequate time.  I created a chart for you below that might help you identify the approximate stage with a sample of capital markets available to you. The smaller the business, the more difficult it is to raise capital. It is so very important, that you can de-risk your inquiry for capital to the investor by providing solid and realistic numbers and you may have to provide a personal guarantee. Having a strong sales history and being on a fast track also helps.

Capital Market Chart                                                                                                    We  know that interest rates will be raised, some speculate as early as September. The US economy is starting to show signs of strength and hopefully will lead us toward faster growth. What happens when the interest rate is raised? Things that it will affect will be Cost of Borrowing, Effect on Prices and Plans for Marketing. This will also affect your vendors, so allow for some elasticity in your forecasting. You might want to revisit your strategy and business plan and evaluate whether you have the proper outlook and risk criteria in place.

Let me emphasize the importance of size of your business. The larger the annual revenue, the lower your Cost of Capital (CoC). The market views it as less risky. Public companies will enjoy an even lower CoC and gain more trust in the market, as they typically are run more efficiently. More on that in another blog!!

However, if you are in the $5-$50M revenue range as many of our clients are, you may benefit from working with a trusted advisor like NSS who can guide your through these complex preparations and transactions. We can provide you with alternative options you may not have thought about, such as:

  • Mezzanine debt
  • Subordinated debt with warrants
  • Leveraged asset-based loans
  • Secured trade credit

This of course also depends on where you are in the process. NSS tailors its approach to your needs. You may want help with the preparation, connections to the right lenders, negotiate the best terms or all of the above.

Listen to our RudiTuesday video on “Access to Capital” for additional tips in how to prepare.

Rudi TuesdayTake this opportunity and act on it now before interest rates increase significantly. Securing the appropriate financing now can give you a competitive edge so that you can expand, grow and bring on the right talent.

We also developed a funding guide and check list for our clients to properly prepare for a lender meeting. We will be glad to provide this additional resource so you can start on your deliverables. Sign up here for a copy and we will be glad to send it to you.

Begin to work on that list, let us know if you need help, so that at the end you have a greater chance of locking in a strong financial round.

So where might you be in this process? If you are not ready, you are not alone, the majority of businesses we work with do not have the internal resources or time to have all the ‘docs’ lined up! Start today with the conversation of how much money you need to raise, the timing of it and the financing options you should consider. Decide where you are in the process and give us a call if you need help!

Where in the Process

In conclusion, it is a buyer’s market and a great time to access capital. Larger companies have easier access to the capital market. Smaller companies can fundraise successfully too, so consider closing the funding gap today and remember, first impressions are lasting.

According to lenders, companies are generally not prepared. You can change that statistic!

Contact us at 617-449-7728

CFO Coaching & Mentoring

CFO Coaching & Mentoring at NSS

CFO Image

You have heard a lot about how the CFO position has become more complex and demanding over the years. Let’s also acknowledge, that a typical midmarket CFO oversees different parts of the finance spectrum. Sometimes they are called Controllers who do CFO level work and sometimes it’s the other way around. So for our point of view, let’s define this position as Head of Finance in your company.

The Head of Finance is often a person who has been with the organization for some time, and has enjoyed a number of promotions including a title promotion from Controller to CFO acknowledging the increased transactions associated with the business growth. More employees are added, additional markets entered and products introduced, and the financial management expectations become more and more complex.

The challenge for a growing business is you must now consider an operational and results driven CFO who is capable and has the time to discuss your growth opportunities. Ideally, you want your finance department to provide a valuable service to the organization, rather than be seen as an isolated department that provides results/numbers only. One who embraces walking the floor, talking with sales and operations and helps them problem solve with specific issues. The compliance and fiscal responsibilities are a given, delegated and with oversight by the CFO.

Has your Head of Finance kept up with professional development and courses to handle the increasing demands of their job? In all fairness, things get so busy and besides, an evolving CFO is not often asked to participate in key decisions and apply their respective business insight. The CEO or Business Owner is very loyal to that Head of Finance and typically wants things to work out.

Understanding and accepting that loyalty is the key reason for stability, NSS has developed a program to mentor and coach your existing Head of finance or CFO. Our program is unique in how we work with the existing CFO and allows for true on-the-job training and shadowing.

