Archive | Blog

How to Make Dramatic Changes in Business

How to Make Dramatic Changes in Business

Recently, we had a coaching participant mention to us how her company was wanting to make a huge change in their business that would ultimately destroy the current business. This happens more often that you would think. The owner or founder of the company wants to make a shift, a change, but the leadership did not full think through what that would actually look like. In our coaching participants case, her company had been around for a long time. They were known widely for their innovation. They were also a non-profit. The founder wanted to convert the company into a for-profit entity. That change would change EVERYTHING. In fact, it would be an entirely different company. In this week’s blog, we look at how to make dramatic changes in business while avoiding catastrophe and how to reinvent your company.

Change requires a strong leader. Learn how to be a more effective leader here.

How to Make Dramatic Changes in Business

When a company makes dramatic changes in their organization, it’s important to ensure the change will be sustainable and has the benefits outweigh the risks. This starts with questions like… How can we better develop our product/service to provide more value to our customer? What organizational changes can we make to reduce overhead and increase productivity? Is our current company structure the best structure for accomplishing our mission? Do we need to totally reinvent ourselves just to survive?

In our first example, changing the organization from a non-profit to a for-profit would only stuff the founder’s pockets; however, upon further conversations with their Finance Director, we came to the conclusion that that organizational structure change would change everythingmarketing, branding, funding, employees, legal aspects, and accounting. It would cost more to make that dramatic change than to stay the same. They would most likely loose their funding, their employees, and their entire culture.  They apparently were making a change for the wrong reasons.

Driving Radical Change • McKinsey

In a McKinsey article called Driving Radical Change, they outline how to make dramatic changes in business. It first starts with the aspiration – the goal for the change. Then, the leadership for the change needs to be addressed. Who is doing what? What are the priorities? The next two steps include articulating actionable steps for employees to act on and the direct impact they have on the change. This stage is what really fuels the change. Leadership needs to engage and energize their employees during change (change is scary for most people). Read more about making radical change here.

How to Make Dramatic Changes in Business

Why Make Dramatic Changes in Business

So, why make dramatic changes in business? Sometimes, it just needs to happen. Businesses can get stuck in a “rut” where they continue to practice the way that they have always done without evaluating the changing environment or their team. If your company has not made a change (or at least evaluated current practices) in a decade, then it’s time to look at whether radical change is necessary.

Reasons to change include but are not limited to the following:

  • It’s just not working
  • Competition is growing and taking business away
  • There are legal restrictions
  • The market is shifting
  • Technology shift (this is probably the most common in the last decade)
  • New opportunities identified
  • Customers demand something else

Changes could include the following:

Sustaining Business After Big Changes

So many businesses have made changes due to technology advancements, competition, etc. Barnes & Noble has been through numerous CEOs because they did not continue to press on with their Nook and e-commerce platform. Netflix went through a period of declined stock prices as they pressed on to be a primarily online-streaming platform. Sustaining business after big changes can be difficult, but it all comes down to the leadership. Forbes contributor, Erika Anderson, says, “When CEOs and their teams fail to fully commit to change, change fails.” The entire company needs to commit to making this change successful. If one link in the chain is weak, then the whole project will fall.

Here are a few more notables:

  • Amazon started as an online book sales company; it is now a large distribution and logistics company
  • Western Union started as a telegraph company, then it grew to one of the largest money transfer companies in the world
  • Nokia started selling rubber boots; it is now is a major cell phone manufacturer
  • Shell (the major oil company) started in a small store in England importing and selling shells

There is a great quote that I saw in an article from MONEY… “A successful company is like a giant great white shark. In its prime, it chews up the competition, but if it dares to sit still for too long, it dies.”

Your CEO needs a strong leader – especially a strong financial leader. Learn our 7 Habits of Highly Effective CFOs and become the strong leader your CEO needs.

Supporting Change as the Financial Leader

Change is uncomfortable for everyone because there is uncertainty about the results. Accounting type people are often prone to being the no-sayers during change. It’s too expensive, too risky, and too advantageous. When making dramatic changes in your business, it’s important for the financial leader to support the change. If a certain change will dramatically impact cash flow and profitability, then work with your CEO to figure out what you can do. Do not just say “no”. The CEO needs a trusted advisor, a confidant, someone who they can rely on for a more financially sound way of doing something.  In my experience, change has usually been good and for the right reason. To learn other ways to be more effective in your role as the financial leader (and to become a trusted advisor), click here to access our most popular whitepaper – the 7 Habits of Highly Effective CFOs.

