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30 WWW.CFOSTUDIO.COM 1st QUARTER 2013 A company in a fast-growth industry hit a stubborn plateau.The president con- vened the management team to address why the business wasn’t growing. Naturally, they focused on the marketing and sales func- tions first. In their case, the president’s primary responsibility is new business development so he shared his frustration over not being able to invest more inmarketing or to get a real sales department behind him. Hmm. Maybe the plateau isn’t just a matter of too little or ineffective sales effort. Maybe it’s also a profitability issue. At first blush, that didn’t seem to be the case because the net profit reported on their P&Ls looked pretty good. Maybe the company needed to obtain growth financing. After all, they are in a growing industry, and the window of opportunity won’t be there forever. The CFO cringed at the thought of dealing with private investors. It was hard enough to get the invoices and monthly financial reports completed in a timely manner. By this point in the discussion, the managers of the client-facing departments sounded exasperated. They were exhausted from working so shorthanded at a time when clients were demanding more and more from them. This company had a serious profit- ability problem and the president and other owners could not see it. Where should they begin? Yes, this company needed to attract more revenue, but if they just brought in more work for already exhausted production people, they could experience significant resignations. Money had to first be invested in financial analysis. Clearly, this business did not have a real CFO. Despite the high salary paid to the individual, the company only had an over- worked staff accountant. Big difference! Once some outside direction was provided from a qualified source, they could see that their largest client-focused department had huge amounts of unbilled client-related time, multiple inefficient approaches to core tasks, and highly paid employees performing every level of work, including basic clerical functions. Several clients generated well below the minimally acceptable level of gross profit and a handful of clients actually generated nega- tive gross profit. (Yes, you read that correctly: negative gross profit.) Together, the management team made huge changes. They instituted new systems, changed their organizational structure, hired some lower-paid employees to whom simpler tasks could be delegated, wrote job descrip- tions, addressed customer expectations, modified their approach to pricing, and dealt with contracts. They also hired a professional salesman. Even though he had industry ex- perience and a strong track record, it would still take a little time for him to ramp up and become fully productive. This company is now more worthy of private investment and/or bank loans. All of this work has been costly and cash has gotten tight. So here they go again. If the president has to spend a great deal of his time preparing business plans and other documents for bankers and private investors, will he and the new sales executive attract a sufficient number of profitable new accounts quickly enough to carry the company through this cash-tight period? This company needs a real CFO Who would have the authority and credibility to tell the president that he and other owners may need to temporarily reduce their compen- sation? Who would generate the best-case and worst-case scenarios and contingency plans? Who would quantify the cash shortfall so the president would know the size of any bridge loan? Who would calculate the appropriate level of interest if loans from relatives are even possible? Who would generate at least a “quick and dirty” valuation in case a private investor group did approach the president … to pre- vent him from selling too many shares for too little cash…because he can’t sleep at night? Having a real CFO on board could have prevented all of these issues. Why do so many leaders of mid-sized companies still not know the difference between a CFO, controller, staff accountant, and bookkeeper? C GROWTH STRATEGIES Aldonna R. Ambler, The Growth Strategist CFO Isn’t just a Title, It’s a Mindset Aldonna R. Ambler, CMC, CSP, has earned the right to be called THE GROWTH STRATEGIST ® . She has won more than two dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across four recessions. Her midsized B2B clients come to her for opportunity and resource analysis, four approaches to strategic planning, executive advisory services, growth financing, and targeted search, all of which are key to achieving accelerated growth with sustained profitability ® . Her clients get on — and then stay on — the published lists of the fastest growing pri- vately held companies. Ambler is in her eighth year hosting a weekly peer-to-peer-to-peer syndicated online talk show that features interviews with CEOs/presidents of midsized companies sharing success tips about the growth strategy of the week. An archive of more than 300 interviews is available at www.GrowthStrategistShow.com . She can be reached at 1-888-Aldonna or at Aldonna@ambler.com. Learn more about the author www.CFOstudio.com/AldonnaAmbler THIS COMPANY HAD A SERIOUS PROFITABILITY PROBLEM AND THE PRESIDENT AND OTHER OWNERS COULD NOT SEE IT.