Firms Outsource a Top Job as Cheaper Than Hiring Their Own Executive
By RAYMUND FLANDEZ
This past year, Al Lovata, chief executive of Be Our Guest Inc., cut expenses for his party-equipment rental business by laying off staff and reducing workers' salaries. He credits an "outsourced" chief financial officer with helping him prepare for the worst of the economic downturn.
The Boston-based company had sales growth in the double digits for the past few years, when revenue fell flat last fall. Now, thanks to the part-time CFO's guidance, the company is stable with revenue down 20% to 30%, but profitability higher than in the previous months, he says.
If we hadn't had this service, "we would still be struggling," Mr. Lovata says.
Mike Loria of Re.Source Partners Asset Management, in Detroit, consults his CFO, Sheri Pawlik of B2B CFO. Some small-business owners in need of accounting help to balance their books and guide them out of a financial black hole are renting CFOs rather than hiring them. The strategy comes at a time when the deep recession has forced small companies to look for money-saving alternatives that can yield good returns yet avoid substantial overhead costs.
"They're looking for ways to streamline and be efficient as they can," says Glenn Dunlap, a co-founder of Milestone Advisors LLC, a small-business consulting firm in Indianapolis that provides CFO services. The average annual salary for a full-time CFO in a small- to medium-size businesses ranges from $94,250 to $175,750, according to a 2009 Salary Guide by Robert Half International Inc., a Menlo Park, Calif., staffing services firm that serves the accounting and finance fields. Renting one can be significantly cheaper.
B2B CFO Partners LLC, a Phoenix, Ariz., firm that has over 100 CFOs-for-rent, charges at least $300 to $400 per month for the service. The company has doubled the number of small- to mid-size business clients to 650 since 2007, says Jerry L. Mills, founder and chief executive.
Business owners often want such a service when their company's finances are getting more complex and need someone with more financial expertise, says Germain Böer, professor of management and director of the Owen Entrepreneurship Center at Vanderbilt University in Nashville.
Still, he cautions that some small businesses that have simple financial structures or are completely self-financed may find renting a CFO not so useful. But "if you have a loan in the bank or an outside investor, something like this is well worth considering," he says.
These CFOs have a bigger role than accountants, who mainly keep track of the company's books. They work with business owners to manage their accounting and finance departments, connect them with business sources that can help them grow and provide financial data to help make strategic long-term or day-to-day decisions. Many are certified public accountants.
The payment structure varies. Some are on project-oriented deals, such as developing financial projections, assisting with raising capital or completing a business plan. Some are on-going in nature and can be based on an hourly or flat monthly fee. Concerns regarding privacy from such consultants can easily be mitigated by nondisclosure agreements, experts say. Mr. Mills suggests that small businesses interview at least three CFO candidates, assess the quality of the firm they work for and avoid long-term contracts, if possible.
Some business owners turn to CFOs to establish proper bookkeeping systems. Ruthann P. Lacey, owner of a law practice in Tucker, Ga., brought in a part-time CFO in October. Before, an office manager handled bookkeeping while she also turned to her husband for ad-hoc financial and tax-preparation advice. "I didn't really know what the big picture was," she says. "I only knew we made payroll every month."
Upon the advice of her rented CFO, she installed QuickBooks software, hired an accountant and sorted out the company's accounts-receivable system, billing those customers who owed the company. Ms. Lacey also began reviewing monthly reports about cash flow and profitability that's making it easier for her to make hiring decisions or put more into the marketing budget. She says she's quite happy paying the rented CFO's $185 per-hour rate about 15 to 20 hours per month, because she can't afford a full-time executive. "This is something I should have done a long time ago," she says.
Entrepreneur Bob Compton, founder and chief executive of Vontoo Inc., an Indianapolis-based voice-messaging company, says he has rented CFOs for six companies he has started or been a lead investor in. "To hire a CFO in the early-going is a waste of money," Mr. Compton says. "It's much better to invest that money in engineers and sales people."
For Vontoo, he pays $5,000 a month for the CFO's strategic advice, bookkeeping services and accounting expertise. "It's a tremendous cost-saving," he says.
