CFO2Biz

Technology Road Map – 2012 and Beyond

By Buck Gentry

Greetings from Nashville!

The Technology Conference for CPA’s held annually in Nashville is always one of my favorite events – not to mention I get continuing education credits! The general sessions are up to date and forward thinking on general technology issues affecting CPA’s and financial professionals with specific breakout sessions focused on industry, consulting or public practice management.

The Conference has been coordinated and presented by a group of CPA’s and consultants, K2 Enterprises since the Conference was 1st held in the 1990’s. They are the definitive experts and all-knowing source of knowledge as far as I am concerned and I take their opinions and observations to heart. I have been to the National Conference a couple of times and the sessions and materials are even more ramped – highly recommended. See more on K2E at www.k2e.com .

Randy Johnston has always kicked off the Conference or ended it with his Tech Update. Some notes on Randy’s observations this year follow.

This year is going to be a year with many hardware changes and upgrades. Pent up demand will drive purchasing and hardware upgrades to take advantage of efficiencies, speed and cost effective technologies. Be wary of buying hardware that is already out of date (even if it is only 6 months old). Intel has released a new series of processors, their Intel Core Series – i7 being the flagship product. New “Quantum Dot” monitor technologies are on the horizon replacing OLED displays which will be brighter and use less energy. Touch screens are slow to market but will come.

UPS’ do not seem to be doing the job. We all trust that the power source and protection are there, but the units do fail over time. We should replace our UPS’ every time we change the hardware they are protecting, and at the very least every 5 years. They could actually damage your servers if not operating properly.

The discussion continues about where to back-up your data. In many cases your data may actually be safer in the cloud as our staff need for data access remotely increases. For many small and medium sized businesses, a basic backup appliance may be a good fit. These solutions are stable and user friendly while addressing many issues in your disaster recovery plan (you have a plan, right?). Look at the NetRescue X Business Recovery System.

Browsers are going to change because of HTML security risks. Here comes HTML 5 to address these risks. As a result all web sites will have to be rebuilt in the next 2 years because of massive changes. A new generation of browsers is becoming available. Internet Explorer 9 is already out but deemed unstable!

Did you know about these printing cost savings tips? Save toner by changing fonts. The University of Wisconsin saved $10,000 by setting a font policy and changing default fonts for new software upgrades and rollouts. Most of you know by now that on average you still have 40% of the original ink capacity left when your low toner light warning first comes on.

This generation of hardware purchases may very well be the last cycle of hardware purchasing. New strategies will lead us to stop buying hardware on a 3 year rotation after this next round. IT engineers are highly threatened by these changes when approached and see movement to the cloud as threatening. Soon there will not be enough work for purely hardware fix and software loading skills sufficient to provide a full time job for someone.

Since being introduced 2 years ago to Google’s FREE suite of products for online e-mail, calendaring and contacts I continue to move more functionality to Google’s cloud based platform. Being semi-self-employed I suffer from the same challenges as most trying to secure data while making it accessible to me wherever I am on whatever device I am using. Currently, tools exist and work well enough to sync data between your Outlook .pst file data and Google Apps. The online functionality is somewhat basic, but who’s using pivot tables for their Christmas lists anyway? I would suggest using the Google apps and tools for a non-profit committee or event, youth league team coordination and other basic communication and sharing needs to begin with. This will involve others using the tool and give you experience without the fear of damaging sensitive data or accidentally exposing your data to the world.

About Buck Gentry

In addition to his strong technology expertise, Buck runs our Healthcare practice. He also has experience running and selling a successful enterprise, providing him with deep exposure to the demands of the business life cycle.

He was previously Chief Operating Officer and Chief Financial Officer for a rapid growth IT services firm where he managed the human resource and infrastructure necessary to support better than 3000% growth over 14 years.

Buck has also served as Chief Financial Officer for several medical facilities among other roles, after starting his career with KPMG. Buck is a Certified Public Accountant (inactive), member of the AICPA and holds a BS in Accounting from the University of Tennessee in Knoxville.

About CFO2Biz

CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ

Number two of the seven habit’s espoused by Stephen Covey in his epic writing is to “begin with the end in mind.”  Yet, we see so many successful business owners lose sight of this principle.  This behavior becomes magnified when they are finally ready to sell the business.

