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Do You Hire a Controller or a CFO?

Many people use Chief Financial Officer (“CFO”) and Controller interchangeably because they think it is the same position. In some companies, a Controller could be the top financial leader. But that does not mean they are a CFO or CFO-level. Before we answer the question of do you hire a Controller or a CFO, we need to understand when companies need to hire a financial leader.

Do You Hire a Controller or a CFOWhen Companies Need to Hire a Financial Leader

Every company needs a financial leader – depending on the stage or life/size of your company this financial leader may be a bookkeeper, accounting manager, Controller or CFO. For example, some companies over $25 million in revenue may want to consider having both a Controller and a CFO. In this blog, we will focus on the difference between a Controller and a Chief Financial Officer (CFO).

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When to Hire a Controller

You need to consider hiring a Controller once the number of transactions in your company increase and the size of your company increases to the level of needing accounting records based on Generally Accepted Accounting Principals (“GAAP”). This may be $10 million in revenue and more. Why? At that level, you are beyond the basic cash basis bookkeeping. You need accounting records that are based on GAAP and accrual basis so that you can better manage your business. Plus, you may have bank debt that requires you to present your financials based on GAAP.

Role of a Controller

Some of the duties that a Controller has include the following:

As your company grows, you should always maintain the Controller function, eventually as the company gets big enough your company will have the Controller report to the CFO.  The Controller “books the past” and continually works with historical information.

When to Hire a CFO

Once your company gets to needing more than good accounting records based on the past, you may start considering hiring a CFO. Things that may require a CFO include forecasting, maintaining debt covenants, mergers and acquisitions, deeper analysis of the financial statements, managing capital structure, investors, banks, and/or taking your company public.

Many companies find themselves in a stage of growth that I refer to as “transitory” – that is, your company is transitioning from small to medium or large. In this stage, you wish you had a financial professional with great experience such as a CFO, but you cannot afford a full time CFO. That is where an Interim CFO makes a lot of sense. Now, be careful as the Interim CFO market has become a popular market where many have jumped in and they lack the true experience. The problem is that you do not need a license or degree to become a CFO, anyone can call themselves a CFO. If you are seeking an Interim CFO, then call us and we can certainly help you identify a solid Interim CFO.

Remember, a good CFO is a great manager, has good operational experience and is the strategic financial partners to the CEO.

Do You Hire a Controller or a CFO

Role of a CFO

While the role of a Controller puts together all the financials and focuses on the historical transactions, the CFO works with the historical information but uses it as a tool that enables him/her to be a strategic partner to the CEO. The CFO then projects what is going to happen, provide strategy for the CEO to implement, and improve profitability. This can include adjusting pricing, increasing efficiencies, identifying opportunities, and enabling the CEO to make calculated risks. The CFO role goes beyond being a trusted advisor. It also includes:

  • Managing capital structure
  • Manage risk management for the enterprise
  • Acting as a figure head for decisions and taking ownership
  • Usually manages IT, Human resources and tax functions
  • Coaching leadership team and employees to get to best results
  • Being a diplomat with third parties (banks, vendors, auditors, customers, investors etc.)

This is very much a multi-functional role within a company. It is a role that truly demands someone with not only good financial skills, but someone with excellent management skills. And as I already mentioned, a really really good CFO has very good operational experience and that person likes operations.

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Do You Hire a Controller or a CFO

Do You Hire a Controller or a CFO?

The big question is, do you hire a Controller or a CFO? It depends… It depends on the size of your organization. We speak to CEOs and business owners all the time, especially those under $100 million in revenue, they are not sure at what point they need a Controller and then a CFO.

Every business is unique, and I do not want to generalize. But for conversation sake, if your business is between $10 million and $25 million in revenue, then a Controller may suit you well. If you are over $50 million, then you are at the size where you actually should have both functions of Controller and a CFO. Now I left the range of $25 million to $50 million without mention on purpose. That is because it depends. It depends on your complexity, industry, number of transactions and many other things.

We have spoken to business owners of $35 million companies and determined that they can function very well with just a strong Controller.  We have also met with start ups with zero revenue but funded $75 million in CAPEX by investors, well we highly recommend they hire a CFO from day one because they have big plans and complexity from day one of their operation.  So every situation is really unique.

Roles are NOT Interchangeable

Many companies opt to hire a Controller when they really need a CFO. These two roles are not interchangeable. Although in the same area of expertise (accounting and finance), these two roles are different. You cannot hire a Controller and expect them to be your CFO. These are two very different functions.  And it is simply a fact, not all Controllers make good CFOs. As already mentioned, a CFO has certain characteristics that many Controllers simply do not have and frankly do not want to have. Take your time to understand the different roles. You are not alone because all growing companies are facing this dilemma. But we are only a phone call away and can help you sort through this challenge and assist you in making the right decision no matter where in the world you are located.

If you are hiring either a CFO or Controller, then take the time to truly understand the difference between the two. Because the financial function is a sensitive one, it’s important to chose someone who will not only be loyal and trustworthy, but will make your team star quality. Check out our free 5 Guiding Principles for Recruiting a Star-Quality Team now! Then answer the question, do you hire a Controller or a CFO?

Do You Hire a Controller or a CFO

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Do You Hire a Controller or a CFO


What Accounting System Should Your Company Purchase?