Dramatic Changes in Business

Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to manage your company before your financial statements are prepared.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Dramatic Changes in Business

0

Is Your Business Bankable?

Is Your Business Bankable

Businesses call us for many reasons but here are two very common reasons why we get called: they are growing and want to strengthen the financial function OR they are in financial distress and can’t find a way out. Why does a business need to be bankable? What does being bankable mean? In this blog, we are going to answer all those questions and advise you how to strengthen your banking relationship (something all businesses need to do).

What metrics are you using to gage your company’s performance? It’s important to identify and track those KPIs. Need help tracking them? Click here to access our KPI Discovery Cheatsheet, and start tracking those KPIs today!

Is Your Business Bankable?

Before we answer the question “is your business bankable?”, what does bankable even mean? Bankable is a financial jargon that indicates that a business is sufficiently healthy to receive interest from lenders to loan. It’s a basic indicator of a company’s success. If a bank is willing to loan a business cash and/or support a business, then the risk of it failing or not paying is low. A bankable company has significant assets, profits, liquidity (cash), and collateral.

An article from Forbes says it like this, “The bank is your cheapest, but often most difficult, source of capital with which to operate and grow your company.”

So, is your business bankable? There are several things to consider. Financial health will be the primary focus of determining if your business is bankable. There are other things, such as collateral and the character of the person, behind the loan.

Financial Things to Look for

Financial things to look for:

Non-Financial Things to Look for

Non-financial things to look for include the following:

  • Do you have a strong management team?
  • What does your industry or segment look like (strong, declining, etc.)?
  • Do you have a business plan?
  •  The character of the people behind the company and signing the loan documents
  • Will you provide a personal or corporate guarantee?

If you are unsure, then just ask your banker.

Is Your Business BankableThe Need to be Bankable

We deal with companies that are both highly successful or maybe in a distress situation. If you are successful, then you may want to acquire another company, have a distribution, or invest in CAPEX. In today’s market of relatively cheap access to capital, why would you use your own cash? If you are growing, then you really need to consider a line of credit to help you grow. We see very successful companies in a high growth scenario bleed out of cash and working capital. In those cases, a line of credit would make life so much easier.

 Click here to access our KPI Discovery Cheatsheet, and start tracking your progress to be bankable!

Bankable Business Plan

Now, that you have determined if you are bankable or not bankable, it’s time to put together a bankable business plan. There are several things that banks (and investors) want to see before they invest in your and your company. There are ten sections to a bankable business plan.

(HINT: If you do not have a good banking relationship with your banker, then even the most perfect business plan will not guarantee you will get the capital or line of credit you need/want.)

Value Definition

What ares in your business create value? In a bankable business plan, you need to define your value-generating centers (core-business activities). A successful business will continue to come back to the value that they provide to customers; however, an unsuccessful business will continue to get distracted by other areas of the business that are not generating any or as much value.

Needs Assessment

A Needs Assessment identifies the company’s priorities. It also defines what needs to be accomplished and the steps that need to be taken to achieve the goals. This is a great tool to use to identify what you know and don’t know about your business. Use this process to analyze every part of your business. Score.org provides a Needs Assessment that will gage how well you know your business and your needs.

Differentiation and Competitive Assessment

Porter’s Five Forces of Competition is used in the differentiation and competitive assessment to identify competing products/services and to start the process of differentiating yourself from the competitors. For example, there are 3 companies in Houston that provide the exact same product; however, ABC Co. is working to be bankable. So ABC Co. works to position their product differently and to provide more value than their competitors. Without conducting a differentiation and competitive assessment, ABC Co. risks loosing valuable market share.

Market Analysis

Bankers want to mitigate their risk. Conduct a market analysis to explain exactly that your market is doing. Is it new and expanding? Or is it saturated and declining? This will help explain your company’s growth potential.

Marketing Planning

Put together a marketing plan. Identify how you are going to market your product or service, what your target market is, and how you are going to continue to grow.

Sales and Promotion Strategy

Now, that you have built out your marketing plan, identify your sales and promotion strategy. For example, if a $1 trial for a subscription is critical to your sales strategy, then write that out and explain how it has contributed to your company’s growth.

Organization Design

What does your organization look like? Are you bombarded with too many non-essential personnel or administrative functions? Or is your company designed to optimize all positions to cover both value-adding functions and administrative functions?