Those who have successfully built, run and sold businesses realize the importance of having a carefully crafted  “exit strategy.”

This strategy should become the catalyst that drives everything from your capital structure, and daily key performance indicators to your human resources, business development, sales & marketing strategy and succession plan.

The actual transaction to sell your business will be challenging enough.  The decision to sell is the most important step towards the successful closing of that transaction.  With an early start, you’ll have enough time between these two events to adequately prepare and fulfill your exit strategy for maximum value.

The goal of most business owners is to simply “own” the business.  Any thought of “selling out” is antithetical to the mindset of the typical entrepreneur.  Eventually, real life circumstances surface that may include aging owners, loss of interest, lack of expansion capital, changing market conditions, health or marital issues, loss of key customers or death of the founder.  These matters may be further exacerbated when certain family members are not ready or willing to continue the “dream,” or you may find irreconcilable differences between siblings and key managers.  Any of these could result in a forced sale, before your well-crafted exit strategy is in place.

Professional business brokers and investment bankers agree that the buyer is usually much more prepared for the process than the seller.  The typical Private Equity Group buyer will have a swat team of professionals that evaluate, structure and negotiate the purchase price and other critical terms of the deal.  These experts process numerous transactions while the average business owner will only sell once.  Unless the seller has prepared well in advance, the advantage shifts to the buyer.

In my experience, I have worked with many sellers who started and ran a business effectively but never realized the importance of building a plan to sell their business.  The difficulty with selling your business and realizing the exit while you are still young enough to enjoy the proceeds is almost always underestimated.  The search for a buyer can take well over a year.  Market cycles that raise or depress values can last for years.  The buyer may require the owner to stay on for several years after the sale.  Your ultimate exit may not occur for many years after the initial closing.

If you are not prepared to sell today, you should take an honest assessment of precisely where you stand on the following issues.  How many years are you from exit?  What exit alternatives are available to you or can be developed?  What is your best use of time and financial resources today, that will maximize your value at exit?  What will it take to “get there?”  How long will it take to “get there?”  Which employees need to be hired?  How much must sales grow?

In effect, you should “begin with the end in mind.”

Whether you can support these initiatives internally or have to outsource them, your call to action is to begin a plan now to implement them.  They are proven and will pay off handsomely with higher enterprise value for your company.

About the Author:

Frank Pazera, CPA, MBA, is Founding Partner with CFO2Biz (www.cfo2.biz) providing on-demand financial services for growing companies.

About CFO2Biz

CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ

RUNNING ON EMPTY – WHEN CASH IS TIGHT

Updated by: Frank Pazera

There are times in almost every company’s life when the amount of cash needed for payroll and bills is greater than the cash on hand, and these excessive needs seemingly will continue for the foreseeable future.

How do you get through this tough cash flow period?

Does your company have a line of credit with a bank or other lender, and if so, has it drawn the full amount of available credit? If not, then borrow additional funds to cover the current cash flow shortfall. If the borrowings are already at the limit of available credit, then you need to carefully manage the cash receipts and disbursements. Whether or not you borrow additional funds to cover the current shortfall, you still need to conduct a comprehensive evaluation in order to identify the precise causes of the shortfall and put in place actions to prevent the shortages from persisting.

First, are your customer accounts stretching out in terms of the number of days outstanding? Do you need to get more aggressive in calling your customers to request payment?

Second, have you reviewed your level of expenses as compared to your projected revenues? Are the expenses exceeding the revenues, and if so, are there expenses that can be reduced or deferred to more closely match the current and projected level of revenue?

Third, are there new sales prospects and/or plans that can be implemented to increase revenue?

In addition, are there idle assets like older inventory items or equipment for which there is no current or projected use. Perhaps these can be sold to provide some additional cash?

Assuming you have taken all of these actions and still have more requirements than available cash, how do you manage to keep your vendors & suppliers supportive of the company, even when you cannot keep all of their accounts current? One method is to develop a 13-week rolling schedule of cash – beginning balance, anticipated receipts, and cash requirements. This entails identifying which specific customers may pay on specific weeks; which specific weeks will payroll and related taxes be paid; when will rent and other specific items be paid; finally, which vendors/suppliers will be paid (and how much) each week. It is critical that every vendor be included in the schedule, not just the squeakiest of the wheels! Then, at least, each vendor knows they are getting some amount of cash (probably not as much as they would like), but they are not being ignored. And, track your actual results each week against the projections to ensure that going forward you can have some degree of confidence in the future weeks’ projections and your communications with your vendors/suppliers.

