INTROI’m happy to be here today. I’m going to be talking about something that happens all to often to business owners and entrepreneurs as their business grows and becomes more successful.First a word on B2B CFO, where I’m a Partner[CLICK]
B2B CFO is 25 years old, and the largest firm of part-time CFOs in America. Every company, regardless of its size, needs a Chief Financial Officer. Smaller firms can’t afford to hire an experienced CFO full-time. We bring CFOs within the reach of every firm, by offering services on a part-time basis.There is no industry we haven’t worked in, and no small and mid-market business issue we haven’t addressed.
We can provide a wide range of CFO services, tailored to the need of each client.
My talk is based on two books, written by Jerry Mills, B2B CFO’s founder and CEO.I have copies of each book with me today and I’ll be raffling them off later. Please make sure you’ve put your business card in the bowl.[CLICK]
Just to let you know a little bit about my background prior to joining B2B CFO.Mark Derr is a highly experienced C-Level executive with over thirty-five years experience in finance, operations, business development, strategic planning and information technology in a variety of industries with large corporations as well as small business.
Here is the hidden organization chart, which comes from Jerry Mills’ book. This chart exists for every company.And it looks like this.The company is made up of one or two Finders, a few Minders, and mostly Grinders.Finders have great ideas, and are good with customers.Minders “keep the train on the tracks”.Grinders do the day-to-day work of the business.Each role is important to a growing, thriving company.
Admittedly, these are gross characterizations. Some individuals may have characteristics of more than one role.
Finders, Minders, and Grinders, live in different “business time zones”. This can cause communications misunderstandings.
Jerry Mills’ book outlines four Stages of business growth that can lead a Finder to The Danger Zone. They are:Infrastructure Development, Infrastructure Peak. Out-Growth of Infrastructure, The Danger Zone
What do we mean by “infrastructure?” It can includes all these things.NOTE: You don’t see customers, products, and services on this list. That’s because they’re the core of being in business. Infrastructure supports the core.
Jerry’s book contains a number of what he calls “B2B CFO Truisms”. This is one of them.
The Infrastructure Creation Stage occurs after the business has started and is delivering products and services to paying customersCosts are not high, revenue more than covers themCash in usually exceeds cash out, as long as bills are being paid on time.Life is good.
During the Infrastructure Peak Stage, sales continue to grow rapidly. The Finder continues to focus on customers and products and services. Non-billable costs are still low.
For a time, things are good.But… notice the rightmostbullet.
Companies that experience significant growth rapidly outpace the ability of their infrastructure. Reason: The Finder has been so busy bringing in sales that no attention has been given to the foundation (infrastructure) of the company.Now the lack of adequateinfrastructure causes problems. The business starts to struggle.
Remember Jerry’s Truism.The Finder “takes charge” of fixing the problem, acting on instinct. After all, they’re the leader. When the company was smaller, if something was wrong, THEY fixed it.But while the Finder is fixing… [CLICK]
The Finder spend less time with customers.That puts the business at risk! Why?[read][CLICK]
What’s the result?
What are some other consequences of being in The Danger Zone?
OK, now we understand what can happen when the company gets into the danger zone.Is the situation hopeless? No. But to solve it… [CLICK]
The Finder must return to Finding.Stop…Rely…Return…RefocusLet me emphasize:the Owner must return to Finding and let OTHERS do the MINDING.[pause][CLICK]
Not just any Minders will do.
When selecting Minders, the Finder should consider their own strengths and weaknesses, and select a management team whose members can embody, collectively, the skills listed here. Some people may have more than one of these skills, which can be particularly useful when the company is still small.
Here are characteristics the Finder should look for when selecting Minders.
Even experienced Minders need assistance from the Finder to do their job well.
