To CFO or not to CFO? Better Invest Now!

By Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc, a leading on-demand financial management advisory firm.

Are you tired of reading about the economy, the uncertainty, the election, Greece and the possible fall of the Euro when all you want to do is grow your business?

So many uncertainties and yet how do you calculate them into your forecasts? To CFO or not to CFO is firstly about whether you make the choice, or not, to work with a CFO and secondly, how to augment the missing expertise or skill set to work with your trusted CFO and/or Controller so not to harm sustainability and growth. Believe it or not, the right CFO can make all the difference. In this article we give you ideas and a checklist how to identify CFO capabilities that stretch way beyond the conventional CFO boundaries. We will explore ways to access or augment expertise without compromise.

Let us take a few minutes to explain why a CFO is so important to your growth and why you should invest in such a solution! What do your current finance functions look like?

Are any of the above people your partner who can offload some of your responsibilities so you can spend time ON the business? Do you gather information and problem solve 24/7 and have to make all the decisions on your own? Does the finance staff even have the time to work ON the business with you and what might be the barriers to your growth?

You see, with the right CFO you can actually delegate important executive level tasks. Controllers are very important in that they keep you compliant, give you the financial, monthly reports, take care of payroll and reconcile your bank statements, important but mostly tactical. The VP of Finance oversees the tactical side and provides administrative and HR support.

Let’s discuss the other side of finance, the strategic, forward–looking and value creating aspects of finance. Here are some examples of what your Accountant, Controller or VP of Finance do not do or help you with, but the CFO will:

The list above exemplifies what a cross-functional, modern CFO must bring to the table and where small and medium size companies make the biggest concession in hiring a ‘Jack of all Trades’ or one person who can do it all. They can’t, it is that simple. For them, a part-time team solution involving a CFO, Controller and Accountant is appropriate. To maintain sustainability or achieve growth, especially in a sluggish economy, you must consider alternative resources appropriate to your stage and size of company. You want to have most of the above items checked to eliminate business performance gaps.

Think about your strategy, expectations and goals and how you are going to achieve them before you go out and start a search for a CFO or Controller. Consider the next level of financial sophistication to meet your objectives and goals so that the value-driven support benefits your business growth and increases your valuation.

So often we see CEOs struggling with this issue of what the CFO should bring to the table and what a Controller takes care of.  Should they be strategic? Why are they not interested in your vision? Why do they never have the time?

The reasons vary by business, often we see that the CFO has to oversee all finance functions and is simply bogged down with all the daily, transactional tasks. The CFO should help you grow the business in a sustainable manner.  If s/he spends time working on monthly reports, then you are compromising and overpaying, because that is Controller work. In fact, a team will bring you more bang for the buck than one person who will accomplish some of the tasks some of the time. You may also consider augmenting the current CFO’s tasks or skill set with a consultant who can provide you the additional expertise needed to move your business forward. Frankly, no CFO knows everything in today’s complex business world, so budget for extra support to access the needed expertise.

In the table below we have identified key questions and expectations you want to set when searching for a CFO or identifying the resources gap between what you have and what you need.  Again, when the CFO is allowed to focus on the value drivers of the business, the results are value creation driven.  It takes soft skills to successfully achieve the hard skills. Communications is an important attribute and soft skill for a CFO to have, since the metrics and expectations (hard skills) you set for the employees are relationship based and require buy-in from all employees to succeed.

Once you create this gap analysis you will want to consider how to augment the missing capabilities. Let’s say you are a company with under $20M in revenue. You can rarely justify a fulltime CFO. The team approach to finance including a part-time CFO, Controller and Accountant is very effective. CFO Turnover is still close to 18 months and ends up a very costly event for a business. Think hiring bonuses, severance pay and more.  The CFO you have currently may no longer have the right skill set, especially since you want to double your growth over the next three years. Often s/he has become your trusted advisor but you easily can eliminate business performance gaps with a consultant.  A CFO Consultant is often better positioned to provide you frank and objective feedback on issues and problems that need fixing, whereas a fulltime employee might be more cautious.

Yes, it is a paradigm shift in how we think about the finance function and how much to expect from them. On the other hand, how we conduct business today has also shifted and gotten more complex. Tomorrow’s companies need to be agile and fast in making changes and corrections on the fly.

