Do you need a financial sounding board?

Looking for someone to bounce your ideas off? Hoping to make smart financial decisions and avoid the pitfalls? These aren’t the questions you should be asking your friends and family members, unless they really know their stuff. This is where your virtual CFO comes in seriously handy.

“…Roughly 50% of small businesses don’t make it past the five-year mark. While there are several reasons for business failure, many small businesses simply aren’t making the wisest financial decisions,” according to Xero. “Unfortunately, most small firms can’t afford an in-house finance head to help navigate the dark art of accounting and finance. Nor do they want to. They’d rather be running the business, talking to customers and drumming up that next sale. They need the help of an accounting professional more than ever.”

That accounting professional can be your virtual CFO, helping you understand all the potential financial ramifications when you’re making decisions for your business. We can talk you through the short-term costs, the long-term outcomes and how long it will take for your expenditure to pay for itself. We can analyse the numbers and look for potential upsides – or downsides – you may not have considered.

Bounce your ideas off your virtual CFO to help you grow sustainably – not too fast, not too slowly. We can talk to you about how to fund your growth, whether it’s from the business or via a loan or a new investor. We can run a cost-benefit analysis and talk you through the ways we’ve worked with other clients to make similar decisions, and what the results were. And don’t forget we understand the tax implications, so we can help you factor in any cost or savings in that department.

For just an hour or two each month, you’ve got your own chief financial officer to bounce ideas off and give you a fresh perspective on the bottom line. Because we have so many successful clients, growing hundreds of businesses across our books, SME can give you a broader outlook than you might get even with a dedicated CFO. It’s not always easy to make rational financial decisions when you’re so heavily invested in the day-to-day running of your organisation. A second pair of eyes – and ears – can be an invaluable tool in the growth of your company. Talk to us today about consulting with a virtual CFO.

The on-demand CFO

Sometimes you don’t need a full-time CFO – and that’s where a virtual CFO comes in. Virtual CFO services can help you get all the expertise and financial reporting you need, on a regular basis, without employing your own Chief Financial Officer. Excellent.

A virtual CFO can help you by providing possibilities and potential answers to some of the big questions facing every business:

·       Can we afford it?

·       How will we pay for it?

·       What are the long-term financial implications of this decision?

·       Where can we save money?

·       How can we make more money?

·       Are we correctly pricing our products or services?

·       What should our targets be?

Ideally, you’d have a virtual CFO working on these questions regularly and providing you with direction and strategies for growth. But you don’t always need to have a virtual CFO on a regular reporting schedule. Some small businesses may find they need the services of a virtual CFO for a single project or a set timeframe. It could be that you just need to analyse your financial data:

·       Which products are making us the most money?

·       Are our accounts ready for the sale of the business?

·       What trends are we seeing in sales over time?

·       Where can we increase prices?

·       Which items are falling short of expectations in terms of margins?

Alternatively, a virtual CFO can be outstandingly helpful if you’re aiming to raise funds. Your virtual CFO can present your current accounts to showcase the positive aspects of your business and its potential for success and growth. Your CFO can help you find new shareholders, speak to lenders and evaluate other credit options.

Additionally, your virtual CFO is a vital part of any feasibility study. The right advice can help you work out whether you should:

·       hire that extra staff member

·       buy that new vehicle

·       stock that new high-end product

·       open a store

·       launch a new brand, or,

·       upgrade your office, for example.

Finally, do you need someone with deep financial understanding to represent your company when you are meeting with major clients, suppliers, lenders or shareholders? Your virtual CFO can help represent your business in a range of situations.

Talk to SME today about working with a virtual CFO on your next project or feasibility study – or simply to help you answer the big questions and set your business up for a successful year ahead.

What does a virtual CFO do?

Not too many businesses have their own chief financial officer, or CFO, – but you might still need the help of someone in a similar role. A CFO would usually help direct financial operations at your business and attend a regular meeting with directors to report on the financial performance of the company.

By outsourcing this role, you can get many of the benefits of an in-house CFO without the large salary required. This is an increasingly popular service at SME, but we’re often asked what it actually involves.

A virtual CFO will be able to do the following for your business:

·       Find a way to help you see exactly what financial position you’re in at any moment.

·       Work out how to get the essential numbers into your systems so that can happen – this week we helped a client import all her inventory to Xero so she can keep track of her sales at a glance.

·       Create financial forecasts to help you plan and organise your cashflow.

·       Help with the structure and governance of the organisation.

·       Work out where your money is coming from: your gross profits, net profits, most profitable items or services, what’s making you money and what’s inefficient.

·       Know where your money is going: your payroll, taxes and the costs of what you’re selling; where you can cut back and where you might need to spend more.

·       Give you budgets and goals for the coming month and the year, plus strategic and business plans for the longer term.

·       Create financial documents that show lenders, investors or potential buyers how successfully your business is operating and how much more growth it might have.

