Presentation to
New England Region Fall Conference
Frank Armenio, Partner
B2B CFO®
September 17, 2012
What Is B2B CFO® ?
Established:
Founded in 1987
National :
220 Partners in 45 states, 6000+ years of experience
Focused:
Privately-held companies with sales between $5 - $75M
Affordable:
As needed CFO services
We are Specialists In:
Banking and Lending
Relationships
Gross Profit
Optimization
Profit Improvement
Expense Reduction
Financial and Strategic
Planning
Timely & Accurate
Financial Statements
Cash Flow Projections
Increased Sales
Working Capital
Improvement
Exit Strategies
Some B2B CFO® Publications
Who Am I?
• 30+ years of progressive operational, finance and
accounting experience
• First 11 years spent with high tech Fortune 500
companies, next 20 years with privately held small
to mid-sized businesses
• CFO, Controller, Director of Finance
• Manufacturing, Healthcare, Medical Devices
• BS Accounting (Northeastern), MBA (Suffolk)
• Certified Management Accountant (CMA)
• Certified Financial Manager (CFM)
What is it? How to Avoid it.
Traditional Organization Chart
Hidden Organization Chart
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 18
Characteristics of Finders
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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
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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
Stages of Business Growth
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 64
What is “Infrastructure”
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Employees
Vendors
Subcontractors
IT systems
Operating procedures
Machinery
Buildings/office space
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Contracts
Policies
Websites
Advertising
Bankers
Accountants
Attorneys
Consultants
B2B CFO® Truism
Most Finders do not spend a lot of time
methodically planning their business
infrastructure
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 66
Infrastructure Creation Stage
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 64
The Finder’s Activities During
Early Days of the Business
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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
Infrastructure Peak Stage
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 69
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
Stages
During Infrastructure Creation and
Infrastructure Peak
Few customer
complaints
Short cash
collection
cycles
High
customer
service
Personal
sacrifice by the
Low
overhead Founder
Company runs “lean and mean”
The Finder’s Perspective Shifts
The result of running lean is......
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
The Finder Becomes a Minder
and Grinder
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 19
Infrastructure Outgrowth Phase
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 74
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
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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
Infrastructure Outgrowth Phase
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 71
Remember…
Most Finders do not spend a lot of time
methodically planning their business
infrastructure
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 66
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
Infrastructure Outgrowth Phase
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 74
Result? The Danger Zone
The Danger Zone is created when the cash needs of your business 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
The Danger Zone
How to Avoid it
The Finder Must Return to
Finding!
Stop trying to solve all
the problems personally
Rely on others for
Minding
Refocus on finding new
customers
Refocus on product and
market factors
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 19
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
Reports for Finders
Forward looking
Dashboard
Sales by Month
300000
250000
Sales
200000
Plan
150000
Actual
100000
50000
0
1
2
3
4
Period
Analytics
Sales per Employee
Plan per EE
Actual per EE
6,000
5,000
4,000
3,000
2,000
1
2
3
Period
4
Reports for Finders
Ca$h Flow Model
Cash Flow Forecast
Why Companies Fail
Cash Out exceeds Cash In
Finder is drawn into Minder duties
The plan was to grow but lack of planning
results in:
Poor Management
Overspending
Surprises
Firefighting
slow vendor payments
& time spent seeking new vendors
poor morale
turnover
poor collections
poor customer service
loss of customers
FORECASTING alerts you to possible
future problems and allows time to:
investigate alternatives & take action
find additional funding
improve performance
Survive & Grow
Prescription for Escaping The
Danger Zone
• Let the Finders find the sales
• Let the Minders find the cash
A Final B2B CFO® Truism
If you delegate responsibility without
the authority, you will after a period
of time, be given back the
responsibility
Source: The Danger Zone by Jerry L. Mills, ©2011, p. 16
Questions? Comments?
Frank Armenio, Partner, B2B CFO®
e-mail: frankarmenio@b2bcfo.com
phone: 508.572.5743
website: www.frankarmeniocfo.com