Author: Ascent CFO

By Matt Kelly

While navigating through times of rapid growth and expansion, businesses often encounter specific challenges that can sink the ship if not recognized and avoided. An experienced CFO can help businesses identify and steer clear of these hidden dangers, helping to ensure smoother sailing to financial success.

As someone who has spent 15 years in finance roles at Fortune 150 companies and another 12 years as a CFO for high-growth firms, I specialize in leading organizations through various phases of growth, circumventing the pains and risks that commonly go along with them. Whether with a VC-funded, PE-backed, or Founder-owned firm, many of the same challenges present themselves. Here are some of the most frequently encountered: 

Ensuring the basics of your company organization are seaworthy – before getting too far from shore

Many companies are founded quite simply. Understandably most of the initial efforts are spent refining the product and GTM strategy and there is rarely much time or money spent setting up a detailed legal structure. Many times they register their trade name, get an EIN, draft up brief Articles of Incorporation and ownership documents and set off to build a business.

However, as soon as possible, a detailed legal and risk review should take place. Owners must know exactly who owns what- both profits and losses. Companies need to walk through multiple future scenarios and know exactly what happens in each case. Who gets what from a prosperous future sale? How would those gains be taxed? What about liabilities from a large lawsuit? What classes of stock will be utilized in the operating agreement, and what rights will each class have as far as participation rights, anti-dilution provisions, voting rights, etc.

Experienced CFO’s can lead this review, in tandem with good corporate counsel. We’ve seen relationships between founding partners become strained and these legal structures tested. We’ve helped design deal terms to optimize, not gross, but net gains. We’ve seen a potential sale threatened due to a seemingly innocuous document that in fact threatened the entire S-Corp status. We’ve quickly set up insurance to cover major liability gaps. We’ve even helped founders close loopholes that would have allowed them to be voted out of their own companies.

Constant assessment of your crew – ensure you always have the right talent onboard for each stage of the company’s journey

Conditions change very rapidly at growing companies. The skills required to perform a position successfully one year may totally change the next. Often companies begin as a small group of individual contributors, all hacking and hustling to get the company to viability. The next year those same mavericks may be struggling to manage teams of employees or to build documented processes.

Thorough financial and resource planning can help identify these skill set necessities before they arrive. In some cases, upskilling can take place in advance to help resources adapt and grow into those new sets of challenges. In other cases, new resources can be targeted with experience in those next phases of planned growth.

Speaking of Crew – Make sure your Accounting & Finance function isn’t malnourished

Don’t get too far into your journey before building out your top-tier Accounting & Finance function.

It is very common for businesses to neglect Finance and Accounting in their early phases. And most times they get away with it, as basic bookkeeping and simple cash management suffices while you are busy proving your concept and fighting your way to profitability.

But when you have reached the point where the business is expanding rapidly and many employees are now depending on it for their livelihood, it is time to ensure the growth and health of the company are sustained.

A strong Finance and Accounting practice brings organized and GAAP compliant accounting. It includes thoughtful planning, timely reporting, and insightful analytics. It ensures solvency through strong financial controls and cash planning and management.

It can be difficult to determine a specific amount or percent of Revenues to spend to achieve a healthy Accounting & Finance function. This depends largely on the size and complexity of the organization.

So examine your own situation. If it feels like you don’t have clarity of your results, if you don’t have solid planning and focused direction, then you likely have under-invested in your Finance and Accounting function. And know that this doesn’t have to break the bank. If your business is not large enough to require or afford a full-time CFO, by all means enlist one on a fractional basis.

Don’t sink the boat with too much cargo – when too much success can lead to serious threats

In the early stages of a company, much of the focus is (rightfully) placed primarily on  product development and sales. However, when traction starts to occur at scale, this poses a number of very real risks to the entire business if not properly planned for.

Obvious is the burden on cash. Most businesses will experience a major cash pinch in times of rapid sales growth. An experienced CFO will help you plan ahead of time for the proper amount of growth capital required if you hit or exceed your plan. And they can help you secure it most cost-effectively.

Also common are difficulties in producing or implementing your product at true scale. Oftentimes smaller organizations are running on highly manual and minimally documented procedures for the production or delivery of their products. These quickly fracture when attempting to be run at scale. A detailed planning process helps each department know about the desired growth for a coming year and then thoughtfully plan for proper resources required to achieve those goals.

Sometimes this is additional tech infrastructure. Other times it is planned investment in Operational or Procedural process improvements. A good CFO will lead the planning process to identify and address these risks in advance of your rapid success.

Focus on the Destination

Consideration of your ultimate goal is crucial. Is there a desired sale or transition plan in the future? In how long and to whom? Maybe you plan to transition the business to a family member, or slowly sell chunks of equity to employees. Perhaps the plan is to sell to a strategic buyer, to a PE firm or to go public. All of these destinations require different paths. Your legal structure, organization of your documents, your preparation for diligence and legal pre-work can all be charted out well in advance, optimized for your specific desired outcome.

