Free Emergency Scenario Planning Consultations

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In the light of events over the past weeks, we are very conscious of the heightened levels of concern facing businesses at the moment. The CFO Centre is also an SME and it’s very much a time where we are all in this together.

The purpose in writing was to let you know that we are here to help and have set aside some time to talk to companies in need of urgent advice, on a pro bono basis. We are very well positioned to help and would like to give something back.

As it stands today, the greatest concern for SMEs is cash/liquidity. As Chief Financial Officers, navigating these issues is what we do. Admittedly this is a particularly unusual situation, but there are measures you can take to put yourself into the strongest possible position for the weeks and months ahead – and fast action will of course pay dividends.

Even if it’s just to have a 3^rd party perspective and potentially put forward some options you may not have known were available, we’d love to help if we can.

If you know someone who would value a conversation to review their current situation and look at their options to increase liquidity and mitigate risk, please contact us on 1-800-918-1906 or at [email protected] so that we can set up a video conference call to review with one of our virtual CFOs.

The Dangers of Phishing: How to Identify and Protect Yourself

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In this day and age, we rely on the Internet for its convenience, such as online shopping or banking. Although the Internet solves various pain points in our lives, it also comes with its dangers, such as cybercriminals who try to exploit users online. One of these cyber attacks is known as “phishing” – below is more information about this issue and how you can identify and protect yourself from phishing:

What is Phishing?

Phishing is a general term used to describe emails, text messages or websites that try to obtain personal information from recipients by posing as trustworthy organizations or individuals. They may impersonate a trusted individual in a professional organization or use the company’s logos and graphics as an attempt to pass off as legitimate content.

The purpose of this form of content is to get a quick reaction from users. For example, they may threaten to close down your bank account unless immediate action is taken, such as asking to verify your account by entering your personal information in a web form. Please note that phishing can come in various forms, from an alleged professional asking for gift cards to an alleged financial institution asking to transfer hundreds of thousands of dollars.

According to the Government of Canada’s website, around 156 million email scams/phishing emails are sent out everyday and 80,000 individuals become victims to this form of cyber attack on a daily basis. Falling victim to these phishing scams can have serious implications, especially when cybercriminals ask for personal information, such as one’s social insurance number, driver’s license number or banking information. This information can be used to transfer funds, open new bank accounts or apply for loans. As of today, approximately 1 million Canadians have entered their bank details on a website they are unfamiliar with.

How to Identify and Protect Yourself From Phishing

In order to avoid falling victim to this form of cyber attack, the RCMP has provided information on the ways to identify phishing scams and prevent future attacks:

Phishing messages are normally not personalized and the content may include serious consequences if immediate action is not taken. Here is an example of a catchphrase they may use: Dear Online Account Holder, Access To Your Account Is Currently Unavailable…
Be wary of email or text message senders who ask for personal information – when in doubt, it is always best to call and double-check with the alleged organization asking for personal information.
Check your bank, debit and credit card statements regularly in order to ensure you are aware of all of the transactions. If a certain transaction does not look legitimate, contact your financial institution and report it.
If an email link looks suspicious from an unknown sender, do not click on it.
Before opening emails from unknown senders, it is recommended to run them through your computer’s anti-virus software.

Phishing Emails Targeted at Financial Institutions

There is an increase in activity where cybercriminals impersonate the CEO, C-Level Executive, Board Member or owner and make unusual requests, such as requesting wire transfers, gift cards or other cash transfers from the recipient. The email addresses of the alleged financial leaders are often very similar to the original and may only differ by a single letter. If you receive unusual requests from an alleged financial leader, it is recommended to call the individual to confirm whether this request is legitimate and double-check with another senior executive within the organization.

Need help with protecting and managing your finances beyond cyber attacks? Our team of part-time CFOs is ready to assist your business.

The importance of a business plan and how to create one – Part II

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In our previous article, we have highlighted the importance of creating a business plan. In this article, we will focus on the key elements of a business plan, the sections it should contain and how a part-time CFO can help you to create your business plan and implement it.

The key elements of a business plan

The most important part of your business plan is its financial information. Your financial forecasts should include your cash flow predictions for the next 12 months or more. You’ll also need to provide monthly sales estimates and costs to prove the business has enough working capital or to show that you understand you need to arrange additional financing.

