Laurie Taylor joined the NSS team recently.  He has over 20 years of experience and has worked with multiple start-up as Controller. We are delighted to have him on board.

Most Satisfying: In your CONTROLLER work you have done in the past, what is the most satisfying feedback you got from the CEO?

Nineteen out of twenty client companies have offered me a full time position during the engagement.

Most Inventive: Given that as CONTROLLER we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

I began a two person project to determine why a major bank’s ATM conversion had an out of balance total of $19M after the merger of the two banking systems.   The bank booked a 200k reserve to cover this reconciliation exposure.  I requested a Bank Tiger team to assist my current consulting team and at the end of the project we had completely reconciled the account and were only unable to account for $9k in bank funds.  We also discovered a major systems glitch that was the result of the systems merger and trained the banking staff to recognize the problem and how to correct the system if it occurred again.

Most Positive: CONTROLLER’s have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was assigned a project to take over for a Director of Finance at a specialized moving van company.  I first determined that there was a massive amount of misspending going on and no one was managing the AR accounts.  In 6 weeks we were able to make enough corrections that company was stable enough for sale to a much better funded and staffed regional carrier.  The sale of this business unit saved 250 staff member’s jobs as a result of the merger instead of a company closure due to prior management neglect.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Why of Work: How Great Leaders Build Abundant Organizations That Win by
David Ulrich and Wendy Ulrich

Funniest Fact: Tell us something funny about you.

I am crazy about WWII aircraft that have massively supercharged engines that “go fast, stay low, and turn left!” also known as the National Championship Air Races held each fall in Reno, NV.  The only rules are that these planes must have a prop and straight wings.

While the M&A market is fairly quiet as we enter the summer doldrums, it is a perfect time for owners and boards to think about what preparations can be made now in anticipation of selling a company when the market does open up.  Over the next several weeks, I will highlight some of the key financial issues that you should be thinking about and preparing for during this quiet period.

Are Your Historical Financials In Order?

In discussions with potential buyers, one potential red flag is a set of historical financials which doesn’t stand up to scrutiny.  You should have a complete set of financial statements (Income Statement, Balance Sheet, Cash Flow) for the previous three years (two minimum) which have either been reviewed by or, better yet, certified by outside auditors as well as unaudited interim financials for the current year.  If your accounting is currently on a cash basis, you should consider changing to an accrual basis (after consulting with your tax advisor) and it would be advisable to ensure that your accounting is in compliance with GAAP (Generally Accepted Accounting Principles).

Most companies have someone in house to do their bookkeeping but it is wise to have an independent company like Next Stage Solutions (NSS) come in and review the historical financials and get them in good shape.  NSS has strategic-thinking CFO’s who have experience in leading companies through the M&A process.  Their participation in this phase will actually pay for itself to some degree as it will reduce the cost of the review/audit by the outside audit firm and accelerate the process.  Furthermore, you cannot use the same firm to prepare the financials and then audit/review them.

One other good reason to have sound historical financials is that they will better enable you to prepare a Credible Forecast which will be the subject of my next article.

Mark Ott

CFO Consultant

Next Stage Solutions, Inc.

Mark Ott joined Next Stage Solutions this Spring.  Read on to see what Mark has been up to – he has a great story to tell!

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

The most satisfying feedback I received is when the CEO told me that he knew he could spend a considerable amount of time out of the office (with customers, investors, board members, press, etc.) knowing that everything back at headquarters was being looked after with me looking after things.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

When we moved a company from California to Massachusetts, I had to build a complete infrastructure pretty much from the ground up.  This included the recruitment/interviewing and engagement/hiring of new corporate attorneys, external auditors, Accounting Manager, Office Manager, and Human Resources Manager as well as establishing new banking relationships and corporate insurance programs.  All of this had to be done in a matter of three months.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