Does this mean that the Finder completely ignores what’s happening internally in their business? NO.However, to maximize the time they can spend on Finding activities, the Finder needs to work with the Minders to gather the information they need EFFICIENTLY.Here are some things to do.Of all these things, the most important is to remember that CASH IS KING
Thanks for your time today.[OPEN FOR DISCUSSION AND QUESTIONS]
The DangerZone - Mark Derr
Presentation toJackson White P.C.Mark Derr, Partner B2B CFO® May 18, 2012
What Is B2B CFO® ?Established: Founded in 1987National : 200+ Partners in 44 states, 6,400+ years of experienceFocused: Privately-held companies with sales up to $75M
We are Specialists In:Banking and Lending Gross ProfitRelationships OptimizationProfit Improvement Expense ReductionFinancial and Timely & AccurateStrategic Planning Financial StatementsCash Flow Increased SalesProjectionsWorking Capital Exit StrategiesImprovement
Who Am I?• 35 years in finance, operations, business development, strategic planning and information technology• CFO, VP Finance and Administration• $250M+ businesses as well as small businesses under $1M• BS and MBA (Drexel University, Philadelphia)• As a B2B CFO ® Partner, I help companies achieve a higher level of success using our proven six stage process - The GamePlan™
Characteristics of Finders• Creative, innovator, visionary, dreamer• Idea generator• Risk taker• Act quickly• Catalyst for change• Confident in their convictions• Relationship creator/builder, especially with customers
Characteristics of Minders• Deep expertise in one area: Finance, HR, IT, Marketing, etc.• Like structure and process• More risk averse than Finders• Like to follow Finders who are good leaders• Relationships are primarily with suppliers
Characteristics of Grinders• Focused on the task at hand• Do not like to delegate• Like doing one thing at a time• Distrust Finders and Minders• Will do as instructed, but rarely generate new ideas
Who‟s Who• Finders: Entrepreneurs, Business Owners• Minders: CFO, VP of HR, CIO, VP of Marketing• Grinders: Workers, Salespeople, Recruiters Some individuals may have a mix of characteristics
Timeframes• Finders: 2 years from now• Minders: Next month, last month• Grinders: Today
The Finder‟s Activities During Early Days of the Business• Obtaining financing for working capital• Refining products and services• Ensuring quality delivery• Spending time with current customers• Finding new customers• Giving direction on the fly to the Minders and Grinders• Working long hours, but enjoying it
Business is Booming• The Honeymoon Period continues• Plenty of cash• Can give a false sense of security about the company‟s future
Characteristics of the First Two StagesDuring Infrastructure Creation andInfrastructure Peak Personal Low sacrifice by the overhead Founder Few customer complaints Short cash collection cycles High Company runs “lean and mean” customer service
The Finder‟s PerspectiveShifts of running lean is...... The result 1. Burn-out – of owner and employees – who have been doing the 100-yard dash for 100 miles 2. „Extra‟ cash leads to thoughts like:
What Happens to the Finder?• Realizes that the current infrastructure is too thin to support a larger company• Focuses on infrastructure investment needed, BUT… – Less thought is given to the needs of customers – More thought is given to the needs of the company – More resources begin to be spent on things that do not lead to increased sales and better customer service – Finder spends less time Finding
Result? The Danger Zone The Danger Zone is created when the cash needs of yourbusiness far exceed the cash available to meet those needs
Finder‟s Activities During Infrastructure Outgrowth and Danger Zone Stages• Endless meetings with staff, bankers and lenders, attorneys, accountants...• Analyzing cash flow• Deciding which bills can be paid• Hiring or firing staff• Writing checks
But …• The Finder hates these activities• Minding is typically not the Finder‟s skill set – no good at it• Finder needs complementary skills that can handle the Minding and Grinding…• …So the Finder can get back to Finding!
Consequences of The Danger Zone for the Finder• Loss of current and future customers• Damaged business relationships• Damaged relationships with family members and friends• Less enthusiasm for the company• Death of the Finder‟s dreams• Death of the company
When The Business is Small• The all-purpose Office Manager, or your cousin, may be good enough…• …But the company‟s needs will likely outstrip their abilities as the business grows
Target Skills Mix Across the Management Team• Understanding the market and thinking strategically and long-term• Creating great products and services• Finding, retaining, and growing customers• Managing financial performance• Finding, motivating, and retaining talented staff• Managing risk
Look for Minders with these Characteristics• Good at tactical and operational planning (based on strategic goals set by the Finder)• Have the experience you‟ll need 2-3 years from now, not just today – Consider adding part-time supervisory/mentoring from experts to help them• Have the discipline to write down processes and procedures• Hire people you‟ll feel comfortable giving authority, not just responsibility – You‟ll also need to give them sufficient money to build the infrastructure needed for growth
Educate and Monitor Your Minders• Make sure they understand “the business” (i.e., product/service delivery)• Articulate your goals and dreams to them• Set clear priorities, and communicate when they change• Make sure your Minders do what you‟ve asked them – If not, fire them and replace with better people
Efficient Business Monitoring for Finders• Determine Key Performance Indicators (KPIs) – Examples: sales, inventory changes, employee turnover, staff utilization, cash balances• Have daily, weekly, monthly dashboards – Color-coded for easy scanning• Attend periodic business reviews, run by the Minders and key operational managers• Get clean and timely financial statements• #1 Rule for all growing businesses: CASH IS KING
Prescription for Escaping The Danger Zone• Let the Finders find the sales• Let the Minders find the cash