With our coaching and mentoring support, we emphasize the transition from being a technical expert to becoming a business leader, partner, and advisor. We have worked with CFOs and senior finance leaders who, just like you, needed an experienced, friendly and non-judgmental voice to get them to the other side of the financial spectrum.

Being at the top is lonely not just for the CEO but also for the CFO. Professional development for CFOs is typically geared towards the compliance side of finance.

This is a great opportunity for you to augment your CFO’s capabilities and offer this customized in-house and hands-on approach over a short period and get an important strategic program completed.

The NSS program incorporates a skill-set matrix methodology and an in-depth evaluation of your finance department’s capabilities. Both are critical components if your CFO is going to become a more active partner in the growth of your business.

Our well received coaching incorporates the project objectives, expectations and timeline with you and the executive team and is executed by the CFO with the assistance of an experienced NSS Growth Advisor with over 30+ years’ experience.

Please watch our Rudi Tuesday on Mentorship and give us a call to discuss our Coaching and Mentoring support further.

RudiTuesday Mentor

We are the only peer-to peer CFO group out there helping CFOs become more strategic and forward-looking. We work in a non-threatening, collegial way and are result driven to help your CFO be an effective partner to you and your business.

Staying status quo is not an option. If your incumbent CFO or Head of Finance cannot give you the decision-making support you need to grow and keep a competitive edge, then you are compromising the value of your business.

Call Bob Weber, Managing Director at NSS at 617. 449. 7728. He oversees the NSS Coaching and Mentoring program.

What Does Your Gut Tell You?

Plotting Out a Roadmap | What Does Your Gut Tell You?

Many mid-market company owners and operators trust their intuitive senses —or “gut instincts” — to help navigate issues as they arise. Deloitte Development, 2012

What Does Your Gut Tell You?

Understanding where you are today with your business, both on a qualitative (gut) and quantitative basis (backed by well-defined business analytics), is essential in plotting a roadmap to where you want to take your business.

Capturing your present state will empower you to make the changes necessary to move your business forward.

  • Have you conducted a competitive landscape analysis lately?
  • What are your key strengths and weaknesses?  How have they changed?
  • Are your scarce internal resources holding you back from making the changes necessary to sustain profitability? Should you be making some changes in who you need on the bus moving forward?
  • Have you considered alternatives to achieving growth or maximizing the value of your business?
  • Are your business systems and processes aligned with your customers’ needs?  When was the last time you took inventory of your processes?

Your answers to these questions may tell your gut that it is time to take action. The process begins by acknowledging that you want to make a change.

Once you get a pulse of where you are positioned in the marketplace, you then can analyze and evaluate your opportunities by creating a roadmap that will get you there. Whether you decide to maintain status quo, consider alternatives like acquisitions, partnerships or product diversification, or plan for a future sale of your business, you want to be in a position to make optimal decisions based on rigorous quantitative and qualitative analyses, not just gut instincts.

Ready to Analyze Your Opportunities?

Next Stage Solutions partners with you. We take you (owner) through an intensive one-day work out, where we leave no stone unturned.  The process we use has helped dozens of companies identify key opportunities. By focusing on 3-5 initiatives during the workshop, we assist you in creating a plan for immediate implementation.  The benefit of this workshop is that it is designed just for you.

Call us for more details at 617-449-7728

Additional Resources | RudiTuesday Video on Benchmarking

Not All Growth is Good Growth

How Can I Grow Profitably AND Add Value to My Business?

NSS CEO Workshop | Wed,  Nov 5, 2014

10:30am – 12:30pm with light lunch

Bay Colony Office Park, 950 Winter Street, Waltham, MA 02451


Not all Growth is Good Growth! Join an expert panel to learn how you can drive your company’s growth.  The CEOs will talk about their own experience and the experts will bring an outside perspective of what makes a business more valuable over another.


Moderator: Laurie Kirk, CEO of The Board Forum

A sample of questions we will address:

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  • What are the Differences in Value Creation both Short & Long term?
  • How do you Mitigate Risks and Reduce your Cost of Capital?
  • How do you Promote Operational Excellence across your Organization that Generates a Strong EBITDA?


