Many small to mid-sized businesses run on the efforts of the business owner and its professional manager, the CEO. But the rate of change isn’t slowing and your day has timed out before half your questions are answered. So, when is the right time to introduce an outsourced CFO into your company? The answers to the questions an reveal the bright line:
1. Do I have time to focus clearly on the business drivers necessary for success? Am I spending too much time figuring out the books and not enough time managing the business? Twenty percent of your activities will drive 80% of the results. The first thing a short-term, outsourced CFO helps identify is the understanding of the fundamental principles of business. What are the truly key metrics or business drivers for my company? Sometimes this basic approach is just what the CEO needs to objectively view the business. CFOs relieve CEOs and operational managers from routine responsibilities so that they can play an expanded role in the strategic direction of their companies.
2. Do I have the information I need to make business decisions and can I trust it? Many CEOs simply do not have a high-level financial head in the organization so they manage by instinct, using a few key bits of information to proxy for all the rest. Usually, much more information is available that would lead to better informed business decisions.
3. Is my business adequately funded? Securing equity or debt financing requires financial expertise and representation. Since Sarbanes-Oxley, most venture capital firms and financial institutions alike insist the businesses they fund bring in experts to ensure their accounting is sound. These funding sources appreciate an expert, independent view informing projections and ensuring consistent financial presentations. And they look for continued financial executive involvement in the boardroom.
4. Am I missing strategic opportunities because of absent or weak financial leadership? Most companies are in high-change environments today which generate business challenges and opportunities at a faster rate than ever before. Sound financial processes and internal controls provide stability for existing operations and freedom to attack new opportunities as they present themselves. The CFO is uniquely positioned to evaluate new opportunities and gauge the company’s readiness to take advantage of them.
5. Am I contemplating an entity-level transaction? Growth through acquisition or positioning your company for sale both beg for financial leadership to build and defend financial models, prove valuations, and guide negotiations.