How to NOT Prematurely Scale Your Business With a Part Time CFO

March 18, 2019

 

It’s hard to scale your business without a part time CFO. When you initially start your business, it’s all about the dream. Your enthusiasm and talent has gotten you this far, and honestly passion is exactly what you need when starting a business. It’s what keeps you going on those days when things aren’t living up to the vision.

 

But the dreams and enthusiasm can only get you so far.

 

Did you know that 74% of starts ups fail due to premature scaling? According to Startup Genome Report startups that scale properly grow about 20 times faster than startups that scale prematurely. 93% of startups that scale prematurely never break the $100k revenue per month threshold.

 

So how do you know if you’re scaling properly? I guarantee it’s more than just taking a risk and putting your business out there.

 

In order to scale properly, you have to do your homework. You have to develop a plan for growth that will minimize risk and maximize the odds of a successful transition to a larger organization, and a part time CFO can help.

 

There are plenty of reasons to expand your business, the most obvious one being to increase the profitability. 

 

Howvever, according to the Balance Small Business, most entrepreneurs forget to see these other reasons.

 

1. It gives you the opportunity to move into new product lines which broadens your audience

2. If you want to expand geographically, you can take advantage of opportunities. You could even relocate the business to a lower cost area

3. Scaling your business properly increases your ability to attract qualified staff who can further improve the organization

4. Making your business bigger puts it on the right path to ecome a public company

 

Here are some ways a part time CFO can help you scale your business properly.

 

A Part Time CFO Will Help You Know Your Numbers

 

Before scaling your business, it is CRUCIAL to know your numbers so you can optimize your costs and profit. Are you getting the best ROI you can?

 

Knowing your numbers ensures that there is money to meet your short-term working capital needs like payroll, utilities, rent, etc. Having a handle on your immediate needs puts your company in a place to scale properly.

 

A part time CFO will chart out your future cash inflows and outflows so that you have a better understanding of what is around the corner for your business. As you consider expanding, you may be wondering if your company is in a position to take on new customers. Will that impact your cash position and the ability to serve your existing customers?

 

In addition, you need to know that you are making the best profit you can make before you scale.

 

For example, if you want

 

to sell a widget for $10, figure out first the actual cost of the widget. It costs $5 to make the widget? That already cuts your margin in half. So go back to the drawing board. A part time CFO can do a breakeven analysis to optimize your expansion for you to receive the best return on your investment.

 

 

In addition, a part time CFO can also assist in forecasting future costs of expansion. Some things to consider may be:

 

  • Leasing new building space 

  • Renovations

  • Additional staffing

  • Additional manufacturing equipment, machinery, vehicles

  • Office equipment and furniture

  • Additional inventory 

  • Moving

  • Increased utilities 

  • Additional property taxes

A part time CFO will be able to understand where all the numbers come from and assist in developing strategies to optimize your ROI.

 

 

A Part Time CFO Will Help You Know What You Need

 

A part time CFO will be able to tell you if you need to seek out financing for your expansions, and will be able to help acquire the funds. Banks and financial institutions can provide lending based on the projected ability of your business to make a profit. A part time CFO can help you create an updated business plan that clearly forecasts your costs and sales and communicates to financiers or investors how scaling will be profitable for your business.

 

A part time CFO will also be able to tell you if hiring more people is required to scale and the right people to bring on board. A business is only scalable when it has the right people on board. They will be able to provide insight on the opportunity that will bring the greatest profit and therefore be able to speak into what positions to bring on board.

 

According to Neil Patel, here are some of the key characteristics of a team member who will help you scale:

 

• "They can do what a program can't. If you have a human doing something that a machine can do, then you're wasting human effort. A startup needs to automate everything that it can in order to maximize the output of human team members."

• "They are full of good ideas. You can't put a dollar price on the value of a good idea. A single lightbulb moment on the part of one employee can more than pay for that employee."

• "They have more than one skill. In the startup environment, one person might have to do three jobs. Hire people with a multifaceted skill set, or skills that can be transferred from one task to another."

 

A Part Time CFO Will Help You Know Your Endgame

 

Before you can scale, you have to know the ultimate goal for your business.

 

According to Tim Ferris, you can’t be clear on your strategy until you’re clear on where you’re going. For example, are you building a company to sell or growing a business that supports a lifestyle? Both require a different approach.

 

Once you figure out what you want, a part time CFO can help you figure out how to reach your endgame. A part time CFO is able to take the data and use it to project helpful predictions for your business. They look at your budget, your sales, your revenue, and identify things to focus on to help you make your business more profitable. They can provide intelligence on things to tackle and target. They are able to zoom out, look at the bigger picture and tell you where your best chance for success is—what your strongest month is, what your strongest product is thus helping you perpetuate tough financial calls as you work on the expansion of your business.

 

A Part Time CFO Will Help You Know Your Mindset

 

Scalability is all about mindset. Does your business need you or do you need your business? Both answers are wrong. A part time CFO can help you put the right systems and processes in place to feel good about stepping outside your business.

 

Your business is not about you. If you really want to scale your business, it should be just fine without you. Start shifting responsibility off your shoulders to employees that you trust.

 

Plan an intentional vacation and let your business run without you, and don’t be afraid to return and see it’s running perfectly fine without you.

 

That’s what you should hope for. Prove to yourself and your employees that your business isn’t tied to your presence. It’s liberating for you and empowering for your staff.

 

With the help of a part time CFO, you can feel good about not always being there.

 

Clarity Consulting Part Time CFO Services

 

 

We know you need systems in place to support your business expansion. We've worked with dozens of business owners to put processes in place and create a more black and white understanding of their financials. Instead of confusing and boring excel spreadsheets, we help create a clear picture of current financials and future projections. 

 

Part time CFO services and Fractional CFO programs can open up a whole new world of operational efficiency. We know that seeing your numbers on a daily, weekly, monthly, quarterly rhythm alone can provide amazing opportunity for growth and profit in any business. 

 

In addition to financial control, we also provide administrative support for HR, insurance and taxes.

 

HR

Once you’ve hired a new employee, Clarity Consulting is there to help with the onboarding process. We make sure they have filled out all their documents and get their direct deposit set up. If there is any admin related the employees need throughout employment, Clarity Consulting handles it, freeing up the business owner to focus on growth.

 

Insurance

For insurance support, we help companies with their annual General Liability and Worker’s Comp audits by gathering all the certificates throughout the year and sending the payroll report to your auditor.

 

Taxes

For tax support, we communicate with your CPA and make sure your CPA strategy is being implemented throughout the entire year.

 

Book your free Clarity Call with us today!

 

 

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