NSS CEO Workshops are part of our continuing series of educational forums where CEOs participate in peer-to-peer exchanges of ideas and thought leadership. Professional Advisors may attend WITH a CEO or call the office.


Looking for Growth Strategies?  Contact Next Stage Solutions to Start a Conversation!  617.449.7728


Measure what you Manage

You Can’t Manage What You Can’t Measure!

by Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc

Keeping  a competitive edge in today’s market place requires ongoing investment in the transformation of your business.  What kind of information should you be looking for to give you the necessary insights?  Are you collecting the right kind of data?  Are things on track?

Let’s take a look!  A Performance Metric is a measure of an organization’s behavior and performance against a stated target or goal.  You can’t manage what you cannot measure. Key Performance Indicators (KPIs) are a group of metrics that allow you to track your progress and promote accountability & transparency throughout an organization. The measurables have to be informative; they must be chosen carefully.

KPIs are a management tool, a set of metrics to assure complete alignment with your corporate strategy. Create a few metrics that provide a holistic overview. The metrics vary from activity to activity and industry to industry. However, they should support the needs of your company as well as your customers, stakeholders and employees. Strong KPIs give us ample time to make necessary changes. Make sure you have some metrics similar to those of your competition so that you can compare.

What is important to your business? If you use metrics, how well do they measure your goals?

Here are our steps to implement effective measures for your organization:

1. Clearly define your Corporate goals

2. Identify short and long term operational goals

3. Develop business plans with goals and objectives that tie to Corporate goals

4. Establish milestones, deliverables, and tasks to support these objectives

5. Develop and implement metrics for all key activities

6. Monitor progress and make corrections/improvements as needed to stay on course

7. Assess the effectiveness of metrics and modify if necessary.

Communicate all the steps with your employees; buy-in is an important piece of the success of your actions. Include them in deciding what metrics are important for their department or division. If an employee is held accountable for certain outcomes, it is best to include him/her in the decision making process. Evoke a sense of ownership and they will have ideas in how to optimize their task or department. Make it a learning environment.

Once your metrics are in place, begin to gather data and trends. Accurate and timely data are vital and automation can facilitate their collection. Remember, as your business changes, so do your KPIs, so monitor them regularly and re-align them with your budget and forecasting process.

Transparency and accountability are a big part of this initiative. All information used to create a KPI must be transparent and data must be accurate. All KPIs must have actionable steps and the behavior-driven steps are backed by incentives to your employees. Talent retention is vital to the middle market success. Disengagements are associated with an employee not knowing the potential contribution he/she could be making. Keeping KPIs simple with clearly defined expectations will improve job satisfaction and will add value to your business.

According to the Aberdeen Group, midmarket enterprises that establish methods for defining key performance indicators, and conduct regular reviews for these performance indicators, tend to perform better in the marketplace.”

Whether you are starting new with performance metrics or you are concerned your current metrics do not give you the desired outcome, start the conversation today in how you can drive results with the right performance metrics. Transparency and accountability will be on your side as you have a way to measure and manage.

Listen to our short video for this month’s RudiTuesday for steps to take and how to properly plan your next acquisition. – See more at:
Listen to our short video for this month’s RudiTuesday for steps to take and how to properly plan your next acquisition. – See more at:

Get some additional points from this month’s RudiTuesday short video and call us at 617-449-7728 so we can help you get there faster!

Listen to our short video for this month’s RudiTuesday for steps to take and how to properly plan your next acquisition. – See more at:

New Standards for Revenue Recognition

Revenue Recognition Principles promulgated in 2014

By Derek A. Smith, Managing Director, Next Stage Solutions, Inc |

The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) have at long last completed their deliberations on the establishment of revenue recognition principles that are common wherever US GAAP and International Financial Reporting Standards (“IFRS”) are applied. The new standard was issued on Wednesday, May 28, 2014 and will be effective for fiscal years beginning after December 15, 2016 for public companies and December 15, 2017 for private companies. Entities will have the option to apply the standard retrospectively or to adjust opening retained earnings for the cumulative effect of accounting for contracts that are not completed under legacy GAAP at the adoption date.

