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Tag: CFO centre

7 Ways To Increase Profit And Business Value

by charlottenoble
7 Ways To Increase Profit And Business Value

Have you ever wondered how your business is valued in the eyes of an external party? Then you need to know the seven (7) levers in your business.

With just a little additional focus on one or more of these 7 levers, you can directly improve the cash-flow, profitability and/or value of your business. There’s no smoke and mirrors, nor anything particularly difficult to undertake. However, many business owners do not take the time to appreciate how the financial performance of their business really works.  So, let’s break it down.

Often business owners will primarily focus on sales volume, in other words trying to sell more. However, whilst sales volume is important, it’s only one of the 7 levers available to you.

What are the 7 levers in a business that control your cash, profit and business valuation?

The first four levers are focused on your Profit and Loss and therefore directly impact the profitability (and cash-flow) of your business. As most, businesses are valued at a multiple of cash earnings. These levers also have a huge impact on the value of your business (along with other aspects such as Brand, customer base / income streams, and internal expertise / “keyman” dependence).

  1. Volume

Selling more – although increasing sales can grow your business, don’t forget to focus on the other levers below! How much of every extra $1 in revenue turns into profit and into cash in your bank account, and when?

Tip – formulate a sales & marketing plan, with a budget, which is aligned back to your  overall Strategy. Review and tweak the plan regularly.  This will help keep you focused on the right way to grow your top line.  Any growth needs to be sustainable!

  1. Pricing

can you increase your prices? Even a 1% increase can have a big impact. There can be a fear of losing customers by putting up your prices, which can often be unfounded.

Tip – review your margins by product / service stream / customer to ascertain which sales are making you money and which are not.  You need to know your break-even points!  Your part- time CFO can help – they love this stuff!

Tip – the results of your pricing analysis need to dovetail into the sales & marketing plan. It’s possible to make more profit from less turn-over!

  1. Cost of Goods Sold – reduction in % terms

This lever is most relevant to those businesses with direct costs such as manufacturers, construction, etc and places the focus on your gross margin.

Tip – revisit your direct purchasing arrangements and negotiate better terms and pricing. For example, bulk purchase discounts, early payment discounts, reduced freight.  Maintaining strong supply chain relationships is important but that doesn’t mean you can’t ask the question (or find potential alternatives).

Tip – review your direct labour-force using metrics such as labour utilisation, overtime levels, re-work, customer complaints, and down-time.  You may be able to re-deploy staff or reduce casual labour / overtime once you have this data.  Again, your part-time CFO can make this happen for you.

  1. Reducing Overheads

This may sound like an obvious one, but we always find at least some unnecessary “fat” in our client’s overhead expenditure.

Tip – someone needs to review the overheads line by line. Indirect / office wages, communications, insurance, utilities, freight, and advertising are the common ones where savings can be achieved. Even small reductions in certain areas can all add up over time!

These last three levers are focused on your Balance Sheet and are collectively called Working Capital. They have a significant impact on your cash-flow and therefore also on your funding requirements. Many businesses can avoid additional debt borrowings, or pay their existing debt faster by shortening their cash-conversion cycle.

  1. Reducing debtor days

This means improving the ageing profile of your Accounts Receivable function (i.e. getting your customers to pay you faster).

Tip – review your credit control policy and your payment terms as customers with poor payment histories should be carefully managed.  Review your collections process in terms of who chases the debt and when.  The introduction of direct debit may be an excellent solution for some businesses.

  1. Reducing stock days

This means a faster conversion of your inventory (if you carry it) into sold product, thereby reducing the amount of stock you hold.

Tip – introduce a stock-take process if you don’t have one. This can ensure that your financial records mirror what you actually have on the shop-floor. Then review the results of the stock-take for slow-moving or obsolete stock items – these may need to be discounted in order to convert them into cash.  Your purchasing policies may also need review if you are over-stocked with certain inventory lines.

  1. Increasing creditor days

This means taking longer to pay suppliers (without hurting the relationship or cutting off supply).

Tip – contact your suppliers to re-negotiate your settlement terms. It’s just a matter of asking the question – they may say “no” but then again, they may really value your business.

Now you know the what the 7 levers are, it’s time to do something tangible with them in order to make a real impact on your business. If you don’t have the internal expertise or time to make it happen, we would be happy to talk to you about how a part-time CFO can bring this to life. After all, as CFOs it’s what we do!

