The owners of high-growth businesses can really benefit from having a virtual CFO to help guide their decision-making and ensure that growth is sustainable. This story tells how even an experienced entrepreneur can be more sure-footed going forward with a virtual CFO as their expert inside advisor.
In my latest start-up adventure, a kind of D-day occurred when the P&L showed turnover would hit $1m in the current financial year. “Performance is on-track with your budgets and objectives,” our bookkeeper said. “Well done,” said the accountant. While most business owners would celebrate this ‘Magic $1M’ milestone now looming, I felt rising anxiety. I’d reached this same milestone in businesses before and hit the ‘EXIT’ button immediately – forecasting, calculating multiples of EBIT, preparing an IM, and calling business brokers to divest just as actuals crossed the $1m-annual threshold.
How I felt stuck making the same mistake as a ‘successful’ entrepreneur
In each instance, with benefit of hindsight, I would have done better for myself if I’d run the business for longer and divested for more, or by continuing to run the business indefinitely with the sky as the limit. I’d always had talented staff and advisers but never my own ‘council of war’ with strong generals (couldn’t afford one). I couldn’t see how to become like the panellist on Shark Tank with the seemingly-infinite capacity to do yoga, make smoothies, meet for coffee, be a mentor, and take on new things.
The dilemma of reaching the ‘Magic $1M’
Melanie Williamson, founder of Backyard Pods Australia, would rather focus on marketing, customer satisfaction, and product development than doing micro-analysis of sales versus cost-of-goods-sold.
Did I need a coach or counsellor? Well, anyone who can repeatedly bootstrap disruptive start-ups from $0 to $1m+ annual revenue with a clear vision, the capacity to execute, and a steady hand on the rudder should be lecturing (I do speak sometimes) and able to figure out their own needs and decision-making. Should I talk to my accountant? The accountant can do the numbers on options and outcomes but may not fathom why my head wants to divest the business and flee the sector whenever I’m about to face the frontier of managing turnover beyond $1m.
Fear of flying or management-resource deficit?
I started making enquiries with my inner-wisdom as to where my anxiety was coming from. Fear of flying? Then I realised that in the past, whenever a business I’d started approached $1m-turnover, the internal management of the business and increasing complexity of its machinations began to preoccupy and consume me. I could do less of what I really love to do and how I’m contributing the most value to the business, which is making sure it’s offering great solutions and facilitating sales efficiently; delighting customers and partners in growing markets; and growing its market share. I loved the manifestation of this particular business-vision in such a way that I didn’t want to part with it. There had to be an answer to my ‘successful’ mistake-making with start-ups – not packing my parachute this time – a new method. Could I find one?
Managing business growth without increasing personal stress and downsides
As luck would have it before I called the broker on this occasion, I happened across the solution to my post-$1m dilemma and it’s called a “ceefo”. With ‘my’ ceefo (Robin Snelling CPA), I’ve got a solid and switched-on CFO virtually at my side, de-stressing my running of the business just like any large enterprise with its CEO having a CFO, C-etc. With a ceefo, I can grow myself into being the CEO of a significant business entity without getting bogged-down in high-end administration and compliance or granular financial analysis. What it means to me is the potential for managing business growth without increasing personal stress and the other distracting, energy-draining downsides that success brings to entrepreneurs. It means still having time to help other businesses grow [NB: my actual A-game is being the strategic director of a national B2B marketing agency, just sayin’].
Contemporary CEOs need time to attend trade events and build business relationships (in this example, connecting with media – Melanie Williamson seen at an event with Handyman magazine).
To give everyone a better idea of how happy I am with the idea of having our own ceefo, here are some real-life examples of questions I’m now able to ask someone other than myself (or our bookkeeper or accountant):
- How can we get a clearer picture of real-time business performance when in any given month, sales orders are turning into invoices, and purchase orders into bills, but the corresponding cash picture can never quite catch up? Like when we receive customer deposits and either hold/refund or transfer them, with the final transactions (any which way) often not happening for months down-the-track?
- Can we have greater clarity over funds held for GST versus short/long-term customer deposits versus day-to-day working capital versus any accumulated cash without running numerous separate bank accounts and shuffling funds between them?
- Could we save money and gain value by switching suppliers, service providers, banks, payment gateways?
- Do we offer some products with margins so tight that it can cost us to facilitate the sale and if so, can we renegotiate supply or raise our prices and if not, for which does the benefit to customers justify the hassle and expense?
- If we take a costly full-page advertisement to run in October, payable in November, would we be comfortable upgrading some business equipment with cash in September – or do we need to wait until the ad has generated more sales and we’ve recouped some return on this investment, perhaps until December?
- If we hire another assistant in August, as we enter another busy time of the year, what would this decision look like in late December when demand is quieter, and our major suppliers are closed for the festive period? Given that this year’s slower summer-period sales should still be better than last year, could we comfortably carry this extra person until February when we enter the next busy period and anticipate a higher rate of enquiries and sales than same-time the year before?
- What happens if we invite or pay subcontractors to attend a business-related event? Do we need to check if they’re insured, or insure them? What if ‘free’ alcohol is being served and they over-indulge at commensurate risk? How do we properly address our responsibilities and indemnities in all situations and manage them with everyone concerned?
- We can see market trends, product margins, popular products and customer locations, but can we have deeper sales-analysis to help guide our roadmap for developing future products, market footprints, and promotions?
Radar, sonar, GPS, and someone you can trust on close duty-watch
ceefo – the affordable, dedicated CFO for small business owners.
In my experience, I’d say that no captain of industry (nor promising contender) can confidently and comfortably steer their ship through the night without radar, sonar, GPS, and someone you can trust on close duty-watch. For any business owner on a growth trajectory above the $1m-mark, and no CFO already working at their side, I’d suggest getting your own ceefo right now on a monthly subscription that’s sustainable.
Melanie Williamson
Founder & Captain
Backyard Pods Australia
www.backyardpods.com.au
Open Trading Network Pty Ltd | ceefo user
Backyard Pods Australia partners with major Australian manufacturers and suppliers, as well as independent architects, installers, and builders in NSW, VIC, and QLD to deliver more affordable and easily-customisable solutions for granny flats; home offices and studios; backyard retreats; alternative housing; extensions to existing homes; movable buildings; and dependent person’s units (DPUs).