A company outsider can also help deliver a reality check. Re.Source Partners Asset Management Inc., a reseller of technology products in Detroit, has used cash to fuel growth since 2001 but is now using a line of credit for the first time, and needed help managing the new financing. In 2007, Mike Loria, the company vice president, brought in a part-time CFO who advised the company to rein in aggressive plans for growth and prepare for flat sales this year of about $9 million.
The CFO is more objective and "someone who can prevent us from making any bad decisions,"
Mr. Loria says. "It has really given us a level of confidence that we did not have in decision making."
Write to Raymund Flandez at raymund.flandez@wsj.com
Printed in The Wall Street Journal, page B7
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Wednesday, September 23, 2009
Monday, September 14, 2009
It's Not the Economy, Stupid.
This article contains some harsh talk to business owners. Although I don't agree with his perspective, he does bring out some interesting points to consider. I did find it interesting that he doesn't mention customers or vendors anywhere in the article. All business troubles won't be eliminated by focusing entirely on your employees (especially in the manner he prescribes.) -JH
Your sales are down. Your operating costs are out of control. Your cash flow has slowed to a trickle. Your bank won’t give you a loan. Of course you blame the economy. Everyone’s suffering, so it’s no wonder your business is in trouble. Right?
Wrong.
Don’t blame the economy. Recession or no recession, if your small business is failing, it’s your fault. Sure, we all take hits in downturns. But if you’re struggling, it’s because you’ve been doing something wrong all along. Take a good hard look under the hood and you’ll see that most of the problems in your small business are internal. But guess what? That’s good news. That means the situation is not beyond your control and can be fixed. It won’t be easy. My advice is controversial and uncompromising, but there is nothing I preach that I don’t practice myself as a business owner.
Here are five things:
1. Forget teamwork. Teamwork is overrated. It simply doesn’t work in most small businesses. Insisting on teamwork is a fast route to lousy financial performance. Why? Because your team is only as strong as its weakest link. A single poor performer brings everybody down. Employees crave strong leadership and structure, so focus on individual performance. Place set goals and demands on each head, one by one. Your employees have to know that at the end of the day, they answer to you, not to each other. And replace that tired cliché “There is no ‘I’ in team” with this thought: There is no $ in team--just mediocrity and excuses.
2. Micromanage like crazy. Don’t delegate to the point of abdication. Delegating is just another word for shirking responsibility. Expect someone else to do it and 90 percent of the time it won’t get done. In a small business, you don’t have the time or money to correct someone else’s mistakes. Instead, you should wear the badge of “control freak” with pride. Sure, delegate tasks, but watch your employees like a hawk until you are satisfied they are doing what they are supposed to do; then keep watching. Insist on “flash reports”--one-sheeters that give you daily updates on the status of each flashpoint in your business. And never hand over the reins of your business to anyone, no matter how senior the employee. Micromanage, micromanage some more, then circle back to make sure the task is getting done, and done right. You may have to put in a lot more time at the office, but you’ll ensure your business is making maximum profits.
3. Pay raises are over. Freeze your salaries now. Paying for performance is an absolute necessity for small and midsized businesses to achieve real profitability. Anywhere from 30 percent to 100 percent of an employee’s compensation should be based on performance, and that amount should be against the goals set for employees by the owner.This applies especially to businesses with sales staff: sales people should have 100 percent of their compensation based on performance. Keep in mind that pay-for-performance doesn’t just mean an employee gets paid more for doing well--this is not an entitlement. You have to be willing to set up a system and then also penalizes failure to perform. Pay-for-performance is so important to the success of your business that if you don’t establish it today, you should fire yourself.
4. Fear is the best motivator. Owning a small business isn’t a popularity contest. You cannot be effective unless you are feared and respected by your employees. Your employees won’t thank you for being tough on them, but they’ll respect the dictator who keeps the business afloat and continues to cut them a paycheck. And fear of not getting a paycheck was, is and always will be the best motivator.Fear shouldn’t just motivate your employees. It should motivate you. Never get too comfy. A business owner’s internal fear of failure is what keeps the company alive.
