A great hire can push a team to unprecedented levels of success, while a poor one can cause problems well beyond sunk costs. And the stakes are even higher at the executive level. There’s more money, more responsibility, bigger expectations and often, a greater need. Most organizations can’t afford to get these hires wrong.

By now, you’re well aware of the fractional trend sweeping through the U.S., in which organizations are choosing to bring on high-level, high-skill talent on a part-time and project basis in a range of different C-Suite roles. Organizations can save money while getting access to a leader they could not afford otherwise, while also de-risking the hiring process through contract lengths and the ability to turn support on and off based on their needs.

But like any other type of working arrangement, a fractional executive will work extremely well in some situations and be less effective in others. While every organization is different and every situation has its own nuances and complexities, the following scenarios were identified by Canopy’s own experts as those in which a fractional executive would be the ideal choice.

1. Unlimited ambitions, limited budgets

Cost effectiveness is routinely listed as the top benefit for organizations in bringing on a fractional hire versus their full-time equivalent. Whether or not you agree where that benefit belongs on the list, our community of experts agrees that it should be a factor you consider in approaching any executive hire.

It’s well-documented that hiring a fractional expert, especially at the executive level, can save organizations a bundle. When you factor in the timebound nature of the work and the fact that most fractional experts will not receive health insurance or other benefits, the savings can run into the hundreds of thousands of dollars. In the case of a financial executive, assuming an average per hour rate of $350 per hour and a year-long contract, hiring a Fractional Chief Financial Officer (CFO) might cost an organization close to $168,000, while total annual pay for a full-time CFO might run an average of $742,011.

If you have large projects on the horizon or you have critical needs that can’t be filled with your internal team, and you’re limited on budget, it makes economic and strategic sense to consider a fractional expert first.

“Even for organizations with a lot of resources and reserves, it can take months or even years to recover from a bad hire. The ability to de-risk an executive hire, even slightly, continues to be a powerful selling point for fractional experts,” said Griffen O’Shaughnessy, founder and CEO of Canopy Advisory Group. “Significant cost savings aside, fractional hiring offers a way to access expert, executive-level talent without locking you in if things go sideways.”

2. Executive leader transitions

An executive-level hire is a big deal in any organization. Even if these hires don’t work out as planned, there’s a ton of pressure on founders and CEOs to “make it work,” at least for a certain period of time. On the flip side, when the new leader performs extremely well, founders and CEOs need to worry about how to retain an individual who will be in high demand.

Regardless of how an executive leaves the business, the hole they leave in the organizational structure presents both opportunities and challenges. From the perspective of the founder, CEO and Board of Directors, the opportunity is to bring in new skill sets and new thinking. The challenge is to minimize the disruption and, in the case of losing someone valuable, limit the damage from their departure.

The situation is often extremely suitable for a fractional hire given the need to bring someone into the business quickly, the strategic nature of the position in a period of transition and the level of experience required to navigate a potentially difficult situation (including the possibility of preparing for a full-time hire in the role within the next year).

“When you lose a high-level executive who was important to the business, there’s often no clear direction, and the team may not know where to turn,” said Canopy Marketing Expert Kate W. “A fractional executive immediate senior-level expertise without the full-time cost, no annual salary, no benefits overhead. They can step in quickly, stabilize the team, assess the landscape, and drive strategic action.

3. Periods of rapid growth

Early on, much of the messaging around fractional hiring centered on the use of fractional experts as stop-gap measures in transition periods. While many organizations continue to use fractional hires to bridge these gaps, a growing number are discovering the value of fractional experts in accelerating growth plans.

Whereas the first two scenarios are clearly tailored more toward hiring a fractional expert than a full-time resource, the growth stage is a situation where you’re making more of a strategic choice. Regardless of the discipline for the role (e.g., CFO, COO, CRO, CMO, etc.), a full-time hire can certainly prove to be an excellent choice, especially if the individual ends up being a longer-tenured member of the organization and is a leader that the founder and CEO wants to grow a team around.

Reasons a founder or CEO may wish to go with a fractional expert in a growth scenario include:

• An interest in keeping costs down while maximizing impact
• The need for speed-to-impact, including areas like faster onboarding and truncated time-to-result
• A desire to bring in an executive leader with very specific situational experience
• A market or organizational situation that prioritizes agility and the ability to react and adjust quickly

4. Navigating large-scale change

While the departure of a leader or leaders certainly qualifies as change, these are far from the only situations where fractional executive hires can be instrumental in helping an organization withstand turbulent times. And unlike a situation where a single leader leaves an organization and the founder, CEO and Board are forced to move quickly to replace them, a large-scale adjustment to the direction, model or structure of an organization can (paradoxically) provide a bit more breathing room for leadership to approach the problem more strategically.

Similar to the rapid growth scenario, founders, CEO and Boards have the potential to be successful in this situation with either a full-time or fractional hire. In this case specifically, the choice can be largely dependent on the strength and clarity of the organization’s business plan. Clarity on direction often brings with it an understanding of the team that’s likely to be able to fulfill the long-term vision, and in these instances, leaders tend to lean toward full-time hires who can grow with the organization. While fractional experts can perform quite well in this scenario, organizations may choose to skip a bridge option and move straight to a longer-term hire.

Conversely, for all of the reasons fractional experts thrive in any organization, founders, CEOs and Boards may choose to bring in an experienced expert to help them build the future direction of the organization. In this case, they can also provide recommendations on who to hire to build a full-time team, and when it makes the most sense to hire those roles. 

We have also seen leaders set a new direction and then compile a group of the best fractional experts available to drive the plan forward. Whether or not this is a longer-term solution, it invariably helps the organization gain the traction and foothold necessary for a new direction to get off the ground.

