One of the key figures and the focus for company growth is always the CEO. Yet, too many CEO’s feel out of control and nervous about their financial picture. This is a terrible position in which to be if one is trying to lead and grow. How can one instill confidence about the future if they are nervous about the present?
The CEO should have a wealth of financial information available to them especially as it relates to the specific industry in which the company operates. They should be keenly aware of what drives their profitability, have a clear direction, and set goals for at least the next 3-5 years. When there is profit each month (whether it is reinvested in the business or distributed to shareholders), the CEO can rest assured that the business is performing instead of worrying about whether there is enough cash in the bank to pay the bills or whether a key customer will make a payment in time to fund payroll.
You can be certain that when daily cash flow problems capture the CEO’s mindshare, the company is clearly in deep distress. It is a very bad place to be when the CEO is managing cash instead of looking at a broader and longer-term picture.
In a profitable enterprise the cash will take care of itself. Too many business owners are forced to think about day to day cash flow problems – but not my clients!
The Private Equity Zone
The Private Equity Zone is a bit different simply because of the level of sophistication of the investors. I work with them to help their, controllers and accounting managers better understand and map out a plan about the financial future of the portfolio company. This also often involves coaching the CEO as well and a very active role with the Board of Directors.
Sometimes the greatest challenge is unraveling the status quo mentality of the management team, who rather than serving the interests of the private equity investor, are looking to protect their own interests. My job is NOT to maintain the status quo; I am there to drive change.
I had one experience where a high earning controller was asked how to get this company into profitability. His response to the private equity company was, “I won’t do anything that affects the employment of any of my colleagues. So I won’t participate in any discussions that might cause some of my colleagues to lose their jobs.” Needless to say, he was the first guy out.
Their prior mantra had been that things would be better tomorrow but they just went from bad to worse and “tomorrow” never arrived. I explained that it would be slow going and take about 18 months. They gained confidence in that prediction as they began to see progress along the way and marked improvements in the first 3-6 months. In the end, we achieved our goal in exactly 18 months.
Every private equity investor should have a fractional CFO in their arsenal of tools.
My book, “Your Cash Is Flowing: Why every entrepreneur needs to think like a CFO” has one goal and that is to increase the financial intelligence of business owners and entrepreneurs across the globe.
While entrepreneurs and businesses owners are passionate about their companies, too many lack the financial acumen to drive their enterprises to remarkable levels of success. Although they have traded the day-to-day employment rat race for the freedom, flexibility, and risks of entrepreneurship, many have failed to achieve the appropriate financial reward.
My book is filled with thought-provoking examples, real life experiences, and tactics and methodologies that all entrepreneurs can apply to their business to drive them to higher levels of profitability. “Your Cash Is Flowing” is not a textbook. Each chapter is short and to the point, leaving readers with a key takeaway. Readers will want to keep this book nearby as they increase their financial IQs and see profits increase from month to month and year to year.
Through my book, podcasts, “Your Cash Is Flowing” YouTube channel, Finance Matters newsletter, and more, my goal is to help business owners and entrepreneurs enjoy a greater level of success.