Now, this is a topic that hits every company: what accounting system should your purchase? There is no question that technology has changed the way we do business. When I started working in the late 80’s, we had our first system implementation in an oil and gas company I worked for. It was a huge server(s), and they mainly ran our accounting system. It was an oil and gas producer, and we had thousands of joint interest billings and partnerships to account for. Before this, it took an army of bookkeepers and accountants to track this information manually via Green Bar Paper, written ledgers, etc. The revolution of the computer has changed the world – especially the accounting world.

What to do and what not to do!

As companies grow, their needs will change. We do not promote any software, but our professionals and myself have had great experience with everything from Spreadsheets, Quickbooks to SAP and Oracle.  I would not recommend that anyone keep their accounting records on spreadsheets, but Quickbooks, SAP, and Oracle are all great systems. Here is the kicker… Which accounting system  should I purchase ? It depends on your unique situation. Unfortunately, we see companies make two mistakes over and over again.

Mistakes Companies Make When Purchasing an Accounting System

What are those two mistakes?

  1. They either refuse to spend the money and upgrade above Quickbooks, when they have clearly outgrown Quickbooks
  2. They did not have to upgrade, or did not need such a monster package and they purchased the wrong system, maybe one that was to big

You need to understand if you need just an accounting system or a full blown ERP system. There are also big differences in just accounting systems and you still need to understand the different accounting systems through a system selection process.

Understanding your processes in your own company is a big part of selecting a system, and knowing what you must have and what you can live without.  Click here to start your Internal Analysis!

Making the Decision on an Accounting System

I have made it a hobby of mine to observe how CEOs, Boards, and business owners go about decision making for an accounting system. And most of the time, these are some of the ways they have made their decision:

  1. The CFO or Controller worked with that package in his past, so that is what Company A decided to implement – WRONG
  2. The I.T. department makes it their project and selects the system – WRONG
  3. The CEO or Business Owner has a buddy that runs his own company and uses Software X, and he highly recommended it – WRONG
  4. A sales person finally gets through the door and convinces that decision makers that they must go with either Software A or Software B. No other choices. – WRONG
  5. The CEO of a small company has friends that are very wealthy and own huge companies, and his own clients are huge companies and he wants to be like them, so he purchases Software X  – WRONG (nothing wrong with either of those systems but not for this company, this was a past client of mine)
  6. This is the beauty that I lived through – The PE Group run by 30-something-year-old Ivey League MBAs must have learned in a text book that S$! was a cool system.  So these “X!#&$*!”  forced S$! in a new acquisition that was a regulated utility. They dictated who the implementer was going to be, what the time line was going to be, and when we would flip the switch and go live. – WRONG  (more on this story below)

These experiences that other businesses have lived through resulted in very costly experiences. I have heard horror story after horror story and millions of dollars wasted in cash, productivity lost, and many sleepless nights for those involved. Also, lost jobs.  There is a right way to acquire an accounting software system.

what accounting system your company should purchase

Example of Accounting System Implementations Gone Wrong

Everything below are real stories that have happened to me or a client.

Borderline Bankruptcy of a $220 Million Company due to a failed system implementation

Background: Company X was recently acquired by a fund that was managed by a large well-known equity group. The representatives running the show and giving orders to management were three 30-something-year-old (the three musketeers) highly intelligent individuals. They only had a couple years of experience in the real world outside of their protected environment.

Mistake #1 – Inexperienced Highly Intelligent People Should Not Be Calling the Shots

The three musketeers hired a salesman to act as, “interim President” and chairman of the board. The chairman, a dominating personality, with 40 years of sales experience convinces the young lads that he will take control and make their problems go away. The three musketeers were told by a friend running another portfolio company, that they really need to implement “Software S$!”. The chairman salesmen hires his buddy, a former school teacher, to run the “Software S$!” implementation. This is not a knock on “Software S$!”. It is a fantastic system but only for the right company and when implemented properly. Unfortunately, between the three musketeers, the chairman salesman, and the school teacher, this accounting system implementation was doomed from the beginning.

The original budget for the system implementation was $8 million dollars. Even for this $220 million revenue company, this was a major part of their CAPEX. But the following are other mistakes that compounded the problem with the implementation:

Mistake #2 The IT Department Was Put In Charge Of The System Implementation

The system implementation should have been a Management project, it is never an IT Project. The CFO, Controller, the CEO or his delegated VP of Operations should be managing the implementation.

  1. There was no system selection process. Someone up the food chain determined that the company would install “System S$!’. It was the wrong system for this regulated utility.
  2. Someone up the food chain mandated that the system would go live in 8 months. – WRONG. As with all projects, there should be a project timeline, but this timeline is a projection. It should not be a drop dead date that only exaggerates mistakes and issues.
  3. Since time was a concern, there was a rushed process to Blueprint the system and testing was minimal.
  4. When the CFO hired one of the Big 4 and expert internal people, they identified the weaknesses and presented a possible train wreck to the Board. The dominating chairman ignored warnings and moved on. – i.e. management was shut down.

Result of a Bad Accounting System Implementation

The resulting consequences were that the implementation of the system escalated to over $30 million in costs and the system did not work. The company had service contracts in place and the system did not generate a single report that was correct. The services contracts were all terminated within a 90-day period. The company lost 50% of its revenue in 90 days.  This caused the cash flow to the company to be cut in half, and they defaulted on debt covenants.  The company was now in a tailspin out of control. The financial crisis escalated and the finger pointed started. The company would have ended up in chapter 11 if it were not for two very patient lenders that modified covenants and believed the long term story of the entity.

what accounting system your company should purchase

Suggestions on how to go about the system acquisition

I mention this story because it could have all been avoided. There was no need to go through all of this and 1,200 employees lost their jobs. These are some suggestions to CEOs, CFOs, and business owners about selecting a system.

