Category Archives: Finance

On-boarding a New CFO – Four Imperatives or Considerations

Situation: The Company is hiring their first CFO. How do they integrate this key person into the company?

Advice from the CEOs:

  • The company should reflect the values, needs and desires of the CEO.
    • Have a clear discussion and agreement with the CFO candidate on values, role, and organizational structure before hiring or announcing anything to the company.
    • The talents of the CEO and CFO should complement each other.
  • The CEO may put the CFO in charge of areas that they want to delegate – accounting, administration, finance and contracts.
    • The CEO should remain involved in banking relationships.
  • Recommended announcements and timeline:
    • When the new CFO is announced, simultaneously present the new organization chart (broad responsibilities, not detailed position descriptions).
    • Set a timeline for realignment of roles. It is not necessary to specify exact roles at the time of the announcement – let everyone know that this is a work in progress and give a time frame within which all will be resolved.
  • Once the CFO is in place, the CEO and CFO should meet at least weekly, to assure that the CFO has the support and resources needed to accomplish their responsibilities.
    • All decisions within the CFO’s group, personnel responsibilities and any shifts in roles should come from the CFO, with the support of the CEO.
    • This will help the new CFO to more rapidly assimilate into the company and will give them the authority needed to manage their organization.

Key Words: CFO, On-Boarding, Values, Roles, Responsibilities, Authority, Personnel, Delegation  [like]

My Worst Nightmare – Sell or Downsize? Fifteen Considerations (Part 2)

Situation: The Company is losing money and has been approached about a merger. The CEO’s ideal outcome would be to get cash on the table, integrate with the merger partner and continue business. The other alternative – downsizing – may hurt company morale. What are the best options available?

Advice from the CEOs:

  • The downsizing experience is wrenching, but results were far more positive than expected.
    • A 10% cut resulted in a 30% increase in productivity.
    • Employees once thought to be critical were not missed post-layoff.
    • The employees generally understood more about the situation than the CEO knew, and those remaining responded positively to a restructuring that allowed them to keep their jobs.
    • Some companies used a layoff as an opportunity to cross-train employees and increase company flexibility.
    • If concerned about loss of key talent, consider rehiring a laid-off employee on a consulting basis for a limited period.
  • Smoothing the layoff process:
    • Communicate with the employees. Let them know the truth, and share enough of the situation so that they understand.
    • Challenge employees to come up with ways to save money or make processes more efficient and cost-effective. This can have a remarkable impact.
    • Consider a cross the board salary reduction as a temporary alternative to layoffs.
    • Position as a layoff to restructure expenses – keeps you on the right side of employment law.
    • Obtain assistance from a personnel consultant who can help to handle the process effectively.
  • Summary: If you can save expenses, return to profitability and stay independent you will be happier than you may be post-merger.

Key Words: Merger, Negotiation, Ownership, Downsizing, Mitigation, Layoffs, Profitability  [like]

My Worst Nightmare – Sell or Downsize? Fifteen Considerations (Part 1)

Situation: The Company is losing money and has been approached about a merger. The CEO’s ideal outcome would be to get cash on the table, integrate with the merger partner and continue business. The other alternative – downsizing – may hurt company morale. What are the best options available?

Advice from the CEOs:

  • The realities of mergers:
    • 70% of mergers fail, and the merger process often leaves founders with a minority stake in the company.
    • Experience of others with partners has been disappointing – better to control your own destiny.
    • Look at all alternatives before you jump into a merger. You founded the company and have brought it this far. The company will be a different company following a merger, and not the company that you founded or have led to date.
  • Message to your potential merger partner:
    • Be a reluctant bride.
    • “We are making improvements to return to profitability and I’ve joined a board of CEOs who are consulting me through the process.”
    • If the partner sweetens the offer to keep the merger on the table, make sure that you get 51% of the merged company and retain control of your own fate.
  • Reconsider downsizing – Others have found the downsizing experience wrenching, but with far more positive results than they expected.
    • More on this in the next ceo2ceos blog.
  • Summary: look more closely at your situation before your jump into a merger. If you can save expenses, return to profitability and stay independent you will be happier.

Key Words: Merger, Negotiation, Ownership, Downsizing, Mitigation, Layoffs, Profitability  [like]

Financing: OOM or OPM? Three Things to Consider

Situation: An early stage web Company is looking at steep ramp up expenses. Many companies have bootstrapped their way to success. However outside investment may speed the process. How have other CEOs evaluated these two options?

Advice from the CEOs:

  • Raising money takes time and is a major distraction to your development process. The two big variables will be investor interest and timing of investment.
    • Talk to Angels and VCs now. Start by presenting a broad outline of your technology and business model. Ask what they will want to see to offer you funding at different levels.
    • This will give you a reality check as to investor interest in funding you, and creates a roadmap to funding if the response is positive.
  • What are you seeking? Money or accountability? One CEO bootstrapped the company early, then looked for outside investment to gain accountability and advice – a whip to help move things along.
    • This CEO found that investors brought few of the anticipated assets, and added a new level of distraction and pain.
  • If you are looking for funding to purchase content to serve through your portal, consider a more creative way to gain content.
    • Can you use a Web 2.0 portal through which your target audience provides both the content and the consumer audience in a marketplace exchange? Establish the audience and add premium services to monetize the model.
    • This can minimize your upfront cash investment requirements, and may create a faster track to positive cash flow.

Note: OOM = Our Own Money; OPM = Other Peoples’ Money

Key Words: Investors, Investment, Ramp-up, Bootstrap, Financing, Cash Requirements  [like]