I could see this was going to be a tough conversation. By the sound of his voice on the line, I knew my prospect was hesitant to tell me the bad news… they decided they were going to “hold off” on our proposal until business picked up again.
But, while I was disappointed for us, the “ouch” ringing in my head was for the missed opportunity for my prospect to fix the problems that have been plaguing him for so long, and which were exacerbated by the pandemic.
On the other end of the line, I knew my prospect was thinking, “There is no way I can hire a CFO, my business is down 25%!”
I could have listed at least 10 reasons why this was a mistake, but that’s not my style. I also know that it is hard for a prospect to understand the value of CFO services, especially if they have never used one before.
The ROI on a CFO can be vague.
Most companies navigating through the pandemic are looking at the return on investment (ROI) on every dollar being spent. So when they get to the accounting and finance line item, there is a general sense of grumbling and the same two questions run through their mind “What exactly are these people in finance doing for me? Can I find a way to do it cheaper?”
They can see the results of hiring a new VP of Sales. Sales should go up, right?
They can see hiring more Customer Service Managers or Account Managers, because retention and upselling should increase, right?
They can see hiring a VP of Ops because they can see the chaos of a fast growing organization be tamed into systems and processes making them more efficient, right?
But a CFO? What do they do? Don’t they just take care of the accounting, report out on the past and tell us everything that is wrong with our business?
AND, good ones (like us!) also provide solutions to those challenges, where to cut costs so you don’t jeopardize your future, and can strategize with you how to navigate through these unprecedented times. Especially good CFOs innovate with you and run the numbers on different business opportunities.
I’m not going to go into why budgets and forecasts and financial modeling are good ideas, or how establishing KPIs are critical for staying on track… you probably know all that already. These are all things CFOs can do– even on a fractional basis. But there are a few other things a good finance team can do that aren’t so obvious.
CFOs can make you money.
In hindsight, I wish I had explained to my prospect the less obvious benefits of hiring a CFO, beyond just budgets and forecasts…
#1: You have dollars that unlock even greater dollars in your business. I see SO MUCH potential in certain companies that they have no idea what a goldmine they are sitting on. And like a mine, you have to invest time and money to uncover those strains of gold if you know where to look. A good financial team can provide the analysis and experience on where to find those dollars, whether that is in cost cutting or optimizing spending or evaluating investing money in new hires.
#2: Information is the springboard for growth. Especially now, during the pandemic, finding those hidden gems of information buried in your financials is critical. CFOs have a trained eye– and industry knowledge of norms, benchmarks and common pitfalls to give you a leg up on the competition. By maximizing the information you get from your financials or doing the deep-dive analysis to uncover those gems, you’ll find you’ll have more cash and profit opportunities that you didn’t have before. A strong advisory and financial team can harness the data that is floating around your organization and turn that information into meaningful metrics and KPIs so that you can focus and grow your business with less effort.
#3: You cannot make good decisions when your numbers are crap. Yes, it is important that you have a good set of books and records, but you also need a good handle on your numbers. If you consider knowing your sales and bank balance numbers as having a “handle” on your numbers I can guarantee you are leaving money on the table somehow…whether that is missed opportunities to increase the profitability or cash flow of your existing business or earning more with less effort. A strong finance team gives you peace of mind that your numbers are telling the truth, as hard as it might be to accept.
#4: At some point, it’s going to become a credibility thing. When your numbers are crap, someone from the outside, whether a banker, an investor or a buyer is going to look at those numbers and they are going to think “this guy/gal has no clue what is going on.” If you are seeking outside investment, or want to retain good relationships with your current investors, or assure them you are going to be good stewards of their money, having a strong finance team backing you gives you a certain level of credibility. If you eventually want to sell your business, having 3-5 years of clean and carefully structured financials will give you better bargaining power when you are at the negotiating table. Sometimes credibility can mean the life or death to a business.
#5:You need to be the woodpecker. A woodpecker doesn’t get the ants in the tree by a peck here and there. It works on making a hole by pounding away at the same spot over and over again. A good finance team helps you have that same focus. Find the right spot (issue) drill on it (metrics), beat it into submission, reap the rewards, and move on to the next one. Taking this bad analogy even further (lol) you may be working on a few holes at the same time– a CFO can help prioritize which issues to identify first as the goal.
So I wish every business owner knew that hiring a good, innovative, forward-looking CFO is a money-making opportunity. And, if you think your business is “too small” or “not that complicated” to warrant the need for a CFO, we get it. But I’d challenge you– maybe you just haven’t found the right finance team that sees the potential of your business and wants to make it succeed as much as you do.