B2B CFO^®    (877) 4-B2B CFO

Are your profits where you want them to be? Has your CFO/Controller/CPA helped you to really understand what is driving your company profits or losses? 

 Does your Controller or CFO spend most of his/her time fighting fires, closing the books,  processing transactions, managing HR issues and performing other non-value added services?  Is he/she overwhelmed?

 Or,

 Does your CFO/Controller add tremendous value to your company by:

• Clearly identifying the profitability drivers of your business and leading and driving profitability improvement initiatives for each of them?
• Providing on-going financial analysis of operations that identifies where actions are needed to improve profitability?
• Maintaining up-to-date overhead rates so you understand the true cost of making and selling your products and services.
• Providing quoting and pricing models so you understand the real P&L and cash affect of winning business and know how to price your products or services to win business?
• Employing techniques like 80/20 to improve your business?
• Leading or playing a key role in your strategic planning process to develop ideas and strategic initiatives to make your company a market leader?
• Creating pro-forma financial projections and in-depth financial analyses of new products/services/opportunities to validate major business decisions?
• Squeezing down working capital and improving the cash position.
• Helping the company increase sales? (Yes, really, the CFO!)

 I help companies with and without CFO’s to improve their profitability and financial management and help their financial staff to be more effective. How much would even a small 1-2% improvement to your bottom line mean to you?

 If your financial staff is not addressing all of these areas, your firm could be more profitable. Please contact me at 608-576-3773 to set up a short meeting to learn more.

CASH. WE HELP YOU GET IT.™        WHO IS YOUR CFO?

IMPROVE YOUR PROFITABILITY

Gross Profit (or gross margin) is a very important financial measure in almost every type of company. It is the profit from sales before administrative, sales and marketing expense, interest and other expense.

It is important to focus on Direct Margin as a component of Gross Profit: 

• Direct margin equals sales less direct costs. For a manufactured product direct cost normally includes direct labor, raw materials and subcontracted costs.  For distributors or retail this is the cost of purchasing the product for resale.  For service firms this is a bit trickier, but normally would include direct labor, materials, subcontractors, supplies and other variable costs that are directly attributable to the completion of the service.
• Gross Profit is direct margin less the cost of the operational overhead required to manufacture the product, provide the service or distribute the product.  The key word is operational overhead.  It is very important to separate operational costs from administrative expenses, sales and marketing expenses and other expenses.

Gross Profit Optimization therefore is the process of optimizing, or maximizing the profits from producing the product or service. Here are the steps:

• Identify the direct costs. Set up separate ledger codes so you can track them.  For example, most firms do not properly track labor...they put it all in one bucket.  Direct labor should only include time spent producing the product or service; all other labor should be coded to indirect labor, including breaks, vacations, holidays, PTO, seminars, training, meetings, etc.  Indirect labor is overhead and should be coded as such.
• Calculate the direct cost of each major input as a % of sales.
• Develop detailed strategies as to how to lower each of the direct costs.  Assign teams, responsibilities and timelines for achieving specific cost reduction goals.  Often the goals will be a percentage of that direct cost to sales.  If direct labor has been running 20% and materials 30% of sales, develop specific action plans to bring labor down to 18% and materials to 28%.  This will bring 4% directly to the bottom line.  Detailed labor analysis and carefully planned purchasing strategies are required to achieve these results.
• Identify direct margins down to the product line and item level.  Fix or rid the items that do not add value to the company.
• Continue to track the cost/sales % over time to monitor your results and make sure you hit your direct margin targets.
• Analyze the overhead costs (including the indirect labor) and set additional cost reduction goals for these expenses.  Tackle the big ones first.  Compare your costs with industry averages to benchmark your operations to your peers.
• Calculate the gross margin % of sales and track over time.  If you improve your direct margins and reduce your overhead, gross profit will improve.

By breaking down your margins and developing specific strategies for each category of cost, you may be able to add substantially to your bottom line!

Please contact me if you are interested in learning how to apply Gross Profit Optimization techniques to improve your company's bottom line!

“Rick is a god-send. Chamberlain gets a top notch CFO at less than full time who has helped us analyze and understand our profitability drivers and helped us implement changes to increase our bottom line.  He also brought our monthly accounting processes in-house and trained our accountant.  He continues to act as a trusted advisor to the company. When we need Rick, he is there and when we don't, he isn't. We're happy to pay for the great advice he gives.”

Please take a few minutes to think about these two questions:

1) What are our company's three most important opportunities?
2) What are our company's three biggest issues or threats?

If your company is successful in taking advantage of its most important opportunities and eradicates its biggest threats in 2010, it will move your company to an entirely new level of profitability, growth and financial strength.  If instead you work on lots of other less important goals and spend your staff time fighting fires, your company may be little better off than it is today and will have wasted a year of its history.

To achieve these goals, you must:

1) Properly identify the most important (3-5) opportunities and risks.

2) Develop detailed action plans to successfully tackle them.

3) Execute these plans effectively.

Don't waste time.  Begin planning for 2010.  If you don't have a strong planning team in-house, I recommend bringing in a good outside facilitator to help you.  There are some great ones in Madison, including www.3GoodQuestions.com where I am on the planning team.

