Intentional Growth

#314: [Owner Success Stories] What is a Fractional CFO, Why is the Market Growing, and What is it Like Working With One?

Aug 18, 2022

01:31:23

Ep.#2 [THEME FOUR]

Running a business is a lot like running a sports team. You need all the positions filled—ideally with the top talent—in order to even participate in the game.

Many middle-market private companies are going without positions that are needed in order to participate in the game. So many lack the resources to find, hire, and maintain A-player executives who can fill each function (finance, sales, marketing, IT, HR, etc.). A-players completely take the responsibility for the department, come up with a long-term plan, and execute their strategic initiatives with accuracy against that plan because they have “been there and done that” before.

Without A-player executives, it’s hard to even participate in the game of business because all the responsibility for each department lands on the shoulders of the CEO/owner. This leads to burnout and ultimately a failure to reach the full potential of the company and long-term valuation target.

Today, Ryan breaks down why the middle market struggles to get access to top executive talent and how the fractional executive market is helping fix this problem. He then dives into the specifics of the fractional CFO services industry and the various types of offerings out there. Finally, Ryan interviews two owners who have a fractional CFO and what that has done for them and their businesses.

// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast

Fractional CFO Overview, Ryan Tansom // 01:00

Ryan goes in-depth about why the fractional CFO space exists and why it’s so crucial to the mid-market, and then he tee’s up the two 30-minute segments with Steve Schaffer and Jimmy Fritz.

Why every business–regardless of the size–needs highly skilled talent overseeing each function but typically falls short.
Why most companies can’t afford high-level executives even though they employ an outsized portion of the population.
Why the fractional executive marketplace is growing rapidly.
How a CFO helps a CEO run a company through the financial lens.
Why doing EVERYTHING yourself leads to burnout.
How the role of a CFO can help offload many operational responsibilities from a CEO.
What it truly means to be a fractional executive.
The different business models of fractional executive companies (and in more detail fractional CFO services).

Owner of Schaffer Manufacturing, Steve Schaffer // 19:30

Steve Schaffer was born into his family business. Like many second-generation family business owners, he grew up working in the company. In 2008, he bought the business from his dad and took over the long-term family company. Like many first-time business owners, he thought he knew everything he needed to know about running the business.

After some hard lessons, he realized the company was making no money and needed to make a change. After engaging with Arkona’s fractional CFO services, he has clarity on how to organize his cash so he can see where his company has been, where it’s going, and how close he is to the ultimate goal. In this episode, he talks about his 10-year process of starting confused, stressed, and unhappy, to now–when he is having fun, creating wealth, and going on 200-mile runs.

How Steve realized what he wanted from the business long-term.
How Steve realized he needed financial help.
Why financials can be intimidating and how to overcome that perspective.
Why establishing your cash position can help you understand the future value of your business.
Why Steve now builds and organizes his business functions based on one goal–wanting to be happy.
Why hiring the right people makes less work for the business owner and how Steve realized that when hiring his new president.

CEO of the Wedding Shoppe & Kennedy Blue, Jimmy Fritz // 56:15

Jimmy is a second-generation owner of his family’s retail wedding shop. Once he graduated college, he was brought on to the business with a unique fascination toward digital marketing, e-commerce, and analytics. Since joining, Jimmy helped start and scale the e-commerce company, Kennedy Blue, into a multi-million dollar business alongside the retail business.

Jimmy is now the CEO of the Wedding Shoppe and Kennedy Blue. In this episode, Jimmy talks about going to conferences and CEO peer group meetings where he would listen to stressed-out owners discuss their business problems and how he felt the same way. He explains that many owners–himself included–are really stressed because they don’t know their numbers and the impact of their decisions on the business. He tells about how, after he became a client of Arkona’s fractional CFO services, his stress and anxiety dropped off because he now understands the numbers, the impact his decisions have on cash flow, and the long-term value of the company. He explains how all decisions that are made in his business now (expansion, discounts, new products) are based on what the financials are saying and whether the project will increase cash flow and the long-term value of the company.

How “shiny object” syndrome causes more stress and why understanding your financials can rid yourself of all that stress.
How having a clear valuation target in the future can help guide all your decision making.
Why you need a CFO who understands how to put together and quarterback financials rather than someone who just understands how to close the books.
How an accountant and CFO are different and why they are both important–but what makes them incredibly different.
Why Jimmy has made his fractional CFOs part of the team and how that is different from other consultants he has used in the past..
How a CFO helped Jimmy tie marketing back to the financials.
What Jimmy wants out of his business.

// USE YOUR FINANCIALS TO CLARIFY A PATH TOWARDS A MORE VALUABLE BUSINESS: Intentional Growth Financial Assessment

Bio:

Jimmy Fritz is a second-generation owner of his family’s wedding shop. Once he graduated college, he was brought on to the business with a unique fascination toward digital marketing and analytics. During this time, online ads were starting to come into effect and Google was starting to overtake past marketing material like the yellow pages.

Interview Quotes:

23:38 - “I was not intimidated or scared about business at all. Then I immediately fell on my face and lost $700,000 my first year owning the business.” - Steve Schaffer

23:53 - “I vowed to surround myself with very knowledgable, passionate people who knew more than I did. And my way of owning is to give them direction and then get out of their way.” - Steve Schaffer

26:24 - “What gets me out of bed in the morning is, how can we add the maximum amount of value to the most people on a day-to-day basis?” - Steve Schaffer

27:32 - “If I put my owner hat on really quick, I want to have options. And the more options I have long term, the better.” - Steve Schaffer

57:21- “When you’re in the ecommerce world and you start spending thousands of dollars on Facebook ads and Google ads, it’s so dynamic and it’s so fast-changing.” - Jimmy Fritz

57:30 - “Your culture’s gotta move and you’ve got to be able to adapt on a dime because if you are spending a thousand dollars on an ad and that ad’s not performing, you could blow through a lot of money quick.” - Jimmy Fritz

58:57 - “A lot of the decision making was based off of impulse–which I think a lot of entrepreneurs are good at and they’re willing to take risks–but it wasn’t very calculated.” - Jimmy Fritz

1:00:19 - “And the transition from the first generation (business owners) to the second generation, I think the challenges were very mathematical but also somewhat emotional.” - Jimmy Fritz

1:09:20 - “Having your numbers in a way that you can actually make decisions, versus what you have to send to the IRS at the end of the year, are two totally different things.” - Jimmy Fritz