The Importance Of Forecasting And Planning When Running A Business - Apr 19, 2011
Posted by: Peter Aronstam in Articles
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AS A BUSINESS OWNER, DO YOU REGULARLY SET UP AND REVIEW ANNUAL OPERATING PLANS AND BUDGETS? |
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If you do not, read about my recent experience with a client who is now using budgets set up by his B2B CFO®.
A call last week with a potential client got me thinking about how important it is to run a company using a forecast that contains both operating metrics and financial targets. The call came because the company's banker was concerned by the company's very rapid sales growth. In January 2011 alone, sales of a major product line exceeded sales for the same product for all of 2010. The client had been successful at year-end in landing two very large new customers, each of which had placed significant orders at the end of last year. All parts of the business were being stretched to meet this new demand. A high-grade issue for most businesses, you might think, but also a legitimate case for banker concern.
Why was the banker so concerned that it had threatened to pull its line of credit? High growth rates in a business can easily translate into a major cash squeeze. If the business owner does not have a close eye on the overall financial landscape, and does not run a forecast or anticipate exactly how various growth scenarios will affect inventories, receivables and payables (the 3 key elements of working capital), the business can very easily become over-extended and run out of cash. Without adequate preparation, the owner won't have sufficient information to avoid such a situation. ....When A Company Goes Public By Accident - Mar 3, 2011Posted by: Peter Aronstam in Articles CFO Magazine recently published an article in its March 2011 issue (click here to read) describing how easy it is for a privately-owned company to make the mistake of going public unintentionally. Going public comes with significant consequences and obligations, including the obligation to register with the SEC, to report financial results to its shareholders on a regular basis, and to make public disclosure about material company events (like new contracts). It's a decision that should therefore be taken carefully, and deliberately. Owners and management should seek the guidance of their legal and accounting advisors before taking the step. As the CFO article points out, a company that has more than 500 shareholders is by definition public. Passing that number can happen without control if, for example, the company has issued options or warrants to more than 500 employees and/or contractors, and they exercise the options and become shareholders. The SEC is paying close attention to companies like Facebook, which has issued options to thousands of employees. Peter Aronstam and Dennis Gagnon, B2B CFO® partners, are quoted in the article. Please read it to see what they have to say about the perils of going public by mistake. Almost Every Business Is Required To Have An Emergency Action Plan Are You In Compliance - Sep 23, 2010Posted by: Peter Aronstam in Articles If you have to ask this question: "Does my company need an Emergency Action Plan?", then you may be at a high risk for being non-compliant with OSHA rules! According to OSHA: · Almost every business is required to have an emergency action plan (EAP). · If fire extinguishers are required or provided in your workplace, and if anyone will be evacuating during a fire or other emergency, then OSHA’s 29 CFR 1910.157 requires you to have an EAP. There are some exceptions to this, but determining exactly when an EAP is required is complex and daunting to most employers. Even companies with EAPs in place may not have plans that meet OSHA's ever-increasing requirements. This is where your B2B CFO® and law firm can help. The lawyers in particular can provide detailed assistance with preparation of the EAP, as well as implementation and training. If you don’t have an EAP, or if you have not had your plan reviewed by someone fully experienced with OSHA requirements, contact us or your law firm for assistance. Thanks to Legal Solutions Group for this information. What Are Your Top 10 Action Items For Finding Cash In A Business - Sep 15, 2010Posted by: Peter Aronstam in Articles The third quarter is almost done. Fourth quarter and year end loom. In many companies where I have worked, Q4 = Budget Time ("!@#$%^&*"). As a B2B CFO, I'll be working soon with my clients on 2011 budgets, looking to squeeze more cash out of their businesses as we continue to deal with the current economy. What are your Top 10 action items for finding cash in a business? Here are some of mine. 1. Talking of budgets, let's set one for 2011. In the budget, set targets that encourage cash-generating behaviors. For example, set a DSO target. Then ensure that all company processes tie to that number. Make sure that the company has defined, contractual selling terms that will achieve the DSO target. Create incentives for employees to meet or beat the targeted DSO. On the other hand, don't reward behaviors that override the budget targets. 2. Implement steps to collect the cash. Look for ways that automate cash collection. If you don't accept credit cards now, consider doing so. You will incur transaction fees and small monthly fees, but you'll get your cash faster. Faster cash collection reduces borrowing or factoring charges. Implement effective collection procedures. Have a process to issue invoices on time. Be sure that process prevents excess overdue payments or build-up of bad debts. Review aged A/R reports regularly. Call customers when payments are not made on time. Ask them if they received invoices or if they have problems paying. Use the call to confirm payment terms. 3. Get out of the business of mailing invoices. Use email to send invoices instead. Ask or require customers to accept e-mailed invoices. An e-mailed invoice can be re-transmitted very quickly by the approver to the accounts payables department for processing. Result: your company is likely to get paid sooner, with no printing or postage costs. If you must use regular mail, consider where the invoices are mailed. Think about printing and mailing from a location closer to t....