Canopy Nonprofit Expert Meg G. described what a fractional expert engagement can look like during a major organizational change: “Sometimes during the life of a nonprofit, the Board of Trustees may find that a total restructuring of staff and mission is required. I went through this for a magazine, during which I was called in to supervise the restructuring and to shepherd how the magazine approached production, management, marketing, fulfillment and more. The process took approximately nine months.” 

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Thank you for reading! If you’re interested in hearing more from our experts on when and how to hire fractional executives, check out our guide, Demystifying Fractional Executive Hiring.

The post Hiring an executive? Here are the top four scenarios where fractional makes sense. appeared first on Canopy Advisory Group.

During these life cycles, the quality of the financial decisions at crucial stages contributes to the company’s development. Most startups don’t launch with finance or accounting teams. Several times, one of the founders assumes the accounting or financial planning positions. However, as the company expands, the need for a specialized finance expert, a full-time CFO, or a team to oversee financial functions becomes increasingly crucial. Bringing in a CFO during the early stages can significantly influence a company’s initial profitability strategy. However, the feasibility of hiring one can be a challenging task for startups with limited financial resources. This is where the expertise of a fractional CFO can be engaged, and when supported by an accounting staff and a part-time finance controller, can provide adequate support for a business that cannot afford to build a full-time team but requires financial expertise.

If you are new to Fractional CFOs, our blog on How can a fractional CFO contribute to Business Growth and Profitability provides a background on the importance of a skilled fractional CFO and areas where your company can see a long-lasting value in growth and profitability.

When to Consider a Fractional CFO

Here are Ten signs that it is time to hire a fractional CFO.

Rapid business growth and expansion

As a startup, going through a phase of swift business growth and expansion brings excitement to the company, usually when revenues are high, net profits are positive, customer retention is impressive, and the business is gaining recognition in its respective industry. However, effectively managing business growth and the company’s finances can become increasingly intricate. Startups experiencing rapid growth and expansion can employ the services of a fractional CFO to navigate through the growth stage while ensuring that the cost and capital structure is optimized to support the business operations.

Raising capital

There is a sense of fulfillment and validation that comes from raising venture capital. Founders and business owners consider this phase a fulfilling one. However, the pitching and fundraising process can be tedious and sometimes unpredictable. The requirements of each funding round change, and a business can leverage the services of a Fractional CFO to manage the requirements of these rounds. In addition, not only can the Fractional CFO function in the fundraising process, but they can advise on the timing of the fundraising and the percentage of debt and equity that is best for the company at each round.

It is also important to note that in the series A or seed funding stages, what investors value most is the idea, management, and scalability of the business. When you are heading towards series B or later stages, the key value driver becomes the financial metrics, profitability, and revenues. Therefore, if you are in the series B or later rounds of your fundraising, this can be a perfect time to have a fractional CFO on your team.

Navigating an audit or transaction

Organizational audit periods can be one of the busiest periods in a company’s calendar year. While internal audits can help a company understand the status of its financial health, there are other cases where the government, investors, or shareholders demand an audit report before making relevant decisions. Audit requests may come last minute, and the complexity of this activity can seem difficult for first-time founders and entrepreneurs. Audit tasks can be contracted to fractional CFOs, who can ensure that the company’s financial statements are accurate against other financial documents and credit card statements.

When it’s time to scale

“Growth” and “Scale” are words often used interchangeably in business. However, growth involves increasing top-line revenues without significant concern for expenses, whereas scaling a business focuses on optimizing revenues while efficiently managing costs to improve profit margin. This concept is known as the “economies of scale.”

Popular approach companies adopt for scaling involves incorporating new software into their manual operational procedures. For instance, they might utilize Zuora for invoicing and Salesforce for managing customer relationships. When a company opts to scale, it can be a smart move to bring on board an experienced fractional CFO. This helps guarantee smooth and problem-free integrations, all while maintaining the company’s workflow undisturbed.

Cash flow issues

One specific challenge that startups encounter is dealing with cash flow issues. These issues can arise due to uneven cash inflows and outflows, unexpected expenses, or delays in receiving payments from customers. In some cases, startups may struggle to determine the average number of days it takes for customers to pay their invoices, which is known as the accounts receivable turnover. A lack of clarity regarding this metric can lead to uncertainty in predicting when cash will be available. A fractional CFO can play a crucial role in addressing cash flow challenges by devising a fresh billing strategy. This strategy may involve setting clear payment terms, offering incentives for early payments, or implementing efficient invoicing and collection processes. Furthermore, a fractional CFO can work with the startup’s management team to negotiate improved payment timelines with customers. This negotiation process may involve finding ways to align payment schedules with the company’s own cash needs, smoothing out the variability in cash inflows. By securing more favorable payment terms, the startup can enhance its ability to maintain a steady cash balance and navigate cash flow fluctuations more effectively.

Optimizing employee compensation and benefits

If you are considering improving your employees’ benefits, payroll, and workers’ compensation, outsourcing these tasks to a Fractional CFO can significantly help companies to reduce their non-operating expenses. For example, the cost of employee benefits, particularly in healthcare, is constantly increasing. In 2022, a McKinsey article reported that the average employer saw a 5% increase in cost of employee healthcare benefits, and will increase by an additional 10% throughout 2023 according to Willis Tower Watson. An experienced fractional CFO is always attuned to emerging economic alternatives and should be capable of suggesting strategies to reduce costs while upholding or elevating employee benefits.

Frequent industry regulatory changes

Some industries experience frequent regulatory changes. If you are a multinational company or have a diverse supply chain, you need to pay attention to the changes in relevant regulations in the countries you operate. These regulations could be reporting, disclosure obligations, or compliance, and therefore require individuals with related experience or professional skills, as the implications of misinterpreting regulations can be reputationally and financially disastrous.