Implementation of the new standard will mark a big change for many companies in the United States today. It is estimated that there are more than 200 pieces of authoritative literature that create industry-specific rules for revenue recognition including ASC 985-605, Software: Revenue Recognition; ASC 605-35, Revenue Recognition: Construction-Type and Production-Type Contracts; and ASC 932-605 Extractive Activities – Oil and Gas: Revenue Recognition. These will all be replaced by the new standard. In the press release announcing the new standard FASB Chairman Russell Golden stated “It will eliminate a major source of inconsistency in GAAP, which currently consists of numerous disparate, industry-specific pieces of revenue recognition guidance.”


Why you want to start sooner rather than later

While the launch date may seem far off, companies and their management teams need to understand that systems and processes are going to need adjustment to satisfy the new guidelines. It is not appropriate to use an Excel spreadsheet to track the reporting obligations. Further, for any company that provides comparative financial statements, the results for the earlier periods will need to be recalibrated if the company applies the standard retrospectively. Public companies have to provide three years of comparative Statements of Activities.


What is the new Standard?

The core principle of the new standard is that “an entity shall recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services”. While there are some exceptions, the standard will apply to most transactions with customers.

The New Standard in 5 Steps

The new standard has five steps an entity must take in determining the recognition of revenue. They are as follows:

1. There must be a contract (either oral or written) with the customer;

2. The contract must spell out the separate performance obligations;

3. The transaction price must be determinable;

4. The transaction price must be allocable to the separate performance obligations in the contract; and

5. Individual performance obligation revenue will be recognized upon satisfaction of the individual performance obligation.

1. Contract with a Customer

A contract must have commercial substance; the parties are committed to perform their respective obligations; each of the parties can identify their rights regarding the goods or services to be transferred; and the entity providing the goods or services can identify the payment
terms for effecting the transfer. The standard addresses contract modifications and add-on obligations.

2. Separate Performance Obligations

The final standard will provide specific guidance on evaluating the goods and services in a contract to identify each separate performance obligation. While the final standard will not define goods or services, it will provide several examples including goods produced for sale, granting a license, and performing contractual acts. A good or service will represent a separate performance obligation if it meets both of the following criteria:

(i) It is capable of being distinct (that is, the customer can benefit from the good or service on its own or with other readily available resources); and

(ii) It is distinct in the context of the contract (that is, it is not highly dependent or highly interrelated with other promised goods or services).

The final standard will include other indicators (or similar indicators) of whether a good or service is distinct in the context of the contract.

3. Transaction Price

The third step in applying the new standard is to determine the transaction price. That is, an entity must determine the amount of consideration to which it expects to be entitled in exchange for the promised goods or services in the contract. The transaction price can be a fixed amount or can vary because of discounts, rebates, refunds, credits, incentives, performance bonuses/penalties, contingencies, price concessions, outcome-based fees, or other similar items. Under this model, an entity would estimate the transaction price by considering the effect of variable consideration, the time value of money (if a significant financing component is deemed to exist), noncash consideration, and consideration payable to the customer. Entities would use a probability-weighted approach to estimate a transaction price that is subject to variability (expected value) or an approach based on the single most likely amount, whichever is more predictive of the amount to which the entity would be entitled.

Note: Contingent consideration would only be included in the transaction price when an entity has a “high level of certainty” that the amount of revenue to be recognized would not be subject to future reversals.

4. Allocating the Transaction Price

Next, the entity must allocate the transaction price to the separate performance obligations. When a contract contains more than one separate performance obligation, an entity would allocate the transaction price to each separate performance obligation on a relative stand-alone selling price basis (with certain limited exceptions). The standard will note that the best evidence of stand-alone selling price is the price at which the good or service is sold separately by the entity. If the good or service is not sold separately, an entity will be required to estimate it by using an approach that maximizes the use of observable inputs. Acceptable estimation methods will include, but are not limited to, expected cost plus a margin, adjusted market assessment, and a residual approach (when the selling price is highly variable or uncertain).

