When Does Your Client Need a CFO?

We've all seen it: A business owner who thinks exit planning is something you do when you're ready to go to market; who equates exit planning with 'after life' planning; who is too busy with day-to-day operations to even think about the future; Or whose 'exit plan' is simply to assume their child will take over one day. 

There are myriad reasons why otherwise savvy business owners neglect exit planning, but an unsolicited offer or a change in personal or family circumstances can shift a business owner's perspective on exit planning and its timing. That's why it's crucial to have a business that's always prepared. A fractional CFO (or, as we like to think of ourselves, an embedded CEPA) can be an expert resource — and your ally — on the leadership team, every week, helping them to get ready and stay ready. 

"The best way to get ready is to be ready and stay ready."

How Does a CFO Fit Into the Exit Planning Process?

Fractional CFOs make the role of chief financial officer accessible and affordable for small to midsize businesses. We embed ourselves within a company, becoming an integral part of the executive leadership team, analyzing the financial performance of the business, and designing a strategic roadmap based on the overarching goals for the coming months and/or years. 

The long-term relationship built by a fractional CFO (our average engagement length is 5-6 years) is particularly vital when it comes to Value Acceleration. Value Acceleration initiatives often span years; a fractional CFO can help maintain client focus and enthusiasm, ensuring long-term health, sustainable growth, and positioning the business for a successful exit in the future. 

The work of a fractional CFO comes into play at every stage of Value Maturity: 

• Identify: During this stage, fractional CFOs play a vital role in determining the value of the business as it stands today, providing the insights and data necessary for entrepreneurs and leaders to make well-informed strategic choices. We identify the strengths of the business, but also the weaknesses – what are the company’s potential value detractors in the eye of a potential buyer? This provides the roadmap of items we need to address in the coming years.
  

• Protect: This stage is all about de-risking the business. A lot of these items will have been identified in the previous stage, but we also work with business owners on items like operating and succession agreements, insurance and regulatory exposure. Fractional CFOs take this work seriously, and earning a reputation as “Chief De-risking Officers,” our goal is to help business owners understand their financial risks and how to safeguard the existing value of the business.
  

• Build: This stage is focused on building the value of your clients’ business, and it’s where fractional CFOs shine. We create strategic roadmaps around their goals, which chart the path to growing value over time. As fractional CFOs, our focus is always steadfastly on the future, making us a fundamental part of the value growth process. Matching the numbers to the plan.

• Harvest: This stage is typically when business owners enlist the help of external exit advisors as they seek to reap the most value and reward from their businesses. The CFO often provides critical support during this stage – coordinating due diligence efforts, evaluating offers, and making sure the business has their ducks in a row. One of our clients underwent a successful exit recently and shared, “[My CFO] made me look really smart to the buyers!” Learn more about this successful exit here.

• Manage: A good fractional CFO will ensure the owner and the business are well-positioned to help achieve the owner’s long-term financial goals. Key to this positioning is the years of collaboration and coordination between the financial planner for the owner and the financial planner for the business (the CFO).   

When is the Right Time to Bring in a CFO?

In our work with business owners, this is one of the most common questions we are asked. Fortunately, CEPAs know the answer. When is the best time to start exit planning? The best time was when the business was started. The next best time is today! If businesses enlist a fractional CFO during the initial stages of value maturity, they are well-positioned for a successful exit – even in the case of an unexpected offer. 

Financial leadership is an investment, not an expense. A CFO can help your clients build their financial roadmap, optimize operations, navigate challenges, establish and document systems and processes, and enhance the effectiveness of the leadership team– i.e., helping grow sustainable and transferable business value.  

Here are seven telltale signs for your clients that can provide you with the opening (excuses) to suggest they consider bringing on a CEPA-friendly CFO: 

1. Are they frustrated with performance and cash flow? 
2. Are they overwhelmed by the challenges of growth? 
3. Do they know profitability by customer/product/service? 
4. Do insights from financial data inform decision-making? 
5. Do they have 1-3-5 year goals with a financial roadmap? 
6. Is the leadership team on the same page, sharing a common vision? 
7. Will the value of the business meet their goals? 

There's no magic revenue number; the above challenges often signal a need for financial leadership. However, many businesses can't afford a full-time CFO's salary ($200k-$300k+), plus benefits & equity. Our highly experienced, C-level associates provide expertise on a part-time basis, making it a cost-effective solution for small and medium-sized businesses as they chart the path toward sustainable, transferable business value. 

We believe Scott Snider, president of the Exit Planning Institute, put it best: “Value acceleration actions require tireless commitment and relentless execution. Exit planning is simply good business strategy integrated with your personal and financial goals and objectives.”  

That’s why exit planning is core to our mission and culture at FocusCFO. Every associate, as part of their initial onboarding and training, is well-versed in Exit Planning and the Value Acceleration Methodology, through EPI-supplied training. These exit planning concepts are a key part of our service delivery model and are embodied in the FocusCFO mission statement: Helping Entrepreneurs Build Sustainable, Transferable Business Value. 

As Strategic Partners of EPI, we would love the opportunity to connect with you and to learn more about how we can partner together to work together for the mutual benefit of our clients. 

We invite you to develop a relationship with a FocusCFO Area President in your local market. A list of Area Presidents can be found on the ‘Our Team’ section of our website. If you do not see an Area President in your local market, complete the contact form to be connected with an Area President.