Given that fractional CFOs often possess experience spanning multiple industries, their wide-ranging expertise and understanding of various regulatory demands can facilitate the transfer of knowledge within existing teams, as well as provide adequate insights to the CEO and management teams.

Management restructuring

Management structures often change, particularly after the completion of a merger and acquisition (M&A) or a leveraged buyout (LBO). If investors are not looking to appoint their CFO, some incumbent CFOs and staff resign at this stage, leaving the business without a financial decision-maker to implement new strategies. Moreso, it takes an average of 6 months to a year to hire a CFO, compared to the swift onboarding process of an experienced fractional CFO who can fit into the role on an interim basis.

Influencing the board of directors

Venture or private equity (PE) funded companies end up with diverse board members that hold significant influence over decisions and future trajectories of the company. Introducing a fractional CFO to participate in board meetings and contribute fresh perspectives to business decisions can be beneficial to the company.

In addition, larger companies typically have a more complex board of directors, including independent board members with no significant financial, business, or familial ties to the company and whose decisions should not be influenced by internal interests or conflicts of interest. Occasionally, specific corporate actions may place an independent board member in a potentially conflicted position. During such instances, a fractional CFO can step in as a temporary board member, ensuring unbiased oversight of the matter without any personal conflicts.

Decision-making on budget allocation

High-growth companies expand rapidly with increasing operational demand and often need to make decisions around the strategic allocation of funds. One notable aspect of their decision-making process is determining where to invest their financial resources to achieve high returns for their shareholders. For example, decisions made during Mergers and Acquisitions (M&A) can significantly impact a company’s trajectory, market positioning, and competitive advantage. In the absence of a dedicated full-time CFO, which is not uncommon for many evolving companies, the option of engaging a fractional CFO becomes particularly valuable. In situations where complex and impactful decisions must be made swiftly, often referred to as intensive, time-sensitive sprints, the fractional CFO can step in to provide insightful project evaluation.

In the dynamic landscape of business growth and financial management, recognizing the pivotal moments to engage expertise is key. The ten signs elucidated here underscore the critical junctures when a fractional CFO can be your strategic partner. From steering through rapid growth and complex scaling transitions to deftly navigating audits, regulatory changes, and budget allocations, the insights and expertise of a skilled fractional CFO can guide your company to enhanced profitability and sustainable success. As you assess your company’s trajectory, remember that these pivotal moments are opportunities for transformation. To ensure that your financial decisions align with your growth ambitions, contact Canopy Advisory Group for Fractional CFOs today. Let our seasoned professionals empower your journey, ushering you through these crucial phases with expertise, insight, and a commitment to your company’s financial excellence.

The post The 10 Signs It’s Time to Hire a Fractional CFO appeared first on Canopy Advisory Group.

The main responsibility of a marketing consultant is to help a company develop its brand through various marketing services including website design, event planning, social media, graphic design, and creating an effective online presence. 

A marketing consultant is usually available as an individual consultant or part of a full marketing agency with several professional marketing specialists who can create and implement every part of a marketing plan.

What A Marketing Consultant Does

After implementing a new marketing strategy, a marketing consultant will analyze the results for effectiveness and present the results to the client. When it comes to implementing marketing strategies, a marketing consultant handles the task from start to finish. Presenting the results is vital to the reputation of a marketing consultant since it showcases the level of their work ethic.

The first thing a marketing consultant does is examine a company’s marketing to determine its strengths and weaknesses. This is being done to get a complete picture of which marketing platforms are working and which ones need improvement. 

Performing Market Research

The difference between a second-rate marketing consultant and an amazing one is that the latter goes the extra mile to come up with ways to reliably help your business develop. This entails performing market research to find new marketing trends, as well as coming up with ways to develop current strategies. 

Best Marketing Strategies 

Partnering with a marketing consultant who provides effective marketing strategies will be a huge benefit to your business, ensuring future success. Businesses must have successful marketing strategies so they can be competitive in their industries. 

Your marketing consultant should know valuable marketing tactics that will be helpful for your company, but also useful strategies to aid in your future business growth. 

Advantages of Hiring a Marketing Consultant

If your goal is business growth, it is crucial that you work with a marketing consultant.

A skilled marketing professional will possess the expertise and knowledge to assist your business in achieving its goals. 

How can you be sure you’re hiring the right person? When selecting a marketing consultant, some important questions must be asked before hiring. They include:

• Ask about any experience with similar projects
• Ask about marketing results with past clients
• Ask about references

Denver’s Top Marketing Consultants

With years of marketing experience, a marketing consultant’s services include creating new ideas for business growth. Since they know what marketing strategies work, partnering with a marketing consultant saves you time and money. Your business will benefit from effective email marketing, website designing, and copywriting.  

With so many marketing consultants in Denver competing for new business, why not reach out to Canopy Advisory Group today? We look forward to hearing from you.

The post What Services Do Marketing Consultants Provide? appeared first on Canopy Advisory Group.

If you can’t afford a full-time CFO, a fractional CFO delivers the same expertise at a fraction of the salary. 

A fractional CFO has an active management and leadership role in a company. They provide important information that comes from analyzing trends and helping to develop accurate plans for your business. Additionally, they can identify risks to your business and safeguard you against those risks.

Ways A Fractional CFO Helps Accelerate Your Growth

Top-level of Expertise 

As a seasoned financial expert, the skills and experience of a fractional CFO are tried and true. Engaging with a fractional CFO at the appropriate time brings substantial value to a company. Fractional CFOs are critical in financial problem-solving, complex financial analysis, capital raises, working with new investors, creating incentive plans, and more.