 

Photo by Monstera

Don’t Call it Your Dream, Call it Your Plan

by bethfarnham
Don’t Call it Your Dream, Call it Your Plan

Life through a lens

One of the toughest challenges for owners of SMEs is to be able to stand back, to look at their business through a wide-angle lens and identify what it is they really have.

Because quite often, the day-to-day distractions and diversions that inevitably surround the running of a successful business – particularly when there’s a global pandemic pulling the rug from under everyone’s feet – get in the way of sensible, objective evaluation and strategic decision-making. Crucially, that can mean that really important opportunities to grow and develop go at best un-exploited and at worst, un-noticed.

This is where the role of Chief Financial Officer becomes so vital. And where the specific advantages of joining forces with a part time (and often virtual) CFO are brought sharply into focus.

Allow yourself to dream…

What does your CFO do for you as the owner of an SME? Hopefully, they’ll make sure that everyone gets paid the right amount at the right time; sort out your internal reporting, compliance and tax planning, and probably run your relationship with your bank.

While that (along with a few other bits and pieces) is probably enough to keep a business ticking over, it’s not a reasonable platform on which to base a sound growth strategy.

Of course, things look even worse if you don’t have a CFO on your team. Whatever your business and whatever your own specific talent, it’s almost certain that you didn’t get into business to spend your life doing cashflow projections or dealing with taxes! No dreaming for you – you’re more likely to be waking up at 3 am in cold sweats.

A CFO Centre CFO can help make your dreams come true

When you started your company, you almost certainly allowed yourself to dream – every successful business operator needs ambition. But as we’ve seen, all too often those aspirations become bogged down in the everyday grind of keeping a business afloat.

The CFO Centre team provides CFO expertise of a very high caliber – the top 1% of talent in the marketplace. These are people who know their stuff – the operational finance stuff, which keeps the wheels in motion and the strategic finance stuff, which brings the dream to life.

In many cases they’re able to draw on their own business success to guide others.

A CFO Centre CFO will help decode the dream and turn it into a plan and be the one to hold you to account to make it happen. He or she will bring forward the target by showing you how to come at it from a different angle. Great CFOs are catalysts and can help you break the pattern of linear growth and get you what you really want on an expedited timetable. And that’s essential if the dream is still to come true.

The CFO Centre ‘Entrepreneur Journey’: our ‘secret sauce’

All CFO Centre CFOs operate within an environment that provides comprehensive support and expertise. The CFO Centre has a global network – a Collective Intelligence Engine – of more than 700 individuals, each of whom has achieved success as a CFO and often as an MD or CEO, themselves. What’s more, they are uniquely able to access and deploy the limitless potential locked up in your business model. And they talk to each other, share expertise, experiences, and contacts.

In brief, a CFO Centre CFO will guide the entrepreneur on a three-stage journey to achieve clarity about what it is they really want from their business. To take them from where they are now, to where they want to be.

And to be clear: ‘where they want to be’ is an individual choice for the business owner. It might involve scaling up significantly; it could mean launching new products in new markets around the world; perhaps it means ratcheting up your multiple as you prepare for exit. Whatever form it takes, it’s invariably about making that dream a reality by refashioning the plan and making sure it actually happens.

Stage One on the journey covers the process of achieving operational excellence. In other words enabling an organisation to do what it does best, to the best extent possible.

Stage Two, strategic opportunity, involves preparing the springboard. This is where the strategy to achieve those dreams is forged. Perhaps it’s a question of entering new markets; evaluating risk, raising new funds. Whatever the strategy, it’s based on sound experience and, yes, that ‘secret sauce’ that blends the logic with a little magic and know how.

Stage Three, game-changing performance is, simply, what happens when stages one and two are complete.

The dream is achieved by developing a concise roadmap based on what the business owner wants to achieve. The role of the CFO Centre CFO  is to identify and unlock that potential – thus freeing the dream and making it a reality.

Fly like a bird

Of course, this is not to suggest that success comes easily. Business challenges are usually complicated and risky. That’s another reason why potential isn’t always realised; why many business owners end up working late nights on mundane tasks.

So, one of the first conversations a CFO Centre CFO will have with a client is to understand what it is that motivates them to be in business, and what they want to achieve from it. What really matters to them. There are numbers, many numbers, in the life of a CFO, but it’s identifying and understanding the numbers that really matter in the client’s life that is crucial.

A CFO Centre CFO aims to unlock that potential and give wings to the dream.

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Client Story: Fiera Private Debt

by annbeldia
Client Story: Fiera Private Debt

Client Profile

Fiera Private Debt, a subsidiary of Fiera Capital Corporation, is a leading pan-Canadian private debt firm. It specializes in providing financing to developers, property owners, and mid-market businesses, as well as securing corporate and infrastructure debt financing.

