Intentional Growth #313: The Role of a CFO as a Guide in Value Creation and M&A
Ep. #1 [THEME FOUR]
Many owners (me included back when I was running the family business) often lumped anyone who works on numbers together in one big group and many times view that group as a cost center in the business.
Have you ever heard yourself – or another business owner – say my “finance team” or “accounting people” are handling it? You may have also said or heard a statement like: “We just need to get paid, pay our vendors, and get our monthly results in so we can see how much cash we have so we can keep growing.”
This shouldn’t surprise to most because many business owners did not have a tour of duty in Private Equity or work at a Big Four Accounting Firm prior to starting their business. Why should we expect any owner to understand how all the financial and accounting functions work, exactly what good looks like, and how all those functions roll up into a comprehensive financial forecast. This forecast should answer the only questions that matter: can we afford our growth, desired distributions, and taxes on the way towards the targeted equity valuation and timing?
In order to view – and run – your company like a financial asset, it takes a team with a strategic financial leader (the CFO) to produce valuable information you feel comfortable making decisions and take action based on.
On today’s show Arkona co-founders, Ryan Tansom and Pat Hobby, explain all the roles in the financial department and how each function is crucial in getting closer to your ultimate goal, taking it one month at a time.
They break down the roles of bookkeeper, accountant (which he explains can be viewed as a totally separate department), controller and, of course, CFO. You will get very detailed insight on the role of each position and how the CFO plays into the equation
After explaining each individual role, Pat puts all the pieces together and describes how the finance department can be the driving force for all the business owner's decisions and how the business owner can feel confident moving toward their long-term goal without worrying about whether they have the money to grow or not.
// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast
What You Will Learn
- How the CFO provides the current – and future – financial impact of the business owner’s goals and ideas and their impact on cash flow and the future value of a business.
- How the CFO is the missing link to finally take away the mental stress from the owner who mentally keeps track of the future financial impact of operational decisions in the business
- The difference between finance and accounting and why they are two very distinguishable departments.
- How to separate the roles of each internal finance team member (bookkeeper, CPA, controller, accountant, CFO).
- How to not GROW yourself out of business.
- What exactly a controller does in the finance department.
- Why the monthly financial statements matter even when your annual financial statements look “good.”
- The difference between the roles of a CFO versus a Controller
- The process of budgeting and how it’s a business planning exercise (like strategic planning).
- The relationship between the CFO and bankers and the CPA
- How pivotal a basic understanding of financial literacy can be for your business.
- The role a CFO plays in leading an acquisition strategy
- The role a CFO plays in the exit
// USE YOUR FINANCIALS TO CLARIFY A PATH TOWARDS A MORE VALUABLE BUSINESS: Intentional Growth Financial Assessment
Interview Quotes:
08:07 - “Once a business owner shifts their mindset and understands the value of useful, timely, and accurate financials and what can be done with it. Then they look at the cost (and it’s a cost) of those functions as additive to the value of the business as opposed to a necessary evil.” - Pat
11:30 - “Finance is more analytical. Taking that comes out of, not only the financial statements but, other data within the company to analyze what’s going on.” - Pat
14:10 - “Without accurate and timely recording of transactions, you’ve got nothing.” - Pat
32:00 - “It is incredibly valuable information. How are we doing? Are the strategies we put in place last year working?” - Pat
38:52 - “Don’t take last year’s [budget], add 5%, and divide by 12 for every line. Don’t do that. That’s not budgeting.” - Pat
49:39 - “When you get to understanding the financials… Being able to read them, understand them, and use the information to make decisions, that’s what business owners want to do.” - Pat
59:25 - “You can increase your return on your investment by mixing in some debt with your cash investment.” - Pat
Links and Resources:
Arkona Fractional CFO Services
The 5 Intentional Growth™ Principles (5 Videos to Help Clarify Your Vision)
Intentional Growth™ Financial Assessment
You can also reach out to me via email at rtansom@arkona.io, or on my LinkedIn.