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The Danger Zone - Pat O'Brien


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Pat O Brien, a B2B CFO partner talks about The Danger Zone. How does this affect you as a business?

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The Danger Zone - Pat O'Brien

  1. 1. DANGER ZONEThe Danger Zone Pat O‟Brien Partner B2B CFO®
  2. 2. The Danger Zone Business Life cycle of a fundamentals business• Common illusions • How a business starts What do we do • How a business grows about it? • How we get to The Danger Zone
  3. 3. Characteristics of the entrepreneurLive in the future; pull others into the High ethical and moral business core Creative, visionary, innovator, dreamer Relationship builder Risk manager future values
  4. 4. Why do entrepreneurs start businesses? Freedom Provide Create Innovative Moreto “run the superior value for product income show” service the future
  5. 5. How does it start?
  6. 6. Infrastructure Creation
  7. 7. Build an infrastructure Bankers Vendors Lenders/leasin g companies Employees
  8. 8. Build an infrastructureMachinery/equipmentAccountants/attorneysProcedures/processesOfficespace/buildings
  9. 9. Owner‟s Activities Causing Delegating Building sales and Creating tasks torelationships cash to relationships employees with come into with vendors or customers the associates company
  10. 10. Infrastructure Peak
  11. 11. Business GrowsAs a result of Infrastructure Creationis Infrastructure Peak.Company runs “lean and mean” Personal Low sacrifice by the overhead Founder Few customer complaints Short cash collection cycles High customer service
  12. 12. A Shift in Perspective A result of running lean is......1. Burn-out – of owner and employees – who have been doing the 100-yard dash for 100 miles2. This „extra‟ cash leads to thoughts like:
  13. 13. Result of Shift During infrastructure peak Less thought is given to the needs of the customer“lean and mean” is no longer the mantra of the company.
  14. 14. Outgrowth of Infrastructure
  15. 15. Symptoms of outgrowinginfrastructure
  16. 16. CustomersComplaintsincreaseOrders decreaseProblems increase
  17. 17. ProductivityQualitydecreases Inaccurate information More meetings
  18. 18. Employee Higher turnover s Increased theft of time Increased cost of benefits & training
  19. 19. CashCash shortagesReceivablesincreaseMore deadinventoryOwner lendsmoney to coveroverhead
  20. 20. VendorsDelay deliveriesRelationshipssufferTime is spentfinding newvendors
  21. 21. Result? The Danger Zone The Danger Zone is created when the cash needs of yourbusiness far exceed the cash available to meet those needs
  22. 22. Owner‟s New Activities• Endless meetings, with staff, bankers and lenders, attorneys, accountants...• Analyzing cash flow• Deciding which bills can be paid• Hiring or firing staff• Writing checks
  23. 23. But …• They hate doing it• It‟s not their skill set – not good at it• They don‟t know what they need, or how to go about filling those needs They need to realize that: A business is more than just getting customers They need complementary skills – more than currently exist within the company
  24. 24. Traditional Organization Chart
  25. 25. Real Organization Chart
  26. 26. Real Organization Chart Finder The entrepreneur, the visionary, the leader, the idea generator and the catalyst for future change. Minder The administrative, accounting and operational staff of the company. Grinder The people who do the physical work of the company. Grinders may be construction workers out in the field or telemarketers at a desk or the sales staff in a company.
  27. 27. Different Life Time Zones Finder Works in the FUTURE. Minder Works in the PAST. Grinder Works for TODAY.
  28. 28. Finder Becomes a Minder
  29. 29. When the Owner‟s Activities Shift BEFORE • Building relationships with customers • Creating relationships with vendors • Delegating tasks to employees or associates • Causing sales and cash to come into the company AFTER • Endless meetings with bankers and lenders, attorneys, accountants • Deciding which bills can be paid • Hiring or firing staff • Writing checks • Analyzing cash flow • Making collection calls • Purchasing computers
  30. 30. Owner Must Return to FindingStop trying to solve allthe problemsRely on others forMinding• Find someone who is good at it• Bring in someone Finder can trustReturn the focus tofinding new customersRefocus on product andmarket factors
  31. 31. Let the Minder Find the Cash ‘Liberate’ cash tied up in A/R, Inventory, fixed assets……. Re-negotiate credit facilities based on: • Clean and timely financial statements • Acceptable key ratios • Evidence of improving cash flow Find alternative sources of credit • Bank • Asset Based lenders • Subordinated lenders
  32. 32. Pat O’ 214-536-3095