How the CFO Can Become the CEO’s Collaborator in Growth
Great article by Robert Sher in CFO magazine about how CFO’s at fast growing middle market companies should spend less time on accounting and more time building the leadership infrastructure to allow the firm to scale. For the full article, click here.
“Regardless of which sources of growth their companies pursue, the results indicate that, in the coming years, CFOs will need to up their game in a wide range of growth-related activities.” Click here for full article.
This is part five of a seven-part series of tips for interim CFO’s at companies in the portfolio’s of private equity groups. These tips are intended for financial professionals who already have the skills and experience to be a successful CFO at a typical mid-market company. They specifically address the differences between being a CFO at a typical mid-market company and being an interim CFO at a growth-oriented mid-market company in the portfolio of a private equity group.
Tip #1: Be an ambassador
Tip #2: Be the advance team
Tip #3: Understand the exit strategy
Tip #4: Get to know the portfolio
Tip #5: Be an agent of change
Tip #6: Be a do-er
Think of yourself as more than just a consultant. You are not there merely to assess the situation and make recommendations. You are there to get things done and you may have little help so you need to roll up your sleeves and get to work. Not only is this often the only way to get the job done, the client will like and respect you for it. If you follow tips 1 through 6, you will have the foundation to be effective as an interim CFO at a private equity portfolio company.
This is part five of a seven-part series of tips for interim CFO’s at companies in the portfolio’s of private equity groups. These tips are intended for financial professionals who already have the skills and experience to be a successful CFO at a typical mid-market company. They specifically address the differences between being a CFO at a typical mid-market company and being an interim CFO at a growth-oriented mid-market company in the portfolio of a private equity group.
Tip #1: Be an ambassador
Tip #2: Be the advance team
Tip #3: Understand the exit strategy
Tip #4: Get to know the portfolio
Tip #5: Be an agent of change
You are not there merely to maintain the status quo or fill in the gap between permanent CFO’s. The company probably does not have adequate budgeting, forecasting or financial reporting in place. They may not have been audited and their tax strategy may need to be overhauled. You may need to implement radical changes, but you need to do it in a way that is respectful to the folks who built the company that way. Help them understand that their efforts helped the company get where it is today, but changes need to be made to get to the next level. Embrace your role as an agent of change.
A recent article by Robert Steven Kaplan in the Harvard Business Review titled Leading with Conviction shows how great organizations are built on people who act like leaders and speak up even at the risk of sounding stupid. This is particularly important for CFO’s at high-growth middle market businesses.
This is part four of a seven-part series of tips for interim CFO’s at companies in the portfolio’s of private equity groups. These tips are intended for financial professionals who already have the skills and experience to be a successful CFO at a typical mid-market company. They specifically address the differences between being a CFO at a typical mid-market company and being an interim CFO at a growth-oriented mid-market company in the portfolio of private equity group.
Tip#1: Be an ambassador
Tip #2: Be the advance team
Tip #3: Know the exit strategy
Tip #4: Get to know the portfolio
The strategy of a company in the portfolio of a PEG may be related to other companies in the portfolio, so get to know the other companies and their CFO’s. Situations that present a win-win situation for two companies in the same portfolio are particularly advantageous. Do not hesitate to help the other sister-companies when requested or to seek assistance from the other companies when needed. Opportunities range from sharing advice on vendors and customers, or sharing policies and procedures to sharing employees, cooperative marketing or even joint ventures.
Help other employees understand how the portfolio may impact the company’s strategy and how helping the sister companies can help their company and even benefit them personally when their efforts are reciprocated, which they usually are.
This is part three of a seven-part series of tips for interim CFO’s at companies in the portfolio’s of private equity groups. These tips are intended for financial professionals who already have the skills and experience to be a successful CFO at a typical mid-market company. They specifically address the differences between being a CFO at a typical mid-market company and being an interim CFO at a growth-oriented mid-market company in the portfolio of private equity group.
Tip #1: Be an ambassador
Tip #2: Be the advance team
Tip #3: Understand the exit strategy
Most companies make money on the bottom line. As CFO’s, that is ordinarily our obsession. PEG’s primarily make money by buying and selling companies. Obviously, improving the bottom line is one way to boost the value of the company, but it is not the only way. The strategy should always be in the long-term interest of the company, but also in the short-to-mid-term interest of the shareholders. Building the company in a way that will fetch the highest price at exit sometimes leads to a different strategy than a company might take if it is solely concerned with the bottom line.
For example, adding new customers may in some cases reduce your gross margin percentage and do little for your bottom line, but it will diversify your customer base (reducing risk) and might increase your top line enough to “move the needle” for prospective strategic buyers. Another example is a particularly risky product line that is currently profitable may discourage prospective buyers when trying to sell the company, or distract the focus from the product lines that are the most marketable to potential strategic buyers.
As the interim CFO, make sure you understand the exit strategy and any related confidentiality issues. Help other key employees understand this so they do not get frustrated when they see decisions being made that do not seem to contribute to the bottom line.
CFO’s who have been successful in high level financial positions at large organizations often have a difficult time adjusting when they become a CFO at a middle market company. A recent article in CFO magazine by executive recruiter John Touey titled “Why CFO’s fail in moves to small companies” explores some of the reasons why and lists some of the attributes shared by those who have made the jump successfully.
This is part two of a seven-part series of tips for interim CFO’s at companies in the portfolio’s of private equity groups. These tips are intended for financial professionals who already have the skills and experience to be a successful CFO at a typical mid-market company. They specifically address the differences between being a CFO at a typical mid-market company and being an interim CFO at a growth-oriented mid-market company in the portfolio of private equity group.
Tip #2: Be the advance team
Picture yourself on the Starship Enterprise, about to be beamed down as a key member of an advance team whose mission it is to make the first contact with an alien planet. As the interim CFO, you need to be the advance team for the incoming permanent CFO and possibly also the incoming CEO, or other key employees.
When you have determined the priorities, completed as many as possible, and organized the information that will allow the incoming team to hit the ground running, you can prepare to be beamed up.
The Middle Market CFO 