In the vast ocean of business challenges, an experienced CFO can be a valuable member to have onboard. They will collaborate with your leadership team to thoughtfully plot the course and they can lean on their experience to confidently navigate the way around these, and many other potentially hazardous icebergs. Wishing you smooth sailing!

In the dynamic landscape of business growth and expansion, having a rolling forecast plays a pivotal role in the strategic planning and decision-making processes. Unlike traditional static budgets that can become obsolete by mid-year, a rolling forecast enables companies to adapt to changing market conditions and scale their business effectively. 

Let’s explore 4 reasons why a rolling forecast is essential for companies navigating growth:

1. Agility and FlexibilityA rolling forecast provides companies with the agility and flexibility needed to respond to market shifts and unexpected events swiftly. By updating forecasts regularly, businesses can make informed decisions based on real-time data, allowing them to adjust strategies, resource allocation, and financial planning to align with evolving circumstances.
2. Continuous Planning and MonitoringUnlike annual budgets that may lose relevance as the year progresses, a rolling forecast facilitates continuous planning and monitoring of business performance. Companies can regularly track their progress against forecasted targets, identify variances, and take corrective actions in a timely manner to stay on course towards their growth objectives.
3. Enhanced Decision-MakingHaving a rolling forecast enhances decision-making by providing management with current and accurate information to support strategic initiatives. By incorporating up-to-date  operational data, competitive insights, and market trends into the forecasting process, companies can make informed choices that drive sustainable growth and profitability.
4. Strategic AlignmentA rolling forecast ensures that financial planning remains aligned with management’s strategic goals and business objectives. By incorporating short-term and long-term forecasts into a cohesive plan, businesses can maintain a clear vision of their trajectory and make informed decisions that support sustainable growth.

As companies scale their business and navigate the complexities of growth, having a rolling forecast is instrumental in driving agility, enabling continuous planning, enhancing decision-making, and maintaining strategic alignment. By embracing a dynamic forecasting approach, businesses can adapt to changing environments, seize opportunities, and achieve sustainable success.

Do you have questions or are you looking for some support with this? Reach out: ascentcfo.com

Selecting the right Chief Financial Officer (CFO) is a pivotal decision for any organization. Beyond technical proficiency, the ideal CFO possesses strategic vision, leadership acumen, and cultural fit. 

Here are key interview questions to uncover these crucial qualities and ensure you’re hiring the best candidate for the role:

1. Strategic Vision: “Can you outline your approach to long-term financial planning and strategy development?” This question assesses the candidate’s ability to align financial goals with broader organizational objectives and steer the company towards sustainable growth.
2. Leadership and Team Management: “How do you foster collaboration and cohesion within your finance team?” Understanding the candidate’s leadership style and team-building skills is essential for ensuring a cohesive and motivated finance department.
3. Risk Management: “How do you identify and mitigate financial risks in a rapidly changing business environment?” A strong CFO must be adept at identifying potential risks and implementing strategies to safeguard the company’s financial interests.
4. Communication and Stakeholder Engagement: “How do you communicate financial insights and strategies to non-financial stakeholders?” Effective communication is crucial for translating complex financial data into actionable insights that drive informed decision-making across the organization.
5. Adaptability and Innovation: “Can you provide examples of how you’ve adapted financial strategies to respond to market shifts or technological advancements?” This question evaluates the candidate’s ability to innovate and adapt financial processes in a dynamic business landscape.
6. Cultural Fit: “What values do you prioritize in a company culture, and how do you embody them as a CFO?” Assessing cultural fit ensures alignment with the organization’s values, fostering collaboration and cohesion across departments.
7. Track Record and Achievements: “Can you share a specific accomplishment or initiative from your previous roles that you’re particularly proud of?” This question provides insights into the candidate’s track record of success and their ability to drive meaningful impact.

By asking these interview questions, organizations can delve beyond technical competencies and uncover the strategic insight, leadership qualities, and cultural alignment necessary for a successful CFO hire.

Let’s chat essential interview questions.

Raising capital is a pivotal step for businesses aiming to scale, yet it’s a journey laden with unexpected twists and turns. While the fundamentals are widely understood, there are several surprising aspects that entrepreneurs and CFOs should be aware of. Here are seven insights to consider when embarking on the quest for funding.

