October 2009 Contract CFO Articles
How to Amp Up Your Charisma
http://www.forbes.com/2009/10/22/charisma-lying-leadership-entrepreneurs-management-cabane.html
Do Small Businesses Use Social Networking?
http://news.cnet.com/8301-1023_3-10374886-93.html
Where Will Your Business be in Five Years?
Contributed by Ted Hofmann; Principal; http://www.CFOplus.net
Should I Use an Outsourced CFO?
Contributed by Ken Weil, MBA; http://www.ConsultYourCFO.com
Where Will Your Business be in Five Years?
Most everyone working in any type of business hardly has time to set goals and objectives, let alone do any short-term daily planning. Walking into the office with a preset list of daily "to-do" items will surely go to the bottom of the in-box within a matter of minutes. And, in the long-term, matching quantifiable outcomes with goals and objectives just isn't part of reality. Or is it?
An increasingly demanding marketplace coupled with the need to get more done prevents some from planning, setting business goals and measuring outcome. Yet other business owners make time for this critical process. These entrepreneurs have experienced, firsthand, how applied business projections can turn dreams into currency.
The need to plan for the future of your business dates back to the Stone Age. As elementary as it may seem, cave men who hunted for food found they could not transport much on their backs or in their hands, so they planned for the future by inventing the wheel. Once a vehicle to carry food was available, the goal was achieved, and life was much sweeter.
Our business environment isn't much different. We realize an end result through a goal- and objective-setting process. For example, your goal might be to increase business in 2010 by 10 percent. How are you going to get there? What's keeping you from reaching that mark now? Asking the right questions generates the critical information you need to turn action into results. Even more important is accessing the data needed to set your goals. If you've never attempted this kind of planning before, you aren't alone. Properly executed, this type of planning can significantly impact a business, but most entrepreneurs aren't sure what to focus on, so they focus on what is urgent. Often, though, what is urgent is not a priority in the lifespan of your business.
It's much easier to begin the process by thinking of the task in small, easily reachable segments. Following a streamlined, eight-step approach to planning keeps you focused. Even though you may already have taken on some of these points and begun the planning process, revisit them for a fresh perspective.
1. Make sure you are looking at the right numbers. If you are looking at financial statements, you may be looking at what we call lagging indicators. These numbers tell you what has already passed. What transforms action into measurable results is setting goals based on leading indicators - specific measures that give you a real-time snapshot of areas within your business. This gives you the power to make changes now rather than later. Often, what seems to be the area of concern is actually a symptomatic sign of another area that needs attention.
2. Assess the company's strengths and weaknesses. Even the most advanced, revenue-generating businesses can benefit from assessing strengths and weaknesses. Gather your teams and create! First, you'll quickly realize you have as many weaknesses as you have strengths. Second, if the group is given creative freedom without pressures of being watched by the boss, you'll receive honest feedback.
3. Conduct a thorough market segment analysis. Who are you trying to reach? The same customer or client you had just a few years ago may have morphed into someone completely different. Perhaps you're going after an audience that no longer has a need for your services. Consider generational differences (Gen-X, Baby Boomers), demographics (age, race, gender) and any other indicators that match your company's mission.
4. Analyze competitors. You can't begin to make any headway without determining your competition. The answers "we don't have any" and "we are the only ones who provide this niche of services" isn't viable. Everyone has competitors; yet, they may not be apparent at first glance. If you can't come up with a short list, talk to your customers or clients and ask their opinions. Chances are they'll tell you who the competition is, but more importantly, they'll tell you why you're different than the competition.
5. Create company goals and objectives. This task may very well be the most fun, but again, be careful not to be too aggressive with your goals and objectives. It's far better to concentrate on two to three specific items that can be accomplished, rather than a long, complicated list that sets the company up for failure. Of course, setting simple goals that don't challenge your team won't yield the results you truly desire.
6. Formulate strategic options and select the appropriate strategies. What are your options on reaching your goals and objectives? How are you going to organize your teams to accomplish your end result? Weigh factors like budget, people and staff time when planning your strategies. If you plan for 10 percent growth, what are your options - do you have the staff, money and time to reach this goal?
7. Translate strategic plans into action plans. This is the most creative step in the entire process because of the progression involved in coming up with action plans. The most productive meetings with the best outcomes come from dynamic, group sessions in which everyone offers their suggestions. Most companies are amazed at the creative knowledge inherent within employees during this stage.