Small and mid-market companies also employ top sales and operations executives, but not financial executives.  The majority have bookkeepers or controllers who process financial transactions and generate financial reports, but they cannot provide the financial strategies or offer the level of financial sophistication, problem solving and strategic financial management the companies need to maximize profitability and growth.

Companies without a CFO are at a disadvantage.  Many small and mid-market firms have sophisticated operations and complex cost and financial challenges like large companies.  They need the expertise of a senior financial executive, but not full time, nor can they afford the cost of a full time CFO.  These firms often seek financial advice from their CPA firms who provide tax, reporting and general financial guidance, but do not have the corporate experience and specialized skills that CFO's excel in.

B2B CFO^® provides CFO services on an affordable, part time or as needed basis and is the largest CFO firm in the U.S. focusing on small and mid-market companies.  With over 115 partners in 43 states, B2B CFO^® provides small and mid-market companies with the financial management they need to prosper.

What are the benefits B2B CFO's bring to small and mid-market companies?  Cash, profitability and growth:

In Summary, B2B CFO's

• Allow Start-ups, small and mid-market companies the advantage of a CFO.
• Help drive revenue and profitability that far exceeds the cost of their services.
• Help reduce "administrivia" so Owners/CEO's can focus on leading their companies.
• Help Companies without CFO's gain significant competitive advantage and improve profitability.

CASH. WE HELP YOU GET IT.^TM

Successful Business Owner:

You have worked for years and made incredible sacrifices building your company.  It is your largest financial asset.  However, in the next one to three years you may want to sell or transition out of your company, maximize the value you receive from it and ensure its future success so you can enjoy your retirement and other endeavors.  Planning is the key to a successful exit.

B2B CFO's^® have extensive experience helping owners increase the value of their companies and plan successful exits. While you may have a controller or a CFO, most likely they do not have the experience of a B2B CFO^®. Our skills in business improvement and exit planning make us uniquely qualified to help you reach your goals.

Planning the Exit - Steps to Maximize Value

I. Improve Profitability and Cash Flow

Most companies are valued on a multiple of EBITDA (Earnings before interest, taxes, depreciation and amortization).  Increasing earnings drives EBITDA.  A company with a history of increasing profits and cash flow with margins above its industry averages will sell at a higher price. Tools used to increase profitability and cash flow include the following:

• Accurate, timely, well-structured and meaningful financial statements and reports
• Benchmarking tools for tracking and improving operations and financial performance
• Gross profit optimization - margin analysis and improvement
• In-depth labor analysis and reporting to improve labor efficiencies and reduce overhead
• Working capital improvement strategies to reduce A/R and inventory and increase cash
• Purchasing and negotiation strategies to lower purchase costs
• Job and cost accounting systems for understanding and improving margins
• Line of business, product line and customer profitability analyses and improvement
• Formalized cost and overhead reduction programs
• Tax minimization strategies for increasing cash

II. Increase Sales

Increasing sales, if done properly, is often the quickest way of increasing company value.  When above the break even point, gross margin on additional sales can dramatically increase profits.  In addition, companies with higher revenues normally attract higher EBITDA multiples. Financial tools can be very powerful for creating strategies to increase sales.  Some of these tools include:

• Proven B2B CFO^® process "Finding the Exit"^® to help the CEO/Owner sell more
• Strategic and Financial Planning, incorporating sales and marketing strategies
• Quoting and pricing tools and strategies to understand costs and improve proposals
• Financial modeling & ROI analyses for new products, investments, and facilities
• Sales analysis tools - insight from understanding trends by customer and product line

III. Strengthen the Infrastructure

Acquiring companies want to buy well run companies with solid infrastructures.  Strong management teams are a critical component.  Robust and well documented systems, procedures and processes are also essential. Strong infrastructures also make good use of technology and have strong internal controls. Well documented intellectual property and customer and vendor contracts are also critical.

Companies with strong infrastructures command a higher price.  Most acquirers will analyze the infrastructure when performing due diligence.  You do not want them deducting significant amounts from the sales price, or worse, walking away altogether because you do not have your infrastructure in order.  At B2B CFO^® we understand how to help you improve your infrastructure to maximize company value.

IV. Strategic and Financial Plans

The most successful companies have a strong strategic planning process which helps them create the vision and strategies to drive high long term growth and profitability.  They prepare financial models to analyze their strategic initiatives and projected financial statements to understand what future profitability and financing needs may be.  They also have a strong operational planning process to develop goals, action plans, timelines and accountabilities to reach their current year goals, which are integrated with the strategic plan. The operational plan includes a well thought out budget.  Finally, they have a results management program to ensure they continually execute their plans and keep on track to reach their goals.

Companies that have well thought out plans using a structured approach are much more successful in reaching their sales and profitability goals than those that run with simpler planning methods or "by the seat of their pants". They are able to command higher EBITDA multiples when they are sold because the acquiring company can see the future value potential of the company through the strategic plan.  At B2B CFO^® we know how to facilitate the strategic and financial planning processes to accelerate your company's growth, and have extensive experience helping companies execute their plans, overcome barriers, and drive profitability.