5. If your business fails during a recession, it’s your fault. This bears repeating. It’s not the economy, stupid, it’s you. Don’t use the recession as an excuse. If you’re not surviving it’s because you weren’t doing all that you should have during better times. Resist the bunker mentality--if you wait until the tide turns, you will drown. Instead, take action: cut costs, get aggressive about sales and fire mediocre workers. Continue to invest in areas of your business that will generate growth. Don’t play the victim. Do everything you can to take care of your business--work harder, faster and smarter than the competition by a factor of 10. As long as your business has a pulse, it’s in your power to turn things around.
George Cloutier is the author of Profits Aren’t Everything, They’re the Only Thing: No-Nonsense Advice from the Ultimate Contrarian and Small Business Guru (HarperCollins, Sept. 2009).
Your sales are down. Your operating costs are out of control. Your cash flow has slowed to a trickle. Your bank won’t give you a loan. Of course you blame the economy. Everyone’s suffering, so it’s no wonder your business is in trouble. Right?
Wrong.
Don’t blame the economy. Recession or no recession, if your small business is failing, it’s your fault. Sure, we all take hits in downturns. But if you’re struggling, it’s because you’ve been doing something wrong all along. Take a good hard look under the hood and you’ll see that most of the problems in your small business are internal. But guess what? That’s good news. That means the situation is not beyond your control and can be fixed. It won’t be easy. My advice is controversial and uncompromising, but there is nothing I preach that I don’t practice myself as a business owner.
Here are five things:
1. Forget teamwork. Teamwork is overrated. It simply doesn’t work in most small businesses. Insisting on teamwork is a fast route to lousy financial performance. Why? Because your team is only as strong as its weakest link. A single poor performer brings everybody down. Employees crave strong leadership and structure, so focus on individual performance. Place set goals and demands on each head, one by one. Your employees have to know that at the end of the day, they answer to you, not to each other. And replace that tired cliché “There is no ‘I’ in team” with this thought: There is no $ in team--just mediocrity and excuses.
2. Micromanage like crazy. Don’t delegate to the point of abdication. Delegating is just another word for shirking responsibility. Expect someone else to do it and 90 percent of the time it won’t get done. In a small business, you don’t have the time or money to correct someone else’s mistakes. Instead, you should wear the badge of “control freak” with pride. Sure, delegate tasks, but watch your employees like a hawk until you are satisfied they are doing what they are supposed to do; then keep watching. Insist on “flash reports”--one-sheeters that give you daily updates on the status of each flashpoint in your business. And never hand over the reins of your business to anyone, no matter how senior the employee. Micromanage, micromanage some more, then circle back to make sure the task is getting done, and done right. You may have to put in a lot more time at the office, but you’ll ensure your business is making maximum profits.
3. Pay raises are over. Freeze your salaries now. Paying for performance is an absolute necessity for small and midsized businesses to achieve real profitability. Anywhere from 30 percent to 100 percent of an employee’s compensation should be based on performance, and that amount should be against the goals set for employees by the owner.This applies especially to businesses with sales staff: sales people should have 100 percent of their compensation based on performance. Keep in mind that pay-for-performance doesn’t just mean an employee gets paid more for doing well--this is not an entitlement. You have to be willing to set up a system and then also penalizes failure to perform. Pay-for-performance is so important to the success of your business that if you don’t establish it today, you should fire yourself.
4. Fear is the best motivator. Owning a small business isn’t a popularity contest. You cannot be effective unless you are feared and respected by your employees. Your employees won’t thank you for being tough on them, but they’ll respect the dictator who keeps the business afloat and continues to cut them a paycheck. And fear of not getting a paycheck was, is and always will be the best motivator.Fear shouldn’t just motivate your employees. It should motivate you. Never get too comfy. A business owner’s internal fear of failure is what keeps the company alive.