1. Relationships over Pitches: While a compelling pitch is essential, building strong relationships with investors often carries more weight. Cultivate genuine connections by attending networking events, seeking introductions, and engaging in meaningful conversations beyond the boardroom. Some investors often put team before the business model.
2. Timing Is Everything: The timing of your fundraising efforts can significantly impact your success. Market conditions, industry trends, and even macroeconomic factors can influence investor sentiment. Be mindful of timing and seize opportunities when the market is favorable. Also, timing any fundraising to occur after hitting significant company milestones including revenue scaling, product expansion, etc. will allow for a step-up in valuation.
3. Due Diligence Goes Both Ways: While investors scrutinize your business during due diligence, savvy entrepreneurs also assess potential investors. Evaluate their track record, portfolio companies, and alignment with your vision to ensure a mutually beneficial partnership. Check references with portfolio company founders to learn more about how they operate in the boardroom.
4. The Power of Bootstrapping: Bootstrapping isn’t just a fallback option; it can be a strategic choice. By demonstrating revenue growth, proving market traction, and minimizing dilution, bootstrapping can increase your leverage and valuation in future fundraising rounds.
5. Investors Want to Invest in People: Beyond your business idea, investors are investing in you. Your passion, resilience, and ability to execute are key determinants of investment decisions. Showcase your leadership qualities and vision to instill confidence in potential investors.
6. Flexibility Is Key: Plans rarely unfold exactly as anticipated in the fundraising process. Stay adaptable and open to pivoting your strategy based on investor feedback, market dynamics, and evolving business needs.
7. Rejection Is Inevitable, Resilience Is Essential: Rejection is par for the course in fundraising. Embrace rejection as a learning opportunity, refine your pitch, and persevere with resilience and determination.

Raising capital is a multifaceted journey filled with surprises. By understanding these nuances and approaching fundraising with diligence, agility, and perseverance, entrepreneurs can navigate the challenges and unlock opportunities for growth and success. 

Looking for some support with this? Let’s get started. 

Acquisitions represent both exciting opportunities and complex challenges for a business to navigate. As a key player in the acquisition process, the Chief Financial Officer (CFO) must possess a unique set of skills to ensure a successful outcome. 

Firstly, financial acumen is paramount. A CFO must have a deep understanding of financial statements, valuation methodologies, and deal structures. This includes analyzing the financial health and performance of both the target company and the acquiring company, identifying potential synergies, and assessing the financial risks and rewards of the acquisition. By conducting thorough financial due diligence, the CFO can mitigate risks and maximize the value of the deal.

Strategic thinking is another critical skill for CFOs involved in acquisitions. They must be able to align the acquisition strategy with the overall business objectives and long-term growth plan. This involves evaluating the strategic fit of the target company, identifying opportunities for market expansion or diversification, and developing a clear integration plan to realize synergies post-acquisition. By taking a holistic and forward-thinking approach, the CFO can ensure that the acquisition creates sustainable value for the company.

Effective communication and negotiation skills are also essential for CFOs in acquisition scenarios. They must be able to articulate the financial implications of the deal to key stakeholders, including the board of directors, investors, and employees. Additionally, CFOs play a crucial role in negotiating the terms of the acquisition, including purchase price, payment structure, and post-acquisition adjustments. By building consensus and fostering open communication, the CFO can facilitate a smooth and successful acquisition process.

In conclusion, the CFO’s role in an acquisition requires a diverse skill set encompassing financial expertise, strategic thinking, and effective communication. 

It’s important to acknowledge that not all full-time CFOs have the specialized skill set needed to successfully navigate a high-stakes acquisition. Consider bringing in a Fractional CFO on a part-time basis who has first-hand experience in leading acquisitions. This way you can feel confident that your financial leader can navigate the complexities of acquisitions and drive value creation for your company.

Contact Ascent CFO Solutions to learn more about bringing a Fractional CFO with specific acquisition experience onto your team.

Fundraising is a critical milestone for any business, marking a pivotal moment in its growth trajectory. While CEOs and founders often take the lead in pitching to investors, the role of the Chief Financial Officer (CFO) in fundraising should not be underestimated. 

Here’s what your CFO should be doing to ensure fundraising success for your company:

First and foremost, the CFO plays a central role in financial strategy and planning. Before embarking on a fundraising journey, they should collaborate closely with the CEO to develop a robust financial forecast model and determine the capital requirements of the business. This involves conducting thorough due diligence on the company’s financial health, identifying key performance indicators, and projecting future financial performance. By providing investors with clear, data-driven insights into the company’s financial trajectory, the CFO instills confidence and credibility in the fundraising process.

In addition, the CFO is responsible for crafting the financial narrative. While the CEO articulates the vision and mission of the company, it’s the CFO’s job to translate that vision into financial terms that resonate with investors. This includes preparing detailed financial models, forecasts, and valuation analyses that effectively communicate the company’s growth potential and investment opportunity. By aligning financial projections with strategic objectives, the CFO ensures that the fundraising pitch is compelling and coherent.

During the fundraising process, the CFO also plays a key role in investor relations. This involves engaging with potential investors, answering their financial questions, and addressing any concerns they may have. Additionally, the CFO negotiates the terms of the investment, ensuring that the deal structure is favorable to the company while also satisfying the requirements of investors. By fostering transparent and open communication with investors, the CFO helps build trust and foster long-term relationships that extend beyond the fundraising round.

In summary, the CFO’s involvement in the fundraising process goes beyond number-crunching; it’s about strategic financial planning, effective communication, and investor relations. By leveraging their financial expertise and insights, the CFO can maximize fundraising success and pave the way for sustainable growth and prosperity.

Consider bringing in a part-time Fractional CFO as a dedicated resource to focus on your fundraising efforts. Contact Ascent CFO Solutions to find a Fractional CFO with the fundraising experience your company needs.