To CFO or not to CFO is an important decision to make for you and having the right CFO and finance function is where a profound difference will break down the barriers to growth. Take action today, evaluate your finance team, perform a gap analysis, budget for the appropriate resources and make the necessary corrections sooner than later.

Next Stage Solution benefits its clients because we set very high expectations for the CFO role, the FUTURECFO™, who brings the GPS of Finance™ tools and methodologies to the discussion. Our CFOs understand how to parse out the financial responsibilities so that you benefit from a strong compliance side with a Controller, to the business insights, metrics and growth opportunities from the CFO.  Our team approach gives you seamless support when you need it with capital efficiency and highest productivity. And no, you will not find our CFOs or Controllers doing Sudoku in their office!

With our assessment tools, we help eliminate business performance gaps and define the right finance functions for you. We’ll have a conversation about how to reach your aspirations and solve the upcoming challenges.

Take action today and give us a call at 617-449-7728 or contact me directly at scheiberkurtz@nexstagesolutions.com | http://www.nextstagesolutions.com

Articles of Interest Related to the FUTURECFO™:

For CFOs, A Move Past Finance – Wall Street Journal | July 31, 2012

As your Business Grows, don’t hesitate to hire a CFO – The Globe and Mail | June 18, 2012

Where Finance Efficiency meets Business Insight – 2010 IBM Global CFO Study: Where Finance Efficiency meets Business Insights | March 6, 2012

Moving from CA to CFO – A Competency Framework | Queen’s University | 2010

Annual NSS CEO Survey Results and Report 2012

Annual NSS CEO Survey Results and Report –2012

NSS conducted its Annual CEO Survey 3rd quarter last year and found some intriguing consistencies as well as one very strong dichotomy.  The purpose of the survey was to gain better understanding of the decisions-making process of CEOs in the greater Boston area and how they view the finance function.

Each of the questions represented a part of the business in the same order. All of the potential answers represent contributions from a finance team can and should make. Examples of how a finance team must contribute in the outlined aspects of a business:

 

Sales: CFOs forecast the most profitable products and channels

Operations: CFOs benchmark performance metrics and financial goals

Organization: CFOs close the gap between information flow and real-time decision-making

Finance: CFO negotiates capital transactions

 

Three of the four business aspects (sales, operations and organization) had consistent answers, with Sales and Organization somewhat more important than Operations.  The exception however was Finance which was viewed very differently and inconsistently from very low in expectations to a very high in terms in providing liquidity and access to capital markets.

The results also give us a better way to identify how to support CEOs with their aspirations, afflictions, challenges and desired improvements. The survey results are not surprising to NSS in that all aspects and questions represented in the survey are Finance Driven Functions.  What is of importance is that the dichotomy gets clearly defined when the expectations of the Finance Functions are set very low yet the challenges such as Access to Capital Markets and Product and Channel Cost/benefit Analyses are set remarkably high. This is an unnecessary compromise that can be very costly to a business.

NSS has observed this compromise where CEOs experience a similar pattern and frustration with the overall finance function and a mismatch of expertise and needs. Maybe the CFO is really a Controller type or the Controller does NOT provide CFO capabilities. CEOs need to be able to rely on their CFO as value creator and integrator for growth and profit.

The biggest organizational improvement aspired to in this survey was Communications.  They want to better understanding of how all levels can contribute to achieving the goals of the company. Again, a NSS CFO helps a CEO by attaching information flow to financial metrics and reporting and plays a major role in achieving this through communications with all departments.

Today’s CEO wants to incorporate and fully integrate the Finance Functions into all parts of a business as the silo mentality of departments gets eliminated and replaced with a more integrative approach and transparency to business.

Next generation finance functions need to be redefined to support CEOs for better and faster decision-making.  Agility is vital in growing and maintaining a business in volatile markets.  NSS and its high level CFOs use the driving analogy to best describe its finance and business focus. The GPS of Finance™ incorporates information integration, capital asset management and business performance measures and monitors as value creators.

In summary, from the survey we deduce that Sales continues to be a major concern along with Organizational well being. Operations sits somewhere in between with medium to high importance. We also conclude that Finance is not recognized as an important function in relations to value creation and is showcased as the only dichotomy of the four business characteristics. CEOs need to know that this is an important and realistic expectation from their CFOs.

Today’s CFO must be a business partner to the CEO, a value creator and integrator and directly affect the bottom and top line of a business.