When I was European Controller for a large networking company, I had eight country controllers reporting to me.  Some of the countries (like the UK and Germany) were larger contributors to the results of the overall operation than others (like Spain and Sweden).  In that environment the controllers for the larger countries tended to be more influential in group decisions and the controllers for the smaller countries would sit back and complain that their needs were always overlooked because of their size.  This ultimately led to a team that did not work very well together and this was reinforced by pre-existing cultural differences.  One of the things I did to turn this around was to solicit ideas from the controllers concerning topics to be covered in an upcoming quarterly staff meeting.  When the time for the meeting came, I appointed the controller who suggested the topic as the leader of the discussion leader and subsequent action items.  This forced the smaller countries to play a much more active role in the group in identifying their issues and forced the larger countries to sit up and listen and help find solutions as they were cast in more of a “follower” role.  Following this pattern in subsequent staff meeting resulted in a much more cohesive pan-European staff.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

“Leadership in the Era of Economic Uncertainty:  The New Rules for Getting the Right Things Done in Difficult Times” by Ram Charan, McGraw-Hill.

Funniest Fact: Tell us something funny about you.

My fraternity brothers used to call me “Howard”, which is my middle name.  They thought that it was an “amusing” middle name, so they thought they could get me going if they kept calling me by that name.  It worked for a while but the nickname stuck throughout college and they will even use it today in those rare occasions when we get together.

Stay tuned for our next team member’s story!

NSS is co-sponsoring four CEO Seminars around the theme of “Moving Forward: A Roadmap to Growth and Best Practices in 2010″ .  The first one was successfully held March 23 at Furman Gregory Deptula.  Our next seminar is scheduled to be on Tuesday, June 15 and we are currently formulating the agenda based on the feedback from the CEOs in attendance at the March meeting.

NSS provided this hand out:

Flexibility

Keep your company nimble, lean and focused.  Just as large companies have divested non-core competencies, carefully consider which aspects of your business should remain fixed costs and which should become variable.  This keeps your business capital efficient and brings greater flexibility in moving your business forward.  Consider outsourcing non-core functions such as HR, finance, legal, sales and marketing.

Focus

Take a look at your lines of business in product/services and analyze closely which lines are using what resources.  If you have a product that takes 70% of your resources and represents 20% of your revenue, you have a problem.  Evaluate your customer/client revenue streams and determine what portion of total revenue each contributes.  Customers/clients that make up more than 30% of total revenue may in fact be a danger to your long term stability.  Stay diversified and avoid relying on one or two big clients.

Working Capital

Cash is always King.  In this recession, keeping cash flow positive has been harder and harder to achieve, especially for small businesses.  Where once monthly cash flow checks were adequate, today a daily/weekly Financial Dashboard is a necessity.  Financial Dashboards give you key financial indicators such as accounts receivable and inventory turnovers, working capital and current account ratios. Know at all time what your 6-month cash flow looks like and what action you may need to take.  Look beyond the ratios to get a regular pulse of industry trends and changes in technology.  Keep an eye on what the competition is doing, and check their press releases, stock prices and other activities that could impact your business negatively.

Equity/Debt Financing

Equity investors are still in flux.  With the financial meltdown, they have become somewhat more risk averse, leaving a bigger capital gap.  However, many are also making continuous investments and new, smaller funds are being created.  Bootstrap as long as feasible and build your revenue streams or user base.   This will enhance your business valuation over time.  Once you decide to raise funds from  equity investors, take the time for due diligence and investigate what type of equity funder would be the right fit, understand the investor’s needs and interests in terms of size of funds needed, industry expertise and support.

On the debt side of financing, try to diversify your banking relationships, the old ‘do-it-all’ approach is no longer an optimal solution.  Many local banks are starting to lend again, but mostly to businesses with strong balance sheets. There are various financing solutions to consider such as Accounts Receivable, equipment and real estate financing. Consider carefully all details in the term sheets and other agreements and evaluate the different options with extensive cost/benefit analyses.