5. If your business fails during a recession, it’s your fault. This bears repeating. It’s not the economy, stupid, it’s you. Don’t use the recession as an excuse. If you’re not surviving it’s because you weren’t doing all that you should have during better times. Resist the bunker mentality--if you wait until the tide turns, you will drown. Instead, take action: cut costs, get aggressive about sales and fire mediocre workers. Continue to invest in areas of your business that will generate growth. Don’t play the victim. Do everything you can to take care of your business--work harder, faster and smarter than the competition by a factor of 10. As long as your business has a pulse, it’s in your power to turn things around.
George Cloutier is the author of Profits Aren’t Everything, They’re the Only Thing: No-Nonsense Advice from the Ultimate Contrarian and Small Business Guru (HarperCollins, Sept. 2009).
Friday, September 4, 2009
Dreading the High Cost of Software for Your Business? Try These Free Solutions.
I picked this article up off of the Internet. These suggestions aren't viable for every situation (i.e. heavy Excel users). But, the email, contact management, calendar and scheduling ideas make a lot of sense for most. -JH
Several years ago, one of the biggest costs for small businesses was software. Accounting software? Expensive. Word processing and spreadsheets? Expensive. Contact management software? Expensive. Calendar and scheduling software? Expensive. Quite often, the total bill would be enough to make you wince in pain.
Since then, fortunately, we’ve moved on to a better era. With the advent of free open source software along with the growing maturity of the software industry as a whole, most of the key software needed for small businesses are now available for free - if you know where to look.
I speak from experience. As a small businessman myself, I use a mix of free and open source software for almost all of my business needs. Accounting, contact management, task management, word processing, spreadsheets, presentation software - I use free solutions for all of these and not only is my budget happy, I’m happy, too. In most cases, the software is as full-featured (for my needs) as the expensive software at the office supply store, plus I usually don’t have to wait around for bug fixes - it’s all updated regularly and upgrading the software is free, too.
Here are the key pieces of small business software I use. I’ve included both offline and online options for each category, since many small businesses do not have or necessarily need online access in the office.
Accounting: Intuit QuickBooks Simple Start Free Edition 2009 (offline) or Quickbooks Online Edition (online). I’ve been a fan of Intuit’s QuickBooks accounting software for years. Recently, Intuit has been offering very solid basic accounting packages for free to small businesses, under the idea that if a person’s business continues to grow, they’ll grow naturally into a larger, full-featured package. The basic packages themselves are loaded with features and easily take care of every accounting feature that a small business will need in the early years, plus it offers a very clean upgrade path to QuickBooks if you decide your business is outgrowing the software.
Calendar/Scheduling/Task Management: Mozilla Sunbird (offline) or Google Calendar and Remember the Milk (online). I used Mozilla Sunbird as my scheduling and calendar software for many years with no problems and have only recently moved to Google Calendar, which is almost as full-featured and runs entirely within the web browser. Sunbird does a solid job of managing tasks offline, but for online management of the countless little things I need to do, I use the brilliant Remember the Milk.
Email: Mozilla Thunderbird (offline) or Gmail (online). Don’t let your internet service provider try to sell you an email package – there are tons of great packages available for free. Mozilla Thunderbird is a great free desktop client for email, but I use Gmail to simultaneously manage several email accounts all under one interface.
Word Processing: AbiWord or OpenOffice (offline) or Google Docs (online). AbiWord may be the best word processing program out there, period, and it’s a free open source package. OpenOffice is a large collection of offce software (also a free open source download) that includes a very solid word processor. For online use, I often find myself using Google Docs when on the road – in fact, I’m composing this post in Google Docs.
Spreadsheets and Presentations: OpenOffice (offline) or Google Docs (online). OpenOffice (mentioned above) includes wonderful packages for spreadsheets (very comparable to Excel) and presentations (comparable to PowerPoint) and it’s free. When you’re on the go, Google Docs provides basic versions of these tools in any web browser – I particularly find the Google Docs presentation software to be quite useful.
