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The value of a CFO to a SME

How a Part-Time CFO Keeps a SME in Top Health

How a Part-Time CFO Keeps a SME in Top Health

*Small and Medium Enterprise

By Chris Carl

Regional Director at The CFO Centre

A part-time CFO is to an SME what a doctor, a physical trainer, and a world-class coach is to a superstar athlete.  The superstar athlete will always be good – but they will only be great if they are healthy (the doctor makes sure of that), they are in great physical shape (the trainer takes care of that) and that they can compete at a world-class level (the world-class coach takes care of that).  In a business setting, the CFO Centre refers to these same three levels of conditioning as Business Support (being healthy), Operational Skills (getting in great physical shape), and Strategic Planning (competing at a world class level).  

The highly experienced and successful part-time CFO’s from the CFO Centre can help make a company flourish in every respect.  From increased profitability, to growth through financing or mergers and acquisitions, to increased happiness in the C-suite and all employees, a part-time CFO can literally help perform miracles.  But, these results can only be achieved through sound business practices and a great strategic plan.  A successful experienced CFO, that costs only a fraction of a full-time CFO, can make all of these happen.  

This article (part 2 of 4) discusses how to ensure your company is in top health through Business Support.

Business Support

To become a top performer in any field, you have to be healthy to compete.  As an athlete, that means not being sick and also being in great health in every measurable way. As a corporation, it means you must have all of the fundamental requirements of running a business under good control.

One of the many ways a CFO can bring value is to run a health checkup of your business to ensure it is strong enough to grow and to compete.  For all companies, “financial health” can generally be thought of in four categories:

Chances are that most of these areas of your business are already pretty strong, but like a chain and many other things in life, the business is only as strong as its weakest link.  At the CFO Centre, we call these activities “Business Support.” Enhancing these areas of your business may not seem like they can increase sales or customer satisfaction, but in fact, it is critical for these parts of your business to be in great health to allow you the freedom to have the resources available to support your customers.

While a part-time CFO will have a mandate that is much broader than these financial health-check issues, a great CFO will naturally take a look at these areas of the business to make sure everything is functioning well.

Most businesses require access to some sort of funding assistance to foster growth and innovation.  This funding can take the form of a conventional bank loan or line of credit, convertible debentures from private investors, government assistance programs, or common or preferred equity being issued to existing or new shareholders.  Though there are many variations of financing available, to be successful in obtaining access to such funding quickly and at the lowest possible cost, the business must be seen as financially healthy.

Making sure that the balance sheet is healthy is a great place to start.  Are assets greater than liabilities?  Are current assets greater than current liabilities?  Once these are in good shape, are the four categories listed above all performing well?

As I have shared with partners, employees and clients over the years, when accessing new funding, it is not enough to have a good idea and be in relatively healthy financial condition to ensure you successfully attract new funding. Rather you need to be “better” than the other 5 or 10 companies your funding source may be looking at.

As an example, if you are talking to a great investor who likes your business idea, you need to remember that investor is likely looking at several other opportunities as well. That means you are competing with others who you can’t see.  A great CFO will help you make sure that by being in great financial health, and by having top-notch reporting systems, that you will score very highly in the investor’s eyes against that unseen competition.  Why?  Because a company that operates smoothly, reports accurately and on time, and has all of the “financial health” issues well covered, is a company that is ready for the challenges that the new opportunity brings.

And of course, the opposite is also true.  If your company is good at these things, but not great, you will always have trouble crossing the finish line with these investors because there will always be a company that does have these things under top control that will be viewed as better than you – even if your idea might be better than theirs.

Maybe it is time to ask yourself, “Is my company in as strong a financial health as it should be?”

Your part-time CFO will take on the oversight of the day-to-day tasks for these parts of your business and they will help your current accounting group (whether one individual or a whole team) modify their current processes to make sure they are performing at a top level that is competitive.  Usually, this does not involve doing more work, but instead making sure the work is prioritized and is being done right the first time around. This may include automation or outsourcing that strengthens processes, increases expertise and improves profitability.

Do you want to be a world-class competitor and grow your business to its full potential?  One of the easiest and most sound ways to get there is to make sure your company is in great health.  And there is no one who is better suited to make sure that happens than a CFO.