  1. Hire a company that will assist you in going through a detailed system selection process. Yes, this has a cost, but it is only a fraction of the cost of choosing the wrong system. Companies that assist with system selection process know the market, know the vendors and will understand your operation before you make a decision.
  2. Do not have any one system in mind when you start the selection process, forget what the next guy uses. Let the experts do their job.
  3. A good company that assists with the system selection process will shop the system world, narrow down less than a handle full of systems and allow you to make the ultimate decision based on cost, timing and capability.
  4. As the decision maker, do not set drop dead dates for “going live”. You will run into problems and you will need to extend that project time line at least once.
  5. Have a budget, write the contract to commit to a system and be aware that modifications are on you. It is very much like building a house. You want a 3,500 SQ Ft home with one story and no pool. If you change along the way and want a 2 story home with a pool, then you will pay for it.
  6. No system will perfectly fit your company and the way you do things, unless you are prepared to spend millions customizing a system. Most likely, your company will need to change at least some of the processes and the way you do things. Know this up front and tell your people to be open to change.
  7. This is a Management project. Not an IT project. So, never let your IT people run the project. At most, they would participate in one of the committees supporting the project.
  8. Keep it simple and chose a system that will allow for growth. But do not purchase the Rolls Royce if the Honda will get you there. The cost difference can be millions of dollars.


There are many good companies out there that can assist you with a system selection process. Do not do it alone, and make sure you go through a detailed system selection process.  Rely on the experts, they are your trusted advisors during this project. If you need any assistance with any part of this, then we would be more than happy to assist you and your company. In the meantime, access our free Internal Analysis whitepaper to assist your leadership decisions and create the roadmap to implementing a new accounting system.

What Accounting System Your Company Should Purchase

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What Accounting System Your Company Should Purchase


Cash Basis vs Accrual Basis Accounting

Cash Basis vs Accrual Basis Accounting

Believe it or not, we deal with this issue of whether to use cash basis vs accrual basis accounting all the time. Many companies start from scratch with one person doing the accounting from home or a small office. Over time, their needs grow. It’s normal to see changes within the organization, especially when companies grow. As you grow, it is critical that you do not neglect the accounting process.

Cash Basis vs Accrual Basis Accounting

What is the difference between cash basis vs accrual basis accounting?

Cash basis accounting is, in its form, the most basic way of tracking your income and expenses based on the actual cash that comes in and goes out every day. Imagine the one employee/owner hot dog stand on the street corner. That business owner goes out early in the morning, pays $2 in cash to the vendor that sells him the hot dog meat and buns. Then, he goes out to the street corner and sells the hot dog for $3 in cash and puts the cash in his pocket. That vendor made $1 profit in cash from the sale of a single hot dog. He sells many hot dogs during the day. This business person is on a cash basis way of tracking his business. In this business owners company there is no difference in timing of transactions between periods.

Moving to Accrual Basis Accounting

If you are bigger than the hot dog stand, then you should probably consider moving to an accrual basis for capturing your transactions and accounting. Why? Because we live in an accrual world. Not a cruel world.

If you are reading this blog, then you probably sell a product or service. Most likely, you give your clients terms to pay your invoice. Maybe it is 10 days, 15 days, or even 30 days… But you give your clients time to pay their invoice. You just created accounts receivable (A/R). In the same respect, you purchase things from your vendors – material or services. Likewise, you most likely do not hand your vendor a check or cash that day, but they give you time to pay for the item you just purchased. So, you have accounts payable (A/P). This is probably more realistic. Guess what? You just created accruals.  In this example there are differences in the timing of the actual transaction and when the transaction process if totally complete and settled.  You have to track what is owed to you as an asset, and you have to track who you owe as a liability.

In reality, this is the world we live in and accrual basis accounting is recommended for virtually any business. We live and transact in an accrual environment.

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Accrual Basis Accounting

There are a reasons why major businesses and small successful businesses keep their accounting records on an accrual basis.  One reason is because that is how they generate financial statements that accurately reflect their operations and business, the other is because Generally Accepted Accounting Principals (GAAP) requires companies to be compliant using the accrual basis. A crucial part of the accrual basis is the matching principal – matching revenue and expenses.

You Are 60-90 Days Behind Your Company

The fact is that you are 60 or 90 days behind running your company if you are keeping your books and records on a cash basis. I have actually seen 30-year-old companies with revenues north of $100 million dollars and millions of dollars of expenses on a cash basis. And the recurring comment I get from these business owners is that they have trouble forecasting their business and they think they know what their margins are but really they are not sure. Especially in a business where there is manufacturing or assembly involved, or a service business that is beyond a half dozen people in size, you can bet your margins are wrong if they are on a cash basis.

By not having your accounting records on an accrual basis you are truly 60-90 days behind your business, you are not able to measure or forecast working capital and you will eventually run in to problems.  Some of these problems may be life threatening to your business if there is a downturn in the market or global economy.