Headquartered in Laval, Quebec, with offices in Montreal and Toronto, Fiera is renowned for its highly disciplined, credit-driven approach to investments that creates significant returns for their investors through collaborative, proactive financial strategies.

The Client’s Need
When Dino Fracassi, Managing Director, Business Finance at Fiera, started working with his new client, a leading supplier of custom products to brick-and-mortar retail locations, he knew that they needed to go in a new financial direction.

His client had already extended their credit beyond their means, and had been put into the “special loans” category at their bank. Needing additional working capital to stay afloat, they approached Fiera for assistance.

Dino reviewed their organizational structure and determined that for the company to transition back to traditional lending from their bank, they needed a significant adjustment to their current financial and operational stewardship. To accomplish this, Dino turned to The CFO Centre.

“Paul Nagpal, COO at The CFO Centre, was already part of my professional network, and our two organizations had successfully partnered on previous occasions. I offered him the chance to help with my new client, and gave him an idea of the perfect CFO for this file: someone with retail and B2B manufacturing experience who had a proven track record of successfully navigating companies through rough financial patches. Right away, he told me about Barbara Palmegiani, one of his company’s principals. After learning about her credentials and speaking with her directly, we knew we had found the right person to help get my client where I needed them to be.” – Dino Fracassi, Managing Director, Business Financing, Fiera Private Debt

The CFO Centre Solution

Barbara went into Dino’s client as the full-time, interim CEO with a mandate to restructure the company by assessing and resolving the cash burn, and work collaboratively with the executive team to make the necessary changes to return the company back to profitability. Her previous executive financial and operational roles gave her the experience to identify immediate insights into what needed to be done in order to improve their strategic direction and implement the appropriate operational and financial processes and controls for a company of their size, including:

  • Prioritize cash management best practices
  • Identify and fix challenges to Cost of Sales
  • Take control over expense management optimization
  • Create financial, forecasting, and budgeting tools and processes
  • Coordinate cross business collaboration to efficiently align with corporate goals, objectives, and strategic direction
  • Replace their dated technology with current, cost effective financial and operational systems to enable the executive team to formulate insights that enhance strategic decision-making
  • Identifying, monitoring, and reviewing key performance indicators (KPIs) and adjusting where necessary to help maximize growth
  • Strategically reallocate human capital to help increase cash flow
  • Improve procurement and inventory management processes

Two other critical issues needed to be addressed in order to return the company to profitability:

  • The company owned a subsidiary in China created to directly serve the growing East Asian market. The location was proving unsustainable, lacking growth potential, and costing too much money to continue operating profitably.
  • Their domestic operation was currently working out of a 150,000 sq. ft. space. It was determined that they could operate more efficiently and at a significantly lower cost with less than half this space.

“Barbara’s commitment to helping my client succeed was impressive. She took a deep dive into every aspect of their business, and quickly identified the roadblocks that were causing cash flow and growth issues. Barbara continues to work transparently with Fiera and the executive team, having earned and built our trust.” – Dino Fracassi, Managing Director, Business Financing, Fiera Private Debt

The Results

Barbara put her plan into action, which continues to yield positive results for Dino’s client.  They are now able to focus from top to bottom on fixing the smaller problems, having developed a strategy to tackle the bigger ones, including:

  • An improved workplace culture driven by collaboration
  • Streamlined internal processes with minimal waste and duplication
  • Increase in cash flow due to better financial processes and controls, as well as a reorganized workforce
  • Better financial accountability and strategic decision making through monthly financial meetings and reviews
  • Additional financial support from government-sponsored pandemic relief programs

Thanks to The CFO Centre’s vast professional network, Barbara was able to connect with overseas legal and real estate professionals who could help transition the client’s operations in China, which resulted in immediate savings.

Barbara’s extensive background negotiating with landlords enabled her to identify and execute a win-win solution for both Dino’s client and their landlord, which will significantly improve their bottom line going forward.

In less than one year, Barbara’s involvement with Dino’s client has already set them on the path to better long-term financial health and sustainable organic growth.

“Working with Barb has been fantastic. We asked The CFO Centre for what we needed in a theoretical sense, and they connected us with a perfect match. We wouldn’t have been able to do that on our own. I’m excited for the future of my client’s business as they once again become able to maintain profitability, and ultimately be able to return to working with the bank. Thanks to Barb and The CFO Centre, it’ll happen sooner rather than later.” – Dino Fracassi, Managing Director, Business Financing, Fiera Private Debt

Find out more about our CFOs.