Financing Needs

Identify your financing needs. How much do you need to sustain your company? How quickly do you need financing? Answer all this questions

Financial Projections

Next, build out your financial projections. Be sure not to have optimistic projections that are hard to near impossible to accomplish. They need to be realistic, detailed and logical.

Risk Analysis

Finally, what risk does your company have? For example, a company who relies heavily on the oil and gas industry needs to identify what risk they will face if that industry declines.

Conclusion

In conclusion, being bankable is a measurement of success. As previously stated, there are several things you need to watch to remain bankable and profitable. Measure and track those KPIs. Click here to download our free KPI Discovery Cheatsheet.

Is Your Business Bankable
Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Is Your Business Bankable

0

Exploit New Business Opportunities

In this age of technology, it’s time for companies to be willing to exploit new business opportunities. More than ever before, companies are navigating this fast-pace and uncertain terrain. Bankruptcies, mergers, acquisitions, reductions, etc… It’s all changing the business landscape. But if companies do not exploit new business opportunities in fear of failing, then they are sure to fail or fall behind competitors. As financial leaders, how do we enable our leadership to take risks without neglecting the numbers?

Exploit New Business OpportunitiesWhy Exploit New Business Opportunities

The reason why one would exploit new business opportunities is to stay ahead of the ever-competitive marketplace. What needs are not being fulfilled yet? How can you gain more market share? What competencies does your company have that can be expanded into other areas – customers, markets, etc.? Opportunity exploitation is what keeps businesses moving forward. In this day and age, we need to continually reinvent our companies or we will not be around very long. Our competitors are doing this every day.

Have you identified any opportunities yet? If not, then click here to access our External Analysis Whitepaper.

Opportunity Exploitation Definition

According to Wiley Encyclopedia of Management, “opportunity exploitation refers to activities conducted in order to gain economic returns from the discovery of a potential entrepreneurial opportunity“. Typically, entrepreneurs are known to exploit opportunities or identify opportunities because it is in their nature; however, financial leaders know what the numbers say and can identify opportunities that make economical sense for the business while balancing risk and reward.

Example: Planet Fitness and Vacant Malls

E-commerce has been growing significantly while brick-and-mortar stores have been steadily decreasing. Shopping malls are more vacant than ever before. But there is one company that is taking advantage of those vacancies and benefitting from it. In a recent Wall Street Journal article, “Planet Fitness Inc. is the rare mall tenant expanding its share of commercial real estate even as many retailers shrink their physical footprint as more commerce moves online.” This is a great example how to exploit new business opportunities. Furthermore, Planet Fitness is focusing on those that do not already have gym memberships. This combination of target market and location is proving profitable for them as they have reported “revenue increase 31% to $140.6 million compared with the same three-month period last year”.

How Entrepreneurs Identify New Business Opportunities

According to Babson College, “entrepreneurs are often characterized by their ability to recognize opportunities (Bygrave & Hofer, 1991) and the most basic entrepreneurial actions involve the pursuit of opportunity (Stevenson & Jarillo, 1990).”

Steps to Identify Business Opportunities

There are several steps to identify and exploit new business opportunities that Babson has outlined:

  1. Preparation
  2. Incubation
  3. Insight
  4. Evaluation
  5. Elaboration

Preparation

Experience is the prime ground for preparing yourself or your company for opportunities. Identify what experiences your team has and what your company is good at. For example, if your company excels in supply chain and logistics, then an opportunity that needs incredible supply chain and logistics processes will be a good fit.

Incubation

Incubation refers to the brain processing a potential idea or opportunity subconsciously. They are already attempting to solve a problem that they haven’t yet written down. This is an ongoing process.

Insight

Then, in the insight stage, an entrepreneur will have the “eureka” or “ah-ha” moment where it all makes sense. As a financial leader, it’s important to talk with your CEO about their ideas so that you can engage in this insight stage. You may even see how to exploit the opportunity before the CEO does.

Evaluation

This step is where the financial leader truly steps up to the plate. Research and analyze whether this opportunity is worth pursuing. At the end of this stage, it could end up in either one of two ways:

  • The idea is not feasible and they kill it
  • The idea is feasible and you move forward.

Elaboration

Finally, the elaboration stage is where you exploit the new opportunity through business planning and implementation.