It is amazing (and rewarding) to see how supportive your vendors/suppliers can be in helping you get through tough cash flow periods, when they know that you are considering their business requirements by ensuring they are included in your payment schedules. Besides putting together these weekly cash receipts/disbursement schedules, you now have a tool to use in responding to calls from your vendors enabling you to inform them of the projected amount to be paid. If something happens to delay the projected disbursement or change the amount, it is critical to communicate that information to the affected supplier. The supplier is much more likely to be supportive when you keep him/her informed and updated as to the status of your anticipated payments to them.

In summary –
1. Identify the causes of your cash flow issues
2. Determine actions that can be taken to stop or minimize the shortfalls
3. Implement the actions that you can
4. Carefully manage the cash balances, receipts and disbursements each week until the shortfall can be overcome (but don’t stop your corrective actions just because the immediate problem is solved)
5. Continuously communicate with your vendors/suppliers, employees, etc. so they all understand the situation and what you are doing to ensure that they are being treated fairly and can have confidence in your ability to solve the problem

About CFO2Biz
CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ

CHATTANOOGA (August 3, 2010) – CFO2Biz announced the addition of Buck Gentry as the most recent Partner to join the Chattanooga practice.

Managing Partner Frank Pazera commented, “We are delighted to have Buck join our fast growing organization.  His unique combination of skills and professional experience will provide tremendous value for our clients.”

Buck previously served as Chief Operating Officer and Chief Financial Officer for InfoSystems, Inc, the local, award winning, technology and consulting company.  There he was instrumental in the planning and resource management required to support many high profile customers.  Buck has also served as the CFO for several local organizations during transitional periods, including Siskin Rehabilitation Hospital, and early in his career was the General Manager of A & A Business Systems.

Buck is a Certified Public Accountant and began his career with KPMG. He holds a Bachelor of Science degree in Accounting from the University of Tennessee, Knoxville.  He and his wife, Tonya, reside in North Chattanooga and are active supporters of several local non-profit groups.

About CFO2Biz
CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ

CHATTANOOGA (May 18, 2010) – CFO2Biz has established headquarter offices in the Scenic City.  The professional service firm offers “on-demand” sophisticated financial and executive leadership to business partners for a fraction of the full time cost.

CFO2Biz is the only firm in the fast growing “fractional chief” service sector to call Chattanooga home.  Frank Pazera, Managing Partner, commented: “We are excited to establish our firm in Chattanooga as we roll out services across the Tennessee Valley Corridor.”

Mr. Pazera previously held the position of Chief Executive Officer for publicly traded Covista Communications, among others.  Frank started his career at Arthur Andersen & Company, earned his MBA in Finance from Emory University and is a Certified Public Accountant.

Mr. Joe Honey, Partner at CFO2Biz, currently owns and operates a public accounting practice and his background includes roles as Chief Financial Officer for Covista Communications and Olan Mills, Inc.  Joe is also a Certified Public Accountant and is Accredited in Business Valuation by the AICPA.

Mr. Honey stated: “We quietly launched the firm earlier this year and word of mouth has spread, allowing us to add several high profile clients quickly.  We expect this momentum to continue as we hire more professional staff to support our growth.”

About CFO2Biz

CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ

Why the Time is Right to Tap into C-Level Talent

Published: May 12, 2010 in Knowledge@Emory

It’s been nearly two years since the U.S. economy skidded into recession, and the overall unemployment level remains in the double-digit range. While the construction industry finds itself at the top of the unemployment pile, white-collar jobs such as those in the information sector recently posted a sobering unemployment rate of 10.4%, according to a recent U.S. Bureau of Labor Statistics (http://www.bls.gov/) news release. Professional and business services (at 12.4%) fared even worse, and a drop in the number of finance-related jobs saw unemployment rates in that sector jump from 6.8 in March 2009 to 7.7 in March 2010.

That’s the bad news. But there’s good news, too. Due to the trimming of corporate ranks, C-level talent once out of the price range of fledgling startups is now available. “It’s the grey beard meets the whiz kid,” says Gordon Rogers, president of Atlanta Technology Angels (http://www.angelatlanta.com/). “It can work to both of their advantages.”