Opportunities for Growth

With robust financial planning, a recession can provide opportunities.  Growth may not be achieved the same way as before, as direct sales may be impacted by the economy.  Consider the option to grow via merger or acquisition of a:

• technology  that brings greater efficiencies
• business with additional products diversifying your product line
• business with different distribution channels

Even a small company can gain greater market share, but this is only accomplished with a strong financial strategy and a solid understanding of managing and balancing risks.  If you are too risk averse you might miss a valuable opportunity and if you are too risky you may compromise the business.

Financial Strategy

Now more than ever you want to revisit your long term strategy.  In this current economic climate it is essential to have multiple roadmaps and be ready to take detours.  Being a productive CEO or business owner gives you a competitive edge.  Every downturn or recession brings opportunities; know what they are and plan accordingly by developing cost/benefit analyses of your options and revisit them regularly.

2010 will still bring some uncertainties and having the best team of experts will make it a better ride.  Have a 6-month, 18-month and 36-month strategy with milestones and execution points you want to accomplish. Share your short-term and long-term goals and objectives with your employees and create a culture where problem solving, networking and business development are everyone’s business.

We can help!

We thank you for attending this first of four seminars.  If you have any questions or specific issues around best practices in finance and growth for your business, we would be delighted to provide you with a consultation free of charge.  Please contact Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc. at 617-449-7728 ext 704 or email at scheiberkurtz@nextstagesolutions.com to set up an appointment.

NSS Ambassador Laura Kevghas of Mirus Capital Advisors will be one of the panelists.  We hope you can join us.

Wednesday, March 10, 2010

8:00 a.m. – Registration and Breakfast
8:30-10:00 a.m. – Program

Whether you are a buyer or seller, there are opportunities in the current economic climate to maximize your return on a merger, acquisition, or sale of a business. Our panel will review the current M&A market including a discussion of the deals getting done, opportunities for both buyers and sellers, and a review of how to successfully sell or buy a business.

Topics will include:
The Current M&A Market and Trends
The Credit Markets and their Relation to Valuation
Current Business Valuations and the Impact on Estate Planning Opportunities
How to Prepare for and Pursue a Transaction

University of Massachusetts Lowell
MIL Conference Room
Wannalancit Mills
600 Suffolk Street
Lowell, Massachusetts
Directions

RSVP
nutterevents@nutter.com or 617.439.2622

Next Stage Solutions recommends this seminar around financing in these economic difficult times.  It is led by Itamar Chalif, principal of Atlantic Capital Solutions in Middleboro, MA.

His announcement:

Due to the great success and overwhelming requests since my seminar earlier this month, I have decided to present my seminar again on Wednesday February 24, 2010.

It will be kept free one more time in order to allow anyone who wishes to learn about strategic planning and controlling their business’s financing to be able to attend, regardless of their circumstances.

This is an information session in a 2 hour seminar from 9:00 – 11:00 a.m.

9:00 – 9:20 doors open with coffee & networking

9:20 – 10:30 seminar

10:30 – 10:45 Questions & Answers

10:45 – 11:00 Networking

My seminar is called “What Every Small-Business Owner Should Know About Small-Business Financing,”  will take place at the Middleboro Holiday Inn Express, conveniently located immediately off of Route 495 at exit 6. The address is 43 Harding St Middleboro, MA 02346.

The seminar is geared toward the small-business owner and the professional who serves as a trusted adviser to businesses. Attendees will benefit from learning more about the different type of financing options that exist, their advantages and disadvantages, and how to evaluate a business’s financing strategy.  Topics will include:

·        Business Financing “Landmines” to avoid

·        Differences between consumer and business financing

·        Three vital elements to consider in a business transaction (from a financing point of view)

·        A comparison of financing options and how each may affect the survival/growth potential of a business

“Anyone who is considering financing or has had any questions about the best ways to finance business expansion or equipment should take advantage of this opportunity,” said Chalif, who has spoken before national organizations on this topic.

Atlantic Capital Solutions (ACS) provides specialized, one-to-one servicing in helping business owners and entrepreneurs attain financing. The company works with business owners, controllers, CFOs and other decision-makers, entrepreneurs, and equipment vendors.