5. Recognition of Revenue

The fifth and final step in the model is to recognize revenue when (or as) each separate performance obligation is satisfied. A performance obligation is deemed satisfied when control of the underlying goods or services (the “assets”) for the particular performance obligation is transferred to the customer. “Control” is defined under the proposed model as “the ability to direct the use of and obtain substantially all of the remaining benefits from the asset” underlying the good or service. In applying the proposed model, an entity will first evaluate whether control of a good or service is transferred over time. A performance obligation is deemed to be satisfied over time (i.e., control of the good or service is transferred over time) when at least one of the following is met:

• The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced.

• The customer receives and consumes the benefits of the entity’s performance as the entity performs, and another entity would not need to substantially reperform the work the entity has completed to date.

• The entity’s performance does not create an asset with an alternative use to the entity and the entity has a “right to payment for performance completed to date.”

If any of the criteria are met, an entity would be required to recognize revenue over time as control of the goods or services is transferred to the customer. In such case, an entity would recognize revenue by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The standard will provide specific guidance on measuring progress toward completion, including the use and application of output and input methods.

Note: There is no reference to collectability of the revenue as currently exists in US GAAP. While there has to be a reasonable expectation of collectability the new standard does not impose a threshold such as “reasonably assured”. The standard setters have stated that any provision for bad debts must be prominently disclosed within operating expenses.

Major Changes to Consider

· Affects both Public and Private companies

· Must run parallel accounting systems for at least 2 years( private companies) and 3 years (public companies)

· New standard is Principled based not Rules based

· There is an opportunity for Judgment

Other Considerations

As with any new standard, there are other items to consider in implementing the standard. They include the required disclosures to be included in the financial statements (hint: they are onerous), and for US companies the impact on accounting for income tax obligations. For example, the Internal Revenue Code addresses advance payments for goods and services and income from long-term contracts. Entities will need to evaluate how the new revenue recognition principles reconcile with income for tax purposes.

Next Steps

For further information, please don’t hesitate to contact your Next Stage Solutions partner. It is not too soon to begin addressing the accounting and operational processes required to be modified to be in compliance with the new standard.

Mitigate Enterprise Risk & Identify Opportunities

Mitigate Enterprise Risk & Identify Opportunities

by Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc.

Lots of literature is available out there discussing the management of Enterprise Risk, the process and the quality of Enterprise Risk Management (ERM) programs. We also know that there is a direct correlation between mitigating risks in a systematic way and increasing the value of your business as your market value is based on replacement cost.

Our RudiTuesday topic this month is Enterprise Risk and the two kinds of risks:

External Risks and Internal Risks.

An important caveat is to view risk as a comprehensive, cross-functional exercise. Typically your CFO is your risk manager in a midmarket business and can lead the integration of an ERM program and tie it to your strategic activities. The risk information is provided through financial metrics and through a process which manages, measures, monitors and reports risks in a holistic view across the organization. Software for the management of risk is available; however it should be considered a tool and not a solution.

Start with a structured Risk Assessment and demand transparency across the organization. Business decisions tied to business strategies reduce surprises and the upside to Enterprise Risk will be that the process will inevitably identify opportunities. Determine your appetite and tolerance for risk which varies from business to business. Your CFO should operate as Risk Advisor rather than as the Risk Compliance Police to focus on changing the mindset from mitigating risk to identifying opportunities. A proactive risk management will reduce your financial losses. The important lesson is to find a balance between taking too much risk and not enough risk. Not taking enough risk means losing opportunities and your competitive edge. For example, what is an acceptable Employee Turnover Rate? Establish this rate and act on it when you divert from the acceptable level. Risks are typically measured in terms of Impact.

The metrics typically used are Leading Indicators, Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs). In all three metrics, identify both external and internal risks and incorporate them onto your dashboard. Quantify all identified activities by tracking the risk losses and avoided losses. This will enable you to better and more accurately estimate future risks. Understanding leading indicators gives you the ability to anticipate risk before it happens. Always ask: How big is the risk? How often will it apply? Quantifiable measures are more accurate than an intuitive guess.

Consider mapping out your event categories in terms of risks. External Risks to your business are economic, natural disasters and political whereas Internal Risks are infrastructure, personnel, process and technology. Take these event categories and map them by level of risks:

unlikely, likely or certain.

