The Outsourced CFO: Part 4 - What Works and What Doesn't

Why Having an Outsourced CFO Increases your Chances of Being Successful

Outsrouced CFO.jpg

An Entrepreneurs Guide to Financial Responsibility

Part 4: Know What Is Working and Take Action When Something Isn’t

So far in our series “An Entrepreneur’s Guide to Financial Responsibility” we’ve talked about several compelling reasons why having an outsourced CFO increases your chance of being successful as a start-up business: 

  • You gain control over your cash flow and burn rate, so you don’t go beyond your cash runway.

  • You know every detail of your expenses.

  • You can forecast the financial direction of your business.

Now, let’s take a look at making change on the fly in Part 4 of the series by knowing what is working in your business and how to take action if something isn’t. 

Business Is Never Static

Many new business owners get caught in the mindset of a static business model. They set goals, they develop objectives (strategies) to meet those goals. And then they act as if their objectives are etched in stone. 

But nothing could be further from the truth. 

No business should ever be static. That is, you should be able to make changes to your business plan just like a pilot adjusts their flight plan to accommodate bad weather. 

Your company doesn’t exist in a vacuum. There are events going on in your industry, in the local market, and in the macro economy that may dictate how your business operates. The best businesses know how to stay fluid and adapt to change without losing sight of their long-term goals, mission statement, and values. 

"Every success story is a tale of constant adaptation, revision, and change. A company that stands still will soon be forgotten." These wise words come from Sir Richard Branson, world-renowned entrepreneur, philanthropist, and billionaire. He has used the above philosophy to found and grow numerous successful businesses.

Challenges for Business Owners and Founders

Why do business owners get in such a static mindset? There are multiple reasons, some logistical and some philosophical: 

  • Lack of time, due to spending all their time running the day-to-day aspects of their business

  • Inexperience in running a business or launching new products and services

  • Underfunding or low revenue, resulting in being chronically understaffed (which only exacerbates the lack of time issue) or unable to implement change (e.g., no money to retool lines or change marketing materials)

  • Philosophical insistence on maintaining a narrow focus on the end goals of the business without the perspective of the larger picture

  • Corporate culture in management and employees that resists change

  • Inability of employees to solve problems, with all issues going to the top for answers

  • Seeing change as a kind of failure instead of embracing it for good

  • Tight requirements imposed by venture capitalists or other funders

What happens when start-up founders become too myopic? They get in a hamster wheel-like cycle of being too focused on one thing, to the detriment of the rest of the business. They don’t even see the changes they should be responding to. And they lack the capability and fluidity to respond to them. 

They become like a sea captain adrift in the doldrums when simply tacking in a new direction would let them catch the wind and keep moving forward. The problem is that business isn’t a sailing race. By not responding to market or economic conditions, an enterprise can find itself obsolete and wind up going out of business. 

Typical Changes for Start-Up Enterprises

It’s actually quite rare for a start-up business to go from Point A to Point Z without some serious change in between. There are many transitions and switches that are common to young businesses that shouldn’t be seen as failure. Instead, they should be seen as demonstrating the ideal flexibility to thrive in today’s competitive world.

A few examples include:

  • Scrapping a product or changing its features due to a competitor’s product beating it to market

  • Retooling assembly lines or manufacturing processes

  • Upgrading current products or services to meet market demands and technology changes

  • Launching brand new products and services

  • Developing customer service once a product or service is on the market

  • Increasing or decreasing prices

  • Moving to larger or better facilities

  • Scaling down the operation to accommodate financial or market hits, many of which are outside the business’s control

  • Acquiring other businesses

  • Obtaining additional funding, usually through venture capital or loans

  • Going public with the business through a stock offering (IPO)

  • Changing corporate culture that isn’t working, whether through re-training, new leadership, or letting employees go

  • Hiring full-time management or C-level officers to fill the tier between owner and employees

Solutions to Stay on Track

Many entrepreneurs come back to the same problem when trying to stay nimble and manage the kinds of changes listed above. Where do they find the time? 

Without the ability to step back and perform the financial analysis of where they are relative to their goals, their market, and the economy, many business owners simply fall back into that static habit of no change. This is unfortunately true even when it’s drastically necessary to change. It’s a problem of desperation. 

Fortunately, there is a solution that works for many entrepreneurs: outsourcing the CFO role. Perhaps you’re not ready to take on a full-time in-house CFO yet because you don’t have the funding. Maybe you don’t even have an office yet. 

The beauty of an outsourced CFO is multifold. You get an outside perspective on your business that you may greatly need. You don’t have to worry about the time factor when it comes to financial analysis in relation to your business goals. 

Most importantly, you get the benefits of a professional who can look at what’s working in your company and where you need to make changes before disaster happens. That way, your business stays healthy and on track. 

Scrubbed offers turnkey business solutions that address exactly these concerns. You can outsource a CFO for as long as you need, whether that’s six months, a year, or three years. We can assist you with:

  • Accounting and financial reporting

  • Inventory management support

  • White label accounting

  • Audit and professional services

  • Tax preparation and filing

  • Corporate finance services

Don’t be a static company that can’t respond to change, “One thing is certain in business,” said Richard Branson. “You and everyone around you will make mistakes.” 

It’s how you respond to those mistakes that can make or break your company. With the help of Scrubbed, you’ll be able to handle mistakes, weather change, and still keep your eyes on the prize to reach your business goals. Perhaps you will even discover new opportunities along the way. 

For a free consultation about how Scrubbed can help your business, get in touch today.

 

About The Author

 
 

Aira’s financial advisory expertise includes financial forecasting and modeling, financial due diligence, buy-side/sell-side support, drafting of business plans, and creating key performance indicator dashboards. Her risk management expertise includes corporate governance, internal audit, forensic accounting and enterprise risk management.

https://www.linkedin.com/in/airapineda/