It is More Than Margins and Operations

Knowing your margins on an accrual basis and understanding your profit and loss statement is critical. But you also need to know that your balance sheet is correct and truly represents what you have and owe. If you are on a cash basis, then you do not know what you have or owe. For example, prepaid insurance, payroll liabilities, purchase orders entered into your accounting system have not been invoiced by your vendors. As a result, these are all things that will not show up on your balance sheet if you are not keeping your books and records on an accrual basis.

At our firm, we’re are often engaged to help a client company transform their accounting records from cash basis to accrual basis. And the outcome is always positive as management is very happy to know that they can now get good accurate reports and their margins finally make sense. Now they can use their financial statements as one of many tools to run their business.

Cash Basis vs Accrual Basis AccountingA Valuation Perspective On Cash Basis vs Accrual Basis Accounting

You may have a very profitable company on a cash basis, but your financial statements are not going to be accurate. Your company will suffer when it comes down to valuation. Sophisticated financial buyers, strategic buyers and bankers understand that some private companies are still run on a cash basis, but guess what? They are going to discount the value of your company because it is on a cash basis. Eventually, the buyer will want the company they acquire on an accrual basis anyway. This is just another way that you can leave value on the table during a transaction to exit.

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Tax CPA vs Management CPA

What is ironic is that many Tax CPAs that prepare their clients tax returns or keep books and records do not care if you keep you books on an accrual basis. Actually, if you file cash basis for the IRS and your tax return, it will be easier for your tax preparer to keep your books on cash basis. But that is hurting you from a management perspective. Do not let your tax preparer tell you that you can just as well run your business on cash basis. He or she is simply wrong and too lazy. We can assume that they have never run a business. As a business owner, you need management books/records and management financial statements on an accrual basis and hopefully complaint with GAAP to run your business. They must be kept on an accrual basis so that they are more meaningful as a financial leadership tool.

Remember, CPAs are not all alike. Many of my friends still ask me if I am busy between January and April because I am a CPA. What the heck? I do not even prepare my own tax return, because I am not a Tax CPA.

CPAs are actually very different. The following are some of the different areas CPAs specialize in and many times do not cross other areas:

  • Taxes
  • Audits
  • Management and Operations
  • SEC Reporting
  • Forensic Accounting

Why Not Keep Your Accounting Records On An Accrual Basis?

There is no reason why you would not want to keep your accounting records on an accrual basis. (I am not referring to your tax books and records.) Your operational management financial statements should be kept on an accrual basis. Any decent accountant or controller can help you keep your books and records on an accrual basis. We can also assist you convert from cash basis to accrual basis as we have done this time and time again. We have our process in place to make this as efficient conversion.  In conclusion, there really is no good reason to keep your books and records on cash basis.

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Cash Basis vs Accrual Basis Accounting

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Cash Basis vs Accrual Basis Accounting


Battling Uncertainty in Your Company

Battling Uncertainty in Your CompanyUncertainty is all around. Sometimes, it’s more apparent than not. We subconsciously disregard a good chunk of unknowns in our personal life, but in our businesses, anything uncertain tends to cause chaos. Where is my next customer? Am I going to be able to pay bills? Is the economic climate going to pick up? We ask all these questions (and much more). For example, many parts of Houston got destroyed by Hurricane Harvey and it’s 51 inches of rain. As a result, many businesses were underwater and would take months to repair their brick-and-mortar store front. Other business, such as real estate, had to navigate multiple properties being under several feet of water – and no longer sellable either at all or at the same price. Battling uncertainty in your company is a continual fight that you must endure if you want to success.

Battling Uncertainty in Your Company

When you are battling uncertainty in your company, figure out what you know and don’t know. Why? You may be surprised of what you do know and don’t know. It also allows you to see areas of strengths, weaknesses, opportunities, and threats. For example, let’s look at the Astros baseball team – also, the World Series Champions of 2017. They had great players, great coaches, and excelled in every practice and game. But there was no guarantee that they would beat the San Diego Dodgers. In fact, it could have very easily gone the other way as the Dodgers have great players, great coaches, and excelled in every practice and game. There’s a level of uncertainty that has influence over your future. If the Astros were not able to identify a huge external threat, then they could have been potentially blindsided.

Also, it is important to know what you can control and what you simply cannot control.  Many times, we spend hours worrying about those things we cannot control. If you can’t control it, move on and spend your time solving those things you can control. I saw how uncertainty affected many companies with the most recent downturn in the oil and gas industry. Many companies where either affected directly or indirectly when oil prices plunged from $100/BBL down to below $30/BBL. This industry change caused a lot of companies to go into panic mode and uncertainty.

That’s why it is so important to conduct a SWOT Analysis while battling uncertainty in your company.

battling uncertainty in your company

Conduct a SWOT Analysis

Once you have identified what you know and don’t know, conduct a SWOT Analysis. This is a snapshot of what is going on both internally and externally. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses addresses your internal company health. What are your core competencies? Are you maximizing their potential? In comparison, opportunities and threats addresses the external factors that have influence over your company – government, policy, economy, movements, etc.

To get started on your SWOT Analysis, click here to download our External Analysis whitepaper – addressed the OT of SWOT.

Create Plans for Known Threats And Opportunities

This is a great time to create plans for known threats and opportunities. The Harvard Business Review says that, “Uncertain times, when some things are on hold, provide a good opportunity for fix-ups and clean-ups. Uncertainty makes it tempting to let things deteriorate (maybe we won’t keep this office going or live in this place any longer).” First, fix the things you know are broken and improve on the things that could be better. Create an action plan that will address these known threats and opportunities.

