When do I hire a CFO and what is a Fractional CFO? - Scott Geller

Scott Geller – The CFO Perspective

Episode: When do I hire a CFO and what is a Fractional CFO?
Date: January 11, 2020

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INTRODUCTION

I have 20 years of experience in the finance realm that started with the Federal Reserve Bank as a bank examiner, moved on to 7 years at a Fortune 300 insurance company, and then a 50-70 person spin-off technology firm under the Allianz umbrella of companies. I was with the spin-off from day zero all the way until the unfortunate end and I had to close down the business. I am now a financial consultant serving primarily as a fractional or part time CFO for companies that range from start ups to young and scaling to established with stable growth. I take over from the accountant as a lean cost effective option for Profits Engineering, Cash Optimization, Strategic Acceleration and Executive Partnering committed to your success. Please contact me at scott.geller@capitisadvisors.com.

PROBLEM STATEMENT/SHOW OBJECTIVE
By the end of our time together you will understand the value of a CFO, how we are different than accountants, when you might need one, and why a fractional might make sense for you.

1. CFO Value or Purpose within your business
2. C-level experience to your business
3. Oversight
   1. Bookkeeping and controller staff as a series of checks and balances to strengthen security and present accurate financials
   2. Financial Analysis
   3. Other areas of firm - IT, HR, Legal, Backoffice, Operations, etc depending on experience
4. Reporting internally and with key stakeholders
   1. Budgets, financial projections to make strategic and financially informed decisions
   2. Prepare for and/or attend board members - financial package, strategic planning, coach for presenting
   3. Investor relations - public, angel, private equity
   4. Other - Represent the company in difficult conversations with clients, vendors, prospects, etc
5. Firm health
   1. Profits - Pricing, margin analysis, tools
   2. Cash position - AR, AP, liquidity planning beyond bank balance,
   3. Capital position, needs, raising, and sources

WHAT YOU NEED TO KNOW
"How is that different than my account or controller?" ... Do I need both?

1. Congratulations because you've grown your business to a new level, experiencing some pain, and thinking about what you're missing ... many wait too long for the help
2. A business finances are a collection of building blocks
3. Accountant
   1. Record Keeping - Checks, AP, AR, Journal Entry, Payroll, Reconciling
   2. Reporting Engine - Financial Statements IS, BS, and CF
   3. Sometimes - Model, some level of analysis
4. What's missing?
   1. Experience
   2. "Why" along with the "What"
   3. Creating proactive strategies by looking into the future rather than historical reporting
5. CFO
   1. Reporting Engine - Analysis, Executive, Board, Investors, and other Key Stakeholders
   2. Financial Fuel - Rolling Forecasts, KPIs, Budgets, Modeling, Labor Usage
   3. Strategic Acceleration - Capital, Fundraising, Risk, Pricing/Product, M&A
6. The right CFO expands the Accountant's view of "Today" with a deeper and more strategic financial perspective of "Tomorrow" while optimizing current state

When and why to Engage a CFO

1. Size of organization
   1. Less than $1M in revenue generally doesn't need a CFO
      1. Exceptions: startups for funding; selling a business; strategic shift in future
      2. Exception rational: Businesses that are hungry to get and use financial insights
   2. Cost effective for in-house is difficult until annual revenue is close to $50M
   3. Controller needed by $10M for internal controls, closing processes, report generation, and manage the team
2. Sophistication
   1. Lower - service, staffing, etc
   2. Higher - SaaS, manufacturing, resell distribution, software development, tech
3. Why to engage a CFO .. from my perspective
   1. Profit Engineering - You know what your accounting software tells you, but do you know the Why or How of your profitability? Let us explain your existing profitability and pinpoint untapped sources. What is 1 to 5 basis points worth to your business?
   2. Cash Optimization - Do you manage by the bank balance? It might work today, but it will deteriorate your value over time. We investigate cash uses and needs for liquidity planning in growth, retraction, or cyclical environments. Let us also ease your mind with accounting/financials checks and balances.
   3. Funding & Growth Capital - Sometimes you need to spend money to make money, but getting money isn’t fun. We own the process to access capital (equity or debt). Grow and scale your biggest investment efficiently.
   4. Strategic Accelerator - Your gut feeling is probably pretty good, but let’s forecast scenarios to create proactive strategies from your sales pipeline through operating profit. Let us help you create target metrics, KPIs, and learn from trending patterns.
   5. C-Suite Guidance - Leverage C-level experience across the organization with situational readiness. Choosing to listen and being present in the moment. Handle key stakeholders
4. Cost of a full-time CFO
   1. Average cash compensation for a CFO in a private company with less than $20MM in annual revenue is $194,354.
   2. CFOs for private companies with $21-$99MM in annual revenue make an average of $237,983 in base salary.
   3. According to Salary.com the median base salary for a CFO in the United States is $362,030, and the median total compensation package (including bonus, healthcare, and retirement) is $506,386.
   4. As a frame of reference, that median base CFO salary in the US of $362,030 would be $174/hour.
5. Relax from the sticker shock, I have another alternative ... fractional CFO

WHAT YOU NEED TO DO
Let me walk you down the path from my approach as a Fractional CFO.

1. Hiring a full-time strategic CFO is a major $200K+ investment. You’re not ready for that, but you do need C-level experience across the organization. Fractional CFO puts an experienced resource at your fingertips at a reasonable, predictable monthly price.
   1. Not certain where to focus
   2. You can only afford to attack one or two financials aspects of your business at a time
   3. You want to ease into a relationship with someone ... kind of like dating
   4. Gain the insight of a full-time chief financial officer at a fraction of the cost and on your terms.
2. A fractional CFO should prioritize your needs by listening to your specific situation and subsequently serving as your C-level executive across the business.
   1. Profit Engineering
   2. Cash Optimization
   3. Funding & Growth Capital
   4. Strategic Accelerator
   5. C-Suite Guidance
3. How do I personally operate with clients?
   1. Optimistic and at the same time realistic to create a state of enduring financial readiness within my clients.
   2. No is intellectually lazy
   3. Think in terms of the business
   4. Open communication
   5. No surprises
4. Compensation
   1. Hourly $100 to $500 depending on location and experience, but $125 to $300 is reasonable
   2. Retainer basis - bucket of time at fixed daily or monthly rate
   3. Hire as an part time employee for set % of time or hours
5. Gain the insight of a full-time chief financial officer at a fraction of the cost and on your terms.
6. Value: Know your financials and know your business.

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Resources (optional):
You can connect with Scott via his website or LinkedIn
Connect on LinkedIn
See Scott’s Website

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