Databases: OpenOffice (offline) or Zoho Creator (online). Need to create a simple inventory database? OpenOffice also includes a database tool that’s quite comparable to Access and can easily meet your needs. If you’re looking for an online solution, Zoho Creator makes it very easy to create a simple database and entry form online – for free!\
Contact Management: Salesforce Personal Edition (offline) or Keepm (online). As a small businessperson, you have suppliers to contact and customers to keep track of. Thankfully, there are many options for managing all of these contacts. Salesforce Personal Edition is a great free desktop contact manager, but I’ve come to use Keepm, which provides most of the same functionality online, accessible from anywhere, for free.
Why spend your hard-earned money on software packages that are loaded with many more features than you need when there are so many great free software solutions out there?
Several years ago, one of the biggest costs for small businesses was software. Accounting software? Expensive. Word processing and spreadsheets? Expensive. Contact management software? Expensive. Calendar and scheduling software? Expensive. Quite often, the total bill would be enough to make you wince in pain.
Since then, fortunately, we’ve moved on to a better era. With the advent of free open source software along with the growing maturity of the software industry as a whole, most of the key software needed for small businesses are now available for free - if you know where to look.
I speak from experience. As a small businessman myself, I use a mix of free and open source software for almost all of my business needs. Accounting, contact management, task management, word processing, spreadsheets, presentation software - I use free solutions for all of these and not only is my budget happy, I’m happy, too. In most cases, the software is as full-featured (for my needs) as the expensive software at the office supply store, plus I usually don’t have to wait around for bug fixes - it’s all updated regularly and upgrading the software is free, too.
Here are the key pieces of small business software I use. I’ve included both offline and online options for each category, since many small businesses do not have or necessarily need online access in the office.
Accounting: Intuit QuickBooks Simple Start Free Edition 2009 (offline) or Quickbooks Online Edition (online). I’ve been a fan of Intuit’s QuickBooks accounting software for years. Recently, Intuit has been offering very solid basic accounting packages for free to small businesses, under the idea that if a person’s business continues to grow, they’ll grow naturally into a larger, full-featured package. The basic packages themselves are loaded with features and easily take care of every accounting feature that a small business will need in the early years, plus it offers a very clean upgrade path to QuickBooks if you decide your business is outgrowing the software.
Calendar/Scheduling/Task Management: Mozilla Sunbird (offline) or Google Calendar and Remember the Milk (online). I used Mozilla Sunbird as my scheduling and calendar software for many years with no problems and have only recently moved to Google Calendar, which is almost as full-featured and runs entirely within the web browser. Sunbird does a solid job of managing tasks offline, but for online management of the countless little things I need to do, I use the brilliant Remember the Milk.
Email: Mozilla Thunderbird (offline) or Gmail (online). Don’t let your internet service provider try to sell you an email package – there are tons of great packages available for free. Mozilla Thunderbird is a great free desktop client for email, but I use Gmail to simultaneously manage several email accounts all under one interface.
Word Processing: AbiWord or OpenOffice (offline) or Google Docs (online). AbiWord may be the best word processing program out there, period, and it’s a free open source package. OpenOffice is a large collection of offce software (also a free open source download) that includes a very solid word processor. For online use, I often find myself using Google Docs when on the road – in fact, I’m composing this post in Google Docs.
Spreadsheets and Presentations: OpenOffice (offline) or Google Docs (online). OpenOffice (mentioned above) includes wonderful packages for spreadsheets (very comparable to Excel) and presentations (comparable to PowerPoint) and it’s free. When you’re on the go, Google Docs provides basic versions of these tools in any web browser – I particularly find the Google Docs presentation software to be quite useful.
Databases: OpenOffice (offline) or Zoho Creator (online). Need to create a simple inventory database? OpenOffice also includes a database tool that’s quite comparable to Access and can easily meet your needs. If you’re looking for an online solution, Zoho Creator makes it very easy to create a simple database and entry form online – for free!\
Contact Management: Salesforce Personal Edition (offline) or Keepm (online). As a small businessperson, you have suppliers to contact and customers to keep track of. Thankfully, there are many options for managing all of these contacts. Salesforce Personal Edition is a great free desktop contact manager, but I’ve come to use Keepm, which provides most of the same functionality online, accessible from anywhere, for free.
Why spend your hard-earned money on software packages that are loaded with many more features than you need when there are so many great free software solutions out there?
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