ACS’s offerings include the following programs:

·        New and used equipment leasing/financingSmall Business Administration

·        (SBA) options

·        Non SBA solutions for start-up businesses

·        Commercial mortgages

·        Terminal Rental Adjustment Clause

·        (TRAC) leases

·        Lines of credit

·        Working capital loans

·        Business acquisitions

·        Factoring (accounts receivable funding)

Space is limited and interested parties must register by February 19^th.  To register, please do so by e-mail,  itamar@acsus.biz or for additional information call 1-877-ACSUS-14.

I look forward to seeing you there.

Itamar Chalif

Atlantic Capital Solutions

Last month the Wall Street Journal published an article For Rent: Chief Financial Officer by Raymond Flandez, commenting in how more and more firms are outsourcing this high level function of management. For businesses small and large, especially companies that want to grow, the finances do get more complex. He points out that many of these ‘Rent a CFOs’ are also Certified Public Accountants.

I agree wholeheartedly with Flandez’  assessment  that an outsourced interim or part-time CFO is a capital efficient way to access this expertise and an outsourced CFO can be more objective and give a reality check. I also agree that many of the CFOs are indeed CPAs and this is partially due to the Sarbanes-Oxley Act of 2002 (SOX)  that has driven businesses and their CEOs more to the compliance and technical side of finance enforcing the common belief that if you have a controller and an accountant your financial needs are covered.  That may apply to life style companies who do not intend to grow but simply run a sustainable business.

From this juncture, however, is where I begin to differ.  A company with expansion and growth in their forecast, the paradigm has to shift drastically from technical to strategic. In fact, not recognizing the importance of strategic finance and solely relying on your controller’s risk aversion, you may be holding your company back from that growth.  Here is why I think so.

For a fast growing company, the financial spectrum has to be broader and therefore more complex as pointed out by the author of the WSJ article.  You want to consider a broad based and strategic CFO, one that picks up where the CPA or controller leaves off.  The CFO is your business partner and brings a strategic organizational mind set to the discussion and understands the importance of mapping out the corporate strategy into multiple roadmaps.  Given uncertain economic times, this is more important than ever.  Finance for emerging businesses brings a complexity that is more than accounting and number crunching.

The CEO needs to fully understand the financial ramification and bottom line each decision triggers. SOX compliancy has driven us too far towards the tactical aspect of finance forgetting the importance of looking forward, checking your Financial Headlights.  The CFO plays an important role acting as conduit to growth and walking the fine line between the risk-averse controller and the visionary CEO.  Your future CFO needs to have average appetite for risk, not too little and not too much, understand how to translate the corporate strategy and be a true value creator and not a gatekeeper of growth.

Rudi Scheiber-Kurtz, CEO
Next Stage Solutions, Inc.

NSS has joined AIM as a corporate member this week.  In an earlier blog I wrote about the BuyMass.org website, the Massachusetts online business-to-business network.  AIM created this website along with the Commonwealth of Massachusetts.  It is all about creating jobs and bringing economic opportunity to Massachusetts.

We believe that NSS offers a unique value to emerging businesses of the Commonwealth with our CFO on Demand model.  Our CFO team is highly experienced not only in the arena of finance, but also in operations and management.  Today’s CFO needs to provide more than the governance piece of finance by bringing the organizational mind set to the table. We understand how to grow companies and hope to be of value to the other AIM members.

Rudi Scheiber-Kurtz, CEO
Next Stage Solutions, Inc.

What are your indicator factors as a sign of returning confidence in the economy? I posed this question to a few business colleagues in early summer.  Oscar Jazdowski of Silicon Valley Bank (Growth Companies Services) is looking for 2-3 consecutive months of flat unemployment.  Currently, unemployment is still going up, making it the highest in 25 years, but the Index of Leading Economic Indicators has shown growth each of the last 4 months.  So running a business, what should you be aware of and plan in the near future?

