by John Sawinski
I learned something new last week: I always thought CEOs understood what a CFO’s role was. Well, not all of them do. For example, a couple months ago I contacted the founder of a new company in my area. I have great personal interest in what the company does, and I thought it would be a chance to do something fun. The local newspaper wrote a feature article about them and they were really starting to generate national attention. My first meeting with the founder and sales manager went very well and they expressed interest in my taking on the role of CFO.
We decided to move forward: After the appropriate non-disclosure agreements were exchanged, I obtained from their Dallas lawyer their business plan, which I suspect had been quite expensive to produce. I was appalled; Numbers didn’t add up. What few assumptions expressed in detail were so optimistic they should have been represented as waiting for miracles. Nothing made sense. I’d seen this kind of fluff before, mainly in China in the early ’90s, where state-sponsored businesses had goals, but no coherent plans on how to reach them - simply because as subsidized businesses they didn’t know how to build and articulate plans that would enlist investment or outside participation. Let’s be clear: Objectives are NOT plans. The team near my house realized their business plan needed help, but what became patently obvious was that their expectations of their incoming CFO were really what was out of whack. CFOs can drive business goals, but they can’t work miracles.
In subsequent communications, I asked more tough questions about their technology, the target customer and marketing strategy. I had obviously struck a nerve. The response was something along the line of, “We don’t need people to question our vision.” I was disappointed. I would have expected the response to be “Glad you asked. Let me explain our strategy.” Certainly, a knowledgeable investor would ask questions at least this challenging or even more probing. While keeping an eye on product development is important, it’s not the only thing. Today, attracting and keeping investors is a key role of the executive team. The CFO must be objective at all times and is compelled to ask senior management the difficult questions, because sooner or later an investor will ask them too. Clearly, this particular CEO didn’t get it, and wasn’t going to win an investment round.
The investment pie has shrunk and will no doubt shrink even more. Times are tough. Conservative investors play their cards close to their vest. To win the game, you cannot falter, not once. During the boom of the late 1990s, business plans were done in pencil on post-it notes. No more. . . Getting investors to take the bait - big investors who can get the job done, not mom and pop speculators - means having a bullet-proof business plan with the full credibility of an experienced CFO behind it.
I spoke at length recently with a private venture capital group who has all but abandoned funding start-ups, (odd for a VC) and has instead shifted to emerging technologies, small but with proven track records, and more importantly, credible executive staffs who can potentially get big. They have no interest in risk, no matter what the upside. In their view, if you aren’t already making money, at least a little, they’re not interested. A business on a solid footing, with real operations, financial controls, the foundations of enterprise, is what they look for. They’re no longer interested in creating a company out of thin air, only adding to what is already there.
Stock declines are a sign of the times. Equity markets have been chewed to ribbons by broken lending models, huge deficits, dead credit and sky-high energy prices. Taxpayers are saddled with a clean-up none can afford and the economy, while not totally stopped, is grinding to a screeching halt. The country, every sector of the economy, must reinvent itself. Detroit must re-tool, airlines conserve even more, companies drive toward novel ways of limiting transportation and energy costs. They all need money to do it. In the middle of this situation, how are you going to move your own ball forward? Do you have what it takes? What makes you stand out? Everyone is looking for investment. You will have to scramble for each and every penny. Why makes you so deserving?
It’s obvious: Executives must consistently look to the future in order to successfully grow and reach the next level. This is nothing new. Experts at Thomas Financial Services (www.thomasfinancialsvcs.com) know what to do. Building core infrastructure in basics like financial systems, business planning, forecasting and accounting will make all the difference. You’ll become strong and efficient when your plan works the way you want it to. Customers will see the difference, investors too.
The corporate landscape is littered with the bodies of start-ups that failed to plan, or to execute a plan. Don’t be one of them. Stay focused on the long-term. CEOs need to remain synchronized with an experienced CFO in order to win with investors. You’re never too little to succeed, and never too big to fail.
About the Author:
A credible start-up looking for funding and people with money often find it difficult to connect
Small Business Consulting through Thomas Financial Services LLC jump-starts your credibility to help get you in touch. CEO Thomas Mezger, tmezger@thomasfinancialsvcs.com and SVP John Sawinski, jsawinski@thomasfinancialsvcs.com bring compact, broad-ranging experience getting companies to the next level. Call Thomas Financial Services first.