NSS turns this problem into a solution for companies by closing the gap between needs and expectations and by pairing high level finance and business partners with CEOs at a better price point.

Contact us today to discuss further in how NSS works differently with its clients and how we may help you!! 617-449-7728 or info@nextstagesolutions.com

Original Survey Questions:

 

Aspirations

 

 

Afflictions

With the ability to wave a magic wand, what would be most important to your company in the near future?

 

Which is the biggest constraint in the present state of your company?

Market Opportunities are exploited with effective account management

SA

Sales Force and support systems not in place to capture growth opportunities

Profits are maximized by focusing on value drivers

OP

Cost reduction constraints to build out a scalable infrastructure

Performance is integrated from strategy to execution.

OR

Working in the business does not allow time to work on the future of the business

The finance team is a recognized value creator for growth and profits.

FI

Emphasis on accounting and compliance hinder business analysis and predictive capabilities

Challenges

 

Value Creation

Which is the biggest challenge you face in moving forward?

 

Which improvement ranks the highest for you to achieve success moving from present to future state?

Identify and prioritize opportunities using product and channel cost/benefit analysis

SA

Establish a culture for sales of managing team goals and forecasting future performance

Put processes in place, shorten time to market and streamline product delivery

OP

Gain efficiencies by leveraging operating technology and advanced management techniques

Build an executive team that is balanced between vision and execution

OR

Increase the understanding of how all levels can contribute to achieving the goals of the company

Obtain liquidity throug
h organic cash flow plus access to credit and capital markets

FI

Expand financial strategic vision and risk assessment to achieve growth and profitability

Key:  SA = Sales | OP = Operations | OR = Organizational | FI = Finance

 

Figure 1

Build and Retain Value for your Company in a Slow Recovery!

NSS Workshop Series for CEOs and Business Owners

How to Build and Retain Value for Your Company in a Slow Recovery!

Wednesday, Sept 28 2011 | 7:30am-9:30am

Host Place: NENS, New England Networking Solutions, 1 Presidential Way, Suite 104 B, Woburn, MA 01801

Click here to register!

Moderator: Carol Kunik, Vistage Expert

Speakers:

Host: NENS, New England Networking Solutions,  1 Presidential Way, Suite 104B, Woburn, MA 01801

Sponsor: Next Stage Solutions, Inc.

Value Creation Topics:

  • The Role your Company Culture plays
  • Identify Your Value Drivers
  • Balance Variable and Fixed Costs
  • Leverage Technology for Scalability
  • Continuous Improvement Methodologies
  • Leverage IP for new Revenue streams
  • Assess Competitive Risk

Join our Panel of Experts in an interactive discussion how to build and retain value creation in uncertain times.  What is value creation and why should you care?  Value creation is achieved by positively affecting the valuation of your business and is an ongoing process.

Many CEOs are so busy right now working in the business, that they lose sight of the longer term goals. The workshop intends to lead you back to a longer term view focusing on value creation inside and outside your business. Our panel of experts will propose ways to maximize the impact value drivers can have in realizing success.

The uncertain economy demands disruptive innovation, yet that implies risk that is harder to achieve. Agility is more important than ever, you want to be a speedboat rather than an ocean liner.  We will discuss how to incorporate hidden values into your strategy and how to attain value short-term and for the future health of your company. Value creation starts at inception and gets more complex with maturity.

Who should attend?

Exclusively for CEOs, Presidents, Founders, Board Members and Investors.

How do you communicate and manage the goals for your team?

On May 11, 2011, NSS held a CEO Workshop concerning Budgeting and Forecasting.  The group discussed the different measurement criteria, value drivers and how to lead an ongoing budget process within your business. Flexible budgets, annual budgets and rolling forecasts were compared.  Here are two articles you may want to read that are relevant to this topic.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710 for a consultation.

  1. Let It Roll: Why more companies are abandoning budgets in favor of rolling forecasts by Russ Bangham of CFO Magazine, May 2011
  2. Use a Rolling Forecast to Spot Trends by Harvard Business School Working Knowledge, March 13, 2006

Budgets and Forecasts represent two parts of a business management continuous improvement process. A successful enterprise must first have a clear understanding of its strategic plan. In fact Budgets and Forecasts are the financial GPS tools that carry strategy through to implementation.

How do you communicate and manage the goals for your team?