Posted by: Peter Aronstam in Articles I received this excellent sentiment recently. It can be applied to any business or personal relationship. It comes from Avril N. Ball. We all have goals and dreams to accomplish and having the right people around us believing what we say we see matters on how far we go. We need people who respect our vision just as they expect us to do the same for them, they respect our decisions, choices and understand the chances we take to be who we have been created to be. They respect our turns and lean in the direction we lean understanding that we all individually have been assigned a specific and different role of responsibility. Now everyone do not have to be perfect to understand what we see, but they have to acknowledge we all walk a separate path to our ultimate destination. How we individually all get there, is dependent on how we individually see the vision that we see. Finding the right audience is finding where we fit, they will do whatever it takes to get us where we need to be because they know we would do for them the same exact thing." Posted by: Peter Aronstam in Articles 184% Growth Earns B2B CFO Spot in the 2010 List of Fastest Growing Companies in America Phoenix, Ariz. August 24, 2010 - B2B CFO, the nation's largest provider of CFO services to small businesses, has been named to the prestigious Inc. 5000 list of fastest growing companies in America. Now in its 29th year, Inc. Magazine's annual ranking judges US-based and privately held companies by their revenue growth. This year's list was ranked on the percentage in revenue increase from 2006-2009. B2B CFO's growth earned 84th place in its industry. "There are approximately 27 million small businesses in the U.S. today," said Jerry L. Mills, founder and chief executive officer of B2B CFO, "It is a huge honor to be among the fastest growing and the most successful businesses in the country. Our firm has experienced tremendous growth over the past few years and we are on track to continue expanding. I am especially grateful to all of the firm's dedicated Partners who continue to advocate our services around the nation." In a personalized letter congratulating B2B CFO on this accomplishment, Jane Berenston, editor-in-chief of Inc. Magazine's wrote "Congratulations: your company, B2B CFO, has made the 2010 list of the fastest growing private companies in America. This achievement puts you in rarefied company, especially if you consider that over 27 million businesses are registered in the USA. The elite group you've now joined has, over the years, included companies such as Microsoft, Timberland, Visa, Intuit, Jamba Juice, Oracle, and Zappos.com. I look forward to congratulating you in person in Washington, D.C." B2B CFO's growth is reflected in numerous awards this year. The company was also recently named in ACE Corporate Growth Awards, which recognized the most successful and fastest growing companies in Arizona. In August 2010, B2B CFO has grown to 170 Partners across 39 states, representing 5,000 years of cumulative experience. Each Partner is a seasoned financial executive who serves as CFO to growing businesses on as-needed basis. Approximately 80% of the Partners have a background that includes senior executive positions at the Big Four, and all of the Partners have held high level executive finance positions in various industries in corporate America. Together, B2B CFO Partners work with more than 500 businesses in the nation with combined annual sales of more than $3 Billion. Jerry L. Mills and many of the B2B CFO Partners regularly dedicate time to educate business owners on financial matters. Mills is a frequent speaker and contributor and has been featured on many national media networks including FOX Business, Fortune Small Business, Smart Money and many others. Mills is also the author of The Danger Zone - Lost in the Growth Transition, and Avoiding The Danger Zone - Business Illusions, both business non-fiction books that help entrepreneurs understand and build a strong financial strategy. "We look forward to participating in the Inc. 500|5000 conference in Washington, DC this fall," added Mills. "Along with my colleagues, I look forward to the October 2nd awards ceremony and to meeting the entrepreneurs that created the other 5000 fastest growing companies in America." About Inc. Magazine Founded in 1979 and acquired in 2005 by Mansueto Ventures LLC, Inc. is the only major business magazine dedicated exclusively to owners and managers of growing private companies that delivers real solutions for today's innovative company builders. Inc. provides hands-on tools and market-tested strategies for managing