You need to explain all assumptions in the business plan, with best and worst case scenarios. Detail the risks you’re likely to face and how they will be dealt with.

The Business Plan Sections

Executive Summary
The executive summary is usually the first section of any business plan and provides a condensed overview of what the business is and how you intend to reach your goals. If you’re seeking funding, you should detail the terms of the financing and the amount needed. It’s best to leave writing this section until after you’ve completed the rest. It should be less than 1,400 words.

Company description
This is like an extended elevator pitch. You need to explain your company history, business goals and how you satisfy the needs or wants of your market. You will also need to explain your competitive advantage.

Market analysis
You will also need to provide market analysis, size and expected growth as well as, industry participants, distribution patterns, competition and buying patterns, and your main competitors.

Organization and management
In this section, you need to detail your management team (and plans to fill any gaps within that team), your organizational structure, your Board of Directors, as well as a personal plan.

Service or product line
You need to describe your product or service and any associated copyright information or research and development activities.

Marketing and sales
You need to detail your marketing strategy (including pricing, promotion) and your sales strategy (including sales forecasts, programs, and techniques). Your costs, services, and support will also need to be included in this section.

Financial projections
This section outlines what you expect your business to achieve financially over the next three to five years. It needs to include your projected financial statements, expected cash flow and break-even analysis as well as key financial indicators and ratios. Don’t be tempted to overstate your numbers or expectations to obtain financing. It’s likely to harm rather than help you get that funding.

Funding request
If you plan to ask for a loan or capital, you need to include a formal funding request as part of your business plan. You need to include details of how much money you need now and how much you’ll need in the future.

How a part-time CFO can help you to create your business plan and implement it

The CFO Centre will provide you with a highly experienced senior CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO. This means you will have:

One of Canada’s leading CFOs, working with you on a part-time basis
A local support team of the highest caliber CFOs
A national and internationally collaborative team of the top CFOs sharing best practice (the power of hundreds) Access to our national and international network of clients and partners

With all that support and expertise at your fingertips, you will achieve better results, faster. It means you’ll have more confidence and clarity when it comes to decision-making. After all, you’ll have access to expert help and advice whenever you need it.

In particular, your part-time CFO will work closely with you to develop your business plan and your timetable for implementation to:

Gain a full understanding of the business and its operating
Work through the existing strategic plan with you and make necessary changes to build a plan which clarifies how the company’s objectives can be realistically achieved.
Agree on milestones and break down the plan into annual and quarterly targets.
Conduct a fresh SWOT (Strengths, Opportunities, Weaknesses, Threats) analysis, bringing the plan up to date.
Conduct a new PEST (Political, Economic, Social and Technological) analysis, bringing the plan up to date.
Carry out a full competitor analysis to understand in detail what is and isn’t working in the market.
Explore opportunities for effective market research to enable innovation and development of new products/ channels to market/operating procedures
Identify key players in the business
Identify skill gaps in the business
Agree financial incentive structures to retain and motivate key members of the team
Identify five key metrics for determining what the future course of the business should look like
Agree on the exit or succession strategy
Develop a clear, coherent message (vision/ mission/purpose) to staff and to customers
Work with the senior team to ensure individual department goals are aligned with the big picture strategy
Agree on a who/what/when set of objectives for all department heads
Implement accountability protocol for every member of staff
Determine methodology which allows the senior team to course correct periodically when a change in strategy is required
Agree on delegation of authority to department heads to spread responsibility across the business and to free up the CEO/business owners time
Create a feedback route so that strategic goals are regularly shared with staff
Develop a set of relevant KPIs (Key Performance Indicators) and a system which allows for regular (daily/ weekly/monthly/annual) monitoring and reporting
Develop a long-term efficient tax structure for the business and for key employees
Identify key outsource suppliers/advisors and, in particular, corporate finance contacts

This process will instill a deep feeling of confidence both within the senior team and throughout the rest of the business.

Conclusion

Installing an up to date business plan or ‘roadmap’ in your business will allow you to experience a sense of control, which may have been absent since the day you started your company.

The business plan (and the methodology for updating the business plan) will remove a significant amount of confusion from your operating procedures. There will always be challenges contained within new projects but you will have a proper framework against which all decision-making can take place.

The plan provides the blueprint for delegating responsibility to your team and allows you to create some space in your own environment to work on growing your business, with your part-time CFO as a constant guide and sounding board.