Laura Kevghas of Mirus Capital is beginning to see an uptick in the strategic buyers who have money in the bank and are beginning to consider acquisitions once again.  She states that strategics have seemingly had their wallets closed, but are now starting to consider making some acquisitions that fill a strategic hole or which will help grow their market share when business starts to turn around. Ms. Kevghas also points out to be on the alert if one strategic is interested in your business, there may be others as well; so it may be worthwhile to engage an investment banker to run a complete process.

Conservation of cash and strong management of your working capital is still a top priority.  Oscar Jazdowski recommends being ready for an upturn by having a pool of contract labor and more permanent hires that you can quickly engage.  Now is the time to work out several road maps or scenarios that will give you a competitive edge when the overall economy improves.

With this focus on cash management, you want to make sure you plan multiple scenarios over the next 6-12 months so that you can navigate optimally and be proactive.   You want to have these strategies mapped out financially to fully understand the ramifications of your future decisions. I call them your NSS Financial Headlights™.

Strengthen marketing and sales during this economic growth, albeit slow, and keep your business out in the market – visible and ready to respond, suggests Laura Kevghas.

In my opinion, it is also an opportune time to evaluate your exit strategy. Where do you want your company to be in 3-5 years?  Consider succession planning and optimize market value and consider this long term plan in your annual budgeting process.

Send us an email or call us at 617-449-7728 to discuss how we may help you build your business and give you  a competitive edge with our expertise in strategic finance.

Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc.

Pendulum swings are a natural occurrence and with the Sarbanes-Oxley Act of 2002 (SOX) small businesses to Fortune 500 companies have been focusing on the compliance side of finance neglecting the other facets of finance, so important for sustainability and growth. I believe today’s financial expert or CFO needs to bring an organizational mind-set to a business, actively participate in value creation and connect the dots between finance, strategy and operation.
Working in the emerging businesses sector, I find this strategic piece missing; in fact, often the CEO is not sure what type of CFO is needed, since for the past ten years compliance based number crunching as been the focus. CFO.com ran an interesting story on how long the list of controller-turned CFOs is getting, yet they tell the story of Archie Black, CEO of SPS Commerce. His number one criteria in hiring a new CFO was to bring someone on board who could help him drive change, number two criteria to understand the vision and articulate it to the investment community and the board, and third for traditional accounting skills.
Reading the CFO.com article piqued my curiosity to find out just how wide-spread the compliance focus really is. I found an excellent in-depth study called the IBM Global CFO Study 2008 that indicates the lack of organizational mindset among CFOs of large corporation and in how SOX has kept everyone focused on the number crunching. This was somewhat surprising to me, assuming that large corporations would have such experts in place.
Small and medium sized businesses struggle even more with getting the full spectrum financial expertise. Often CEOs hire a fulltime CFO too early and if that CFO is not the organizational forward looking kind, tensions will arise as the company grows. Interestingly, the controller or CPA is and should be very detailed oriented; it is unreasonable to expect them to be part of the visionary thinking. Very few people can do both. This also brings up the point of communications to investors and boards, which was the number two criteria of Archie Black mentioned above.
An excellent white paper by the Economist Intelligence Unit seconds the above findings. It talks about the empowered CFO and the evolving focus need on business creation. It points out that today’s CFO needs to lead with an array of skills including general business expertise as well as financial skills. Again, the paper refers to SOX as having been the driver of perfect accounting, leaving the strategic finance piece in the dust.
One of my favorite articles talks about the strategic momentum under threat. This KPMG Study reiterates the importance for the CFO to remain future-focused. They agree that governance cannot be ignored, but always looking in the rear-view mirror is a thing of the past. Today’s CFO must look forward 99% of the time.
This is where I came up with the idea of driving sustainability and growth with financial headlights. I think it gives a nice visual in how we should think about business finance, make sure your taillights work properly and then focus on the headlights. Do you know where you want your company to be in two years? How will you get there?