Rogers was one of several panelists who joined moderator Benn Konsynski (http://www.goizueta.emory.edu/Faculty/BennKonsynski/), chaired professor of information systems & operations management at Emory University’s Goizueta Business School (http://www.goizueta.emory.edu/), to address “C-Level Skill Sourcing: New Alternatives.” While startups and companies growing at a rapid rate need the expertise of C-level professionals, executive talent is often priced out of the reach of cash-strapped, nascent businesses. But the current economy presents opportunities for small- and medium-sized businesses to take advantage of outsourced C-level executive skills without coughing up C-level salaries.

In this environment, C-level executives and company founders can form a more symbiotic relationship. The C-level executive can work with the startup on a temporary basis (e.g., six months to a year) and in that time introduce the company founders to potential clients and markets, or even help them get funding. “The Rolodex of these senior execs is far deeper than anything these founders can hope for,” says Rogers. “Where else can you get that kind of talent? This kind of economy is precisely that opportunity.”

What kind of talent is available? Financial expertise, marketing acumen, human resources, legal— just name it, notes Konsynski. “But the first thing they need is a controller,” he adds.

Without structure, a company built around a great concept or idea may never get out of the gate. “Just mention the word ‘budget’ to a founder,” says Frank Pazera, founder and managing partner of CFO2Biz (http://www.cfo2.biz). “It’s almost a four-letter word.” Pazera has held CFO, COO and CEO roles in a variety of industries. At CFO2Biz, he and his team provide on-demand financial function support for fast growing enterprises. “I’m an arms merchant,” he says, adding “why should any business waste resources on the total cost—hiring, training, turnover, retraining, and related overhead—of owning a full-time resource when they have the option to invest in a more experienced, powerful and tailored skill set at a fraction of the fully loaded cost?”

Hired guns like Pazera are flexible when it comes to compensation. In general, payment for services involves some cash in exchange for defined deliverables, but an additional equity exchange may also be included. “We prefer to have equity in all the companies in our portfolio,” he explains. The beauty of this arrangement? Startups conserve cash and C-level execs get a stake in the company they’re working with.

This equity position can make a significant difference in overall company performance, argues Pazera. “Rather than operating as transactional consultants, outsourced C-level execs with equity incentive move in concert with the other equity holders,” he explains, “and that alignment provides great assurance that the overall business mission and value creation efforts succeed.”

When it comes to early stage companies and marketing, many are, as Konsynski notes, “loathe to spend money.” With more than two decades of experience as a senior marketing executive, Debra Mercaldo, founder & president of Mercaldo Marketing Group (http://www.mercaldomarketing.com/), hopes to help growing companies avoid costly missteps. “I see a lot of beautiful business plans, but their tactics are a laundry list of things that have no relevance,” says Mercaldo. Her role is to help fledgling firms “look at their strategic plans,” she says, “and put tooth to what they’re trying to do.”

Creating and aligning a message is critical, notes Konsynski. “It’s when entrepreneurs pay serious attention to marketing that they build a message both inside and outside [their company],” he says. An expert like Mercaldo comes in, explains Konsynski, “and says what the baby is rather than what [the company founders] think it is.”

Entrepreneurs who believe they are on to the next great thing tend to be optimistic and protective about their ideas. Advice to be more realistic about expectations doesn’t always go over well. “In my experience,” says entrepreneur and startup advisor Greg Foster, “entrepreneurs think everyone is out to get them.” Foster, who serves on several boards (including that of The Onion (http://www.theonion.com/), the nation’s largest satirical news source), has noticed changes in liquidity events—including what he sees as a new benchmark: “What I’m seeing in the market and what’s changing is small in, small out. You can exit without a press release in the $10, 15, 20 million dollar range,” he says. “A lot of companies will do well and be permanently small.”

The days of entrepreneurs becoming millionaires overnight may have gone the way of the subprime mortgage. “Smart entrepreneurs in this environment know they’re not going public or selling to a large public company,” explains Foster. “They’re thinking about who they can bring on their team to help run the business and sell the business in a fairly condensed period of time. The savvy entrepreneur says, ‘I need someone who knows something about this thing.’”