Accounting 

Even though most businesses already have an accounting department, a skilled fractional CFO will be able to effortlessly fit in with your existing accounting team. Partnering with the controller, a fractional CFO will assist with assembling reports and implementing new procedures. 

Being integrated into an organization’s accounting team helps the fractional CFO better understand how the department and company operate. The fractional CFO can use the acquired knowledge to develop new strategies, unique to that organization’s goals and objectives.

Financial Analyst

A fractional CFO will analyze and oversee your company’s financials, including ROI, liquidity, and other critical metrics on a monthly, quarterly, and yearly basis. As your company experiences growth, a fractional CFO will help your company modify its workflow and processes, managing your increased cash flow and new financial needs.

The Right Fractional CFO in Denver for Your Business

Canopy Advisory Group has the most experienced fractional CFOs in Denver. Schedule a consultation with us today.

The post How Can a Fractional CFO Contribute to Business Growth and Profitability appeared first on Canopy Advisory Group.

Please join us for a free webinar on decoding nutrition noise and getting to the roots of your health essentials with nutritionist, Kelly Eisinger.

The post Canopy Virtual Event: Decoding Nutrition Noise appeared first on Canopy Advisory Group.

Question:

What’s the best way to deal with intersectional gender inequality in the workplace?

Answer:

In 2018, more CEOs were dismissed for misconduct and ethical lapses (e.g. sexual harassment) than for financial performance or board struggles. In PwC’s 19-year history of researching CEO success, this was the first time bad behavior overtook financial performance as the main reason for executive departures.

Dismissing a CEO (or any employee) post-offense is one way to deal with an inequity. But, and this gets to your question—wouldn’t it be better NOT to have to deal with inequity in the first place? Wouldn’t it be better to install systems that can detect and mitigate inequity in its earliest stages?

The best way to “deal” with inequity in the workplace is to prevent it from occurring in the first place. It’s about moving from reactive DEI to proactive DEI, which is easier said than done.

Reactive DEI vs. Proactive DEI

Many organizations struggle with proactive DEI because it requires upstream—as opposed to downstream—resource mobilization.

Upstream resource mobilization presents a unique set of challenges. For instance:

1. It’s difficult to identify issues upstream because, by definition, these issues are still small and haven’t snowballed into bigger problems (yet).
2. Delegating responsibility to manage upstream issues threatens the status quo. Why should I take ownership of a problem that doesn’t affect me or that I can’t see?
3. Resource scarcity tricks us into believing quick fixes in the short term are better than systemic improvements in the long term.

The intersectional gender pay gap provides a clear example of the need for proactive/upstream DEI solutions. 

To End Pay Inequity, Look Upstream

Pay is the quantitative value companies place on their talent. Evaluations of employee performance and potential represent their real value to the organization. These evaluations of employee performance and potential are inputs to determining pay.

So if we want to close the intersectional gender pay gap, we need to look upstream—at the inputs—and ask ourselves: 

• Are the inputs to pay equitable? Yes or no.
• Are the inputs to pay free of bias? Yes or no.
• If no, where are the equity gaps located? In which departments, seniority levels, protected status cohorts, etc.
• What is driving these equity gaps? Oftentimes, it’s unconscious bias.
• How can we close these gaps so that they don’t compromise decisions on employee pay and promotion?

Looking upstream force-functions us to take a proactive approach to DEI. Instead of turning off the fire alarm, we’re turning back the clock to prevent the fire from ever starting.

How To Practice Proactive DEI Thinking

Here’s a mini exercise you can do right now to practice proactive DEI thinking:

1. Identify one example of inequity within your organization.
2. Reverse engineer the inequity until you identify its root causes. (Causes, plural, because many factors influence systemic issues such an inequity.)
3. What are some possible solutions to address the root causes?
4. How would you scale this solution across the entire organization?

The post Do You Know How To Recognize The Early Signs Of Inequity? appeared first on Canopy Advisory Group.

What does this mean? All routine activities – yes, all routine activities – are stopped until you develop Pro-forma Financials for the next year. Run through your YTD financials line by line and create an action plan for every major category that can be restructured to protect free cash flow. Then formulate a team to research and suggest new cost cutting assumptions for the year ahead.

The Key is protecting Free Cash Flow.

Restructure Using YTD Balance Sheet Categories:

Cash –
A roll forward based on retooled cash requirements.

Accounts Receivable –
Identify risk-prone receivables and immediately negotiate new payment terms. Get these customers obligated to you early on (similar to dealing with a bankruptcy). Make sure your negotiated payment plan is in place before others start negotiating.

Inventory –
Just in time or stocked, you need to understand your sell-thru and/or price fluctuations for this highly important piece. Any changes will roll into projected COGS numbers and impact GPM. Make sure the senior team agrees on assumptions for this piece.

Investments –
If you have them, walk away and move on to the next item. Your energy isn’t well spent here in the first round.

Equity Investments –
You need revised equity projections from your partner companies. Back into the P&L Investment Income/Loss based on this change. If it looks too ugly, decide whether you negotiate a deal to cut the cord in order to dodge an expensive capital call.

FP&E –
What are you financing and what can be restructured. You’ll be making a case with your lenders to restructure so paint the best protective financing scenario you can.

Real Estate –
This is most likely in a separate LLC, but can you restructure the debt to take advantage of lower interest rates? If this is leased real estate, can you negotiate short-term rent abatements and tack them on to the end of your lease?

Accounts Payable –
Negotiate extended payment terms for all vendors unless a cash discount makes better sense. I use the term “negotiate” loosely. You may just need to stretch disbursements out as far as possible.