You will move out of the chaos and into a more serene working environment where each of the gears, which make up the bigger system, is able to move in harmony.

Potential hazards will have been identified in advance and dealt with before they become unmanageable. You will be able to move from a culture of fire-fighting to a culture of fire-prevention and the benefits will be felt by each member of your team and most probably by your customers too.

The business plan is the first key to profitable growth!

The importance of a business plan and how to create one – Part I

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Without a comprehensive, up-to-date business plan and an implementation timetable, companies may be missing out on opportunities for growth and not realizing their full potential. A formal plan can be an extremely valuable tool for managing and growing a business, as it allows a company to recognize its strengths and weaknesses. Furthermore, research has shown that SMEs that have a business plan in place are consistently more profitable than those who do not have a business plan. In this article, we will highlight the benefits of creating a business plan.

Introduction

Planning is the key to the success of any business, no matter its size or age, but nearly 30% of the UK’s small to medium-sized businesses don’t have a plan of any kind1

The majority of those without such a plan which sets out the company’s strategic direction, its main operating and financial targets, the actions it will take to achieve those objectives, the new initiatives and investments planned, and their impact on the company’s performance say they don’t believe it’s necessary. Nearly a fifth say they prefer to keep plans in their head, according to research by Close Brothers Asset Finance.

Mike Randall, CEO of Close Brothers Asset Finance, says, “It’s concerning that so many small and medium-sized firms do not have a business plan. Without clear direction, they may be missing out on opportunities for growth and not realizing their full potential.”2

He suggested that those who weren’t prioritizing it or “didn’t feel it was necessary” should rethink their approach.

“Planning is key to any business throughout its lifecycle. A formal plan can be an extremely valuable tool for managing and growing a business, as it allows a company to recognize its strengths and weaknesses.”

The study also asked those who did have a plan, how often they reviewed it. Almost two-fifths said they considered it at least once a year while a fifth said they looked over their plan every two years. Some 14% reassessed it once every two to five years. Randall said this was an area SMEs should be focusing on as “a plan is only useful if it is reviewed regularly to ensure it meets the current and future needs of the business.”

He added: “It’s vital business owners regularly review their financial strategy to ensure they have the right funding in place to meet the needs of their business, at its current stage of the business lifecycle.”

Rebecca McNeil, MD for Business Lending and Enterprise at Barclays, says, “A lack of a succession plan can put the future success of a business at risk, so this needs to be considered far earlier and more formally than the results show.

Having a business plan is fundamental, she says. “It defines exactly what you want to achieve, how you plan to achieve it across a set time period and is a sure-fire way to ensure that growth targets and plans are being met.

“Business plans are dynamic documents – meaning they should be revisited and adjusted as the business develops. In addition, a strong plan can help applications for finance from a business loan to alternative forms of finance and investment.”

She continued; “Importantly, when a business is in trouble, having a solid plan can help to steer it back to good health.”

SMEs that had a business plan in place last year was consistently more profitable (70%) than those that did not (52%), according to yet another survey, this one commissioned by business and finance software provider Exact.3

It showed that those who had a business plan in place were more than twice as successful in achieving these goals than those who did not (achieving a 69% success rate versus 31%).

Creating a well thought-through, comprehensive business plan is an arduous task. Thinking through objectives and likely outcomes which may occur many years down the line is, by nature, challenging. But it is the hard work up front which makes for lighter work down the road as all of our team of part-time CFOs will attest to.

Most CEOs and business owners simply don’t have the time to spend on quality strategic thinking or to document and communicate that thinking in a way which allows the whole business to buy into the vision.

Harder still is managing and implementing the business plan. Significant strategic course corrections are commonplace in fast-growing companies. These should be embraced. The tricky part though is in managing regular change. That requires a combination of time and specialist knowledge.

There is an art and science to effective business planning and getting it right brings a real sense of clarity and direction to business – this is where an experienced part-time CFO can make a significant contribution

Not spending quality time on strategic planning usually leads to a chaotic working environment. Our clients often talk about ‘not feeling in control’ and ‘not really knowing what is coming around the next corner’.

When the plan is weak, business owners tend to operate without the same sense of conviction as those who allocate time and expertise to the planning process.

Our part-time CFOs often find their clients have done some good planning and strategic thinking but need a devil’s advocate to ask the right questions and help to steer the ship in the right direction.