Example of Identifying a New Business Opportunity

For example, a steel manufacturer primarily sells to commercial developers who require the steel for building and/or roadways. One day, they realized that they were not using any scraps of steel, and the company was just throwing them away. Instead of continuing to throw away those scraps, they inquired whether there was an opportunity to take advantage of it. One day, the entrepreneur stumbles across a custom scrap metal design company where they create home decor out of scrap metal. The entrepreneur goes back to his CFO to discuss this potential idea. The CFO knows of a team member who actually does this in his spare time. They gather a team and start outlining a business plan. Eventually, they decide that it is a profitable idea, and they go forward with it.

If you are not familiar with the petrochemical sector, they are experts at this. Nothing goes to waste in the petrochemical business. A chemical is made or processed, it generates a bi-product or waste, and there is always another business in the petrochemical space that buys it to make yet another product, and on and on and on… Eventually, very little is true “waste”.

Manage New Business Opportunities

So, how do you go about managing new business opportunities? It is so easy for entrepreneurs to get caught up in their ideas and chase “squirrels“. They lose focus and may not capitalize on the opportunity sitting in front of them. As a financial leader, it is crucial for you to manage those new business ideas as part of your strategy to improve profitability.

Exploit New Business OpportunitiesConduct a SWOT Analysis

First, conduct a SWOT Analysis on your company with your team. A SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats. There are two view points in this analysis: internal focused and external focused. This analysis provides a comprehensive look at what your company does well and what it may be lagging in. This also helps the CEO/entrepreneur figure out what opportunities they need to look for to convert those weaknesses to strengths and those threats to opportunities.

If you want to get started on your SWOT Analysis, then click here to access our External Analysis Whitepaper.

Enable Your CEO to Make Calculated Risks

Then, enable your CEO to make calculated risks. Entrepreneurs need to take risks and make moves – that’s part of their nature and gift. But, they do not need to make uncalculated risks or risks that will cause more harm than good. As the financial leader, help them to mitigate risk and enable them to do what they do best – find opportunities and grow the business.

Do you know the opportunities and threats that your company faces? If not, then the time to figure it out is now. Click here to access our External Analysis to gear your business for change.

Exploit New Business Opportunities

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Exploit New Business Opportunities

1

Protect Yourself: A Guide to Non-Compete Agreements

Oftentimes, businesses see their competitors as their biggest threat. But what if your star quality team continues to leave to join your competitor’s team? That is, in my opinion, the bigger threat. You have already invested in hiring, training, coaching, and developing those individuals. Then, they leave and directly compete against you. We see this commonly in consulting practices, but it occurs in every industry. In this week’s blog, we are taking a look at how to protect yourself and your company with non-compete agreements.

Non-Compete Agreements, Guide to Non-Compete AgreementsWhat is a Non-Compete Agreement?

A non-compete agreement is an agreement between the employee and the employer that attempts to prevent the employee from working for a competitor within a specified time period and geographical area. Furthermore, it must adhere to all state and national employment regulations. It is best to hire a labor law attorney to verify conditions and ensure that it will uphold in court.  The laws for non-competes and the effectiveness of non-competes vary greatly from State to State. In addition, ever changing laws and precedent will challenge the effectiveness of your non-compete.

According to the American Bar, a good non-compete agreement should prohibit a former employee from doing the following

  1. “… Working with a competitor
  2. … Soliciting former coworkers to be employed in his or her new company
  3. … Soliciting or disclosing confidential information, such as customer lists and data, learned in the course of their employment.”
If you want to protect your company’s future, then it’s important to know what could potentially destroy value. Identify “destroyers” that can impact your company’s value with our Top 10 Destroyers of Value whitepaper.

Why You Should Use Non-Compete Agreements

Take a look at your sales persons and/or consultants. They have developed a relationship with the client and have goodwill with that customer; however, if they decide to leave for whatever reason, then that positive relationship may be in danger. In addition, if that same sales person works for a competitor, then they may poach that customer with the goodwill they have already built up.

Non-compete agreements discourage employees from leaving the current company and competitors from poaching those employees. This only occurs if the non-compete agreements will hold up in court and if the company (you) will take the employee to court. I have seen non-competes work and prevent stealing customers and employees. I have also seen non-competes not hold up in a case. It all depends on the case law, the State you are in, and your luck with the judge hearing your case. 

Tip: A contract is useless unless you enforce it. You must be prepared to take a broken contract to court.
Discover if there are any “destroyers” in your business with our free Top 10 Destroyers of Value whitepaper.

Who Should Use Non-Compete Agreements

You should consider these agreements for employees, clients, shareholders, suppliers, and partners; however, non-compete agreements are typically reserved for executives, senior management, research and development, and key sales people. Not all companies should use non-compete agreements.