Then add the level of impact of each event:

minimal, moderate and critical.

This creates a portfolio view of risks for current and future decision-making. Look for a concentration of risks and put in place adequate responses and actionable steps to mitigate or eliminate these risks. This important diligence work will also inform you the effect each single event can have on your business. Do you have the right controls in place? Do you have adequate transparency of the opportunities and pitfalls?

Anticipate all new risks with strong leadership around the risk assessment process. The business world is always changing and uncertainties are here to stay. At minimum, concentrate on what you have the power to change internally and then have a Risk Assessment Program to manage the external risks.

The cross functional approach and transparency are two key factors in creating a meaningful Risk Assessment Program. Business objectives need to be tied to key value drivers to ensure relevance. Work it like a SWOT analysis. Be aware of the hidden internal risks.

Check out the RudiTuesday Video that focuses on key hidden internal risks and how to avoid them. They pose a real threat
to the overall health and competitiveness of your business if not identified regularly. Ask yourself: What are the risks of NOT having an ERM process?

How to Best Access Capital

How to Best Access Capital

by Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc

Depending on which stage of business you are currently in, each capital market will have different lender requirements, limitations and costs.

The cost of capital for a private midmarket company can vary by size, capital type and assumed risk. Generally speaking, debt financing will be less expensive versus equity financing. A $1M mezzanine loan will be around 20% in annualized gross financing costs versus one at $25M that will be closer to 9%.  This size difference is similar in Private Equity.

A bone of contention for business owners is they do not want to provide a personal guarantee. Well, unless you are a larger firm and can qualify for a larger loan, you will not win this battle.  Be prepared to offer a personal guarantee and collateral.

According to the 2014 Pepperdine Private Capital Markets Report (PPCM) the main reasons for transactions not to go through from the lenders perspective are:

  • Unreasonable seller or buyer demand
  • Economic uncertainty
  • Insufficient Cash Flow
  • Lack of Capital to finance
  • No market for business
  • Seller misrepresentations

The overall consensus in the business world is that the lending landscape will be improving over the next 12 months. Given the increased demand of loans, there will most likely be more stringent due diligence, so you need to plan accordingly. Lots of businesses will already be backed by government loans.

The weights to the multiples method game are also interesting.  From the same PPCM report, here is how the lenders look at multiples, depending of course what lenders you are talking to and in what industry your business is in:

  1. 48% use revenue multiple
  2. 19% use EBITDA multiple
  3. 12% use Cash Flow multiple

Uncertainty in the economy will be an ongoing risk for years to come, so a business owner must have more robust plans to include outside, uncontrollable risks with sensitivity modeling.  Strong cash flow is always a good thing.

Now let’s take a look at the other side of the table – YOU the business owner and CEO.  Almost 50% of businesses feel constrained in achieving their strategic goals because of tight lending requirements according to PPCM. One of the reasons for the May RudiTuesday is to share with you how you must prepare your business before approaching a lender.

The better prepared you are before starting a conversation with lenders the higher your potential in getting the right kind and right sized funding.  Do take the time to work on your business, increase cash flow and EBITDA, which increases your business value.  Reducing your costs is important, but cutting costs to the bone is not sustainable.  Focus in reducing your fixed costs and increase the variable cost to bring greater flexibility to weather future market uncertainties.

Don’t forget your employees; they are an important component of value creation.  Keep them motivated and engaged in your business.  Make them part of the solution and let go of the people who are not willing to change.

A comprehensive lender package will make a strong first impression.  Reaching out to the right lenders for the right capital sources will enhance your chances. NSS prepared a video for you with some fist steps and take away’s:


RudiTuesday – Access to Capital Markets

Contact us with any questions.   617-449-7728

Key Ingredients for the Right CFO: Interview with Karil Reibold

Interview with CEO Karil Reibold

by Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc

Thank you Karil for taking the time to speak with me on this important subject of how to define the RIGHT CFO for your business.  We get this question quite a bit of just what should the expectations be of a CFO.  CEOs know that Accounting and a CPA are no longer adequate from the Head of Finance.  I thought there is no better way to get some take-aways than from a dynamic CEO.

