How does a small/midsized businesses gain the experience and leadership of a seasoned CFO? Generally these types of companies do not employ a full-time CFO as the cost of hiring one typically doesn’t align with their budgets. Fortunately, there are options available to partner with an outsourced CFO and receive the value-added services they provide which pay for themselves many times over.
CFOs are forward-thinking strategists who help owners navigate the financial and strategic challenges in managing their business. Let’s explore five value propositions an outsourced CFO delivers.
1. Long-Term Purpose.
Work with the business owner to identify the long-term vision for the company and develop a strategy to achieve the associated objectives. Examples include growing the company for subsequent sale, transitioning the business to the next generation of family members/employees, or structuring the business to provide cash flow to the owner for an extended period of time. Regardless of the purpose, a map and timeline needs to be created and executed.
2. Strategic Direction for Growth.
Participate with the management team in the development and vetting of appropriate strategic options to drive growth. This participation takes the form of preparing appropriate analyses and documents that articulate the options available (organic/acquisition), the associated risks and costs, as well as the market penetration and upside revenue potential of each option.
3. Funding Options.
Based on the long-term purpose and strategic direction for growth, identify the size/type of funding needs and lead the process of obtaining the desired capital. This is typically a four stage process. First, prepare projections underpinning the amount of capital required to support the Company’s growth. Second, recommend the most appropriate form(s) of capital. Third, lead the process of obtaining the capital (debt or equity) through active relationships with the providers of that capital. Lastly, provide direction/prepare the documentation that supports the funding requirements with appropriate projections and full financial statements reflecting how the funds will be used and repaid.
4. Identify Problems, Opportunities and Solutions.
Many times problems are identified by objectively walking the four corners of your business, talking with the front line people and observing how a business is structured to deliver its goods or services. Even the best run companies have room for improvement through analysis of historical trends and benchmarking against competition to implement industry best practices. Opportunities exist throughout an organization with respect to the speed and quality of how they deliver their products/services, selection and measurement of meaningful key performance indicators, and refining the infrastructure for operating efficiencies. Proper identification and management of these items collectively should result in establishing predictable, repeatable behaviors that enhance an organization’s value.
5. Financial Benefits.
This can be stated in many ways but is best defined by the implementation of analytical tools and processes that create sustainable cash flow drivers. The end result increases the efficiency of working capital, improves margins and profitability, and maximizes the internal generation of cash flow.
What CFO services could your business benefit from that you’re not currently getting?