And, while the CFO will have many more responsibilities than just examining the financial health of the company, an experienced CFO can make this work, and everything else that is required, on a part-time basis.  I believe your company can derive its highest possible value by hiring an experienced, world-class CFO who can manage these things at a fraction of the cost of a full time employee.

Is it time for you to find a Part-Time CFO?

 ____________________________________

 

Chris Carl has a 30-year career growing manufacturing based companies with novel technologies both as start-ups and within Fortune 500 companies. Having held both CFO and CEO roles, he raised a combined $500 million in debt, mezzanine and equity financing in private and public companies listed in Canada, the US and Europe.   

The CFO Centre provides highly experienced, part-time CFOs to small and mid-market organizations at a fraction of the cost of a full-time CFO. We are committed to helping companies work through complex financial issues, in order to maximize profit and provide senior financial leadership. 

Our global team has over 400 CFOs across 13 countries; our services include business and strategic plan development, financial reporting, cash flow management, internal control, risk assessment and mitigation, training and development, and negotiations.

www.thecfocentre.ca 

1-800-918-1906 or email: [email protected]

The Value of a CFO to a SME

What is the Value of a CFO to a *SME?

THE VALUE OF A CFO TO A *SME

By Chris Carl
Regional Director at The CFO Centre

*Small and Medium Enterprise

Can a part-time CFO really add value to a small or medium sized company? If you are like most people in a SME, your thoughts probably fall simultaneously into two categories:

1) Large companies have a CFO, so they must add value and

2) They are an expensive overhead (especially the experienced ones).

In my experience as a CEO, and even being a CFO for SME’s for the past 30 years, I would add a third thought which is often cited but is always wrong:

3) I can get by with a Controller because I already know the business and I just need the numbers.

I would not think badly of any business leader, or Director, for having these thoughts.  Unless you already have a successful CFO within your company, you might naturally draw these conclusions based upon your perceptions of the accounting role within your company and a natural focus on costs.

In this article, and in a series of articles that will follow in the coming weeks, I would like to tell you that for an SME, the value of a good CFO is immediate and creates value well beyond the cost!

I believe this:

“A good CFO can find enough ways to improve cash flow, improve profitability and improve the balance sheet of just about any company to cover the added cost.”

BUT, I have a second even more important belief:

“For SMEs, a great, highly experienced, “part-time” CFO can find ways to improve cash flow, improve profitability and improve the balance sheet of just about any company to cover many multiples of the added cost to the company.”

For SME’s, next to continually communicating with your customers and satisfying their needs, hiring a part time CFO is probably the BEST investment any company can make.  They cost a fraction of a full-time CFO but add great value and profitability.

Your reaction still might be, “But I already have a great Controller so why do I need to add more overhead? After all, I can’t add the hourly cost a CFO to my billings, or to my recoverable COGS.”

My answer to that:

Keep your Controller but hire a part-time CFO.  Together they will generate huge improvements to your cash position, to your profitability, and to the condition of your balance sheet (something your banker will love).

And just how will they do all this, you might ask?  While there are many detailed reasons (12 of which I will cover in the upcoming weeks), the simple answer is this:

A part-time CFO is to an SME what a doctor, a physical trainer, and a world-class coach is to a superstar athlete.  The superstar athlete will always be good – but they will only be great if they are sure they are healthy (the doctor makes sure of that), they are in great physical shape (the trainer takes care of that) and that they know how to compete at a world-class level (the world-class coach takes care of that).

This is exactly what the value of a great part-time CFO is for your company:

1) They make sure your company is healthy and where they are weak, they help make them better.  We call this Business Support.

2) They help the company make better-informed decisions to ensure they are financially fit to go out and compete at a world-class level.  This is Operational Skills.

3) They help the company create, and achieve goals that only the greatest companies in the world have a track record of achieving.  They make the company world-class through Strategic Planning.

In the coming weeks, this special series will examine the role of a part-time CFO and how the immediate and measurable impact of an experienced CFO increases the value of your business. The CFO Centre is delighted to bring this special series to our valued subscribers.

 ____________________________________

Chris Carl has a 30-year career growing manufacturing based companies with novel technologies both as start-ups and within Fortune 500 companies. Having held both CFO and CEO roles, he has raised a combined $500 million in debt, mezzanine and equity financing in private and public companies listed in Canada, the US and Europe.   