In addition, times of uncertainty usually harbor very creative doomsday scenarios. Rumors spread quickly, and this season of uncertainty can cause strife among your team. Use this creative energy to find an opportunity that will make one thing certain. Ask your team to research, talk about, think of, and find opportunities to take. Sometimes, it begins will brainstorming where (not what) the opportunity lies.  As a business leader/executive communication is a priority in times of uncertainty.  You would be surprised how many times I have seen business leaders go silent in times of crisis.  This is the worst thing you can do, and it only makes things worse in your company as a whole.

Battling Uncertainty in Your CompanyAddress Your Company Culture

Typically, whenever an entrepreneur or CEO loses sight on what is going to happen, they become frantic and are not able to think clearly. As a result, that panic travels down the organization chart and no one can make a smart decision. In times of battling uncertainty in your company, address your company culture.

Address your challenges upfront. There will always be things you cannot tell your employees but share what you can. Get a feel for moral in the organization. If you have to make some difficult decisions do so and assure those staying this was the best for the company as a whole and benefits them directly.

Then, harness their creative juices to generate ideas and to find opportunities. Engage every employee – from the lowliest employee to the top leader.

After your employees are feeling certain that something is being done to make the uncertainty certain, engage your customers. Thank them for their loyalty and share your genuine appreciation for them. The last thing that you want to happen is for you to lose a big customer and for your employees to follow suit because they are uncertain of their employment.

Where Uncertainty Comes From

Business Dictionary defines uncertainty as a “situation where the current state of knowledge is such that (1) the order or nature of things is unknown, (2) the consequences, extent, or magnitude of circumstances, conditions, or events is unpredictable, and (3) credible probabilities to possible outcomes cannot be assigned. Although too much uncertainty is undesirable, manageable uncertainty provides the freedom to make creative decisions.” In other words, uncertainty comes from what we don’t know. There is no way that we could ever know everything! But there’s an opportunity when looking at the certainty of uncertainty.

The Certainty of Uncertainty

The good thing about uncertainty is that we are certain it will always be in our midst. If you know that there will always be uncertainty, then you can separate what you know and don’t know. Think about science – whether it’s how the world was created or how gravity works, etc. Scientists have created these theories will all the information that they have found and researched. Those theories hold true until more information comes along that proves otherwise. If we compared theories 300-400 years ago to now, we would be shocked that they thought that way. In the spirit of science, financial leaders must make decisions knowing what they know at the time and adapting as they get more information.

Leading Through Uncertainty

Ram Charan, author of The Attacker’s Advantage: Turning Uncertainty Into Breakthrough Opportunities, says that, “risk takers are catalysts, operating in offense mode… They’re doers who take risks based partly on fact and partly on their imagination about what could happen when those forces combine in what others might later call a convergence… The catalyst, in fact, is the one who often creates the convergence” (Fast Company). When you are leading through uncertainty, make a decision and avoid delaying for more information that you know is not going to be there. Take ownership of those decisions and charge forward. Remember, a fish rots from the head down. If you as the financial leader fail to lead confidently, then the company underneath you will begin to crumble.

It is also important to be a servant leader! A Harvard Business Review article says that, “when lives are on the line, servant-leadership is the only leadership model that truly inspires a team, because servant-leadership demonstrates that you, as the leader, put your people’s welfare ahead of your own.”

To prevent chaos, it’s important that you know how to overcome obstacles and consequently, be prepared to react to external factors. Click here to access our free External Analysis Whitepaper and gear your business up to navigate uncertainty.

Battling Uncertainty in Your Company

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How CFOs Can Drive Revenue Growth

How CFOs Can Drive Revenue Growth

The financial type is stereotypically called a “bean counter” because they focus primarily on the costs or overhead. That’s the easy route to take. They can manage the costs without having to walk outside their office or cubical to talk to another person or department. But a financial leader needs to help drive revenue growth in their company to create real success. We’re looking at how CFOs can drive revenue growth in this blog. First, let’s look at why you should not just cut costs, but drive revenue. Remember, it is easy to cut costs, it is really hard to cut the right costs.

Don’t Just Cut Costs… Drive Revenue

The typical CFO is managing cash flow and profitability. But we have talked with so many CFOs and they say, “revenue isn’t my job.”  Well, it should be. If there is no revenue, you do not have a job.

Why Cutting Costs Doesn’t Equal Success

The sales team is responsible for revenue and the CFO is responsible for everything else… Right? That’s the common misconception among the financial leadership. But the financial function needs to be more involved in sales than they are right now. Cutting costs (aka being a bean counter) does not equal success. Focusing on only cutting costs is a very short-term strategy.  If your organization is a going concern you want a long-term strategy which includes cutting the right costs as well as revenue growth, improved margins and ultimately profitability.

For example, there’s an economic downturn. You as the financial leader are cutting fixed costs, evaluating expenses, not giving out bonuses, etc. Cash is tight. And the money isn’t coming in with this downturn. At one point, you are going to be extremely lean in your overhead and you can’t cut anything else. What happens if the downturn continues another 18 months? You’re going to be out of business or in debt.