Knowing “something about this thing” means knowing how to put together a pro forma and having one’s financials in order. “The entrepreneur needs to be dealing with someone who can get him ready for the big show, even if the show isn’t that big,” adds Foster.

An area of business where many entrepreneurs fall flat is human resources. As companies grow, it behooves a company’s executive team to have a clear understanding of what type of culture they’d like to establish, how they’d like the company to be organized, how to define jobs, what kind of people to hire, how to hire them and/or fire them, drug testing, safety issues—the list goes on.

“Large companies have the luxury of compensation departments, recruiting departments, heads of HR that work with the executive team,” says Peter Rosen, founder & president of HR Strategies & Solutions (http://www.hrsas.com). There’s no reason, notes Rosen, why small companies should do without that expertise—“even if it’s a couple of hours a week,” he says.

Likewise with legal services, says Konsynski. “We’re seeing outsourced, in-house counsel available to startups,” he says. Rather than hire a full-time chief legal officer (CLO) at significant cost, companies like Palladium Legal (http://www.palladiumlegal.com)—one of very few in the field, representing a new model in the legal industry—provide part-time, flat-rate CLOs to companies in search of on-going, internal management team legal expertise. A CLO helps advance and leverage a company’s business model, identify channel partners, and put in place business practices and contractual terms that can create asset value by protecting the company’s ideas, their R&D.

“Entrepreneurs don’t know what they don’t know about where the risks are in their businesses,” says Dawn Ely, founder & president of Palladium, adding that IP law is not intuitive. For example, if an outside vendor provides services and deliverables for a company but is not an employee, “you don’t own anything they’re doing unless you have very specific language in a written contract,” she says. It’s not just about protecting the startup, explains Ely, it’s about “being proactive, advancing your business and creating asset value.”

What a CLO brings to the table in this environment, says Ely, is “knowing your industry, knowing the players in your industry, their businesses and how the legal issues run through your industry, and therefore your business. That’s the greatest value of a CLO—minimizing the pitfalls that result from business managers not knowing what they don’t know.”

What it all comes down to, says Konsynski, is “wise use of available capital.” Not something gung- ho entrepreneurs are often good at. While they may bristle at the idea of parceling out equity in their companies, it’s sometimes the best way to go. “Equity gives [the outsourced executives] a vested interest in your success,” adds Konsynski.

It’s important that outsourced executives believe in where the entrepreneur wants to take his or her company. “You need people around you with expertise in your industry and [who believe] in the direction you want to head,” says Ely. It’s not unlike dating: if there’s a gut feeling it’ll be a match, give the executive a shot. If it doesn’t work out, fire him or her—and do so quickly, the panel contends. Capital is too sparse to waste.

Even with revenue coming in, it matters to investors whether or not the entrepreneur has a track record and whether or not he or she has “assembled the right pieces without spending a lot of money,” according to Foster. “This is the stuff you’ve got to get right. You’ve got to separate building the business from building a company. People are all about building a business and they forget about building a company.”

Foster says he witnesses the fallout from this confusion all the time. “The founder has a great idea, maybe even great execution on a product, but when they approach the venture capital community, their corporate records and information are a disaster. It doesn’t take much time or effort to make sure things like options agreements, the cap table, financials, etc. are all in order.”

While the current economy may make C-level executives easier to employ—even on a temporary or flat-rate basis—entrepreneurs need to be realistic about their businesses. “There should not be a VP of sales until you have sales,” says Rogers. “Until you have a shipment of your product, everyone is a VP of customers. I don’t care if you have a cure for cancer. If you have no paying customers, we’ll never value your company over a million.”

Foster notes that he often sees founders raise their first money at an unrealistic valuation, “which means that when the first round of institutional capital comes in, those original investors’ shares go down in value dramatically. This kind of ‘cram down’ makes for an uncomfortable conversation with those early investors,” he says.

To succeed, and to bring your business to the next level, says Konsynski, don’t be afraid to look for people with different skill sets and expertise to elevate your company’s game. “All too often the people who bring you to one point,” he explains, “are not the ones who bring you to the next.”

About CFO2Biz

CFO2Biz, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2Biz drives value by allowing you to run your business, while we do the math. We have offices in Nashville, Chattanooga and Knoxville. We can be found on the web at www.cfo2.biz or call us toll free at 1-855-CFO-2BIZ