Non-Compete Agreements, Guide to Non-Compete AgreementsA Guide to Non-Compete Agreements

Here is our guide to non-compete agreements. It covers trade secrets, how to protect yourself, and how to protect your company’s future.

Trade Secrets

Trade secrets need to be protected, especially from competitors. A non-compete agreement helps you to protect those trade secrets in the case an employee leaves for a competitor. Also, your company hand book should remind employees that all inventions, ideas, patents, and creative work they develop while at work, is the companies property. Please check your local laws and precedents for more information.

Protect Yourself

The goal for having non-compete agreements with employees is to protect yourself (your company). As said before, non-compete agreements are usually intended for the key management team or anyone with a direct relationship with customers. It’s important that you understand your State law. Certain states, like New York, do not allow for companies to extend non-compete agreements too far down in the organization. The goal of non-competes to protect yourself from growing competitors or new competitors that may pop up as a result of key players building their own organization.

Protect Your Company’s Future

Protect your company’s future by protecting your most valuable assets – your human capital. Don’t let gaping holes in your employee policy leave your open for financial loss. The American Bar says that, “Having a valued employee defect to a competitor and take sensitive proprietary information such as customer lists, pricing information, marketing strategies, or product and service expertise with him or her can be a devastating blow to any business – large or small.”

Protect your company’s future with our Top 10 Destroyers of Value whitepaper.

Example: Consulting Firm

Let’s look at an example of a consulting firm! They are trying to prevent any client from hiring one of their leading sales person or a critical member of the team. In an consulting firm, the top challenge faces is when clients hire your consultants out from under you. For example, you hire Tammy to work 20 hours a week, 50 weeks out of the year. A client will pay $150,000 for a 1,000 hours of her work. As the owner of the consulting firm, you get 40% of the $150/hour. It’s a win-win situation. You fulfill a client’s need and fulfill Tammy’s need for business.

As the relationship further develops, Tammy and the client decide that they don’t need you. Unfortunately, this option only benefits Tammy and the client. It hurts you. If the client offers, $200,000 a year in compensation, then Tammy is pleased. She has consistent work, focuses on one client, and does not have to worry about any gaps in her hours. On the other hand, the client is pleased because they now have a full-time salaried employee that works 50 hours a week for 50 weeks a year.

Let’s calculate the price difference for the client!

Tammy’s previous hourly rate was $150.

With the client, Tammy costs the client $80 per hour. Divide $200,000 salary by 2,500 hours of work to come up with $80 per hour.

Furthermore, you have lost an income stream. Then you have to find, hire, and train a new employee – continuing to cost more and more. If you continue to loose more consultants, you will no longer have a firm. All employees and clients have left.

Non-compete agreements would have protected you from loosing your company.

Don’t Destroy the Value of Your Company

In conclusion, you should use non-compete agreements to protect the value of your company. There are many other ways to make sure you don’t destroy the value of your company. To improve the value of your company, identify and find solutions to those “destroyers” of value. Click here to download your free “Top 10 Destroyers of Value“.

Non-Compete Agreements, Guide to Non-Compete Agreements

Strategic CFO Lab Member Extra
Access your Exit Strategy Checklist Execution Plan in SCFO Lab. The step-by-step plan to put together your exit strategy and maximize the amount of value you get.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs

Non-Compete Agreements, Guide to Non-Compete Agreements

Connect with us on Facebook. Follow us on Twitter. Become a Strategic CFO insider

0

Intangible Assets: Protecting Your Brand And Reputation

“In an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations” (Harvard Business Review). Last week, I had a conversation with one of my coaching participants, Dory. Dory’s company is trying to make a lot of changes. Changes that as a financial leader just doesn’t make sense. It involves repositioning the business. It requires new marketing, new branding, new value, new culture, new staff… It’s an entirely new brand! However, the leadership fails to see how making this large of a shift will not only change the brand, but it will also risk destroying the firm’s reputation. In this week’s blog, we are discussing about protecting your brand and reputation.

With 70-80% of value stemming from intangible assets – such as your brand and reputation – it’s important to know what your company’s strengths and weaknesses are. Start enhancing those strengths (and resolving those weaknesses) with our Internal Analysis whitepaper.