Being a CEO or business owner without a high level ‘finance person’ to bounce ideas off can be tough. CFOs often possess a different, albeit complementary, set of skills to CEOs/business owners.

It is natural for business owners to bring people into the company who see the world in the same way they do. It is often more valuable to have key members of your team who possess very different skills to your own. Constantly doing the same things in the same way as the same people will usually lead to achieving the same results.

If you are worried about whether you have the right team in place to fulfill the vision you have for your business, or whether you have the funds you require, or whether your business plan is sufficient to reach your objectives, then we would recommend you take the time out to work through the detail. It is rare to see a company succeed if it doesn’t have a robust plan.

Our part-time CFOs often work with clients who started off with intentions to run a business and have ended up working in a job. However, with the right business plan in place and a robust implementation approach, the business owner is able to run the business without getting drawn too far into the day-to-day details.

The benefits of creating a business plan and implementation timetable

Proper business planning is very liberating for the business owner, whatever their objective might be. A well-constructed and regularly reviewed business plan will instill real confidence that the goal is indeed achievable.

Writing a business plan has many benefits for businesses of any size and in any industry. It can help owners and senior managers to:

Clarify objectives and develop suitable strategies. They can create a clear path for management to follow in the early stages and identify targets for performance measurement (or ‘milestones’), says David Cromwell, former head of JP Morgan & Co’s Private Equity and Venture Capital Division and co-director of Yale School of Management’s Entrepreneurial Business Planning Course. “Research forces companies to learn what they can expect to make and what the industry trends are. Where has the industry been the last five years, and where is it going? If the research indicates your idea is viable, the actual construction of your plan depends on the goods or services you offer, how much funding you need and your goals.”
Understand the market. You have to research your market to understand it and that will always be beneficial. “Research is one of the big value-adds of writing a business plan,” says Joseph Ferriolo, Director of Wise Business Plans.5
Identify and overcome internal and external threats Organize the company
Organize the company
Access external funding (banks, venture capitalists, and angel investors are unlikely to look at any funding request that isn’t accompanied by a very solid business plan.)

“A professional investor’s decision to pursue a proposed new opportunity will turn on the quality of the business plan and the accompanying materials,” says Cromwell.

“There is no chance whatsoever of raising the needed financing without a business plan. Even with a plan, the content and packaging must be excellent.

“The business plan is management’s first, best, and probably only chance to capture the attention of investors,” he adds. Investors need assurance that management has thought of its corporate goals, management team, products, strategies, competition, and the necessity of capital.

They also want to know that the management team has considered weaknesses as well as strengths, problems as well as opportunities.

“At JP Morgan & Co., we received over 4,000 business plans every year,” recalls Cromwell. “We invested only in about 1% of the incoming situations.” That ‘deal flow’ versus the rate of investment is typical for venture capital investors, he says.

“Venture investors think they are busy people. Instead of trying to find a reason to pursue a new investment opportunity, most VCs try to find a reason to kill it ASAP.”

There is no chance whatsoever of raising the needed financing without a business plan. Even with a plan, the content and packaging must be excellent.

Read our next article on the key elements of a business plan and to learn how part-time CFO can help you to create your business plan and implement it.

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1 ‘Worrying number of SMEs don’t have a business plan’, Business Matters magazine, www.bmmagazine.co.uk, May 1, 2015

2‘ Are business plans redundant? Nearly a third of British SMEs don’t use them’, Smith, Rebecca, Real Business, www.realbusiness.co.uk, May 1, 2015

3 ‘UK SMEs losing out on nearly 20% extra profit by not having business plan’, Exact, www.exact.com, Apr 10, 2014

4 ‘The Business Plan: Lecture 3:1’, Cromwell, David, David Cromwell’s and Maureen Burke’s Entrepreneurial Business Planning course, Yale School of Management

5 ‘How to Write a Business Plan: Outline, Format & Sections’, Arline, Katherine, Business News Daily www.businessnewsdaily.com, Feb 5, 2015

Is your business idea disruptive enough?

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Maybe you see ride-hailing services like Uber and Lyft as arrogant bullies. Or, to you, they’re a breath of fresh air in a world held victim by over-regulated dinosaurs.

