Small business owners face many unique challenges as they scale their companies, not the least of which is the challenge of moving from tactical to strategic leadership as the company grows. One of the best ways to achieve that transition successfully is to bring key strategic expertise to the table early on so that the people around you encourage you to “think forward” into the future of your business.
Fractional executives and outsourced advisors are one extremely effective option for small business owners to consider, because they make accessing highly experienced leaders financially accessible for small business owners and leaders. One key category to consider is the outsourced Chief Financial Officer, or CFO.
Whereas a typical accountant is focused on taxes and compliance or perhaps on the smooth running of your day-to-day accounting operations (the role traditionally held by a controller), an outsourced CFO brings accounting, finance and strategy together to enable new opportunities for growth planning and execution.
Here are seven innovative ways in which an outsourced CFO can make a huge difference in the life, and growth, of your small business:
Cash Flow Strategy – One of the most immediate areas in which an outsourced CFO can have a positive impact on your small business is in cash flow improvement. From working capital to cash flow projections and beyond, cash flow strategy can dramatically improve your operations and finances by addressing deficiencies or weaknesses in cash management, inventory control, billing, collections, receivables management and more.
Finances – Financial strategy and financial statement review and analysis are easier said that done. Furthermore, many small business owners aren’t clear on how to produce financial statements or, more to the point, how they can use them to make better business decisions. An outsourced CFO can help address these challenges by organizing and executing a disciplined process for producing, interpreting and presenting your financial position to you and helping you make more informed decisions as a result.
Planning – Financial planning involves many different components and an outsourced CFO is uniquely positioned to help pull those together for you. Key decisions driven by financial planning strategy might include new locations, sales growth and diversification, wealth strategy, lease vs. buy decisions, hiring key employees and more.
Banking – Building and maintaining effective banking relationships is essential to the growth of almost any business. Still, most small business owners view banking relationships as something akin to inviting the IRS auditor over for dinner, i.e. uncomfortable, frightening and potentially awkward. As a result, small business owners tend to put enormous energy into the banking relationship only when they need a loan or other services. An outsourced CFO can help plan and build ongoing relationships with multiple bankers and financial partners for the long-term health of your enterprise.
Lending – One negative side-effect of the tendency of small business owners to under-nurture their banking relationships is the overwhelming tendency to seek growth financing from just one bank, or only package a financing deal with one institution. An outsourced CFO may know who to talk to and how best to package lending deals to not only maximize your likelihood of approval, but also reduce overall lending costs and spread risk through effective deal packaging.
Investors – In addition to debt financing, the other major option for funding growth is seeking equity investment from friends and family; angels; venture capitalists; and/or private equity firms. Small business owners often approach the investor community directly with a pitch deck and a prayer. An outsourced CFO can help with investor strategy on many fronts. First off, they can analyze and ensure that financial projections and plans are solid and ready for due diligence review. In addition, they can work to ensure that you are positioned to negotiate for the best deal terms to meet your needs, not just those of your investors.
Mergers & Acquisitions – Small businesses can often grow powerfully through organic sales expansion, but many will also need to consider the potential of growth through mergers and acquisitions. This can also include variations such as purchasing or selling a portion of one’s book of business, or buying a team or office from another firm. Sometimes, deals might involve real estate and staffing, other times they might involve acquiring an entire going concern. There are so many variations to M&A in the small and mid-sized business (SMB) marketplace. Having an outsourced CFO at your disposal allows you to bounce ideas, compare potential investment returns, examine financing and earn-out strategies, and structure a deal to meet your needs effectively.
What each of these seven points of focus has in common is that they are all critical to the growth and development of a healthy small business enterprise over time. By partnering with an experienced, outsourced CFO you can prepare your small business for a future of new opportunities and stable growth potential.