The workshop posed the following questions to our CEO participants;

  • Do you see a budget as a Strategic or a Tactical tool?
  • How can your budget reflect your strategy?
  • Do you see your budget as more of a tactical tool, i.e. the performance yardstick for annual goals and compensation plans?
  • Is the budget made up of strictly financial metrics?
  • Where do you capture operational goals and performance measurement metrics?
  • Is your budget implementation process a reflection of your company’s culture or is it a process within itself?
  • Do you recognize your business and industry drivers within your budget?
  • Does your budget have an expiration date, or do you keep it alive through continuous improvement forecasting?

Ben Weller, BD & CFO for Next Stage Solutions compiled the following check list as a hand out:

The measure of how you execute strategy is captured in the topic of Budget. But different areas of your business require different measurement criteria.

Budgets can refer to:

  • Marketing Strategies
  • Sales Plans
  • Operational performance
  • Human Resource development
  • Capital Investment
  • Financing Strategy
  • Ownership Return

And can take on many measurement dimensions

  • Fiscal
  • Continuous Improvement goals
  • Key Performance indicators
  • Strategic Planning Milestones
  • Benchmarked Metrics
  • Customer Satisfaction

Budget Implementations can take on the personality of the organization

  • Size of Company and distribution of authority
  • Top Down versus bottom up management style
  • Fiscal Micro management vs  Strategical Macro management
  • Cash Flow is Primary Focus
  • Performance vs External Expectations is a Priority

And all methods and uses need to focus on Business Drivers

  • Variable Sales and Cost (Marginal Profitability)
  • Fixed Costs
  • Project Costs (New Product Introduction)
  • Occupancy Costs
  • Variable Energy Costs
  • Headcount
  • Average Selling Prices (Competitive Positioning)
  • Efficiency (Labor and Machine Operations)
  • Productivity

What Profiles of budget design fit with various industries

  • Software
  • Life Science
  • Medical Device
  • Manufacturing
  • Food Production
  • Professional Services

What are the various focuses of forecasting and where do they apply

  • Traditional Rolling 12 Month forecast
  • Sales Driven Top down vs trend based
  • Cash Flow vs P&L
  • Analysis vs Plan
  • Current State vs Future State (This involves lean accounting and is a whole other topic)

If you are interested in this topic and would like to explore rolling forecasts further for your business, NSS provided a customized one-day workshop.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710

March 31 |Private Equity Transaction: What you need to know!

NSS Workshop Series for CEOs and Business Owners

If you are a service provider receiving this, please share it with your clients, a value add for you, thank you.

Private Equity Transactions: Raising Growth Capital and what You Need to Know!

Time: Thursday, March 31 2011 | 7:30am – 9:30am

Place: Bridge Bank | 1050 Winter Street | Suite 1000 | Waltham, MA  light breakfast

Bring your questions to this interactive discussion with a great panel:

Moderator:

Frank Leibly, Partner,  Alcon Partners

Panelists:

Paul Harting, CEO, Neuroptix

Ethan Flaherty, Partner,  Pabian & Russell

Laura Kevghas, Partner,  Mirus Capital

Scott Goodwin, Partner, Wolf & Company

Host:

Dick Sweeney, Partner, Bridge Bank

Discussion Topics:

  • What is Private Equity, and how is it relevant to my business?
  • What kinds of transaction structures are common?
  • What questions should I be prepared to answer?
  • Should I hire an investment banker or business broker?
  • What are some of the metrics to consider building value?
  • What are the steps towards a capital raise?
  • What does a due diligence process look like?
  • What to expect after a transaction is complete?
  • Is now a good time for a private equity transaction?
  • We will share horror stories and how to prevent them.

Who should attend?

CEOs and presidents of companies with $10MM+/- of revenue who are considering next steps for their company.

If you do not match the above criteria, please forward this email to clients and colleagues who are.They will appreciate it. Thanks.

About the NSS CEO Workshops Series:

Next Stage Solutions, Inc (NSS) is a financial consulting firm providing CFO and Controller support to growing businesses on an interim or ongoing basis. Through its extensive network, NSS began offering the workshops in 2010 exclusively to CEOs and presidents of growing companies.  These workshops are interactive in nature and encourage company leaders to explore new ways of tackling the complexities a 21st century business, to learn from each other and gain new and more effective tools in leading their business to the next stage.

