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The Inconsequential Owner

The Inconsequential Owner

The Inconsequential Owner

By Michael Stier

In all likelihood, you are absolutely critical to the success of your business. Without you, there is no business.

We need to fix that!

With good planning and some work, we can help you become an Inconsequential Owner. Think Dr. Evil (Mike Myers) from the movie ‘Austin Powers: International Man of Mystery’, “The details of my life are quite inconsequential…” 

All owners understand (at some level anyway) that they will someday leave the businesses they have created. Let’s assume for a moment that tomorrow you leave your business permanently. If you are an Inconsequential Owner, your exit will have no impact on the business, and that’s good for business value. Buyers pay for business value—not for the departing owner.

If you constitute a significant part of your company’s value (a/k/a a Consequential Owner), and you have left the scene, there will likely be few buyers interested in your company, and those who are will likely pay significantly less than they would have had you been an Inconsequential Owner.

Exit Planning is the process you can use to transform yourself into an Inconsequential Owner for your sake, for your family’s sake and the sake of your business and employees. While perhaps not the most flattering label, it probably aligns with what your children have been telling you for years!

Put another way, your Exit Plan should answer this question: “What has to happen in my business by the time I leave it, to:
1. enable me (and my family) to achieve financial security
2. allow me to move forward with the rest of my life, secure in knowledge that I have been a good steward of the business?”

Our mission at FocusCFO is to help owners achieve their personal and business goals. Critical to this mission is increasing the awareness of proper exit planning for all business owners. Many of us a FocusCFO are Certified Exit Planning Advisors (CEPA®), accustomed to helping owners think through their plans and orchestrate their team of advisors to achieve the goal.

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, visit us at focuscfo.com or follow us on LinkedIn. 

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Five Questions for Your Headache

Five Questions for Your Headache

Five Questions for Your Headache

By Todd Peter

You, the small business owner, are on a roll. Every day you are out, landing a new customer at least once a week. You hired a great engineer and she is turning your new product ideas into reality and you can barely build enough to keep up with orders. But it’s payroll week again and the cash in the bank is barely enough to cover your employees. It looks like another month of explaining to your spouse the thrills of working 16-hour days and the stress of never seeming to have enough cash. You wonder, “Is this roller coaster ever going to end?” You call your Uncle who is the CFO of a Fortune 500 company and he reveals to you 5 questions that you must answer, and assures you that your headache will be gone by morning!

Question 1: Am I making any profit?
Question 2: What is the gap between profit and cash?
Question 3: Is there cash hidden in the balance sheet I can uncover?
Question 4: Can I obtain a bank loan to support the gap between profit and cash?
Question 5: Can I reach my growth goals and not run out of cash?

The Dilemma

You conferred with your bookkeeper and your CPA, and you again sought the counsel of you Uncle.  He said you need a CFO to help you answer these questions.  He noted CFOs are typically highly skilled professionals with backgrounds that span multiple decades of financial and operational experience but they may command a salary that might be unaffordable. 

The Role of the CFO

A CFO typically functions as the third leg of the stool for your company. They are as good at understanding cash as most owners are at understanding customers and operations. They are an owner’s financial partner; they work to make sense and provide business insights from the numbers that emerge from your accounting software; they work to integrate the past into a picture of the future. A CFO is there to help the owner make sure the business is healthy. They provide a little aspirin to dull the short-term pain, strong antibiotics to cure any illnesses, and a wellness and fitness program to build long-term health.

Fractional CFO Solution

Alas, many small businesses cannot afford the expense of a full time CFO. A perfect solution is the use of a fractional CFO. The use of a fractional service model allows the investment to be very moderate relative to other professional services. Most are engaged on an ongoing long-term basis, work onsite at their clients, and average a day a week over time. They work as partners and confidants of the business owners to help them meet their goals and assure the financial health of the business. How do I know this? I’ve been a fractional CFO for four years.

Todd Peter is a FocusCFO principal, based in Cleveland, OH.

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Indiana, Kentucky, Michigan, North Carolina Pennsylvania, South Carolina, West Virginia and Tennessee. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses.

For more information, visit us at focuscfo.com or follow us on LinkedIn.

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Welcome Rex Bevis

Welcome Rex Bevis

Welcome Rex Bevis

Welcome to the Team!

 

Senior finance executive with 25 years of hands-on experience building, strengthening, and leading finance teams for companies in both high-growth and turnaround situations. Comprehensive knowledge across the financial planning and analysis, controllership, and tax functions. Broad exposure to service industries with an extensive background in contract negotiations, software implementations, mergers and acquisitions, and post-deal integration projects.