But whatever your view, you can’t deny that ride-hailing upended an entire industry. Some taxi companies have tried to compete with the upstarts through rideshare-like mobile apps allowing customers to choose vehicle options, pre-book rides, and pay by smartphone.

Why have ride-sharing services succeeded against well-entrenched opposition? They’re a new idea – but more importantly, they offer real benefits over the traditional taxicab. In short, they’re disruptive.

As we’ll see later, just being disruptive isn’t enough on its own, but it’s an essential part of success.

Disrupt your way to a better customer experience

To see how being “disruptive” works, consider one of the world’s oldest skills – what some parts of the world call “joinery” and others “cabinetry.” It’s about making furniture, cabinets for kitchens and bathrooms, and other fine woodwork. It’s a slow, meticulous process in which skilled people use tools that have changed little in centuries.

That is until someone crashed into this tradition-bound environment with a radical new approach to the business. As entrepreneur Alex Craster recounts in The CFO Centre’s book “Scale Up”, he’d already helped disrupt one industry – travel agencies, with the then-new idea of people booking their own travel online.

Craster talks of how he’d been pulled into managing his father’s failing joinery business. But he came to see opportunities for the firm to provide better services and meet new needs. He started using suppliers in Eastern Europe who were able to do highly skilled work at a fraction of the cost of UK suppliers. He also switched the focus of the firm, from making products into providing solutions to customer problems.

The result has been spectacular growth and even an invitation to supply services to Buckingham Palace.

Why is disruption like this such an important part of business success today? It has to do with two concepts – something that’s new, and something that’s better.

Grab the attention of people you want to attract

Let’s start with “new.”

One well-made kitchen cabinet is pretty much like any other well-made kitchen cabinet. In some ways, cabinetry is a commodity – it’s hard for a customer to tell one company’s offering from another’s. So it becomes a race to the bottom regarding prices.

To catch the attention of potential customers, Alex Craster’s company had to offer something that was new to the market – providing a service in which company representatives sat down with potential customers to get an idea of their problems. That might involve a hotel that wanted to attract a higher level of clientele. This approach made the company newsworthy, so it gained more word-of-mouth publicity.

The company’s approach made it more attractive to the traditional media. But it also had the potential to attract what is becoming a more important kind of attention, from social media including bloggers and Instagrammers.

This meant that just having a new approach put the company’s name in front of potential customers.

Holding the attention of prospective customers

Once you have the attention of the people you want to attract, how do you hold them? By offering something they will value – something that’s not just new, but demonstrably better than what they have now.

Alex Craster’s approach, which included a consultation and understanding customers’ business objectives, was a big step towards helping a hotel meet its goals. Those may have included being able to charge a higher room rate and improving the hotel’s all-important RevPAR (Revenue Per Available Room) metric.

So too, you need to be sure that your business idea offers real benefit to the people you want to serve.

Start by understanding their situation – some of the most pressing problems they are facing. That matters, because unless you can present them with a solution to one of their most pressing problems, or a step towards a solution, they’re not going to pay attention.

Then, instead of choosing a service or product to offer, you choose a problem to work on – such as increasing a hotel’s RevPAR.

Your approach must then revolve around solving that problem, with your product or service being part of that solution. If you’re offering something that is distinctly better than the solutions your prospective customers have on hand, you’ll have a much greater chance of success.

Planning is essential

All of this – finding something new and better – doesn’t just happen. You need to think it through. It takes time to match the assets you have – your skills, the skills of the people you work with, experience, and other factors – to the needs of potential customers.

A big part of that is the financial resources you have access to. With a good understanding of your financial picture, you can understand your financial strengths and limitations, so you know how much you can spend and still pay your rent and your staff.

Many growing companies find that the best way to make sure they have the financial resources they need is through a skilled finance professional – a Chief Financial Officer – who can help them understand their financial picture, and if necessary, get access to other financing that can help to seize on the opportunities to grow in a “disruptive” way.

For many companies, their best option is to have an experienced CFO available to them, on a long-term basis, but without the need to pay the compensation that a full-time professional would expect. By utilizing a part-time CFO, they have the skill set they need available to them, but in a much more cost-effective manner.

To make sure you’re being disruptive within your market, planning is key. Failing to plan is like planning to fail. To learn more about how you can take your business to the next level, please download our e-book, “Business planning & strategy implementation,” which will walk you through the steps involved in business planning.