The CFO Centre provides highly experienced, part-time CFOs to small and mid-market organizations at a fraction of the cost of a full-time CFO. We are committed to helping companies work through complex financial issues, in order to maximize profit and provide senior financial leadership.

Our global team has over 400 CFOs across 13 countries; our services include business and strategic plan development, financial reporting, cash flow management, internal control, risk assessment and mitigation, training and development, and negotiations.

 

What Ancient Rockers Can Teach You About Making A Profit

At an age when they should (or we just wish they would) hang up their leather pants and retire disgracefully, more and more ancient rockers are embarking on yet another tour.

This year alone, the Rolling Stones (of course!), Madonna, The Who, Neil Young, Rod Stewart, Pearl Jam, Queen and even Ringo Starr are performing on stages around the globe. Given that many of them are nearing or way past grandparent-age, you might wonder why they’re still bothering so many years after their first taste of fame.

The performers will say it’s because they love it and that they ‘don’t want to let the fans down.’ But there’s another hard-nosed reason to get their weary old bones back on the tour bus. And it’s this: touring boosts their profits in a way that digital music sales and royalties can no longer do.

Digital music generates very little return. Peter Tschmuck, a professor at the University of Music and Performing Arts in Vienna, told Business Insider’s Rob Wile that the return on investment from selling a digital copy of a song is 12% compared with about 36% for CDs. That’s before the revenue is shared between various title holders.

“With digital music so freely and widely available, hardly anyone makes money off sales or royalties these days,” reported Mike Rowell in an article for Forbes and Zocalopublicsquare.org.

“Often, these bands seem to approach nostalgic tours as the most expedient way to make bank; choice seats for top acts—Fleetwood Mac, Elton John, the Rolling Stones, and Stevie Wonder—can run in the hundreds of dollars,” he said.

Top concert draws can take home 35% of the night’s gate sales and up to 50% of the money made from merchandise sales sold at the show, according to Forbes’ journalist, Peter Kafka. Their record labels are likely to receive none of that.

That means the stars—including Paul McCartney, the Rolling Stones, Neil Young, The Who and Roger Waters—are likely to receive a whopping payout for their mega-concerts. Tickets for the performances were snapped up within hours of going on sale and topped a hefty $150 million, according to Billboard sources. Think how many downloads those artists would have to sell to get anywhere near that kind of money!

Singing aside, what can you learn from the likes of Mick Jagger and Keith Richard when it comes to your business?

To focus on the part of your business that brings the most profits. The Rolling Stones could have retired decades ago and waited for the income from album sales and royalties to trickle in. Instead, they made the decision to continue to tour and have generated many millions as a result. In just under three years, for example, the band’s overall concert grosses topped $401 million, according to Billboard.

If you would like to read our new report on how companies can greatly increase their profit through detailed analysis of the numbers you can do so by clicking here.

The following story illustrates why it makes sense to focus on the most profitable part of your business. A major US direct marketing company with over $1 billion in annual sales recently reviewed its database to determine where its profits were coming from, B2B or B2C. At that time, 50% of its sales were to consumers and 50% to businesses. It was shocked to discover that the profits on the business sales were 500% better than those to consumers. Most consumer sales weren’t even profitable even though they represented the majority of customers, transactions, and expenses.

The decision was made to focus on B2B sales. It required a significant turnaround in the business: at that time, the company employed 500 people taking inbound calls from customers and only 100 people making outbound calls to businesses.

The change took two years. By the end of that period, 95% of its sales were to businesses and only 5% to consumers. Sales flourished. They had been growing at 21% before the turnaround but by the end of the two years averaged 50%. Profit growth was equally dramatic.

So what can you do to boost your profits besides cutting costs? For a start, identify your most profitable customers and then do everything possible to increase sales to that segment of your business. Focus on attracting more customers like them.

Fortunately, it’s not something you have to do alone. A part-time CFO will help you accomplish your profitability goals with less stress and hassle than if you were to try to do it on your own. You can watch our 3 minute video here which explains the part-time CFO model.

Make it easy on yourself: book your free one-to-one call with one of our part-time CFOs now to learn how your company can become more profitable. Just click here now.

 

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