Protecting Your Brand And Reputation

In today’s world, protecting your brand and reputation should be a priority because it can be destroyed with one social media post. In a WSJ article, Keri Calagna, principal at Deloitte & Touche LLP and leader of Deloitte Advisory’s brand and reputation management services, says that, “brand and reputation are complex, difficult to measure, hard to predict—often a result of strategic and operational decisions—and influenced by factors outside of an organization’s direct control.” But there are things that you can do as an organization not to further diminish value potential.

Protecting Your Brand And Reputation, Protecting Your Intangible AssetsFor example, we have a client that recently experienced an incident near their facility. The client’s concern was reputation and responsiveness to the situation even though they were a third party to the incident. But the perception with regulators and potential customers is very important. So, our client went above and beyond to respond and assist in the situation. This was seen in a very positive manner with regulators, neighbors, and customers. As a result, they were building very positive brand equity.

Brand Definition

Business Dictionary defines brand as a “unique design, sign, symbol, words, or a combination of these, employed in creating an image that identifies a product and differentiates it from its competitors.” Over time, a brand becomes the face of the company, something that customers recognize, and conveys the value of the product/service. It is your Image.  For example, Coca-Cola is historically seen as the #1 soda producer over Pepsi. Coca-Cola’s branding efforts have created a culture and a value among consumers.

Brand equity can go either way – positively or negatively. For example, influencers, bloggers, neighbors, friends, and family have recommended Product A to you. As a result, you are most likely going to buy Product A and any other product you need from that company. Then, you come across Product B. Product B has been known for its poor quality and is generally not as effective as Product A.  Product A has positive brand equity, whereas Product B has negative brand equity. As a result, Product A has a lot more wiggle room to make mistakes than Product B.

Take inventory of your company. What does your company do well at? What weaknesses does it struggle with? Click here to access our Internal Analysis to take a complete inventory of your company. 

Reputation Definition

Cambridge defines reputation as “the opinion that people in general have about someone or something, or how much respect or admiration someone or something receives, based on past behavior or character.” In other words, the reputation is how customers perceive your company versus how they recognize your company.

Protecting Your Brand And Reputation, Protecting Your Intangible AssetsAlign Strategic Decisions With Brand

One method to protect your brand and reputation is to align it with strategic decisions and overall strategy. For example, a company makes a decision without factoring in its brand. Customers and potential customers do not agree with the decision make because it changes X, Y, and Z. We have seen companies destroy themselves because they do not consider all factors before making changes to their brand.

Know Where Breakdowns Occur

Generally speaking, any breakdowns in your company will have to do with your human capital. If there is a misalignment with the actual company culture (not just what you perceive) and the brand, then your team will not be able to successfully deliver what the brand promises. Educate your employees on the brand. Fix issues within your team before it’s vastly different than the brand you are putting out there.

Protecting Your Intangible Assets

In the end, brand and reputation are intangible assets that your company needs to care about. It impacts value potential and the bottom line. Instead of managing crises, let’s look at how to manage risks and consequently, protect your intangible assets.

How does a company protect its intangible assets? Protecting your intangible assets starts with knowing what they are. What is your company known for? Why do customers choose you over a competitor?

Then start to identify what could change those answers. Is it government regulations that will change your product? What about material changes?

Finally, package what your intangible assets are and what influences them. Manage any risk threatening those assets.

How Your Brand And Reputation Impacts the Bottom Line

Before you go about making any changes to your brand, look internally at what is reliant on that intangible asset. In my first example, Dory’s leadership was not looking at how the employees, customers, vendors, investors, etc. were tied and attached to the brand. If her company made the change they wanted to, the company would lose its employees, customers, vendors, and investors. Sometimes, the brand is the thing that has made you so successful. If you are protecting your brand and reputation from potential changes, then take a look at our free Internal Analysis whitepaper. This will help you get a high level view of what impacts what.

Protecting Your Brand And Reputation, Protecting Your Intangible Assets
Strategic CFO Lab Member Extra
Access your Exit Strategy Checklist Execution Plan in SCFO Lab. The step-by-step plan to put together your exit strategy and maximize the amount of value you get.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Protecting Your Brand And Reputation, Protecting Your Intangible Assets

0

Alternative Forms of Financing

Alternative Forms of Financing, Alternative FinancingIt happens all the time. Companies need capital, but they aren’t bankable. Banks or other financial institutions will not touch them because they are either too risky, not able to meet covenants, or it just doesn’t work out for some reason. So, where do those companies go? They need to look at alternative forms of financing. In this week’s blog, we take a look at alternative financing and why there is a need for it.