people, finances, sales, marketing, and technology. Inc. Magazine's 29th annual Inc. 5000 ranking of the fastest-growing private companies in the country is available online at www.inc.com/inc5000/list ABOUT B2B CFO Headquartered in Phoenix, Ariz., the firm was founded in 1987 by Jerry L. Mills. B2B CFO is the nation's largest CFO firm serving entrepreneurial, growth and mid-market companies with revenue under $75 million. The firm's partners have an average of 25 years of experience and each individual partner is a senior level executive with a broad range of expertise. Please visit online at www.b2bcfo.com Posted by: Peter Aronstam in Articles As a B2B CFO® partner, I support not only my clients' entire organization, but also the clients themselves. Most of those clients are the business owners - the ones whose vision established their businesses and whose hard work grew them to their present state. Many of those clients are Baby Boomers, starting to think about how they will get out of their businesses, and looking for new challenges as they move on to the next stages in their lives. Yet, as they continue to work very full days in their companies, how many of them have time to plan how they will get to retirement and financial independence when they do retire? And even if they do have the time, how many of them are overwhelmed by the idea of succession and exit planning? That is where a B2B CFO® can help. "Finding the Exit"™, as we call business exit planning at B2B CFO®, is assuming an increasingly important role in the services we provide to our clients. When I meet with business owners to talk about what B2B CFO® can do for them, I always ask them if they had a business plan when they launched their companies. All will say "yes". Some had a written plan, others a well thought out idea what it was they wanted to accomplish and how. But in all cases there was a plan, which may have been modified many times along the way; but a plan nonetheless. I then ask what happened to that initial plan. In most cases it was changed - sometimes frequently. In the course of growing their businesses, owners had to make many changes to adapt to new markets and competition. I will then ask them if they have an estate plan - what they expect to do with their assets when or before they die. Again, in most cases I find that the owners have thought out this aspect of their futures, and that of their families. A large majority will have consulted with trusted advisors - lawyers, accountants, insurance planners - to develop and implement an estate plan to take care of their families. I next ask if their businesses constitute the biggest asset in their estate. I get the same answer - the majority have most of their wealth tied up in their businesses. It provides most of what they and their families live on, and what they expect to live on when they retire. Very few have the good fortune to have enough wealth outside their businesses to continue to maintain their existing lifestyles. "Is the business liquid?" "No". "Do you know what the business is worth if you were to exit it today"? Most of the owners do not have a realistic sense of value. "As part of your overall estate plan or future plans in general, do you have a formal plan to exit the business and thereby obtain what you and your family may need to live on for the rest of your lives?" Very rarely. Should we be surprised by these answers? Yes; particularly when statistics show that: What should business owners be doing? If they plan to exit their businesses and convert their equity into liquid assets, they must prepare for that conversion at every step along the way. From the very inception of the businesses, owners should be building value and equity by creating unique products, services, relationships and distribution channels, building an intellectual property portfolio and expanding their customer bases. The sad fact, however, is that many business owners don't have these goals in mind as they run their businesses. As a result, many business relationships will not have happy