The CFO cannot just focus on overhead. They need to be looking at more cost-effective vendors, work on improving productivity and efficiency, innovating with the CEO and sales team, focusing on the more profitable customers, and forecasting the sales potential. Basically, the CFO needs to be thinking of ways to bring in more cash while keeping costs down… hence improving profitability.  Many of the most successful CFOs end up as the CEO.  Well guess what, the CEO worries about everything, including sales and profitability.  If you are next in line as the current CFO, are you really prepared to step into that CEO role?  Are you thinking like a CEO?  A good CFO actually thinks like a CEO.

Click here to access our Goldilocks Sales Method and learn how to build your sales pipeline and project accurately.

How CFOs Can Drive Revenue GrowthHow CFOs Can Drive Revenue Growth

When you look at how CFOs can drive revenue growth, you need to look at leadership. Who is the financial leader?  In other words, they may be chief; but are they able to lead a group of people to accomplish a goal. Let’s look at how a CFO can align finance / marketing departments, and not be a CFnO, but have data transparency, and be a successful financial leader.

Align Finance & Marketing Departments

As an example, finance, marketing and sales should be close to one another as one is managing the money and the later wants to spend the money to make more money. These three departments should be on the same page and in sync with one another. Think about when you (the CFO) create a budget. That budget is useless unless your company follows it. You need to manage the marketing department and your sales people need to inform you with their sales projections, what they need to accomplish their goals, etc.  Hopefully this was all captured when you created your annual budget.

For example, I work with my Director of Marketing to make sure we are on the same page as far as marketing goals are concerned, see what she needs to accomplish her job, and to hold her accountable. It could be easy to let her just be a detached marketer, but I would risk spending money that we don’t have, pursuing customers that aren’t profitable, and focusing on the wrong things. We talk about our budget on a weekly basis.

Don’t be a CFnO

We’ve talked about it before on our blog as well as in our coaching workshops. To be a successful financial leader, do not be a CFnO. What is a CFnO? It’s when the CFO only looks at the numbers and rejects every idea that the management team or CEO has or wants to pitch. Imagine you are trying to drive the company forward and invest in areas that you think will be profitable. Then imagine someone looking over your shoulder repeating no, there’s not enough money for that, not until you do X, Y, and Z, etc. You probably wouldn’t like that very much. They don’t either.

Instead, give them the chance to elaborate on their idea. Ask questions like:

  • What would success look like to you?
  • How many sales do you think this would generate monthly/annually?
  • What do you need to make this successful?
  • What are some of the risks or challenges you foresee?
  • Where does this align with the rest of the priorities of the company?

You can also tell them this is what we need to do first before we can venture into this new idea/product/investment/etc.

How CFOs Can Drive Revenue GrowthBe Transparent With Data

Do you ever feel that you’re missing a figurative piece to the puzzle? If so, you’re not alone. Many financial leaders are not able to make the right strategic decision (or any decision at all) because they don’t have all the information and analytics they need to budget, forecast, anticipate disruptions, etc. In “Dun & Bradstreet’s recent 2016 Enterprise Analytics Study, [they reported that] only 38% of companies share analytical insights across departments” (Dun & Bradstreet). That is a big problem. Dun & Bradstreet also argued that “with a cross-functional foundation and analytics toolbox, CFOs can improve their organization’s position in the industry, better manage assets, budget more effectively, and predict potential organizational disruption.”

Forecast your sales accurately with our Goldilocks Sales Method! The days of aiming too high or too low are long gone.

How CFOs can drive revenue growth revolves around the data they have. They should have access to the following:

Transparency of data helps the CFO or financial leader see the entire picture and steer the CEO in the right direction towards revenue growth.

Be a Financial Leader

In conclusion, the CFO needs to be a financial leader. We emphasize leader because it requires you to communicate, have vision, be honest, and make confident decisions. As you learn how to drive revenue as the financial leader, rebuild your sales pipeline and project accurately with our Goldilocks Sales Method whitepaper. This is one tool that will help you project just right – not too high or low.

How CFOs Can Drive Revenue Growth

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Why Valuation Matters

why valuation matters The other day, a client asked why valuation matters. It seems like a lengthy process that is complex and differs in each case. You see, I didn’t respond in an elaborate explanation of the different methods of valuation. Instead, I start off by saying that life is very unpredictable.

Have you ever experienced a life-altering moment (good or bad)? One moment, you are driving; then the next, you are upside down. In another moment, you walk into the office proud of the company you built. Then the next, you are being served with a suit that will put your company out of business. In a less severe example, you may have everything together for the day, only to spill your hot coffee everywhere. Life happens. And unfortunately, there’s nothing that we can do to take the uncertainty out of it.

But there are things you can do to prepare for those unexpected moments. For example, you learned how to punch out a car window in the case of an accident. In another example, you never start a project or venture without completing a full SWOT analysis so that you can minimize any legal risks. Or you simply learned not to carry too many things – especially with hot liquids.

But have you ever thought about the value of your company? You might be thinking why valuation matters. My health is good. My life is good. And the economy is good. We all know that some things in life just happen, beyond our control.

In fact, when our founder, Jim Wilkinson, unexpectedly passed away last June, we found our answer on why valuation matters. You can’t wait for life to just happen to react to it. Preparation will make everyone’s lives less stressful and more productive.

Why Valuation Matters

Before we go into why valuation matters, we need to know what valuation is and why a company needs to be valued. Valuation determines the economic value of a business, asset or company. Although the goal is to determine the fair market value, there is no one way to be certain of the ultimate price paid. Typically, it depends on many factors including industry, sector, valuation method and the economic conditions.  You can also count on a fact, you can have your business valued by two professionals and you will come up with two different answers.