  • In your past CEO role of a fast growing business, what were the key ingredients you were looking for in finding the right CFO?

I think the most important ingredient that I look for is a business partner.  Some of the key attributes are:  strategic, open minded and able to think out of the box, but must be hands on at the same time.  A CFO, who isn’t afraid to learn the business and understands and supports the catalysts to growth (spending money on the right things).   Also, critical is their ability to develop and manage people.   This needs to be coupled with a strong sense of fiduciary responsibility to the corporation, its investors, partners and employees.

  • How important was it to you to have a CFO partner who supported and augmented your position in the board meetings?

To me the CFO has a dual reporting structure to the CEO and the board.  Their role is to ensure proper governance and financial reporting.   I think healthy collaboration and disagreement of ideas within the executive team belongs in a staff meeting or strategy meeting.  I encourage that interaction.  But, I feel strongly that those debates should be resolved prior to a board meeting.  The executive team should provide a unified and clear message to the board.  That isn’t to say opinions are not welcome from the executive team, it just means we don’t second guess our decisions at the board level.  This means no surprises.  The board has two roles.  The first role is they provide fiduciary oversight for all stakeholders of the company.  I define stakeholders to be investors, partners and employees.  The second role of the board is to challenge the strategy and provide feedback to the executive team on the vision, mission, goals and progress against those goals.  So often, I see executive teams bring problems to their board without a well thought out solution.  This is a slippery slope.  From the CFO perspective their role is to support the CEO and the rest of the team with well vetted financial models that ensure the strategy works.

  • Efficiency and Effectiveness are always top of mind. What are your expectations for a CFO to successfully achieve a best practices organization?

Once the business model has been validated, it becomes all about velocity.  It starts with a clear vision and a set of goals.  These goals translate into roles and responsibilities within the organization.  Automating and process mapping are essential to efficiency and velocity especially in rapid growth businesses.  This needs to be a continuous improvement loop because times change and people get stuck in doing what we always did.  I am also a strong believer that a broken or missing process is usually the issue when the “blame game” happens in an organization.  The blame game is usually played cross functionally where dependencies from one group are impacting the other.  Usually people are blamed, but I always look to what is wrong with the process.

  • What are some of lessons learned in not having the right CFO and how did it affect your business or business that you have worked with?

I think the number one lesson that I have learned and encountered is that there is a perception that a CFO isn’t needed until a certain point in a company’s life cycle.  By not bringing them in soon enough, the CFO is faced with getting up to speed quickly in a rapid growth environment without the necessary infrastructure or employees in place.  I think the perception comes from a number of factors.  The first is a preconceived idea of what the CFO’s profile should look like.  With many potential outcomes for the business, CEO’s struggle to figure out what is the right resource for some point down the road and do not realize the challenges right now.  I think the second factor is that CFO’s need to bring a balance of being strategic, hands on and have the ability to learn the business and manage multiple stakeholders.  No small task.  The CFO needs to think broader than just the financial.  They are not counting cash but providing strategy and leadership and value to the organization in other ways than just the perception that they are the fiduciary stewards.

  • What recommendations do you have in terms of expectations setting for your future CFO?

Be strategic, yet fiscally responsible, understand the business drivers, don’t just be the “no” guy.  Look at what the business needs, anticipate future funding and cash flow and see around corners.  Figure out where to invest resources to achieve huge success.  Be open to learning and collaborating, and developing a solid team. And don’t forget to roll up your sleeves.

Karil Reibold’s Bio

Karil Reibold has over 20 years of experience as a results driven senior operating executive helping companies define their organizational strategy and how they execute to achieve results that drive stakeholder value.  In her career, she has raised in excess of $300 million in debt and equity financing.

Most recently, she served as the CEO and President of Whaleback Managed Services were she was responsible for creating a culture to deliver a best in class managed service offering which drove revenue growth for over 16 consecutive quarters. Karil’s work as an Executive in Residence at Norwest Venture Partners allowed her to work with portfolio companies to define the right go-to-market strategy, build the right team and drive shareholder value.

Karil has a passion for innovation, entrepreneurship, creativity and a strong sense of commitment to her community and the investment in future generations.