I am somewhat amused when someone tells me that they are “just” a small business. I guess that is because it is often said in the most apologetic of tones. They should be screaming: “I OWN A SMALL BUSINESS!!!”
Unfortunately, most people think of large businesses when someone is talking about the economy, or the government should do this or do that. The risk takers, those brave souls who have the guts to start a business deserve more than just a cursory mention when it comes to discussing actions that are being taken to help “business”. So let’s do that now.
ALL HAIL TO THE SMALL BUSINESS OWNERS OUT THERE!
To be considered a small business you must have less than 500 employees. Here are some facts about small business:
- As of 2013, there were 28.2 million small businesses according to the Small Business Administration (SBA). 28.2 Million!!! Let that sink in for a minute. There were only 18,600 Large businesses. The people running small businesses, the owners and/or their managers will never make millions in salary for a year. Some may not make millions in their lifetimes. I will address that a little later on in this article.
- The small business provides 48% of all private sector jobs in the US. That’s right. On average nearly half of the jobs in your community are not provided by the “big guys”. For those of you who like numbers, that is just shy of 60 million jobs that are provided by the “I am just a small business”.
- • Do you know that 33.6% of the value that is exported is from firms that are considered a small business? The value of those exports is estimated to be around $500 Billion. That’s billion with a capital B!!!
I could go on and on about the value of the small business in the economy but that will not answer the question at the start of this article. But, let’s agree that value that you provide as part of the small business group is just as responsible for the successes in the economy as well as much of what is good about the country overall.
So, Why hire a CFO?
I don’t want to scare you but: 20% of businesses fail in their first year. 50% are out of business before year five and only a 33% will make it ten years. If your business is older than that you have beaten the odds. But, what if one of these scenarios applies to you:
- Maybe you survived but are just barely eeking out a living and you have become frustrated with your business and aren’t sure what to do to make it deliver on the promise it once had.
- Or, and there are millions of you out there, you are the Baby-Boomer business owners whose business is pretty successful but your kids don’t want it and it is time to “dress her up and take her to the dance” known as selling your business.
- Or maybe, and I hope you aren’t in this group, you are like the business owners that I have worked with that is having cash flow problems, the bank is on you to make changes or they will call your loan, your vendors are not being paid and your customers aren’t paying. If you ARE in this group you better check out my contact information below.
- Or, maybe YOU ARE the CFO and you are buried. You don’t need someone full time but you need someone who understands your pain, who will have the knowledge to do the things that need to be done and in a timely manner. Someone who isn’t after your job! Someone who might be at a higher rate than that temp but brings significantly more value.
- Or, and Lastly, you have a CFO or a controller but you would like some oversight or additional reporting that they can’t seem to get you, or you need someone on an interim basis until you can hire that CFO or Controller, or (you fill in the blank)
In short: You hire a CFO for the same reasons those big companies do: To get results that move you along toward your goals. The only difference is you can’t afford to pay the same thing as those big guys pay for a full-time CFO. You don’t need to. You still deserve the service though. That’s where firms like Conceptualized Dynamics come in. By engaging the CFO on a part-time basis you can take advantage of their expertise at a fraction of the cost and at an amount that will fit within YOUR budget. Who knows, by working together you might just become one of those CEO’s that earn those seven figure salaries. Some of these are: Increase profitability, improve cash flow, raise capital, Establish benchmarks (KPI’s), Manage Banking Relationships, Facilitate Reporting to the Board/Owners, help manage growth (including Merger and Acquisition activity)
What should I expect from my CFO?
- Honesty, integrity, and respect. No one, and certainly no CFO, has all of the answers. On day one they should be listening to you about your goals, your objectives, and your business. They should ask questions about your business that will help them craft a plan for doing what needs to be done, what kind of help you need and how they are going to bring value in excess of the amount on the invoice that they will hand you on a regular basis.
- Your CFO needs to understand your business. Whether you are a restaurant, a manufacturer of widgets, fidgets or gadgets, there are aspects of your business that will be unique. Some of these things may be your culture, your style of dealing with the customer, vendors, etc. Your CFO can’t and shouldn’t be giving advice until they understand YOUR business.
- Your CFO should be able to have an impact on the following areas of your business:
- Your CFO will monitor cash, make cashflow forecasts, and work with your lenders and your banks to ensure that you have adequate funds to operate and grow your business.
- Systems and processes – your CFO should be able to make suggestions for improvement
- Financial Statements and Data Presentation – your CFO should be able to discuss financial statements in a manner that makes them understandable and the data should be presented in a manner that makes it actionable. What is the point of presenting data if you can’t or won’t do anything with it?
- Your CFO should understand the relevant measurements of your business. They may be referred to as KPI’s, Industry Benchmarks, etc. They should be able to develop them if none exist. These will provide a baseline for measuring performance going forward.
- They must be able to provide actionable guidance on managing the balance sheet of the business. This will likely include advice about decreasing the payment gap between receivables and payables, capital expenditure recommendation and/or justification, debt structuring that is cost-effective, etc.
- Last and most importantly, the CFO will have an impact on profitability. This may come in the form of helping you avoid costly pitfalls, cost containment and negotiation of supply contracts, contract review, review of bid numbers to avoid costly calculation errors, etc.
- Your CFO will be able to, in conjunction with you, develop budgets, forecasts and a long-term growth strategy for your business.
- Your CFO must be able to communicate with you in a no-nonsense and courageous manner even when delivering bad news
ABOUT THE AUTHOR
Patrick Cowan has over thirty years experience in financial and business management, public accounting (licensed CPA in California – inactive). He has experience in multiple business types and industries including construction, manufacturing, retail, contracting, telecommunications, etc. He is the founder and owner of Conceptualized Dynamics, a CFO services firm offering affordable guidance to small to medium-sized businesses. Conceptualized Dynamics offers business owners in the Louisville, Kentucky area a free no-obligation assessment of their business and he may be reached at firstname.lastname@example.org or by phone at 502-664-0546. Patrick is available for engagement on a contract basis in other areas of the country if a cost-effective agreement can be reached between Conceptualized Dynamics and the Business Owner/ Manager. This usually equates to one or two full days a month on-site with much of the work being done remotely.