8. Establish accurate controls. As in any business, controlling expenses and resources is paramount to any process. You can't sell the farm if the farm isn't for sale! Be sure to outline during the action plan stage just exactly how much the company is willing to commit to the effort, and attempt to stick to that whenever possible. Of course, there will be some deviation, but more likely than not, a well-defined set of controls will go a long way to ensuring goals are met in a timely, cost-effective and efficient fashion.
In addition to these eight steps, companies must evaluate the effectiveness of its plans throughout the process. Assessments must be reviewed and thoroughly analyzed to determine what's working and what needs to be changed. You won't want to wait a whole year, for example, to rethink your goals. Plan a mid-year review.
In five years, where do you want to be? What does your company look like? Put the incremental plan in place that will get you there and stick with it until you reach your destination. Business performance is key to realizing company objectives. Give us a call at 415-289-5050 so we can help put you on the fast track toward reaching your goals.
Should I Use an Outsourced CFO?
Consider these scenarios:
A. Your business needs an independent advisor, free of internal politics and biases, to recommend and implement policy, procedure, and system changes for the betterment of the entire organization.
B. Your internal accountant/bookkeeper requires advice and guidance on an on-going basis.
C. You don't have enough work to keep a CFO/Controller employed full-time, or you can't afford one.
What does each of these scenarios have in common? A common solution. That solution is an out-sourced CFO or controller who can work at your location once a week or more, once a month, or even quarterly.
When/why do I need an Outsourced CFO/Controller?
No matter how great your product or service, if your financial house is not in order, then you will not achieve your goals. Worse yet, you just might go out of business. That's why CFO services are integral to success at every stage of the business cycle, from startup, through the end stages of succession or divestiture of the business.
In the earliest stages, an outsourced CFO or controller can assist with finance-department structure, accurate accounting and reporting, business-plan development, assistance with obtaining financing, treasury management, profitability enhancement, and budgeting. By establishing a strong financial foundation, future re-engineering costs and audit costs will be reduced, and internal controls will be improved.
As the new company matures, an outsourced CFO/Controller can assist the owner in many ways through analysis and implementation/oversight. Analysis services might include: 1) analyzing current cost structure and recommending savings initiatives; 2) analyzing current processes to improve efficiencies, thereby reducing administrative costs and improving financial reporting accuracy and timeliness; and 3) evaluating acquisition opportunities. Typical oversight/implementation activities include: 1) serving as a sounding board for key strategy decisions; 2) recommending and implementing internal control procedures; 3) selecting an accounting system once Quickbooks reaches its limits; 4) helping interview Finance department personnel; 5) managing the audit preparation work to minimize audit fees and reduce comments; 6) handling the accounting transition of a newly-acquired entity, merged entity, or the winding down of an entity; 7) conducting cost/benefit analyses for capital decisions; and 8) improving the billing cycle, collections and ultimately, the cash-flow to grow the business.
How do I locate an Outsourced CFO & what makes a good fit?
Without question, referrals are the best way to find an outsourced CFO or Controller. If other business owners in your industry are willing to refer their consultant to you, you will ensure that you hire an outsourced CFO with detailed knowledge of your industry. Ideally, your consultant will have industry knowledge from another market where you are not competing.
Chambers of commerce and other networking organizations are also great referral sources, and accounting firms provide some of the best referrals. In fact, most CPA firms, even those who offer business advisory services, will recommend outside help for CFO services in order to maintain their truly independent roles. Indeed, your CPA will know good CFO work when he sees it and will know the reputation of many of the available CFOs in the area. It also makes good sense to include your CPA in the process, because he or she will interact with your outsourced CFO throughout their tenure.
As you evaluate consultants, review their resumes to determine if they have deep and diverse backgrounds in managing corporate accounting departments. In addition, it is important that the CFO/Controller has the qualifications to roll-up their sleeves and jump in to analyze, recommend, and implement solutions. If the Outsourced CFO/Controller is required for a specific task (i.e. accounting system selection, merger, acquisition or sale, etc.) make sure they have the qualifications and specific experience with that function.
Because their role should be to challenge the status quo and assist in shaping the organization, ensure that their personality is a good fit with the company leaders and that they can command the requisite level of respect without being overbearing. Finally, if you need an Outsourced CFO/Controller on an on-going basis, be wary of recently unemployed CFOs, because they might view the assignment as a stepping stone to another full-time position. If that happens, you'll be starting the process over again.
Ken Weil, MBA is the founder and president of Consult Your CFO. He can be reached at 410-371-0821 or KenWeil@ConsultYourCFO.com.