1 Question CEOs Should Ask Before Starting a Business

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The Mark Zuckerberg era of moving fast and breaking things is over. A more socially aware society requires more from CEOs than ever before. Now, CEOs are not only expected to bring a value driven product to market, but to also consider the social implications of such a product. Here’s one question every CEO should be asking themselves.


I’ve lived and traveled extensively all over the world and rare are the metropolitan business ecosystems as vibrant and thriving as the one I’m living in now.  I’ve witnessed how the confidence inspired by one, then two, then three successes in the ecosystem begins a virtuous cycle fueled by the resulting social confidence.  I have a front row seat as I watch this confidence throwing off startup after startup after startup.  It’s almost breathtaking right now.

Sometimes, and thankfully infrequently, that confidence might be more appropriately labeled as hubris.  Hubris that manifests itself as a disregard for the social impact of company strategy and their resulting choices.  That is why when I recently read Hemant Teneja’s article in Harvard Business Review that exposed the need for more social awareness in the startup community, I slow-clapped alone in my office.

His article, The Era of “Move Fast and Break Things” Is Over empathically reminds us that the choices we make as we develop and roll out new products and companies do indeed have a social impact, irrespective of whether we’re aware.  The primary concept he then elaborates on is the idea that Zuckerberg’s famous motto that companies should ‘move fast and break things’ was intended more for to ‘inform internal design and management processes’ rather than broadly applicable to building around and launching ideas without significant thought and testing.

The groundbreaking ideas we’re building new businesses around have increasingly significant social implications.  Ideas such as artificial intelligence, genomics, blockchain, drones, AR/VR, 3D printing, etc are ideas that have far-reaching implications that we cannot toss about lightly.

Blackrock’s Chairman and CEO recently wrote a letter to CEO’s that inspired both me and Teneja’s article.  He is reminding some, and awakening in others, the idea that we as CEOs have a social responsibility.  And that responsibility is growing.  He suggested that: 

“Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues.”

CEOs and Social Impact

The Big Question

When Teneja posed 8 questions that VCs should be asking companies, (and that frankly, all CEOs should be asking themselves) I read more closely than usual.  They are great questions and CEOs that carefully consider their responses to the questions will be better prepared to create a positive social impact through their businesses.

Without reiterating the entire article, I’ll focus on what I believed to be the most important question, What systemic, societal change do you aspire to create with your product?

I’d suggest a small change for business owners, dreamers, CEOs, entrepreneurs, and starter-uppers alike: “What systemic, societal change do I aspire to create with my product?”

Teneja says,

“If a founder aspires to create a truly transformative tech company, they should appreciate the first, second, and third order possibilities of what that transformation means. When I ask entrepreneurs this question, I look for a sophisticated awareness of how other technologies, trends, and stakeholders map onto their vision for the future. More than anything, I look for empathy.

Let’s take a relatively simple example. Suppose we spoke to an entrepreneur working on human longevity. We would need to see a vision—and a minimum virtuous product—that addressed disruption in labor markets through automation (what does the world look like when people live longer and have less access to work?) and disparity in access (will society allow a world in which the wealthy live 2X as long as the middle class? 3X as long as the poor? Should it?). The best leaders of tomorrow will see these links and plan for them from day one.”

Now more than ever, CEOs need to be aware of the implications of their product and service on society as a whole, not just shareholders and customers. How does your product positively influence the ecosystem you live in? What about the negative implications? Spending time to ponder these questions will help CEOs build a more socially aware business ecosystem and allow them to thrive in a more socially-aware society. What would happen if we all considered these questions when determining the vision and mission of our business? I encourage all CEOs to read the full article and ask the same questions of your company and its purpose. 


David ChaseManaging Partner at Advanced CFO, has experience in small to medium private companies and large public companies as a senior operational and financial leader.  With nearly 20 years in finance, a CFO of multiple entities and divisional EVP experience, Dave has a breadth of experience.  Dave has led or been instrumental in raising multiple rounds of equity and debt in excess of $0.5 billion.

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Women in VC and Compensation — An Analysis

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Pitchbook recently posted an article on the gender pay gap in private equity and venture capital firms and their findings were extremely insightful. To summarize the findings, cash compensation was comparable for both men and women at nearly every level, with women making significantly more than men at upper management levels. However, carried interest compensation tells an extremely different and troubling story.