Debt –
Ok, here’s a big one. The pro-forma financials are used as an internal roadmap out of the crisis. But, they have significant value in establishing how much additional cash is required to hit your target free cash flow and profitability. Credibility with your lenders is key and you’ll use the pro-forma financials to establish what you need and demonstrate why you need it. Then you can confidently negotiate a LOC over-line increase, lowed or abated interest, loan payment abatements on collateralized debt and debt covenant waivers.

Make sure your lender sees exactly what you see. To earn their buy-in produce reliable numbers based on good assumptions. Look at numbers through their lens and anticipate areas of push back. Lenders don’t want to foreclose on your business, but you need to make it as easy as possible for them to help you.

Equity –
The board needs good information to re-evaluate authorized equity distributions/dividends to preserve cash. Make your recommendations based on the pro-forma numbers and get the board to vote on a restructure. Take into consideration revised tax liabilities based on estimated tax abatements.

Restructure Using YTD P&L Categories:

Revenue –
Impair projections for pipeline cancelations. Be conservative. Review you current backlog and test for revenue that might not close or will be delayed.

COGS –
Roll your inventory projections into COGS and make sure your new GPM is defensible.

Payroll –
Generally the largest operating expense category. Develop a bunkered compensation structure. Do you need to cut bonuses and base compensation for a period of time to fortify corporate finances without layoffs? If layoffs are inevitable, put a plan together and swiftly execute – triage moves quickly. But please, make sure you’re not cutting sales compensation that might lower revenue. You must continue to incentivize your sales force.

Taxes –
The U.S. Treasury and the Internal Revenue Service are allowing corporations to defer tax payments – both for 2019 taxes and Q1 2020 estimates – until July 15 with no penalties or interest. Work with your tax advisors to estimate your tax deferral. You’ll also need this in estimating equity distributions to cover tax estimates for S-Corp designations.

These are the major financial categories for most companies. Other expense categories can be reviewed as time allows for additional cost savings. Remember, it’s all about protecting Free Cash Flow.

Once you have working pro-forma financials you’ll be breathing oxygen and have your wits about you. You can do the fine tuning at time allows. Next, work with teams to execute the restructuring and move into the new normal. .

You will get through this. Be swift and confident in what you’re doing. Bring in as many stakeholders as possible for input, but don’t hogtie the process. And please don’t downplay the role of common sense and gut feelings in this process. You know the numbers better than anyone.

All stakeholders look for your leadership – leadership you can demonstrate once your breathing is stabilized.

“Experience breeds wisdom, and wisdom breeds vision – Dalai Lama”

www.cfowisdom.com

The post CFO’s – Your Oxygen Mask Goes On First appeared first on Canopy Advisory Group.

Here’s what I’ve observed:

• The CFO role is very often confused with a Controller role.
• Executive teams are confused about their own roles in conjunction with the CFO.
• Misperceptions about the CFO role are supported by hiring the wrong person into a CFO role – someone who is not working at a CFO level.
• Paying less for a CFO is not really saving money. Paying more for someone that works at the right level can pay for itself many times over.

Let’s use a car as an example. Each component of an engine plays a very distinct role in making that car move. Cars that are prized for their engineering and performance have component parts that are very specific to high performance and cost more than lower performance vehicle parts. And each part works independently at a very specific task to produce the overall effect of high speed with stellar handling and comfort. That car wins the race – gets there faster – is revered by professionals that recognize the gold standard performance.

Let’s jump to the four points outlined above and run them through the engine test:

• The CFO has a very distinct role that doesn’t involve producing financial statements, although they supervise the staff that does. They generally hire a CPA for financial reporting and use financials to paint a picture of the greater financial whole.
• Executive teams may have proficiencies on the financial side. There are lots of MBA’s that end up in non-CFO executive roles. Will they stay within their own roles (roles and proficiencies are different – hiring issue) and give the CFO proper control.
• Hiring a Controller for a CFO role may feel OK to the executive team because the Executives continue to bleed into the CFO role when they should be focused on their individual roles.
• Good CFO’s can restructure, optimize, educate and even save your corporate bacon. But you have to be willing to pay for it. Generating financials statements is valuable but doesn’t keep you shooting straight.

Executive Team and an Engine:

CEO: Determines what the car looks like 3 years down the road and how the parts change to accommodate the new vehicle design.

CFO: Makes sure the computerized alert system works. Constantly compiles diagnostics generated by the system and decides when to give off warning signals when the engine starts to fail. Warning signals have a suggested path for fixing the problem as suggested by the CFO. The CEO can decide whether to adopt the suggested “service” or not.

CRO: Generates enough fuel to make that car run. Also plans for future fuel needs based on the CEO’s vision of the car of the future and new components that will run at even higher efficiencies (but need even more fuel?).

COO: Make sure the engine has what it needs to operate day-to-day. Is the engine maintained so it doesn’t break down. Is there scheduled protocol for preparing maintenance logs, making sure there is enough  oil, spare parts and snow tires for the winter season (higher seasonal volume).

Some of you learned the hard way…saving a buck or hiring someone who’s fun and will play well with the team. This is an engine, folks. It’s about component performance so the car MOVES. Believe me, when you’re #1 at the finish line, everyone in the company is happy.

Action items: make sure you’re hiring for a pure CFO role within the company. Hire a CFO professional to help you hire your CFO. Educate the executive team on the role of the CFO and then let the CFO do what they do. If the “part” starts to fail, find a replacement – fast.

“Experience breeds wisdom, and wisdom breeds vision – Dalai Lama XIV”

The post Are You Really Hiring a CFO? appeared first on Canopy Advisory Group.

From my experience, they should reconsider:  reports only look in the rearview mirror.  Modern, forward-looking tools and techniques are more accessible, powerful and affordable than ever.  Businesses are to the point that they can’t afford NOT to do data analytics – especially because their competitors probably are.

If you’re not sure how to get more out of your data, and then how to reap the benefits, this series of blogs may be helpful to you.