Your virtual CFO will attend – physically, or virtually – a monthly or quarterly meeting to report on the business’s financial performance, just like a full-time CFO would. Because this service can be offered at a fixed monthly (or quarterly) price, it can be worked into the budget along with your other costs.

This is a serious value-adder, because once we’re in those monthly meetings we can help you with a fresh perspective and a hard look at the profitability of your business model, among other aspects. At its most basic, a virtual CFO means you’re not burying your head in the sand. It’s almost impossible to grow your business if you don’t know your financial position right now or what it’s likely to be in the coming months. By giving you some outside guidance, a virtual CFO can lift your business out of the mire of day-to-day sales and give it new direction and momentum.

Give us a call today to find out more about what a virtual CFO could do for you.


Succession planning: stepping back

I’ve spent a lot of time thinking about succession planning, both as an adviser to my clients and as a business owner. New Zealand’s economy is underpinned by small and medium-sized businesses: 

  •  97%, over 473,000, of Kiwi businesses have fewer than 20 employees and 69% of Kiwi businesses, over 338,000, have zero employees.
  • 43% of self-employed people are over the age of 40, which includes over 40,000 people aged 60 to 65 and over 23,000 people aged over 65 – the biggest wave of Baby Boomers.

This means there are tens of thousands of New Zealand business owners who will need to think about succession planning, but there’s surprisingly little out there to help them. If you’re starting a business, you can access business mentoring, grants and other encouragement relatively cheaply or even for free. This is despite the fact that the failure rate for start-ups is high: some estimates put it has high as 80% over the first 18 months.

How does this compare to businesses where the owner/manager is trying to step aside? Surely if these companies manage to successfully move to new ownership, their success rate is likely to be much higher? Yet the amount of help available for those trying to find a way to step back from their business is minimal. It’s certainly far less exciting to buy or move into an existing business than to start a new one from scratch, but I would argue that the existing business is far more likely to succeed because it already has a track record of profitability.

It’s true that many of New Zealand’s smallest one-person businesses simply can’t be sold; they depend so heavily on the personality of the owner/manager and the specific service provided.

For those businesses with employees, however, there needs to be some kind of succession planning. Selling a business can take months, or years, and the right type of buyer can be hard to find. Once you have found a buyer, the transition period can be bumpy.

I think there’s a real gap in the market when it comes to succession planning in New Zealand, so I’m going to be aiming to provide some case studies and ideas about it in this blog over the next 12 months. I’ve had a substantial amount of experience over the past 30 years in getting businesses ‘sale ready’, finding buyers for businesses, and transferring ownership (including, I should add, to family members, which is an extremely tricky process and requires expert handling). If you know someone struggling with the challenge of stepping back from a business, pass on my name – let’s get this conversation started.

 By Geoff Hamilton, CA

Why strategic planning works

A strategic plan maps out the next 12 months or more for your business – along with the obstacles you’ll face and how you’ll overcome them. If your business doesn’t have a strategic plan, it doesn’t mean you can’t succeed. But a strategic plan helps you make decisions, giving you a blueprint to build towards, and preparing you when adversity strikes. It doesn’t need to be pages and pages of plans; this is a one-pager that is continuously revised and updated to keep pace with your changing business. 

Doing a strategic plan on your own is possible, and it’s certainly better than having no strategic plan at all. But with fresh insights and a different perspective, it’s easier and more fun to set up a roadmap to a great year ahead. Most small businesses have vague goals, or none at all, and far too few have strategic plans. Here are five ways strategic planning works:

1. It gives you a chance to step back and look at how far you’ve come.

You’re often so busy working to solve problems for your clients that you never lift your head out of the business to recognise what you’ve achieved so far. When you consider how far you’ve come, it can help you feel inspired and energised for a new phase of growth.

2. It helps you identify your profitable lines – and those that need to be trimmed.

When you want to make more money, it’s hard to say ‘No’ to work, even if it’s not particularly profitable or enjoyable. When you have a strategic plan, you know what work to say ‘Yes’ to, what products or services deserve more attention, and which ones could do with being reduced or even eliminated from your line-up.

3. It helps you set goldilocks goals: not too easy, not too hard.

Small business owners often struggle to know what a sensible goal looks like: a goal that’s too modest won’t help build your business, while one that’s too ambitious can leave you feeling like a failure if you fall short. Outside input can find that balance.

4. It thinks about your future, too.

When you dedicate your life to your business, it’s easy to forget your personal goals. A great business plan will help you build the kind of lifestyle you want at the same time as growing a sustainable company. There’s no point creating a business plan that forces you to work increasingly long hours.

5. It helps you tell other people about your business.

If you need funding, or you’re just networking, a business plan can help you answer all the questions other people have about your enterprise.

Not sure where to start? Talk to SME and we can help you sit down and map out the future of your business in 2016 and 2017 – we can help you put your company on track for its best years ever.