A company needs to be valued if it is being bought, sold, or liquidated. Sometimes a company must provide a value of its assets or company as a whole to raise debt also. A valuation professional typically employs the financial statements, cash flow models, and market analysis. In other words, they are going to look at the discounted cash flow (DCF), market valuation multiples, and comparable transactions. A strategic buyer will also value your company. They may use some of the methods already mentioned, but they will also look at your management team.

Believe it or not the status of your accounting records will also influence the value of your company. Especially when you are looking to sell the business. I have been told twice by Investment Bankers (I.B.) that having clean accounting records based on U.S. GAAP vs. Not having good accounting records based on GAAP can have a difference of a multiple of 1 x turn of EBITDA by one I.B., and the other I.B. stated a difference of 20%-30% of value. That is because if you do not have good clean accounting records based on U.S. GAAP, how are they ever supposed to have confidence in your reported EBITDA or Net Income? The buyer will need to build a cushion for his acquisition, even if they love your company and are a strategic buyer.

why valuation mattersHow To Deal with Valuation

When dealing with the valuation process, it is important to get as many facts as possible with 1-2 clear goals. Why are you valuing? What are you trying to accomplish with this valuation? You need to assess what the purpose of this valuation is.  It could be shareholder disputes, estate planning or gifting of interests, divorce, mergers, acquisitions, sales, buy-sell agreements, financing, and purchase price allocation.

To identify areas of improvement for your company’s value, it would be wise to identify any weaknesses or threats that are destroying your value. Click here to download our Top 10 Destroyers of Value whitepaper. Don’t let the destroyers take money from you!

Valuation for Mergers, Acquisitions & Sales

Interested parties during a merger, acquisition, or sale need to obtain the best fair market price of the business entity.  They need to look at their return on their investment.  (your company is their capital being deployed).  This will ultimately be negotiated between the buyer and the seller.

In buy-sell agreements, you transfer equity or assets between partners and/or shareholders.

Valuation for Estate & Gifting

Death is a fact that everyone is going to face. But the timing of that event varies for different people. If your business is part of your estate, you need to conduct a valuation of your business. This can be done either prior to estate planning, gifting of interests, or after the death of the owner.

The IRS also requires this type of valuation for charitable donations.

Valuation for Disputes (Shareholder or Divorce)

When a couple divorces, they need to divide the assets and business interests from one another.

Occasionally, a breakup of the company is in the shareholder’s best interests. This could also occur when shareholders are withdrawing and need to transfer their shares.

Valuation for Financing

Banks hate risk. As a result, they need to validate their investment in your company before they provide capital. At this point, they request for a business appraisal of your assets.

Valuations are important, but there are “destroyers” that are lurking to limit the value of your company. If you are valuing your company, click here to download our Top 10 Destroyers of Value guide.

why valuation mattersPricing Your Deal Right

There is no one way to value a business and there are multiple valuation approaches, including Income, Assets, and Market. Valuation can be a very complex process. It can also bring up issues that weren’t previously addressed – such as an owner’s differing interest from the other shareholders. In order to price the deal right, you need to figure out which approach will best work for your company and which one really applies.

There are three primary business valuation theories that fall into the following groups:

  • Income Approach – this applies to a going concern
  • Asset Approach – the asset theory considers a liquidation approach
  • Market Approach – considers value to be related to other companies, (or real estate) in a similar line of business

Income Approach

The income approach determines a company’s value based on the income. This may include:

Asset Approach

In comparison, the asset approach determines business value based on the assets of the company. This is where you might engage an appraiser to discuss value of assets based on market value and possible liquidation.

Market Approach

The market approach decides the value by comparing it to similar companies. A valuation professional will focus on the comparative transaction method. Then, they will appraise competitive sales of comparable businesses to estimate the economic performance of revenue or profits.  This works well with publicly traded companies where earnings information is readily available or when looking at real estate it is easy to find recent comparable transactions.

Valuation Destroyers to Watch Out For

There are a couple valuation destroyers to watch out for. Hopefully, you aren’t in a moment where you have to value immediately and are just preparing for a potential event. Some of the destroyers of value include having:

  • No recurring or consistent revenue
  • No good accounting records
  • A lack of clear direction or a weak management

To discover other potential destroyers of value and to learn about the above three destroyers, click here to access our free Top 10 Destroyers of Value whitepaper.

why valuation matters

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why valuation matters


How Decision Making Impacts An Organization

In my 28 years of working for different types of organizations – public, private and consulting for companies from $4 million in revenue to $1.5 billion in revenue – I continue to be surprised how decision making impacts an organization. I’m even more surprised how the lack of decision making negatively impacts an organization. In order to accomplish anything in your company, there are two options: to make a decision and control the outcome OR to not make a decision and react to whatever happens. 

What It Takes To Make A Decision

The University of Massachusetts (UMass) Dartmouth publicized a paper that summarizes how to make a decision effectively and successfully.

#1 Identify the Decision

First, a leader must identify the decision. In other words, you need to identify when a decision needs to be made. Clearly define the nature of the decision. 

#2 Gather Information

Then, gather relevant information that will help you make a good decision. 

#3 Identify Alternatives

After you gather internal and external information, identify the alternatives as you are likely to have different paths or choices to make. List those alternatives. 

