A recent newspaper article featured a company near my home. It was a start-up in a business segment close to my heart, one which is technical in nature. Because there was a 'Green' aspect to its activities, it had begun to stimulate attention in the press. Like many new ventures they needed financial guidance and investment, so I offered my services. I have experience as the CFO of a publicly traded company, and I thought my initial discussions with the CEO and VP of Sales went quite well.
I called their attorney to get some background and a copy of their business plan. While the business plan showed where the company wanted to go, it did not explain how they would get there. Financial projections were very elementary, and missing most of the supporting detail. Their time-line for revenue ramp-up was unrealistic, especially considering the many hurtles remaining in product development. While they admitted the plan needed to be re-written, they were totally focused on product development so they had stopped working on it. Call a spade a spade; A business plan generated after the fact, to fit the facts, is a report, not a plan. This reminded me of a meeting I had with China Unicom in Hong Kong in the mid-1990's. They were new to the telecom business and were demanding that suppliers finance the build-out of wireless systems. I asked them if they had a plan. "Yes! We are going to install systems in 88 cities by the end of the year." That is a goal, not a plan.
The devil is in the details. I next asked the tough questions, ones any investor would probe: Headcount ramp-up? Sales? Production and supply chain numbers? Capital schedules? Contingency plans? Scalability, etc? A healthy company would have responded along the lines of, 'Let us explain, draw a roadmap. . .' Instead, warning flares went up. One comment was, "We need team players, not someone who second guesses our executives all the time." Bad idea! Think how investors respond to this kind of nonsense. They don't! . . They leave. They know there's nothing there. An executive team without a plan, who can't attract and sell to the investment community, is doomed. The CFO, being the member of that team with the most to lose professionally, is point man, with his credibility on the line at all times. So investors inherently trust the CFO more than the SVP of marketing, or sales, or even the CEO. CFOs are hired guns for investors, objective and fair at all times, working above the noise. Any CEO who expects differently, or who shoots his own CFO in the foot, will be quickly dismissed by even the most tolerant investors. That kind of CEO isn't going to make it.
Attracting investment is like fishing; Toss out a shiny lure and you may get some bites from small fish, but they won't fill your frying pan. To land that big fish you need more. That is how the investment community is today. In the DotCom days, business plans were done on napkins at the corner coffee house. VCs were in a feeding frenzy and thought if they did not take the deal and run, no matter how badly planned, they would lose it. We all know those days are long gone.
I recently met with a private investment firm who explained they had stopped investing in start-ups and early phase companies. In their eyes, start-ups were too risky and took too long to mature. These days they look to invest in companies that are more maturealready up and runningand running well. They also examine the whole enterprise in greater detail, and it really does not matter what industry, but a company must have established itself and be up and running to attract their attention. It does not have to be high tech, biotech or anything "sexy". They want to invest in good companies, help them to grow and become better, thus increasing in value. So a company that demonstrates good performing internal processes is much more attractive than one that is a mess and requires a lot of attention to fix - even if the potential downstream opportunity is better.
The current situation on Wall Street makes things more challenging. Many investors have pulled out of the market and are waiting for things to calm down. The mortgage crisis has been festering for a while and many were surprised that the government jumped in with a huge bail-out program. The rapid rise in the cost of energy means we can no longer delay the adoption of aggressive energy conservation policies or more efficient transportation systems. General Motors, Ford, and Chrysler were the cornerstones of the U.S. economy for many years, but they are in trouble. For them to survive, they need to quickly re-engineer themselves. This will affect many suppliers and related businesses in a matter of months, and makes it all the more critical to have well rounded, cost effective business processes. Everyone will be looking for capital. How will you differentiate yourself to investors?
It's obvious: Executives must consistently look to the future in order to successfully grow and reach the next level. This is nothing new. Experts at Thomas Financial Services (www.thomasfinancialsvcs.com) know what to do. Building core infrastructure in basics like financial systems, business planning, forecasting and accounting will make all the difference. You'll become strong and efficient when your plan works the way you want it to. Customers will see the difference, investors too.