What is Alternative Finance?

What is alternative finance? The US Small Business Administration defines it as “financing from external sources other than banks or stock and bond markets”. It typically refers to fundraising through online platforms; however there are various sources that could be considered alternative forms of financing. We will look into those a little later in this blog.

Sometimes, the best way to add value in a company is to know where to go for cash. If you want to learn 5 other ways a CFO can add real value, then click here to download our 5 Ways a CFO Adds Value whitepaper.

The Need for Alternative Financing

Why is there a need for alternative financing? Not all entities (banks, stock, bond markets, etc.) are willing to finance certain companies due to a variety of reasons. For example, Company A is a 2 year old company that has a technology that will not be ready for market for another 6 years. A bank most likely will not fund that project because there is no revenue for 8 years and there is no guarantee that the company is ever going to be successful. Alternative forms of financing will help Company A continue to research and develop their product and bring it to market.

In addition, alternative financing often provides benefits like mentorship, customer validation, advice, and buy-in.

Alternative Forms of Financing

There are several alternative forms of financing, but today, we will look at 5 financing options for companies that are not bankable. Those include crowdfunding, grants, mezzanine lending, private equity, and bootstrapping/sweat equity.

Crowdfunding

Crowdfunding is the most public form of alternative financing. It’s simply an online platform where many investors invest small amounts in a company. Popular crowdfunding sites include Kickstarter, Indiegogo, and GoFundMe. This is a great option for companies that have customers who want what they have but the bank does not agree. For example, some indie films have raised capital via crowdfunding platforms as both a marketing effort and capital raising. As a result of investor’s donations, they get perks such as rewards, early access, etc.

Grants

Other alternative forms of financing include grants, competitions, and accelerators. Grants do not have to be paid back, unlike a loan. They are usually disbursed or gifted by one entity. Often, that entity is a government department. It could also be a corporation, trust, or foundation. Most grants require an extensive application process. In addition, most grants are designated for a specific purpose – like research and development.

Grants, competitions, and accelerators often require business plans, financials, projections, etc. A benefit of going this route is to continually improve the business and add value. If you want to learn 5 other ways a CFO can add real value, then click here to download our 5 Ways a CFO Adds Value whitepaper.

Alternative Forms of Financing, Alternative Financing

Mezzanine Lenders

Mezzanine Lenders are organizations that provide loans to businesses; however, they are not required to have all of the guarantees and collateral of a traditional bank. Their loan to you might have some aspects of convertible debt to equity. In addition, it will definitely be more expensive than a traditional commercial loan. It will be about as expensive as using a credit card. But these lenders are great alternative to companies that may not be bankable.

Private Equity

Private Equity firms are funds, and team of individuals manages this fund that provides debt and equity to businesses. Usually, the “hold” period for the investment can be anywhere from 3-7 years. The Private Equity (“P.E”) firms bring best practices and find synergies with other portfolio companies to streamline costs. P.E. firms sometimes specialize in an industry or market to align their interests. Depending on the type of firm, private equity investors may take a managing role in a company.

Bootstrapping/Sweat Equity

While bootstrapping is not necessarily a form of financing, it does free up cash that is needed elsewhere. For example, a company can bootstrap by hiring employees on equity rather than a salary. While this may be a cheap option in the meantime, it can become expensive in the long run (especially if the company takes off).

It’s a CFO’s role to improve profits and cash flow. But to do that, they need to have the financial leadership skills to guide the CEO as they manage the organization. If you are ready to add real value to your company and get the respect you deserve, then click here to download our 5 Ways a CFO Adds Value whitepaper.

Alternative Forms of Financing

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Alternative Forms of Financing

 

0

Financial Leadership in the Digital Age

There is more information available today than in another other age before. It’s overwhelming. Instead of having verbal conversations with one another, there is a room of people on their phones or laptops communicating with other people around the world. We are processing thousands (if not millions) of pieces of information a day. And that’s making the role of the financial leader more difficult. There is simply too much information. So, how do you navigate financial leadership in the digital age?

First, take a look around the office. How much of your team’s work in on a device? How does your team look visibly (tired and exhausted or alert and awake)? If you go to any news source (Wall Street Journal, New York Times, etc.), notice how many articles are about technology and anything digital. Almost every article has some tech or digital component to it. This issue impacts financial leaders all around the world.

