The Exchanges

Q What point in a business's life cycle should they be thinking about having a CFO involved?

A Well, because it's, you know, it's not ridiculously priced, you can access those kinds of resources very early on. Um, and accessing them early on doesn't cost nearly as much as accessing them later if they have to clean up a mess that had been created because accounting or finance or whatnot hadn't been done correctly. In SAS, there's a right way and wrong way of doing your finance and your accounting. You know, there, there are benchmarks. There's agreed upon ways that we say, here's how we're going to measure SAS companies. Um, and you want to set those up early from the beginning because going back and reengineering and cleaning them up is more expensive. So, Get in early, get it set up right, and then you don't have to worry about, you know, re-engineering anything later.

AI assessment note: “you can access those kinds of resources very early on.”

Q Can't the COO do this stuff? I mean, I had my COO do it.

A A lot of CEOs are totally capable of doing it. Yes. Um, you don't have, you don't have to have a fractional CFO. It's if you don't have that function either in your head or somebody else who does that, And in many cases, it's also a la carte, you know, there could very well be a CEO who handles all that. And what I'm, my role at that point is to be very strategic to their CFO or to their controller and say, here's how we're going to do it for SAS. Um, you know, we have lots of clients where we're engaged at say the controller and the CEO level. Um, and then we have other clients where we are the controller and where the bookkeeper and where the, you know, the whole back office, it really depends on what the client need is. And that's the nice thing about the fractional space now is that if you're at a really small startup and you just need kind of basic initial support, great. We'll set up your chart of accounts. We'll get your financial reports set up. We'll get your bookkeeping taken care of. We'll make sure though that it's set up for SAS from day one. So you don't have to redo anything, um, and save yourself thousands, literally thousands of dollars, tens of thousands of dollars later, depending on how far down the road you are.

AI assessment note: “A lot of CEOs are totally capable of doing it. Yes.”

Q as though your business is right now, without some serious work on the internal aspects of how your business is run, your team, your this, your that, you are not fundable. If you felt like someone was going to die, will you still take on the case to try to prevent them from dying? Or would you just go, look, I'm sorry. Like, there's nothing I can do for you.

A The entrance is, does a client come to me with, they're so messed up that no, we would just be taking money from them. No. Um, I've never had that kind of a prospect, um, show up at my doorstep. I'd say without exception, our clients are showing up after they've already been funded in some manner. Uh, okay. I've got some, A quarter of a million dollars, or I have, you know, 2.5 million dollars, or I've got whatever it happens to be. It depends on the stage of the company, but we have them all the way from the beginning. Um, very few, I, I've had a couple of times where I've had somebody come to me on spec and say, okay, I need you to put together the business plan. And so I need, and help with the pitch deck where they don't have any funding. Those I usually do on a fixed fee basis and make it very clear what the scope of work is so that they don't go, you know, crazy. Um, and I'm not going to spend a lot of time on something that's ultimately not going to work. Like, for example, they came to me and said, okay, we want you to build out a financial model. I said, you know, what are your assumptions? What's your go to market strategy? You know, what's your lead gen machine look like? What's your, what are your conversion rates? You know, have you thought through what that looks like? Oh, we don't have any of that figured out. That right there kind of tells me that this is probab…

AI assessment note: “I've never had that kind of a prospect, um, show up at my doorstep.”

Q So then the question becomes, can you grow your business more than 12% in the 24 months?

A If you take in, you know, let's say half a million dollars for sales and marketing, right? You're going to, you're going to throw it into rev. You're going to want more than to get half a million back out. You're going to want to get three to five times that back out at least, um, to prove the concept that, yeah, I put money in here, my go to market works and I get more revenue here. Um, so that, that kind of that, um, if you're using the founder, if you're, if you're using venture debt for growth of your business, understand that that's high risk. That goes back to you. Do you have your go to market figured out? In other words, we are going to pour this money in and then you need to have your cash forecast nailed down to make sure you can support that debt because you're going to have to pay it back. Um, and you have to pay that back out of operational cash. So it's a, it's a two sided story, right? What are you going to use it for? And what do you think that that's going to look like? And then can you support the maintenance of that debt in the meantime?

AI assessment note: “You're going to want to get three to five times that back out at least”

Q So why is the CEO the leader of the company and not the CFO?

A They have the strategic vision. I, I don't know how to put together the software platforms that my clients do. That's not my, that's not my forte, but I, I know how to really help them. I know how to make sure that we're going for the most evaluation for their company. Ultimately, let's face it, you know, the vast majority of our startups are looking for an exit at some time, whether it's, you know, in the near or intermediate future, right? They're looking for an exit. So I'm always thinking of that exit alongside of them to say, okay, you know, are you ultimately a strategic? Are you ultimately a roll up? Are you ultimately, you know, do you have the moxie to actually IPO yourself? I mean, all those questions come into play. And having somebody who understands how that side of the business works and positioning you early for that, you know, is invaluable. Um, you know, having done SAS for years and years and years, we've been through a lot of activity both on the M&A side as well as the, you know, the nuts and bolts, if you will, the supporting of making sure your metrics are right. There's the whole strategic side of it.

AI assessment note: “They have the strategic vision. I, I don't know how to put together”

Q You don't need to have someone full-time who's working for equity. You can hire someone known as a fractional expert, and that's what your business does. You're a fractional CFO. Can you speak to what the fractional part really means in How a founder should understand what they're getting for that?

A It really depends on the level of service that the fractional CFO firm, if you will, or person can deliver. Um, in our case, we're not, you know, there are a lot of people out there that do that as a single shingle right there. They have, you know, they do a fractional CFO here and there, but we're an established business. So we have multiple clients literally across the world in multiple different industries. And so we're able to, you know, Plug and play that knowledge across the entire portfolio. So if we have a customer over here, a client over here that's experiencing X, we can say, look, we've, we've solved that issue over here. We don't have to experiment. We can tell you how to execute on that. So there's a lot of that cross, um, uh, cross flow of information between, you know, best practices across, not just, you know, our industry, but our clients within our own clients, right? Because they're kind of a, I don't want to say a test bed, but we're constantly trying to improve things. The Japanese drilled into me that Kaizen is the way that you should always operate your business. And so I do. Uh, constantly looking for ways to make it better for my clients.

AI assessment note: “Plug and play that knowledge across the entire portfolio.”