Little companies can succeed. Big companies fail every day. Failure to anticipate and plan kills your future. Recent blowups like Lehman and AIG drive home the point that when even the big boys take their eye off the ball, they strike out too. Chief Financial Officers turn organizational discipline into credibility with investors. Make sure your executive team is truly a team. Stay on top of your game. Plan your work, work your plan. - 15224
I called their attorney to get some background and a copy of their business plan. While the business plan showed where the company wanted to go, it did not explain how they would get there. Financial projections were very elementary, and missing most of the supporting detail. Their time-line for revenue ramp-up was unrealistic, especially considering the many hurtles remaining in product development. While they admitted the plan needed to be re-written, they were totally focused on product development so they had stopped working on it. Call a spade a spade; A business plan generated after the fact, to fit the facts, is a report, not a plan. This reminded me of a meeting I had with China Unicom in Hong Kong in the mid-1990's. They were new to the telecom business and were demanding that suppliers finance the build-out of wireless systems. I asked them if they had a plan. "Yes! We are going to install systems in 88 cities by the end of the year." That is a goal, not a plan.
The devil is in the details. I next asked the tough questions, ones any investor would probe: Headcount ramp-up? Sales? Production and supply chain numbers? Capital schedules? Contingency plans? Scalability, etc? A healthy company would have responded along the lines of, 'Let us explain, draw a roadmap. . .' Instead, warning flares went up. One comment was, "We need team players, not someone who second guesses our executives all the time." Bad idea! Think how investors respond to this kind of nonsense. They don't! . . They leave. They know there's nothing there. An executive team without a plan, who can't attract and sell to the investment community, is doomed. The CFO, being the member of that team with the most to lose professionally, is point man, with his credibility on the line at all times. So investors inherently trust the CFO more than the SVP of marketing, or sales, or even the CEO. CFOs are hired guns for investors, objective and fair at all times, working above the noise. Any CEO who expects differently, or who shoots his own CFO in the foot, will be quickly dismissed by even the most tolerant investors. That kind of CEO isn't going to make it.
Attracting investment is like fishing; Toss out a shiny lure and you may get some bites from small fish, but they won't fill your frying pan. To land that big fish you need more. That is how the investment community is today. In the DotCom days, business plans were done on napkins at the corner coffee house. VCs were in a feeding frenzy and thought if they did not take the deal and run, no matter how badly planned, they would lose it. We all know those days are long gone.
I recently met with a private investment firm who explained they had stopped investing in start-ups and early phase companies. In their eyes, start-ups were too risky and took too long to mature. These days they look to invest in companies that are more maturealready up and runningand running well. They also examine the whole enterprise in greater detail, and it really does not matter what industry, but a company must have established itself and be up and running to attract their attention. It does not have to be high tech, biotech or anything "sexy". They want to invest in good companies, help them to grow and become better, thus increasing in value. So a company that demonstrates good performing internal processes is much more attractive than one that is a mess and requires a lot of attention to fix - even if the potential downstream opportunity is better.
The current situation on Wall Street makes things more challenging. Many investors have pulled out of the market and are waiting for things to calm down. The mortgage crisis has been festering for a while and many were surprised that the government jumped in with a huge bail-out program. The rapid rise in the cost of energy means we can no longer delay the adoption of aggressive energy conservation policies or more efficient transportation systems. General Motors, Ford, and Chrysler were the cornerstones of the U.S. economy for many years, but they are in trouble. For them to survive, they need to quickly re-engineer themselves. This will affect many suppliers and related businesses in a matter of months, and makes it all the more critical to have well rounded, cost effective business processes. Everyone will be looking for capital. How will you differentiate yourself to investors?
It's obvious: Executives must consistently look to the future in order to successfully grow and reach the next level. This is nothing new. Experts at Thomas Financial Services (www.thomasfinancialsvcs.com) know what to do. Building core infrastructure in basics like financial systems, business planning, forecasting and accounting will make all the difference. You'll become strong and efficient when your plan works the way you want it to. Customers will see the difference, investors too.
Little companies can succeed. Big companies fail every day. Failure to anticipate and plan kills your future. Recent blowups like Lehman and AIG drive home the point that when even the big boys take their eye off the ball, they strike out too. Chief Financial Officers turn organizational discipline into credibility with investors. Make sure your executive team is truly a team. Stay on top of your game. Plan your work, work your plan. - 15224
About the Author:
Good companies seeking investment and people with money have a tough time finding each other. Small Business Consulting through Thomas Financial Services LLC applies operational insight to get you in touch. CEO Thomas Mezger, tmezger@thomasfinancialsvcs.com and SVP John Sawinski, jsawinski@thomasfinancialsvcs.com bring compact, broad-ranging experience getting companies to the next level. TFS can make a huge difference. Call today..
