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The DangerZone - Mark Derr

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Mark Derr, B2B CFO Partner talks about The Danger Zone and the dangers of running a business.

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The DangerZone - Mark Derr

  1. 1. Presentation toJackson White P.C.Mark Derr, Partner B2B CFO® May 18, 2012
  2. 2. 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
  3. 3. 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
  4. 4. Some B2B CFO®Publications
  5. 5. 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™
  6. 6. What is it? How to Avoid it.
  7. 7. Hidden Organization ChartSource: The Danger Zone by Jerry L. Mills, ©2011, p. 18
  8. 8. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. Timeframes• Finders: 2 years from now• Minders: Next month, last month• Grinders: Today
  13. 13. Stages of Business GrowthSource: The Danger Zone by Jerry L. Mills, ©2011, p. 64
  14. 14. What is “Infrastructure”• Employees • Contracts• Vendors • Policies• Subcontractors • Websites• IT systems • Advertising• Operating • Bankers procedures • Accountants• Machinery • Attorneys• Buildings/office • Consultants space
  15. 15. B2B CFO® Truism Most Finders do not spend a lot of time methodically planning their business infrastructureSource: The Danger Zone by Jerry L. Mills, ©2011, p. 66
  16. 16. Infrastructure Creation StageSource: The Danger Zone by Jerry L. Mills, ©2011, p. 64
  17. 17. 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
  18. 18. Infrastructure Peak StageSource: The Danger Zone by Jerry L. Mills, ©2011, p. 69
  19. 19. Business is Booming• The Honeymoon Period continues• Plenty of cash• Can give a false sense of security about the company‟s future
  20. 20. 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
  21. 21. 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:
  22. 22. 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
  23. 23. The Finder Becomes a Minder and GrinderSource: The Danger Zone by Jerry L. Mills, ©2011, p. 19
  24. 24. Infrastructure Outgrowth PhaseSource: The Danger Zone by Jerry L. Mills, ©2011, p. 74
  25. 25. Consequences of Inadequate Infrastructure• Customers – complaints increase, customers dispute charges, time spent on customer problems rather than customers sales• Productivity – quality decreases, inaccurate information, more meetings, equipment downtime • Employees – higher turnover, increased theft of time, money and inventory • Cash – receivables increases, increased dead inventory, owner lends money to cover overhead • Vendors – delay deliveries, relationships decline, time is spent finding new vendors • Overhead – legal fees increase, government fines increase • Lenders – complaints about delays, accuracy of accounting information, borrowing costs increase
  26. 26. Remember… Most Finders do not spend a lot of time methodically planning their business infrastructureSource: The Danger Zone by Jerry L. Mills, ©2011, p. 66
  27. 27. Who‟s Doing the Finding? Someone is spending time with your current and future customers. If not you, it will be your competition.Source: The Danger Zone by Jerry L. Mills, ©2011, p. 125
  28. 28. Result? The Danger Zone The Danger Zone is created when the cash needs of yourbusiness far exceed the cash available to meet those needs
  29. 29. 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
  30. 30. 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!
  31. 31. 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
  32. 32. The Danger ZoneHow to Avoid it
  33. 33. The Finder Must Return to Finding!Stop trying to solve allthe problems personallyRely on others forMindingRefocus on finding newcustomersRefocus on product andmarket factors Source: The Danger Zone by Jerry L. Mills, ©2011, p. 19
  34. 34. 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. Prescription for Escaping The Danger Zone• Let the Finders find the sales• Let the Minders find the cash
  40. 40. Questions? Comments?Mark Derr, Partner, B2B CFO®e-mail: markderr@b2bcfo.comphone: 480.570.9329website: www.markderrcfo.com

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