Melissa Taunton, a partner at NEA says,

“It’s become increasingly clear that addressing the gender imbalance in venture capital is not simply a function of hiring more women—although that’s a good start. We must also examine the ways in which we mentor, evaluate, promote and compensate women investors, and take measurable steps to improve our practices.”

The article discusses the possibility for the data to reflect past industry practices, rather than future ones, but the data still speaks to the need for awareness and proactive measures to combat the gender gap, particularly in the private equity world, which in the past was a well-know boys’ club. Women are starting to leave their mark on the industry and fair pay should reflect that. Read the full article for more information.

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Why You Should Hire an Outsourced CFO

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The CFO is a key influencer on a business’ success. From startup to enterprise, every business benefits from a strategic CFO. However, contrary to tradition and popular belief, not every business needs a full time CFO. Despite different business needs, a good CFO can help make the difference between a successful year and an unsuccessful one. Here’s why you should consider an outsourced CFO for your business.

What is an Outsourced CFO?

An outsourced CFO is financial expert who steps into the role of CFO at a business in a variety of capacities. Outsourced CFOs can be hired in the interim, acting as Full Time CFO until the business is able to hire one. CFOs can also be outsourced on a project, part time, or full time basis, hired to perform one specific task, or to fully command the finance and accounting functions of the business. They can consult, create financial strategies, and affect positive change just as well as a full time CFO, but on a pay for play basis.

In short, an outsourced CFO is you business’ financial expert — on your terms. Outsourced CFOs usually work on an hourly basis, meaning that you only pay for what you use. Fixed fees are also a great option for businesses needing assistance with specific projects. An outsourced CFO adapts and changes depending on the needs of the client.

Outsourced CFO

Why Hire an Outsourced CFO?

Hiring a CFO is a monstrous task. The implications of choosing the right candidate that fits within budget constraints and company culture can mean lots of time and energy spent reviewing resumes and interviewing. Choosing an outsourced CFO may be right for your business if:

You want to hire an expert, but can’t afford the salary. Outsourced CFOs are experts with proven success at many different companies. You’ll get access to their tried-and-true ideas, without having to pay salary or benefits. Just pay for the time you need, when you need it.

You only need a few hours a month. Outsourced CFOs can work on a part time or project basis, which means no more paying for unused hours. Even better, outsourced CFOs are experts and have worked as CFO on several different companies, so they’ll likely be able to get the job done in even less time than someone with less experience. 

You’re looking to hire a full time CFO, but need help in the meantime. Outsourced CFOs can pinch hit for a short period of time, keeping the financials up to date, assisting with planning and modeling, and managing the financial function so you’re free to focus on choosing the right candidate. Even better, they’ll help make the transition even smoother once you’ve found the right person for the job.

You’re worried about choosing the wrong candidate. A good hire means more than finding the right expertise to get the job done. Often times cultural fit and personality can make or break an employee relationship, especially at the executive level. Outsourced CFOs work differently than internal hires and mitigate the risk of hiring the wrong person. Take an outsourced CFO for a test drive on a project or two before bringing them in full time. If it doesn’t work out, no harm, no foul.

Outsourced CFO

Outsourced CFO for Every Stage of Business

Because of the flexible nature of outsourced CFOs, businesses of all sizes can benefit from their services.

Startup

Startups often don’t need a full time CFO, so paying a $300,000/year+ plus benefits is unnecessary. Budget constraints can also limit companies from hiring an experienced CFO, so many startups hire connections that may not actually have the experience they need. An outsourced CFO is ideal for startups to stay under budget and get the strategy and experience they need to grow.

Growth Stage

As a company grows, its needs can change dramatically. Accurate financial modeling and planning is paramount to the successful growth. Because needs may differ from month to month, an outsourced CFO is a good option, taking on projects and tasks as needed. It’s a win-win — the company saves money on unused hours and gets an experienced professional to get the job done.

Enterprise

Large businesses usually have more full time needs than smaller businesses. In this dynamic, outsourced CFOs can plug into organizations as consultants on a short term basis, or can even fill CFO needs on a fixed term basis. For example, if a company loses their CFO, their need for strategic analysis and planning doesn’t go away during the hiring process. Yet, hiring a good CFO can take time. Outsourced CFOs can step in during the interim and help make the transition easier on both the company and the new CFO.

