254: CFO2GO for Your Business 

Michele Williams: Hello, my name is Michele, and you're listening to Profit is a Choice.

On the podcast today, we're going to consider the work of a CFO or a chief financial officer. Given that most of our businesses are too small to hire this as a full-time position, we've begun to see the rise of fractional offerings in this space. Today, we're going to talk about what a CFO does, and if you need one.

Every day, empowered entrepreneurs are taking ownership of their company financial health and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design industry, educator, and speaker, I coach women in the interior design industry to increase their profits, regain ownership of their bottom line, and to have fun again in their business.

Welcome to Profit is a Choice.

What really is the job of the chief financial officer? I'm going to read out a couple of things that they normally do. They drive the company's financial planning. They perform risk management and look at your liabilities and your investments, maybe helping with some debt repayment. They decide on investment strategies. They look at your liquidity. They control and evaluate the organization's fundraising plans and capital structure. They ensure your cash flow is appropriate. They might supervise your finance personnel. In some of the larger businesses, they even manage the IT department, and they ensure that you are compliant with the law and with company policies.

But when do you know if your firm needs the work of a CFO? Here are some areas to consider. Are you experiencing rapid growth? Do you have a merger on the horizon, or maybe an IPO? Are you looking to buy or sell within your company? Could you have some accounting errors or inefficiencies, or are there challenges to understanding your financials and you need some consolidation or just deeper analysis?

Here's the kicker, though. Traditionally, a company would not hire a CFO until they had revenues of around $50 million. Yes, 50 million. What, are you shocked? Do you not have revenues of 50 million? I know I don't, but I still need the services of a CFO. I still need that type of work to be done in my company. So, because of that, what we're seeing is these smaller companies are jumping in and they're hiring fractionally.

What does it mean to hire fractional? It means to share time. So that's really all that we're saying is you're sharing time with another company to have someone come in and perform those services. Here are some of the more basic CFO offerings that we might need as a smaller company. We might need help with a strategic plan and with assigning a dollar amount to those initiatives. We may need help reviewing our financials and making sure that we're in line with where we need to be for future growth or reduction, and then analyzing our profit centers. We might need help setting and measuring to KPIs and looking at additional KPIs or key performance indicators that our company might need.

The other thing that we're thinking about here is, how do we want to move forward. Do we want to have more of a hiring opportunity, or do we need to fire; what is happening in the company? Sometimes you're going to see these offerings positioned by your bookkeeper, or perhaps by an accountant, and that's great.

But as we know, all CFO services are not the same, just like all design services are not the same. Many of the CFO offerings that I've seen from accountants tend to focus much more, especially from general accountants, not those that are maybe as specific to our industry. In the more generalized accounting, I see that they are either focused more on taxes and tax savings, which we need, but less focused on the individuality of your business. That's where we're seeing a lot of people asking for help. They're saying, I understand in general, like, I listen to a podcast, even this one I understand in general, but when it gets down to the nitty-gritty specifics in my business, what do I do? How do I do it? How do I see that? Working with your bookkeeper, and working with your accountant are great places to start. But I know from speaking to many of you that your team doesn't offer that and if they did, you're talking, in some cases, eight to 10 hours' worth of work, and, if they could even do it, and if they want to do it, to try to give you the information that you need.

One of the reasons that we created Metrique Solutions as software for small companies was actually just for this reason. To give you the power of your numbers in a way that a CFO would look at them. Metrique allows you to model out multiple financial plans before you decide on which one you want to actually implement for the year. These plans give you the ability to go from top-down, meaning from revenue to net profit, or bottom-up, net profit up to revenue, to determine the amount of money your company needs to bring in during the year and how it's going to be spent in the five major areas: revenue, cost of goods, gross profit, operating expenses, and net profit.

Metrique then allows you to create some pricing strategies, because it's not enough to have a plan, we have to know how we're going to price to get there. Then you can work back and forth through the concepts of what are the margins I want and what are the markups I want. How much are we going to make from marking up products versus selling our time or our labor or our expertise?

Once you've worked through and kind of nailed down the model, the one that you want to commit to for the next year, we actually assist you within Metrique in creating the budgets and setting the KPIs to follow. So then at that point, your strategic plan matches your financial plan, that matches your budget, that matches the indicators or the metrics that you're going to measure.

The disconnect that we see quite often when I speak to companies is they've got these great plans, and they might know how much money they need to make. If they know that they don't always know where the intersection is in all of these areas to know what they should be measuring and when, or they spend their time measuring something that doesn't matter in the grand scheme of things. Also, in Metrique, you can model out billable capacity. What is the ability of your team to bill, especially if you are charging by the hour? What if you wanted to increase your billable rate or decrease your billable rate or hours? Then as you keep up with that information and you enter it, we also give you the ability later to see what your utilization rate is. Because it doesn't do you enough, of course, with anything to create a bunch of goals or metrics or KPIs or plans if we're not managing to them and measuring to them. With the latest Metrique release that has just come out, we also have an opportunity to give you break-even scenarios. In the break-even modeling tool that we have, you can put in scenarios and see how many projects it's going to take to get it done, how much you need to make per project that you're doing, and what your average sale looks like. We can tell you what your breakeven is with profit without profit, with your overhead alone, also with your payroll. So, so many ways to look at it so that you have the power of the decision-making.