Motivating People: Can CEOs and Business Owners Get Beyond Money The economic downturn offers business owners and CEOs a great opportunity to more effectively reward talented employees by emphasizing nonfinancial motivators rather than bonuses. In an economy in which all business - from the very largest to small new startups - are finding profits and cash flows under pressure, and with business owners and CEOs looking everywhere to reduce spending in their companies, it can become an enormous challenge to keep employees motivated while controlling expenses. How CEOs and business owners can do this without incurring high costs for awards and incentives is the topic of a great article by Martin Dewhurst, Matthew Guthridge, and Elizabeth Mohr. As the authors point out, there are many other ways of inspiring talent. They refer to studies showing that for people with satisfactory salaries, nonfinancial rewards will be more effective than extra cash in building long-term employee engagement in most sectors, job functions, and business contexts. Many financial rewards generate only short-term boosts of energy, which can have damaging unintended consequences. A recent McKinsey Quarterly survey supports these studies. According to the survey, the leading three noncash motivators-praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces-may be more effective at motivating employees than the three highest-rated financial incentives - cash bonuses, increased base pay, and stock or stock options. The three nonfinancial motivators play critical roles in making employees feel that their companies value them, take their well-being seriously, and strive to create opportunities for career growth. These themes recur in most studies on ways to motivate and engage employees. According to the authors, the current business environment provides owners and CEOs with a perfect time to reinforce more cost-effective approaches to compensation. Their interviews with HR directors suggest that many companies have cut remuneration costs by 15 percent or more. In addition, employee motivation is sagging throughout the world-morale has fallen at almost half of all companies, according to another McKinsey survey - at a time when businesses need engaged leaders and other employees willing to go above and beyond expectations. For more guidance where owners and CEOs can focus to motivate employees in a world of declining pay and low morale, please read the full article.
The Gulf oil spill shows how vulnerable economies and businesses are to natural and man-made disasters, and what finance executives may be able to do to prevent some of the economic impact from adversely affecting their companies. I recently received two articles commenting on the oil spill[1]. The first, from CFO.com Magazine, takes an unusual approach, asking what finance executives everywhere can learn about risk from the disaster. The second, from Moody's Investors Service, explores the impact the spill will have on the Gulf states' economies. The article in CFO.com takes an unusual approach, asking what finance executives everywhere can learn about risk from the disaster. Could something like this happen to their companies? How can they make sure it never does? According to Mark Abkowitz, a professor of civil and environmental engineering at Vanderbilt University and author of the book "Operational Risk Management: A Case Study Approach to Effective Planning and Response" (John Wiley, 2008), Finance can lead the creation of a rigorous risk management process that identifies "all the hazards that can threaten the enterprise. You can have a low-probability event that can have such dramatic consequences that you can't ignore it". For more interesting suggestions how CFOs can prevent such disasters from occurring, click here. The oil leak resulting from the explosion of the Deepwater Horizon in April off the Louisiana coast may result in negative credit impacts for state and local governments. The spill is likely to cause extensive environmental damage to states bordering the Gulf of Mexico. But, as BP PLC has pledged to pay for all cleanup costs, as well as claims of damages, and the federal government has pledged significant resources, it appears that the long-term economic and financial impact of the spill on the states of Louisiana, Mississippi, and Alabama will be manageable. While the spill may have a significant environmental impact on the Gulf region, the short-term economic boom related to clean-up efforts will likely give way over the longer term to deteriorating revenue for coastal communities. These cities ....
Posted by: Peter Aronstam in Articles With this law approved by both bodies, health care reform is now here, and has been signed into law by President Obama. The law affects us all - employers, employees, health care providers, long-term care providers, drug companies, medical device manufacturers. The list is long. There is an excellent review of the legislation in the following article "Health Care Reform Has Arrived". Below is a summary of key legislative provisions: Immediate Impact Many of the Reform Act's provisions take effect in or after 2013, or are gradually phased in. Others become effective immediately or within a short time. These include:
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