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Remember the Gumball Rally?

Remember the Gumball Rally?

Remember the
Gumball Rally?

By Michael Stier

A 1976 movie classic about a cross country road rally, with one of the greatest of movie lines of all time. Just prior to race start the Italian driver Franco (Raul Julia) rips off the rearview mirror from his sports car and tosses it aside proclaiming to his navigator (in a heavy Italian accent), “And now my friend, the first-a rule of Italian driving… What’s-a behind me is not important.[Curious? Here’s the scene in the movie.] 

I often think of this movie line when I hear from business owners, “We have an accountant (or controller), we don’t need a CFO.” I can faintly hear Franco ranting in Italian. 

Relying solely on your CPAs, accountants and controllers is like trying to drive forward only looking in your rearview mirror. By definition, their job is to look in the rearview mirror. They produce historical financial statements, implement controls, prepare taxes, and do some backward-looking analysis. Do you know a business owner who can even stay one the road, nonetheless reach their destination, while only staring in the rearview mirror? If so, I’d like to meet them. 

No doubt your accounting folk are very capable. No critique of their skill or function. But the role could not be more different from a strategic-minded CFO. The strategic-minded Chief Financial Officer (CFO) looks in the rear, around and forward! They help lead your organization by overseeing all financial activities – living in the present and looking to the future through continuous scenario-based planning… and thinks strategically about your company’s future growth and value. And often are the trusted advisor and confidant to you, the entrepreneur/owner/ CEO. A sage old adage… there’s a reason why your front windshield is much larger than the rear. 

 

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, visit us at focuscfo.com or follow us on LinkedIn. 

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Third Prize… You’re Fired!!

Third Prize… You’re Fired!!

Third Prize… You’re Fired!!

By Michael Stier

“A little extra in this month’s sales contest… First prize is a Cadillac Eldorado. Second prize is a set of steak knives. Third prize is… you’re fired!”

While that provided for some great drama in Alec Baldwin’s iconic monologue in movie Glengarry Glen Ross, I think you would agree this is not a very effective way to set sales goals and managing performance to forecast.

Sales forecasting is a critical discipline that business owners, sales leaders and CFOs together use to create sales team goals, operating plans and make informed management decisions. Sales forecasts estimate future sales volumes over a specified period of time, and they are essential to tracking and managing performance.

Despite the natural instinct to out-perform, staying on plan is critical. The sales forecast is the starting point for the operating budget that drives capacity planning, production, direct materials investments, labor investments, capital budgets, and more. Keeping your internal “supply and demand” in balance ensures a healthy growth trajectory with minimum risk to cash flow, short and long-term revenue, profitability, and brand equity.

Five Ways to Align Your Sales Forecasting and Budgeting Processes 


1. What is your ideal customer profile?

Using key customer metrics, you should be able to create a definition of your ideal customer based on acquisition and maintenance costs, longevity, growth potential, overall profitability, or other factors. Consider the trends that are occurring in the accounts of your current ideal customers, and the potential for finding and closing more customers like them.

2. What products and services will you sell?

Analyze the mix of products and services that these customers are demanding from you and your competitors. Regularly re-evaluate these buying patterns, and the changes that you observe will shape the product-service mix that your forecasts will be based upon.

3. What does your pricing architecture look like?

Pricing plays a critical role in a competitive market and in your profitability. Utilizing a thoughtful pricing architecture will make the pricing process more rational. It will minimize potential emotional influences that often result in unsustainable pricing decisions – and ultimately, you are in business to make money, not just to make sales. A detailed pricing architecture will help you find and forecast a balance between the two.

4. How will these products and services be sold?

There are up to five funnels that must be analyzed when building your sales forecast: 1) New Business; 2) Upsells; 3) Retention; 4) Cross-sells; 5) Renewals. How many funnels do you actually manage today? How many you should manage and forecast?

5. How will you build your budget?

It is important to express your forecast in three realistic scenarios: worst, best, and likely. The next step is to build relevant budgets for each scenario. In a manufacturing environment, for example, you can begin with a production budget based on projected unit sales. The production budget can then be used to plan manufacturing costs including direct materials, direct labor, and overhead.

An effective sales forecast provides key leadership insights and an operating budget that will drive management decisions throughout the year. Take your time — ‘measure twice, cut once’. Strongly consider utilizing the services of an experienced CFO as a Sherpa to the process. The more that you invest in planning and preparation today, the more business value you will create tomorrow.

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, visit us at focuscfo.com or follow us on LinkedIn. 

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