Not only does Metrique assist you in knowing what's possible, but it also allows you to set those KPIs, as I said, to measure against. Here's an example. Let's say that Sally is on your team, the plan is that we've set it up for her to bill out at 60% each month, she's working 40 hours a week, at a rate of $150 an hour. That tells us her capacity to bill. Our billable capacity, our plan for her is 96 hours of billable time a month with a revenue of $14,400. That's what we're expecting to come in. But by keeping up with your time tracking and entering that information into Metrique, we can see that she actually billed out at 99.2 hours, and then she brought in $14,880, and her utilization rate was actually 62%. Now, if we watch Sally's utilization rate stay at 62% for a long time, maybe we start assuming that that's the rate she's going to work at. Now we can start to see, is this a blip, or is this a norm for her? Is she always just higher than what we expected?

But what if Sally's coming in at 48%? This is unfortunately what I see the most often. There is an expectation of how people bill, really bill, not like the inflated bill that then you, as the lead cut down, but there is an idea that they're billing at 60%, yet all of the paperwork, all of the time tracking shows us that they're actually billing at 48%. But if we're not looking at it and we're not aware of what we anticipated it being what our financial models were created upon, we might not step in and figure out what is that disconnect. Why is there 12% less billable time than what we had planned for? Because that'll shoot an entire budget if we're not careful. But here's what we found.

Many of you are already doing some piece, portion, or some type of this work in your own individual spreadsheets. The ones that are doing that are usually able to jump into Metrique pretty quickly because they've already been doing it. They're already thinking that way. But there are also many of you who know you need to know this, who want to know this, who don't have spreadsheets, don't know where to start, and don't know how to pull the pieces together. With that, what we decided to do was to create an offer here at Scarlett Thread Consulting called CFO2GO.

Why would we name it CFO2GO? Because our goal is to help you understand how to do this work and then let you go do it, not to hold you tied into some long-term engagement. Certainly, we'll be here to review and to look at things, but the idea is for you and your team, your bookkeeper, and your accountant, to be able to do this with the help of Scarlett Thread Consulting, to set up the framework and then Metrique Solutions to help you actually put it into practice. Some of the things that we would help you do would be to actually learn to think like a CFO.

What does it mean to think like a CFO? It means to look at the numbers, to look at the strategy, to look at the plan, to set some measurements, and then to actually analyze and measure to those very important numbers. It means to create a budget. It means to tell your money where to go. It means perhaps to include Profit First in your money management systems. Metrique Solutions is actually the CFO in your pocket, that's what we want to be. Once it's set up to support you, it's then just about measuring, measuring, measuring, measuring. This work, again, could take eight to 10 hours for an individual every month to analyze, compare, and give you the information that Metrique Solutions can give you. If you paid your bookkeeper $85 an hour for 10 hours' worth of work, just on this a month, not including getting all of your financials in order, that's an additional $850, if not more, a month just to be able to give you the power of this information. Imagine paying that as compared to the cost of ours, which is $129 a month. It's not even comparable.

The CFO2GO program is a bridge. You have the opportunity to come in and have me and my team look at your business. Not just give you generalizations, but look at your financials. Determine what you have and determine what's missing. Help you create those financial plans and those budgets. Help you understand the way to think, and to do it so that if you want to do it on your own or do it over and over, you have the ability to do that. Imagine just learning how to think that way. Even if you have someone else helping you, the ability to know it enough that you can talk about it and ask the right questions is very powerful, I just can't tell you how much.

We're willing to have you bring in your bookkeeper or your accountant when we go through the CFO2GO process with you, we want to be part of your financial team to help you actually put this in place, and have your business, in a good position to move forward. It's truly a bridge. It's meant to help you find the rhythm to manage your financials in a way that's going to fit the plan that you have. The power of your financials is close. It is right here within reach.

So, the question is now, do you want that power?

Do you want to know how to know where to go and how to get there financially?

Because we want to help you. We know that it matters. We know that these numbers can create such confidence in moving forward.

There's nothing worse than either not knowing how to pay yourself, having the money in the account, not knowing if you can take it out, not knowing what it's meant to do, and not having a plan. We can help you solve every bit of that. It doesn't matter if you're in your first six figures, first few six figures, if you're in the seven, eight, nine, or ten figures. Everybody deserves to be able to understand their numbers.

Starting, planning, and measuring are needed at each step of the way to be intentional about the business that you're building. And guess what? Again, you can invite your bookkeeper and an accountant to join you. We welcome them. Let's work together as a team to get your finances in order so that you can make a plan and you can measure responsibly. I can say this until I'm blue in the face, and it's usually the sign-off on every podcast that profit doesn't happen by accident. This is your invitation to be intentionally profitable.

To learn more, you can check out scarletthreadconsulting.com/CFO and you can also check out more by going to MetriqueSolutions.com. Choose to be profitable by doing the necessary work. 2024 is your year. As always, profit doesn't happen by accident.

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