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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.
We decided to move forward: After the appropriate non-disclosure agreements were exchanged, I obtained from their Dallas lawyer their business plan, which I suspect had been quite expensive to produce. I was appalled; Numbers didn't add up. What few assumptions expressed in detail were so optimistic they should have been represented as waiting for miracles. Nothing made sense. I'd seen this kind of fluff before, mainly in China in the early '90s, where state-sponsored businesses had goals, but no coherent plans on how to reach them - simply because as subsidized businesses they didn't know how to build and articulate plans that would enlist investment or outside participation. Let's be clear: Objectives are NOT plans. The team near my house realized their business plan needed help, but what became patently obvious was that their expectations of their incoming CFO were really what was out of whack. CFOs can drive business goals, but they can't work miracles.
In subsequent communications, I asked more tough questions about their technology, the target customer and marketing strategy. I had obviously struck a nerve. The response was something along the line of, "We don't need people to question our vision." I was disappointed. I would have expected the response to be "Glad you asked. Let me explain our strategy." Certainly, a knowledgeable investor would ask questions at least this challenging or even more probing. While keeping an eye on product development is important, it's not the only thing. Today, attracting and keeping investors is a key role of the executive team. The CFO must be objective at all times and is compelled to ask senior management the difficult questions, because sooner or later an investor will ask them too. Clearly, this particular CEO didn't get it, and wasn't going to win an investment round.
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 spoke at length recently with a private venture capital group who has all but abandoned funding start-ups, (odd for a VC) and has instead shifted to emerging technologies, small but with proven track records, and more importantly, credible executive staffs who can potentially get big. They have no interest in risk, no matter what the upside. In their view, if you aren't already making money, at least a little, they're not interested. A business on a solid footing, with real operations, financial controls, the foundations of enterprise, is what they look for. They're no longer interested in creating a company out of thin air, only adding to what is already there.
Stock declines are a sign of the times. Equity markets have been chewed to ribbons by broken lending models, huge deficits, dead credit and sky-high energy prices. Taxpayers are saddled with a clean-up none can afford and the economy, while not totally stopped, is grinding to a screeching halt. The country, every sector of the economy, must reinvent itself. Detroit must re-tool, airlines conserve even more, companies drive toward novel ways of limiting transportation and energy costs. They all need money to do it. In the middle of this situation, how are you going to move your own ball forward? Do you have what it takes? What makes you stand out? Everyone is looking for investment. You will have to scramble for each and every penny. Why makes you so deserving?
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.
Lots of great ideas die on the vine. Companies implode for the dumbest of reasons. The biggest and oldest banks and investment houses of our time are falling in on themselves over simple missteps that could have been easily avoided. It's not about oversight, it's about execution. CFOs and their credibility with investors make a huge difference. Chief executives who are at odds with their CFOs are a red-flag warning for any company. Run from them. Listen to your CFO. Stay on track. Execute to a realistic plan and you'll never lack for investment. Plenty of companies are liked, but few are admired. Be one of them.
We decided to move forward: After the appropriate non-disclosure agreements were exchanged, I obtained from their Dallas lawyer their business plan, which I suspect had been quite expensive to produce. I was appalled; Numbers didn't add up. What few assumptions expressed in detail were so optimistic they should have been represented as waiting for miracles. Nothing made sense. I'd seen this kind of fluff before, mainly in China in the early '90s, where state-sponsored businesses had goals, but no coherent plans on how to reach them - simply because as subsidized businesses they didn't know how to build and articulate plans that would enlist investment or outside participation. Let's be clear: Objectives are NOT plans. The team near my house realized their business plan needed help, but what became patently obvious was that their expectations of their incoming CFO were really what was out of whack. CFOs can drive business goals, but they can't work miracles.
In subsequent communications, I asked more tough questions about their technology, the target customer and marketing strategy. I had obviously struck a nerve. The response was something along the line of, "We don't need people to question our vision." I was disappointed. I would have expected the response to be "Glad you asked. Let me explain our strategy." Certainly, a knowledgeable investor would ask questions at least this challenging or even more probing. While keeping an eye on product development is important, it's not the only thing. Today, attracting and keeping investors is a key role of the executive team. The CFO must be objective at all times and is compelled to ask senior management the difficult questions, because sooner or later an investor will ask them too. Clearly, this particular CEO didn't get it, and wasn't going to win an investment round.
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 spoke at length recently with a private venture capital group who has all but abandoned funding start-ups, (odd for a VC) and has instead shifted to emerging technologies, small but with proven track records, and more importantly, credible executive staffs who can potentially get big. They have no interest in risk, no matter what the upside. In their view, if you aren't already making money, at least a little, they're not interested. A business on a solid footing, with real operations, financial controls, the foundations of enterprise, is what they look for. They're no longer interested in creating a company out of thin air, only adding to what is already there.
Stock declines are a sign of the times. Equity markets have been chewed to ribbons by broken lending models, huge deficits, dead credit and sky-high energy prices. Taxpayers are saddled with a clean-up none can afford and the economy, while not totally stopped, is grinding to a screeching halt. The country, every sector of the economy, must reinvent itself. Detroit must re-tool, airlines conserve even more, companies drive toward novel ways of limiting transportation and energy costs. They all need money to do it. In the middle of this situation, how are you going to move your own ball forward? Do you have what it takes? What makes you stand out? Everyone is looking for investment. You will have to scramble for each and every penny. Why makes you so deserving?
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.
Lots of great ideas die on the vine. Companies implode for the dumbest of reasons. The biggest and oldest banks and investment houses of our time are falling in on themselves over simple missteps that could have been easily avoided. It's not about oversight, it's about execution. CFOs and their credibility with investors make a huge difference. Chief executives who are at odds with their CFOs are a red-flag warning for any company. Run from them. Listen to your CFO. Stay on track. Execute to a realistic plan and you'll never lack for investment. Plenty of companies are liked, but few are admired. Be one of them.
About the Author:
A credible start-up looking for funding and investors looking for great opportunities often find it difficult to connect Small Business Consulting through Thomas Financial Services LLC applies operational insight to make the connection. CEO Thomas Mezger, tmezger@thomasfinancialsvcs.com and SVP John Sawinski, jsawinski@thomasfinancialsvcs.com have over sixty combined years getting companies to the next level. Get in touch with us today
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