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Client Story: Walker Homes Ltd.

by annbeldia
Client Story: Walker Homes Ltd.

Client Profile

Located in Port Elgin, Ontario, Walker Homes Ltd. specializes in constructing beautiful new homes that stand the test of time. Co-owners Ryan and Brooke Walker carry on three generations of family homebuilding tradition, helping to develop thriving communities with each new build.

Walker Homes goes the extra mile for its customers by guiding them through each step of the home-buying process, all the way to closing day. Your family can then enjoy the 9-foot ceilings, Napoleon Gas fireplaces, luxurious Canadian-made kitchen cabinetry, and brick exteriors that come standard with each Walker home.

The Client’s Need

Walker Homes had been steadily busy for a number of years in a strong housing market. However, the company was quickly outgrowing their financial system, which consisted of manually entering projects, revenue, costs, and other important data into Excel spreadsheets. They also handled procurement verbally without a purchase order management system, and tracked hired contractors by cheque stub.

This system offered no way to generate financial reports, budgets, or forecasts hampering business growth.

In January 2019, the Walkers discussed their concerns with their accountant, who suggested they contact The CFO Centre for assistance in getting their financial management under control.

“Brooke and I wanted our time back from working with a system that no longer met our needs, so we were intrigued by what The CFO Centre had to offer. When we were introduced to Byron Dyck, we were thrilled to learn that not only was he intimately familiar with the Port Elgin area, but that he also used to run his own construction company before joining the firm. We couldn’t wait to get started.” – Ryan Walker, Co-owner, Walker Homes Ltd.

The CFO Centre Solution

Byron drove out to the Walkers’ location for a fact-finding visit to learn more about their business, listen to their pain points, and pull from his experience as a construction business owner and a CPA to discuss possible solutions that would be part of their overall action plan.

“Byron paid close attention to where the business was now and where we wanted to take it. It was refreshing to speak to someone who knew our business, understood what we were facing, and could offer the advice we needed to succeed. We felt so confident that he was the one who could help us that we signed the engagement letter that same afternoon.” – Ryan Walker, Co-owner, Walker Homes Ltd.

Byron reviewed his clients’ goals and created scenarios in order to put together an ambitious financial strategy to move their business forward. The highlights of the plan included:

  • Decommission the use of Excel for financial recordkeeping
  • Install specialized integrated construction software
  • Fully revamp their estimating, invoicing, cost reporting processes system to better track projects
  • Increase financial report frequency to once per month
  • Put budget and forecasting processes in place
  • Hold monthly financial review meetings to discuss results, make changes where necessary, and track progress
  • Negotiate better payment terms with creditors

Walker Homes also enabled Byron to work remotely from his location, granting him network access to their system so he can mentor them through the implementation and use of their new software in real time.

Byron set this remote system up because The CFO Centre focuses on collaboration, and fosters strong working relationships with their clients to implement strategies completely customized to their needs. The ultimate goal is to keep CFO Centre clients competitive and well-positioned for long-term sustainable growth.

The Results

After working with Byron to implement the plan, Walker Homes has seen an increase of 300% in sales volume. In addition, by the end of 2019 they had pre-sold their entire 2020 inventory, and as of November 2020 they’ve sold a vast amount of their 2021 inventory, even under the current year’s challenging economic climate.

Behind the scenes, the clients saw results that improved the overall operation and financial health of their business, including:

  • Significantly improved financial management across the board
  • Improved scalability for increased volume of projects
  • Monthly review of financial statements to report on individual projects
  • Seamless record keeping and retrieval
  • Favourable payment terms from their biggest creditor, improving cash flow to stimulate growth
  • Additional funding secured in response to the COVID-19 pandemic
  • Hiring of additional staff to support data entry work

Byron continues to work with Ryan and Brooke one day per week, on call to answer questions about their new systems and provide oversight to their entire financial structure. For almost two years, the strategic partnership between Walker Homes and The CFO Centre has solidified into a professional relationship built on trust and experience, something that the Walkers are quick to recognize.

“Byron is always there when we need him. All it takes is to send him a quick text and he’ll get on the phone or Facetime to answer a question or help us solve a problem. We’re happy with the results and the ongoing support from Byron and The CFO Centre as we keep moving our business forward. In fact, we think of Byron as more than part of the team – we consider him family.” – Ryan Walker, Co-owner, Walker Homes Ltd.

For more information about Byron Dyck.

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