Financial Leadership in the Digital Age

Too Much Processing of Information

News channels, Facebook, Twitter, Instagram, Youtube, TV shows, financial statements, reports, contracts… Every piece of information we take in from the moment we wake up to the moment our eyes shut is simply overwhelming. There is too much processing of information occurring, and it has the risk of destroying a company’s value. A company’s leadership needs to be on guard of how much information they are processing each day. An article Fast Company published says, “Our brains have the ability to process the information we take in, but at a cost: We can have trouble separating the trivial from the important, and all this information processing makes us tired.” Our brains can only hold so much – much like a bandwidth of Internet. Once we go over that bandwidth, then we start to lose or forget information – even the most important information.

So, what does one do? They focus on a few key metrics rather than all the metrics. Click here to start identifying those key metrics with our KPI Discovery Cheatsheet.

Financial Leadership in the Digital Age

Financial leadership in the digital age is continuing to evolve and involve more areas in business than accounting. Already, financial leaders take a role in operations (productivity, efficiency, etc.), investment decisions, strategic planning, and human resources. I tell any CEO hiring a CFO that the CFO should be good enough or better to take on the role of a CEO.

Have a Team to Process the Information

As the financial leader, you have the opportunity to defer the role of sifting through all the information and data. Have your accounting department analyze all the information and package it into the most important information that you need to make strategic decisions. The CFO sits on a lot of information to begin with. With a team’s support, the CFO can focus on the most important information.

Financial Leadership in the Digital Age

Focus on Key Performance Indicators

Financial leaders in the digital age need to identify the key performance indicators (KPIs) that really matter in the business. If they don’t identify those KPIs, then they risk being overrun by data and may miss something important – result in injury, lawsuit, fines, etc.  With current systems that are properly installed, you can have thousands of bits of information in your monthly report.  But may I ask, what do you really need to make decisions?

Today, a client asked me if I wanted to see the daily reports. I asked what is in the daily report. The client responded with, “everything”. It included man hours, throughput, downtime, what was sold, was was wasted, HR information on who clocked in late and who was on time, literally everything on a daily basis. My response was simply “no” because  I do not need to see everything every day because I am running the company as an Interim-CEO. Instead, I want to see data that is meaningful, weekly, and information that will lead me to make business decisions. If we have over time one day of the week and none the rest of the week, then that will not lead me to make any business decision in this case.

Since so much data is available real time, be sure to gather and analyze that which is relevant and will lead you to make a decision.

Hire the Right Team

CFOs need to reevaluate which positions they are adding to their accounting department. Consider positions like data scientists, data security professionals, statisticians, and IT delivery specialists to add to your team. If the digital age is creeping into every area of business (especially accounting), then you need to have people with more experience in data, security, and analysis.

Adopt and Adapt to Technology

McKinsey recently reported that “the average capital project reaching completion 20 months behind schedule and 80 percent over budget.” Why? Because the stakeholders (project managers and contractors) in these capital projects are resisting technology. This is just one example of how resisting technology is a technology driven world will have an impact on the bottom line. If your company is already utilizing technology, then think of areas that you could be using more technology to reduce costs. If your company is still operating in the proverbial Stone Age, then it’s time to bring in a consultant or a team to implement a digital component. That could be an accounting system, a customer relationship management (CRM) system, an optimized website, etc.

In another example, retailers everywhere are having to change their business models to cater to the buy-now demand that customers have taken up. Retailers are creating e-commerce sites, closing brick and mortar stores, and managing inventory entirely different all because of technology. Recently, even grocery stores have been competing with companies, like Instacart and Favor, who are doing the shopping for customers that do not want to shop by creating their own delivery services.

Automation Plus Analysis

Over the years, the automation has creeped into finance and accounting departments. While at first, many in accounting were terrified that it would make their roles obsolete, we are seeing something different. You can only automate so much. In the end, business is all about humans. You cannot automate humans. What does that mean exactly? That means that now accountants are able to do more with the data than punching the information into spreadsheets, systems, etc. They can now spend their time analyzing the data, and thus, they become more valuable to the firm.

In a Wall Street Journal article, Paul McDonald from Robert Half says that, “companies plan to move the expertise needed to modernize their finance departments in-house, even as the process brings about more automation to routine tasks.”

Stay Focused in the Digital Age

So, how does one stay focused in the digital age? It starts with knowing what information is important enough to earn your attention and what information is simply a distraction. Start measuring your company’s KPIs today with our KPI Discovery Cheatsheet.

Financial Leadership in the Digital Age
Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Financial Leadership in the Digital Age

1