Contrary to the hype about “data science” producing “new insights” from “advanced analytics,” technology and data-driven discovery are the investment and the means; they are not the end results.  The real work begins when the business must change in some way to take advantage of the new discovery.

Viewed in its entirety, the effective use of analytics has five components:

1. Data that are unique and valuable;
2. Statistical and other technical analysis;
3. A clear decision and strategy;
4. Implementation of new practices or processes; and
5. Measurement of the impact.

As the analytic program grows, it will need to adopt good practices for data management to ensure the results are repeatable and reliable, and can expand over time.

What data.   The first choice is where to focus: externally on the market, or internally on your operations.  Starting with internal data has at least two advantages:  a) your data are unique to your company and thus can be used for competitive advantage; and b) you understand your data better than you are likely to understand an external data set.  The most common challenges are to manage it properly and ensure its quality.  Initially, these tasks can and should be done without expensive data warehouses or a massive data infrastructure; it is more important to understand the potential value of data before investing in a field of data dreams.

Start with the end in mind: the goal or pain point you want to pursue.  Not sure you have any data that helps your goal?

• If you want to expand your product line and/or increase sales, your financial system contains customer data that might reveal market segments for closer targeting.
• If you want to hire better people or reduce attrition, your payroll system may contain hiring, promotion and termination data that indicate the profiles of successful employees.

If you want to relieve pain points in your operations, you’ll need data about your processes, such as their efficiency, quality and actual capacity (both in-use and total).  Many SMBs don’t measure their processes, but systematic collection and analysis of process data often identifies out-sized opportunities, especially after you’ve looked at everything else.  Start with the basics, which can be measured non-disruptively by monitoring inputs (resource consumption), timing (applied time vs elapsed time), and outputs (quantity and quality).

What to do first and second. An “explore first, manage second” approach allows new data users to identify the potential value of becoming data driven, which is essential to determining how much to invest in data science, data warehousing and data governance.  Good exploration is multi-disciplinary, integrating knowledge of the business model, the organization, statistics and data.  It also requires good habits:  if you want to trust the results, you must be able to reproduce them.  Here’s where data management, data governance and documentation come in.  I’ll expound on these topics in a future blog; for now just start with a basic data catalog (what data you have and where you got it) and log the steps you took to combine and analyze the data.

Tools.  Let’s face it: businesses run on Excel.  Excel is an excellent tool for basic analysis, but it is not designed for combining data from multiple sources or for advanced statistical analysis or visualization.  You will need additional tools for those purposes, all of which should run on a laptop as well have server-based versions that support sharing across the business.  You’ll also need a relational database that is relatively inexpensive and easy to manage, such as SQL Server.

Next: Taking action.  Note that your analysis can lead you to new insights, but only acting on them will produce new results.  Any new action will require the business to do something new or differently; you will ask people to change.  Change is good but change is hard.  Therefore, initial actions should be incremental, starting with a pilot to manage the risk and expense, and to measure the costs and benefits.  Extending the new approach to the entire business requires organizational development – not just “change management” – in the form of training, coaching, teamwork and sometimes re-organization.   All of this must be done within the context of the organization’s culture, because as W. Edwards Deming said, “culture eats strategy for lunch.”

In this aspect, SMBs have a distinct advantage over large companies: their smaller size reduces the magnitude and complexity of implementing the change.  Smaller companies typically have cultures based on personal relationships and trust – “we’re like a family here” – making it easier for everyone to be engaged and supportive from the start.  That said, adopting new ways of doing business, even when justified by compelling data, is typically the greatest challenge of any analytics program.

After the pilot and subsequent full implementation, the SMB must measure the impact, typically in the form of improved (or new) key performance indicators, enabling the calculation of the return on investment.  The metrics also serve as data for further improvement, in a virtuous cycle of data-driven performance.

Key take-aways:

• You already have the most valuable asset that you need: your company’s data
• Tools and techniques for data analytics are more accessible, capable and affordable than ever
• Your analytic process must be repeatable to be reliable and trustable
• The biggest challenge begins AFTER the analytic discovery: changing the business to improve performance

Future blogs will explore analytical techniques and tools, practices for data management, change leadership, and the evolution and maturity of analytics programs: reality vs. hype, and how to achieve real and lasting impact.

The post Data Analytics: You don’t have to be big to do Big Data appeared first on Canopy Advisory Group.

I got involved with the charter school movement after learning more about the low graduation rates for students in Denver Public Schools.  I was appalled to realize that, at the time we started DSST, the odds of a low-income DPS student attending college were about 10%.  I believed that my previous experience as an entrepreneur had prepared me to tackle the challenge of starting new, more effective schools. After the launch of DSST, I saw an opportunity to support others who wanted to create innovative new schools. Between my work with DSST and Get Smart Schools, I’ve played a role in the development of more than 20 schools, and those schools are changing the future for thousands of students.

How have you turned your passion into a career?

I feel incredibly lucky that I get to work in the nonprofit sector helping all kinds of visionaries put their ideas into action. While I am passionate about education, health care, and human services, which are the fields most of my clients work in, what I truly love is supporting leaders who have big ideas and seeing those ideas take flight.

Share one of the most exciting ways you’ve helped a client experience positive change.

One of my clients was a youth service organization with a track record of success that was experiencing some stagnation.  I led the Board through a process of revising its mission and vision statement and developing a strategic plan in line with the new mission.  Through this project, the Board and Staff were reinvigorated and rededicated themselves to the work, and the organization has subsequently seen gains in everything from fundraising to program participation.

What has been your most gratifying project?