As your business looks to hire a CFO, consider hiring an Outsourced CFO, instead of a full time CFO. You’ll get best-of-breed financial expertise and see the same results for a fraction of the cost of a full time CFO.

Not sure what your business needs? Advanced CFO offers highly skilled CFOs ready to tackle your business’ unique challenges. Contact us for a free consultation.

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3 Tips to Start the New Year on the Right Foot

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It’s day two of a new year and the perfect opportunity to plan for the year. Here are 3 tips to start your business on the right foot in 2019.


Throughout the holiday season, I’ve spent a lot of time thinking about 2018 and how to make 2019 even better. I’ve never been one to actually sit down and write down a whole bunch of goals and a huge action plan, but I have enjoyed spending time thinking and reflecting on the year. As 2019 begins, I’ve been able to come up with a few things to change in the new year that will hopefully positively impact my happiness and well-being in 2019. Being the sister of a life coach and the daughter of a management consultant, planning and goal setting are not new to me, nor are the benefits unfamiliar to me. Just as in our personal lives, a little bit of reflection and planning for your business can do a lot of good. Here are 3 things to do sooner rather than later to make 2019 the best year yet.

Reflecting on the past year

Learn from the Past

2018 may have been the best year yet for your business, or it may have been the worst. Regardless of how you would rank the year, you now have at your disposal a wealth of learnings from your experience. Take some time to reflect and record what went wrong, what went right, and what could be improved. Beyond the results of the actions and decisions, dig into processes and procedures that generated them. Make a list of things that failed and need to be changed, as well as things that worked well and can be implemented in other areas of the business. If you set goals for last year, take a hard look into those as well. Did you accomplish all that you set out to? What bolstered or inhibited your success? Take all of this into consideration as you plan for this year.

Take Aim at your goals

Set Specific Goals

As with any planning, setting ambiguous goals with no course of action is a recipe for failure. Set a few “main goals” and then set “sub goals” to accomplish them. For example, if your main goal is to increase profitability in 2019, you might set a sub goal to retain 5% more existing customers each month. Sub goals create specific, actionable items for your company to accomplish. Try setting SMART goals to hold your team, department, and company accountable. The more specific your goals, the more readily you can check progress and ensure accountability.

Align Your Focus

Lastly, take a look at your business as a whole. What is your focus for this year? Does your business plan and strategy reflect that focus? Like rowing a boat, all the oars need to be moving in sync, working together. Check to see if there are levers in your business that may be slowing you down. Once you’ve determined the focus for the year, communicate this to your team and continue to remind them of this focus for the remainder of the year. For example, a company I worked for had a goal of 10 million dollars in revenue for the year. The executive team clearly communicated that to managers and front-line employees alike, and worked with them to set achievable goals to work towards it. Management incentivized the entire company to work towards this goal and brought it up regularly to ensure that it was our focus throughout the year.

Think about what you want to accomplish this year. Learn from the past, set specific goals, and align your focus with your team’s and you’re on your way to the best year yet.

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Why Utah is the Place to Start a Business

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When considering the best places to start a business, many people immediately think Silicon Valley. However, entrepreneurial hubs like Silicon Slips in Lehi, UT seem to be popping up around the country. Here’s why so many entrepreneurs are saying “This is the place” to Utah.

Economy

The US economy has been conducive to startups and small businesses for a while now, however, Utah stands out as a state that is in especially good shape to help startups grow. Boasting a GDP growth rate of 3.7%, significantly above the nation’s average of 2.8%, Utah’s economic growth is noteworthy. According to an article in the Salt Lake Tribune, Utah also led the nation in job growth in 2018, adding around 50,000 jobs in one year — a growth rate of 3.3%. While more population dense states like California did add more jobs in the year, the growth rate of Utah was the highest in the nation. Utah also boasts an unemployment rate of 3%, as compared to the nations 4%. Strong job growth suggests many opportunities for the unemployed to find jobs. All of this suggests that Utah’s economy is healthy and able to help grow startups and small businesses.

Utah is the place to start a business

Opportunity

Utah boasts a low corporate tax rate, at just 4.95%, lowered from 5% in January 2018. This suggests that starting a business in Utah can be less costly than in other states. Additionally, the state has large willing-and-able workforce, including a large bilingual population, thanks to the number of LDS missionaries that serve over seas. The local universities also churn out a good amount of educated, hungry workers. Growing companies would benefit from educated, motivated workforce in Utah.  Beyond the powerful workforce, Utah also boasts other unique opportunities to drive small business growth.