#4 Weigh the Evidence

Next, you need to weigh the evidence. This is an internal process. It can also be an emotional process. This is what takes the most time in the decision making process. 

#5 Choose an Alternative

After you have weighed the evidence, you need to choose among the alternatives. This is based on the first four items listed above. 

#6 Take Action

Then, you can take action. Only do this when you are ready to take a positive action based on the alternative you chose. 

#7 Review Decision

Finally, review your decision. Remember, this will take some time to accomplish. 

The above 7 steps really apply to business every day. From making a large acquisition of a competitor to hiring your CFO, these rules should be utilized. 

Your CEO needs a trusted advisor. They need you to help guide them through the decision making process. Learn how to get to the trusted advisor level by downloading the free How to be a Wingman whitepaper (and get an invitation to join our SCFO Lab)!

Many Business Leaders Are Not Good Decision Makers

Unfortunately, many business leaders are not very good about making decisions.  They either rush through the steps, many times skipping a step, and end up with a bad decision. Or they get stuck on number 4 – weighing the evidence – and never move to step 5, which is making a choice. 

What Happens When You Skip The Steps

But what happens when you skip the decision making steps? The steps mentioned above in the paper from UMass Dartmouth are critical and should not be taken lightly. They are there for a reason. My guess is that some bright minds with real life experience put these together. I mention this because in my 28 years of business experience, I can relate to each one. 

I have seen “decision makers” (oxymoron) skip one or more of these steps.  This can be in a routine day-to-day business matter, or in a strategic major multibillion-dollar decision. The outcome is always the same. The wrong decision was made. The cost of a wrong decision to an enterprise can be catastrophic. Or at the very least, the cost is an expensive one and sets back an entire department/business unit for months. 

How Decision Making Impacts An Organization

How Decision Making Impacts An Organization Case Studies

It is sometimes difficult to see our own faults in decision making until we hear or read about a similar situation. In my 28 years of experience, there have been hundreds or thousands of examples that I could pull from. See below for 2 case study examples. 

Real life Case Study #1 – Regulated Utility

I was once involved with a regulated utility that was installing an ERP system. The company completed Step #1 (Identify the Decision) and that’s about it! Someone with title and power in the organization decided to skip steps 2-7, and the result was a very bad system implementation that cost the company 50% of its revenue. Because of the lack of decision making and follow-though in the decision making process, they ultimately had to shut down a whole division. 

Real Life Case Study #2 – Chemical Company

In another example, a chemical company needed to fire a CFO and hire a new one. The original CFO had a bad track record of poor decision making. Technically, that CFO was good. But he was a bad people person and managed people with a hammer. As a result, a bad culture had developed. People hated working for the CFO and in turn, hated the company. Finally, the Board of Directors insisted that the CEO fire the CFO. 

The CFO was fired, but the company’s moral was terrible. The worst part is that since the CEO was snake bitten, he was gun shy on making a decision to hire the replacement CFO. The CFO position was left open for almost one year. As a result, the company suffered due to the lack of leadership. During that time, the company loosened its internal controls, and the budgeting process became a mess.  The lack of decision making by the CEO caused the Board of Directors to lose confidence in the CEO. There was a lack of leadership in the entire organization.

Analysis Paralysis

Step #4 (Weigh the Evidence) requires some analysis. We can all get lost in the weeds during this process. You may have heard the term Analysis Paralysis before. Analysis Paralysis is where someone is overthinking the analysis so much that a decision is never made. 

This is actually very real, and it can happen to any of us – especially people who tend to be more detailed-oriented and analytical.  First, you need to realize that in any decision we make, the perfect alternative does not usually exist. We wish there was, but in reality, there is not. 

Is there the perfect car? 

What about a perfect acquisition target? 

Is there a perfect CFO? 

The answer is probably no on these.  We need to work with what we have and make the most educated selection based on the alternatives before us. 

How Decision Making Impacts An OrganizationTrust the Professionals

As professionals in our respective area, we are confident in what we know, or as they say, know what you don’t know. 

If you hired a trusted advisor to assist you with your decision making and they are a reputable person, then trust your advisor’s opinion. 

When I was growing up, it seemed like my father who was a physician would change his tax CPA what seemed to be every year.  He just did not “feel good” about taxes and did not trust anyone. Not even the trusted advisor he hired!  My dad was very talented and dedicated as a physician, but he knew nothing about business or taxes.  So, his lack of knowledge in this area created a huge “monster effect”. There was no monster nor was there a person trying to screw him out of taxes. He simply did not know what he did not know.  We cannot emphasize enough: trust your advisors. 

How Decision Making Impacts An Organization

Decision making makes a huge impact on an organization. It can either propel it forward and into success. Or it can destroy the company’s value. The worst thing that a leader can do is to not make a decision. There is always a better decision than not making a decision. It reduces the uncertainty because you have already collected evidence, weighed the alternatives, and went through various scenarios of how each decision will potentially turn out. 

Poor or Lack of Decision Making

Remember, poor decision making, skipping necessary steps or simply a lack of decision making is a sign of lack of leadership.  Not only is there a perception problem, but most likely your business enterprise will suffer due to the lack of decision making.  As the business leadertrust your professional advisors and allow them to help you in the difficult decision making process Download our free How to be a Wingman guide and step up into the trusted advisor role. 

How Decision Making Impacts An Organization

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How Decision Making Impacts An Organization



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