 
A few years ago, I facilitated a large-scale strategic planning process at Children’s Hospital Colorado.  The goal was to identify new ways that the hospital could identify young children who are living in vulnerable situations and ensure that their families are receiving the support they need to give their children the best possible start in life.  It was exciting to be part of a project that has the potential to impact so many kids and families and to really change outcomes for families.

What do you enjoy doing in your free time?

I have two toddlers- I don’t remember what free time is!

The post Featured Advisor: Nonprofit and Financial Consultant, Amy appeared first on Canopy Advisory Group.

1. Choose the right finance partner.
   Let’s face it: accounting and finance isn’t the sexiest thing to spend your money on. But every hour you spend managing your business finances is an hour foregone at the expense of further business development. Besides, would you hire you to navigate difficult financial decisions? Are you giving adequate time and attention to proactively and strategically managing your most critical asset (cash), or does it get relegated to your sometimes-nonexistent spare time?

   Because cash is scarce, spending must be held accountable to the future business plans if the business is going to survive. Likewise, having a good handle on how to profitably price your product will determine whether you can support future spending as the business grows. Engaging an experienced finance or accounting pro will support your business by bringing clarity to your profit potential and helping direct spending and effort towards the things most likely to propel your business forward. It will also help alleviate the burden on your time.

   For some businesses, a bookkeeper may be enough. But if your business is complex or if you’re planning to grow (especially if you’re looking to grow utilizing investor cash or bank leverage) a bookkeeper likely won’t cut it. At the outset, you probably won’t need a full-time person, and there’s no shortage of firms, freelancers, and consultants that offer fractional help. Here are some considerations to ensure you’re engaging the right individual:
   • Do they know your industry?
   • Do they have enough experience with small businesses to know the systems, tools, and service providers that specialize in small business?
   • Do they have the experience to support your business through the next several stages of your growth cycle?
   • Are you comfortable enough with this person that you can trust their advisement and their ability to execute on the day-to-day financial obligations?
   • Can they commit long term? (And will they? While never a guarantee, consider that someone who isn’t committed to the “fractional resource” lifestyle for the long term isn’t likely to be committed to your firm for the long term either.)

2. Put pen to paper on your mid and long-term strategy.
   You may be asking “why is this in a list of “finance tips?” The answer: cash management.Cash can be tight in a startup. Your initial round of funding may seem like a lot, but you may be surprised how quickly you can blow through that money, especially if your spending habits lack discipline. Your current and future investors will want to know you will spend their investment dollars wisely.The best way to ensure your company can exercise (and later demonstrate) disciplined spending is to know where to invest to achieve your goals. A seasoned financial professional can utilize your strategy to develop a financial model that projects both your future cash generation and your future cash needs. This model can also be used to measure the effectiveness of your spending. Ultimately, the usefulness of this model will be directly correlated to the strength of your strategy. A well-thought-out strategic financial model, time-tested and tweaked for actual experience, is a great way to keep your spending, and the rest of your business, on track.
3. Don’t forget where you came from.
   Unless you’re independently wealthy, you likely raised money through investors or bank leverage. Behind that funding was a litany of individuals and companies willing to risk their (or their employers’) money based on their belief that your idea would generate returns on their investment, either in the form of interest, dividends or investment appreciation (capital gains). They’ve risked a lot on you – you should be communicating with them about how their investment (your business) is performing. The frequency and manner by which you communicate can be debated, but the key is to stay transparent, balanced and consistent in your communications. Also, spend some time deciding which metrics (revenue drivers, leading indicators, operational measures, etc.) are the most meaningful to clearly and succinctly communicate your current and expected future business performance. The right finance professional can help you navigate these communications.

   Entrepreneurship is not for the faint of heart. But with these considerations in mind, you will be better equipped to weather the financial ups and downs that are an expected part of new business ownership.

The post Financial Tips for Startups appeared first on Canopy Advisory Group.

From my perch in Salt Lake City on the west side of the Rockies, over the last few years I’ve been hearing rumblings from the other side of the mountains. In Denver, Dr. Stephanie Gripne has created one of the most dynamic centers of impact investing and social entrepreneurship in the world. With a goal to catalyze impact investments of over $1 trillion and a plan to get there, it is about time that people outside the Rocky Mountains took note.

Dr. Gripne founded the Impact Finance Center as a partnership between the University of Denver’s Daniels College of Business and the Sustainable Endowments Institute, a special project of Rockefeller Philanthropy Advisors.In 2014, the Center launched the CO Impact Days and Initiative with a three year goal to catalyze $100 million of impact investment in Colorado-based social ventures. The event has grown into a marketplace for impact investing.

Wendi Burkhardt, co-founder and CEO of the Colorado-based social enterprise Silvernest was an early participant in CO Impact Days. She says, “I am inspired by the opportunities that Stephanie and IFC are creating to employ traditional philanthropic donations as capital investments that offer a substantial return and thereby further the impact and intention of the applied funds.  I’m excited by this untapped opportunity to bring these worlds together.”

Will Morgan, Director of Impact for Sonen Capital, has worked with Dr. Gripne for several years, providing grant funding for the Center. He sees the need for the infrastructure that the Center is working to create. “I think IFC’s work is great. Investors are searching for more meaning with their assets and resources. Social enterprises and private businesses that create positive impacts are starved for resources. It’s a natural thought that more infrastructure needs to be put into place so that both sides of the equation can get what they need,” he says.

Jeramy Lund, Managing Director of the Sorenson Impact Center at University of Utah, agrees. He notes that she drove great collaboration. He says, the CO Impact Days event was a big success. “The way she was able to bring together the major foundations and get them to agree on collective impact was impressive heavy lifting. To pull it off on the first year was amazing.”

Dr. Gripne isn’t working to create a marketplace for impact capital by leveraging her Wall Street experience. She doesn’t have any formal finance training or experience.