 

Register today at info@nextstagesolutions.com or 617-449-7728

Reflections from the NSS CEO Workshop- Sept 21, 2010

The workshop was sponsored by NSS and hosted by WilmerHale Venture Group. The NSS CEO Workshop Series is intended for CEOs of revenue producing companies.

The board room was chuck full at the WilmerHale Venture Group office in Waltham. The invited speakers were Joan McArdle of Mass Resource Capital, Jane Braun of Silicon Valley Bank, Robin Lockwood of Flybridge Venture Partners and Christopher Mirabile of RacePoint Capital LLC.  The panel discussion was led by Lee Schindler of WilmerHale.

The focus was around changes in the funding arena and how that has affected each group.  We then opened it up to a dialogue with the CEOs.

Here are some interesting facets of this discussion (loosely defined by NSS):

  • Significant changes in activity around Angel Groups, almost a flip side between VC and Angel funding.
  • More syndications between Angels and VCs.  Angels are valuation centric.
  • Huge migration in the VC world and closing of funds from 800-900 down to 600-700 VC funds
  • Because of high multiples among some VCs,  Angels are filling some of that gap
  • With uncertainties in economy it has been hard for companies to commit to expansions
  • Lots of Re-Capitalizations are happening.  Good timing.  With lower interest rates it is advisable to reconsider a re-cap with the layers of debt and the different view from lenders a company may have.  Mass Capital Resources provides this type of re-cap with a 2-3yr interest only financing.  Mass Capital is currently doing deals in the $1M to $5M range and at an interest rate typically between 10% and 12%.
  • Companies are starting to invest again.  All agreed that they are seeing an uptick in business activities.
  • There is a huge Global push
  • More VCs give smaller checks
  • VC’s today are investing in companies that are capital efficient or not at all.
  • It’s more difficult to get investment in a product or services business than it is in a software business.
  • How do you get a highly leveraged company to an exit in today’s market?  Not really any differently.
  • How can an entrepreneur know how much money to raise?  Determine what the life of an investment is and then try to match it with the right investor.  For example, an investment of $500K to $2.5M over the life of the investment probably won’t be appealing to a typical VC.  Putting in $30M over the life of the investment would be more appealing.
  • How often do Angels and VC participate in similar events?  There are some forums when a mixture of investors is present.
  • How about grants as a way to get some funding?  That may be a good thing (it’s non-dilutive) as long as it fits your business strategy.  Do not lose focus.
  • Whether or not an angel or VC invests in the company depends in large part on how good the entrepreneur is.  “Can he/she do it?”
  • Best thing to do if you’re raising money – Don’t go around town asking for money.  Instead, spend your time building relationships with investment community, asking questions like “what would you do if you were me?”
  • M&A activity is picking up and deal flow is up

Our next CEO Workshop will be Tuesday, November 9 from 7:30am-9:30am and the topic will be around “Merger & Acquisitions”.  Save the date!

Interview with NSS team member – Steve Dance

Steve Dance is part of the NSS team.  He brings over 30 years of high level financial expertise in Life Sciences and High Tech. Steve has raised over $500MM in capital.

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

That the CEO could always count on me to be calm and focused during a crisis.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

The sale of one of my previous employers to a major biotechnology company was a complex process, with many potential obstacles arising during the negotiation and due diligence process.  As CFO, I was part of the negotiation team and provided the bulk of the due diligence materials.  I was responsible for resolving the many issues that came up during the sale process.  I believe I was able to establish a strong level of trust with the acquirer’s team and we were able to reach agreement on all the issues, and the sale was successfully concluded.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was CFO for a biotech company in California that had 300 employees, over 200 of whom were located in Europe, principally in Lyon, France, following a recent acquisition.  Since I speak French, I was able to establish good relations with the finance group in France, and ultimately the rest of the management team.  I played a key role in ensuring that the needs of the European team were met and consequently was appointed President of European Operations in addition to my CFO duties.  The good relationships that I built with the European organization also enabled me to negotiate successfully with the French labor union to avoid a workers’ strike that would have halted manufacturing.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Wall Street Journal – still a great way even in this digital age to keep on top of what is happening in the business world.

Funniest Fact: Tell us something funny about you.

I was raised in Wimbledon, England and when I was a kid I used to go and watch the tennis at Wimbledon every year.  In those days the players used to walk through the crowds on their way to the courts.  One time I got too close to a player and he accidentally trod on my foot.  My foot was sore for days afterwards; the player won his match.