Startup Scene

The startup scene (particularly tech) in the Silicon Slopes rivals the early stages of Silicon Valley. In fact, several notable companies have decided to open offices in Utah (think Facebook, Amazon), including some from Silicon Valley. Utah also boasts the nation’s fastest growing tech employment. Provo, UT is making a name for itself in the tech industry over the last 7 years. Growing 65% from 2010 to 2017, Provo has increased its number of workers in tech significantly. Though Silicon Valley still rules the roost when it comes to tech, Utah is the one to watch for tech startups and has proved to be making strides to close the gap.

Beyond its similarities to the Silicon Valley, the entrepreneurial community is thriving in the universities, including BYU’s Rollin’s Center and the University of Utah’s Lassonde Institute. Utah also has several prominent organizations that rally around startups, including: Silicon Slopes, Utah Tech Council, Utah Women in Tech, Beehive Startups, and more. Add in the incubators/accelerators in the area and the local coworking spaces that foster startup growth and you’ve got yourself a recipe for success.

Beyond the formal organizations that drive growth in the ecosystem, there are also plenty of examples of entrepreneurial success in the area for entrepreneurs to look to. Skullcandy, Traeger, Podium, InsideSales, Pluralsight, and others have been and continue to be exemplars to companies in every field. Another noteworthy company local to Utah is Qualitrics, who just sold for a whopping $8 billion. Clearly, Utah is not lacking in inspiration.

Venture Capital

When it comes to Venture Capital, Utah is not very well known and is often overlooked for its VC efforts. However, Utah ranks well for venture dollars raised per capita. Coming in at 6th in the nation, Utah averaged $353 in reported venture funding per person per year, from 2016 to 2018. While California controls about half of all venture funding, Utah, having a population 13x smaller, is doing well for itself when it comes to venture funding.Utah is the place to start a business

Quality of Life

Another huge bonus of living in Utah is that the cost of living is so low compared to many other states. In Utah the cost of living is 35% cheaper than California, overall. Additionally, Utah has little traffic due to a much smaller population. Less traffic means less time spent commuting, and more time spent with family and friends. Beyond the work-related benefits, Utah is a beautiful state, filled with plenty of things to do. From winter sports, to hiking and fishing, there’s something for everyone. Utah’s unique desert environment also means that you can hike a mountain, and go to the sand dunes in one day. Utah is the perfect place to balance pleasure and work, without the traffic and crowding of many states.

Overall, Utah is a great place to start a business. With a steadily growing economy, amazing opportunity, and great quality of life, Utah is one of the best places to start or grow a company. What could your company gain by moving to Utah? Utah companies, what do you love about being here?

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Financial Modeling Mistakes to Avoid

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Financial modeling is an important part of any type of forward looking financial planning. Contrary to popular opinion, increasing revenue and returns is not as simple as “turning on the faucet”. In order for revenue and returns to follow growth, you’ll need to model out exactly HOW you’ll get there, tweaking different levers until you see the revenue where you want it to be.

Financial Model

What is a Financial Model?

Financial modeling is used to create a financial representation of the business at a future date. It is also a tool used in forecasting that relies on key assumptions to perform calculations and make recommendations based on that information. Good models are built out using varying assumptions, because of the somewhat unpredictable nature of forecasting. By modeling out the results of a range of values for each assumption, you can see if your business is on track to meet your goals, or if you’re headed for trouble. Models inform your financial planning, helping you to set better goals and reach them over time.

How to Use a Financial Model

Modeling can be used to do a number of things, depending on the assumptions and calculations you use. Here’s a good list of the top 10 types of financial models, though it’s in no way complete. While models can be used to value companies and options, they can also be used to help make key decisions in business, such as the decision to go public, or to open a new product line. They’re also helpful in deciding whether or not to acquire a company, or to expand to a new market. Depending on how you structure them, models can be extremely helpful in making informed business decisions.

Avoiding the Pitfalls of Financial Modeling

Avoiding the Pitfalls of Modeling

While financial models can be very useful in forecasting and planning, the model is only as good as the one building it and the assumptions feeding into it. When building a model, be sure to avoid these common mistakes:

Pulling From Incorrect Financials

Because many models pull from the financial statements, if your financial statements are a mess, it’s probably safe to say that your model will be too. Be sure your financials are accurate and up-to-date before building a model that relies on them. In most businesses, this also requires appropriate controls and processes to be in place so that the model is correct going forward. Not sure where to start? Here’s an article that may help.