Rejecting her father’s business career as path for her life, Dr. Gripne earned a PhD in Wildlife Conservation at the University of Montana. Her early career had working in academia, the Journal of Wildlife Management, the USDA Forest Service and the DOE Oak Ridge National Laboratory. It isn’t clear when she learned to calculate the present value of an investment.

It was working with her father, however, that she learned about the power of doing good with investment dollars. “ Before my dad passed, we completed some of my first direct impact investment deals together. We partnered with families going through medical bankruptcy. We basically created an affordable housing model where my family would buy a house and give the families partial equity of their rent and all equity above a ten percent return. These were essentially people with good credit who were faced with a medical emergency and were struggling to make ends meet.”

“That experience – the joy of philanthropy with a financial return — permanently changed my course,” she adds.

Since then, her focus has been on impact investing, not for her own account so much as for her community, her country and the world.

The Center operates its $700,000 annual budget largely through grants today, but Dr. Gripne plans to make it financially self-sustaining. Already, she says, the Center earns some revenue through research and development, thought leadership, education, marketplace Impact Days and sub-advisory services.

She acknowledges that the Center is really just getting started and that it may be too soon to measure future results, but she is optimistic. “Having only just launched this catalytic concept this year, we are currently operating at a negative gross margin of -18%. A significant portion of our expenses come from the development of the intellectual property we’ll be bringing to market in the coming months and years. Once we can begin to generate revenue from that IP in the form of educational workshops and sub-advisory services, we aim to be self-sustaining within 18-24 months, and profitable by 2019.”

Dr. Gripne’s early success comes from her passion. Burkhardt explains, “Stephanie is truly a force of nature and I am always amazed at her ability to produce the results that she does! In addition to her being an incredibly accomplished academic, [IFC] capitalizes on something much greater. It is a true labor of love for her – it is her deepest passion and that fuels her at the highest level of performance.”

Her sense of the problem drives her. Rhetorically, she asks, “In [these] times of economic uncertainty, climate change, and social division, how do we increase the flow of resources to the ventures that will deliver positive impact on our economy, society, and environment?”

To address the problem, the Center helps high-net-worth individuals and institutions with $10 million to $5 billion to invest to do it with more impact and lower fees. Dr. Gripne says, “We do this though outreach, education, and technical assistance that allows them to understand their objectives in terms of financial return, impact, risk, and liquidity and them help them find ways to make their philanthropy more efficient, their investments more effective, and in many cases start directly investing.”

By way of sample case, she shared this:

For example, we recently assisted, Nicole Bagley, an individual philanthropist and trustee on multiple family foundations to make her first impact investment into Silvernest, a women led technology company working to help the aging population age in place by providing housemates for additional income, companionship, and help around the house. Not only is she looking for her next investment, she is exploring her first impact investment with one of her family foundations and has joined the Impact Finance Center as a Senior Advisor.

Despite progress that some see as remarkable, Dr. Gripne is impatient. She sees building a critical mass of participating investors as her greatest challenge. She needs financial help to create the marketplace she envisions and needs more people to begin investing within that framework. For many, it will be their first impact investment.

Dr. Gripne is all about rapid growth. “We have the research, educational curriculum, and statewide marketplace; we now are in a place of finding the catalytic philanthropic gifts and partners to allow us to scale,” she says.

Morgan notes, “Steph is doing a lot. Frankly, I think she could or should slow down and focus on a few things deeply. She has tremendous potential, and has accomplished an enormous amount with IFC in the last two years. She’s stretched in many directions due to the potential of this burgeoning field of impact investing and she wants to do it all.”

“I’m working on narrowing her focus, but I don’t carry much sway,” he added.

Dr. Gripne sees potential for a multi-national scale to the Center’s work, helping to create a global marketplace for direct investments in social ventures.

“ How do we move $1 trillion of investment into our communities? $1 billion a time.  How do we move $1 billion into our communities over five years? By investing in the infrastructure to create a national impact investing marketplace,” she says, making the possibility of catalyzing massive amounts of investment capital sound perfectly reasonable.

She concluded our online discussion with this:

Until we build the infrastructure for a national impact investing marketplace that syndicates 10 regional impact investing marketplaces we will not see institutional money flow into our communities at the scale that is needed to solve society’s most pressing problems that include supporting a diverse spectrum of social impact, including improved school readiness, education, accessible jobs, healthy homes and neighborhoods, family economic security, community development and revitalization, climate resilience and more.

The post Is This Wildlife Conservation PhD The Steve Jobs Of Impact Investing? appeared first on Canopy Advisory Group.

We often hear lopsided statistics about the lack of women at the CEO level, but a new global study of 22,000 public companies in 91 countries looked at something else – what about when women hold a significant percentage of management positions just shy of the corner office?

Is Gender Diversity Profitable? Evidence from a Global Survey — released by the Peterson Institute for International Economics and EY — found significant correlation between the number of women in top management positions and profitability.  Interesting.

From The New York Times:  Women in Company Leadership Tied to Stronger Profits

The study found that female CEOs did not significantly underperform or overperform when compared with male chief executives. While it found some indications that having more women on boards was correlated with higher profitability … that evidence is not robust.

But the data was clear about women in top management positions. An increase in the share of women from zero to 30 percent would be associated with a 15 percent rise in profitability.

The study found that educational credentials and work experience are the key differentiating attributes for these women managers. Social attitudes, corporate practices and national laws were thought to be conditioning outcomes.

Holding on to top-performing women is still clearly a challenge for most companies. In our opinion, reinforced by our clients’ feedback, bringing women to the decision-making table – be they full-time, part-time or contractors — makes for a stronger, more profitable business venture.

The post Why having women at the table is good for your bottom line appeared first on Canopy Advisory Group.