V. The Sale and Exit

The sale of a company is a complex process and normally involves many parties and a six to eighteen month time frame.  To maximize value we recommend starting to Plan the Exit a year or more in advance.  We also recommend using an investment banker that is able to bring many potential buyers to the table.  In addition to a good investment banker, an estate and business attorney and your tax advisor should be involved.

Whether you are thinking of exiting your business now, or in a few years, understanding how your company may look to a buyer today is a good first step. We will perform a free Phase I assessment of your company's financial strength and infrastructure and give you insight to the actions you may be able to take to improve your company and its potential sale value.

Your B2B CFO^® is uniquely qualified to help you increase the value of your company to maximize its selling price.  We have the expertise as well as strong relationships with top, middle market investment bankers and other professionals to help you through a smooth and successful exit from your company.

Strong banking and lending relationships are key to a well-financed business. Well financed businesses can operate much more efficiently than cash strapped firms and can take better advantage of market opportunities when they arise. Owners, of businesses that are well financed, are able to sleep much better at night than those who struggle with cash. Since banks are the single largest source of financing (cash) for business, having strong banking relationships is paramount to having a well- financed business.

Some companies, especially startups and those with little equity may have difficulty borrowing from banks. There are times when other non-bank lenders can provide better financing options than banks. Therefore, having strong relationships with other lenders such as asset based lenders, lessors, private investors and investment bankers can be very important to business success.

Strong banking and lending relationships are based on trust and good communications between the banker (lender) and the borrower. Providing lenders with accurate and timely financial statements, good cash flow and income projections, and keeping them informed about major business decisions and activities will go a long way in developing trust and cementing a strong relationship. Bankers/lenders will provide better financing for relationship-based borrowers who keep them well informed about good as well as bad news in the business. Businesses that have strong financial management and institute good financial procedures and controls will also be looked on favorably by bankers and other lenders.

B2B CFO® advisors, on average, have worked and negotiated with lenders for over 25 years and have strong relationships with many banks and alternative financing sources. They understand which banks and other lenders will serve your company the best, based on your industry and company profile. B2B CFO's will help you put together the accurate and timely financial statements and pro-forma cash and financial projections that will help you secure a great financing package for your business. In addition, your B2B CFO® advisor will help you determine the most appropriate mix and terms of financing to best meet your companies needs, whether it be short term lines of credit, long term debt, leases, or working with you and investment bankers to secure equity capital.

Your B2B CFO® advisor will help you make better business decisions by helping you analyze your business from a financial standpoint and by implementing a management reporting system that gives you the information you need to make better decisions. This will help you increase profitability and drive your firm's growth, strengthening your company and its banking and lending relationships.

 Working with banks and lenders can take substantial time and effort. Your B2B CFO® advisor can take care of much of the work for you, allowing you to spend your time leading and improving the business and increasing sales. Your banker/lender will also feel a sense of security knowing that you have a top financial professional helping you with your financial management and will reward your company with a stronger and more attractive financing arrangement.

In summary, B2B CFO® can help you secure a better banking/lending relationship, which will ensure your firm is well financed, has the most competitive rates and terms, and will free you up to concentrate your time on growing the business. As an additional benefit, you will be able to sleep better at night!

We purchased Dane Manufacturing in 2001 with the intent on improving and growing an 85 year old metal manufacturing company. After about $5MM of invested capital, grow it we did. Dane grew at 35-plus percent per year for five years in a row. In 2005 it became very clear we had outgrown our accounting firm and their business model wasn't working any longer. We searched for an alternative and found Rick Perrin from B2B CFO®.

Rick came in and I hired him after our first meeting to start working with Dane. Since coming, he has formalized our financial reporting, job costing, improved the treatment of inventory and tightened up reporting and financial management. Now due to Rick and my management team's efforts we finish a financial period (every 4 weeks) and I have the complete financials on my desk I can trust the following Monday by noon.

We send financials to the bank the following day. Rick has also helped refinance the company's assets and helped Dane with its first acquisition of a complimentary business. The B2B CFO® model is fantastic for a company our size that needs the talents of a CFO sometimes and can't yet afford one full-time.

I would strongly recommend the model for any company between the size of $2 - $75MM without a full-time CFO or any owner that wants a second set of eyes on their current financial team. It is a great model and superb help to small business in America - brilliant model - fractional ownership of a CFO's talents.

Lastly in 2007 Dane was recognized as an Inc. 5000 company (fastest growing, privately held, companies in America) with a rank of 2,015 (178% growth in 3 years) out of 5,000 and recently informed we will be an Inc. 5000 company again in 2008. This could not have happened at Dane without Rick Perrin's talents and the B2B CFO® business model.

Thankfully, Troy F. Berg, President/Owner Dane Manufacturing
www.danemfg.com

Rick has assisted Wind River with developing a crucial pricing model.  This new model will allow us to reach our profitability goals while not diluting our return by bringing in business we really can't afford.

Mark Courchane, Partner
www.windriverfinancial.com