Building a Concrete Model

As with most planning and forecasting, it’s nearly impossible to get every aspect of a model 100% correct. That’s why it’s so important that models are living, breathing documents. As time goes on, assumptions change, and your business progresses, you can use your model as a template, adjusting the levers and assumptions as needed.Don’t make it too difficult to alter your assumptions and you’ll save yourself a ton of time by not building an additional model.

Trying to Nail Down One Assumption

Assumptions are the core of a model. Yet, while incorrect assumptions lead to incorrect recommendations, it’s extremely difficult to make an accurate assumption, especially as you model out farther in the future. Instead of trying to nail down an estimate, try to get a range of values for that particular assumption. Then, use the model to calculate the different outcomes for a few different values in the range. Modeling this way also gives you a set of expectations, should things go awry. Now that you’ve got a few different outcomes to work with, you can plan for the best and the worst.

Using Too Many Assumptions

The more informed your model is, the more information it can give you about the business. However, there is a point where using more assumptions doesn’t provide more benefit. Particularly in startups, it’s difficult to assume anything very far into the future, let alone making accurate assumptions for 20 different factors. Though it may seem beneficial to spend hours planning and calculating every assumption, Dave Chase suggests focusing on 5-15 assumptions that you can really hone in on. You’ll save time and get a more accurate model in the process.

Financial models can be effective tools for planning and forecasting. By modeling out revenue, businesses can more readily “turn on the faucet” and begin reaping the rewards.


Advanced CFO consultants are experts in modeling and forecasting. We offer the full suite of financial services, from CFOs to Controllers and Accountants. You can trust that your business is in the hands of seasoned veterans, ready to take your business to the next level.

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Business Basics: The Difference Between CFO and Controller

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In many small businesses, the financial team may be made up of one or two people. However, as the function grows, it’s important to ensure that you’re utilizing the right people and skills for different financial functions. Two roles that often have a lot of overlap as businesses grow are the roles of Controller and CFO. Here’s why your business needs both.

Controller

The controller of the business is essentially the head of the accounting department. At larger companies, the controller usually manages a team of accountants to ensure timely and accurate reporting, budgeting, tax compliance, payroll, and other accounting functions. In smaller companies, the controller may be the only accountant, supported by other accounting clerks. The controller traditionally reports to the CFO, however, in small companies they may report directly to the CEO or President.

If business were a game of football, the controller would be the scorekeeper. Their function usually is more retroactive, consisting mostly of record keeping and financial reporting, as opposed to working to alter the financials of the future.

CFO

The CFO, as opposed to the Controller is more forward looking. While the CFO really owns the entire finance function (again, the Controller reports to the CFO of the company when there is one), their main value add is in forecasting and strategizing for the future. While the Controller is only expected to have a good understanding of the finances of the business, the CFO is also expected to have a good understanding of the business as a whole, being able to contribute value across many aspects of the business and assist with strategizing for each of them. They are also expected to use this understanding to know when and how to leverage different business elements to drive growth and revenue.

Going back to the football analogy, the CFO is like the coach — planning, reviewing film, and deciding what do to next. With just a bookkeeper or a controller, the business misses out on key opportunities for growth because of the lack of planning and strategy.

How They Work Together

While they are separate functions and each is necessary to run a successful business, the CFO and Controller work together closely. Without a Controller, the CFO may not have accurate financial data to make good decisions. Because their analysis and strategy relies on accurate financials, the CFO is also, in part, responsible for the performance of the Controller.

While separate roles, the CFO and Controller work closely to realize the vision of the CEO and to drive the business forward. The Controller needs to have a great understanding of accounting, GAAP, and best practices. The CFO needs to have a good understanding of the accounting function, as well as finance and business strategy. For this reason, having a good Controller isn’t enough for most businesses. Without the experience and expertise a good CFO brings, companies miss out on the strategic and financial planning available. Likewise, if you have a CFO, but they’re more of a bean counter than a key advisor and strategist, you’re not fully leveraging the finance department of your business.


If you’re thinking it might be time to hire a CFO, check out this article, or contact us. At Advanced CFO, we provide outsourced CFO services that fit your needs and help you take advantage of opportunities for growth and avoid pitfalls.

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