business expansion Archives - The Finance Team

What a Chief Financial Officer can do for your business

You may be familiar with the quip: “When times are tough, the marketing budget is the first to go”. If you have any friends in the advertising field, you’ll know that they often feel like they’re walking a long road uphill. “Even when we create brilliant adverts that bring in loads of new business for the company, the CEO dismisses it as an ‘upturn in the economy’”, these friends can be heard to say. “We’re never fully appreciated for our contribution.”

Part of the problem, of course, is measurability. Unless you’re surveying every new customer about whether they’ve chosen your product as the result of an advert, it’s impossible to know – beyond reasonable estimations — whether sales are attributable to an advertising effort or another coincidental external factor. But digital advertising has helped to change this. Nowadays, companies can see exactly how much interest an advert is generating. They can measure the number of clicks, the amount of time a person spends on a page, and – if sales are being driven online – they can often determine whether or not this behaviour translates into a sale.

In a similar way, it’s been historically difficult to determine the impact of a great CFO on a business. If a company does well, it could be due to the combined leadership of the senior management team, or a favourable turn in the environment, rather than thanks to the chief financial officer alone. But nowadays, increased measurability and research techniques have enabled analysts to get a better idea of the impact that a fantastic financial leader can have on your company. Using that rationale, here are some valid (and often un-thought of) ways in which a great chief financial officer can influence your business.

Find and retain great talent

If you’re looking at hiring a chief financial officer for the first time, chances are that your company is currently growing, and will continue to do so. With the global economy finally on the uptick, projections for the South African GDP are slightly more optimistic for the upcoming years than the last. Absolutely key to your success is finding and keeping the right people to grow with you. And that’s where your chief financial officer comes in.

According to a survey cited by the Controllership Group, 66% of finance chiefs are concerned or greatly concerned about talent acquisition and retention. This obviously applies to the finance department, which your CFO will head up. But it also applies to their savvy when it comes to increasing annual pay and structuring bonuses and incentives for the entire company. A clued-up chief financial officer will know how much to offer to keep employees happy and motivated without putting the company under strain in the process.

Find the right balance for advertising spend

We’re all well aware that the finance department and the marketing department often view their objectives as separate and almost oppositional in nature. A great CFO, however, recognises the importance of the marketing effort and drives understanding and collaboration between these two departments. As a result, she is often able to determine the optimal amount that should be apportioned to marketing efforts. The payoff is growth at the right time and at the right pace.

Use technology to create forecasts that are more accurate than ever before

A valuable chief financial officer has harnessed the latest tools that technology has to offer. As a result, he can develop reports based on real-time, rather than historical, information. His forecasts are reflective of the most recent, relevant data rather than outdated material that only offers limited insight for the future. This optimises cash flow and enables the company to save sufficiently without wasting its resources in a cheque account.

A great chief financial officer helps keep staff happy, optimises marketing efforts and budgets efficiently. Contact The Finance Team to find out how this kind of resource can be available to your company on a part-, full- time or interim basis depending on your needs.

Photo credit: © Christian Delbert | Dreamstime.com

September 1, 2015 / No Comments /

The finance behind your business expansion

“And the day came when the risk to remain tight in a bud was more painful that the risk it took to blossom.” – French writer Anais Nin

Your business has weathered the J-curve of the startup phase and come out strong. Sales and margins are stable and healthy. You’re faced with an option: either plateau, and sweat your assets, or continue to expand. The latter will allow for economies of scale to kick in, and take your balance sheet to a whole new level. So you’re going to go for it: you’re considering business expansion.

There are various ways to achieve your goal, ranging from the development of a new product to opening a retail outlet in a new country. But no matter what the identified plan of action is, there are always financial considerations to be made. Often, your company will need to raise capital before it can implement its ideas. Finance should be the driving force behind your business expansion strategy. A well-considered financial skeleton will allow you to move confidently into untested waters. Below are some ideas to consider as you ponder your business growth plan.

Crowdsourcing – getting donors on board:

An increasingly popular way to raise capital for your expansion venture is to get on your virtual soapbox. Crowdsourcing, or crowd funding as it is alternately called, is a way of attracting “donations” for your business idea. You throw the net wide by appealing to as many potential funders as possible using social media tools. The biggest international crowd funding website, US-based Kickstarter, helped raise more than R3.2-billion for over 18 000 companies last year. Similar local websites such as startme.co.za allow donors to give donations as small as R50. The project or business owner sets a time limit by which an agreed-upon amount of cash must be raised. Only those that raise the money within the stipulated timeframe actually take any money from their donors at all. The funders do not act as investors, inasmuch as they do not take a stake in the business. But it is common for the project owner to promise various ‘rewards’ in exchange for cash. These can range from things as tangible as a free version of a product being developed, to as abstract as a performing artist mentioning the name of a donor during a live performance.

The secret behind any successful crowdsourcing endeavour is to be a master persuader. Sketch a vision of your business expansion that is so compelling that it gets donors wanting to join the movement. If your idea is catchy and you connect with the right audiences, you could see roaring success. One of the most popular projects to date (which produced glow- in-the-dark plants) raised R5-million in just 44 days. But in case this sounds like money for jam, be under no illusions. Dedicated crowdsourcing is hard work. The volumes are high and the amount earned per donor is small. This solution is only effective for products that have instant, broad appeal to a large audience that has discretionary cash and is motivated to be part of your business expansion idea.

Equity for cash:

Carefully consider whether you are looking to attract new business partners or shareholders. Your ideas for business expansion might be revolutionary, but are the potential returns worth the risk and loss of income that comes with giving away part of your business to get there? Other institutional considerations come into play as well. For example, will your new idea for growth require your company to meet certain minimum broad-based black economic empowerment (BBBEE) levels in order to attract the desired business? If so, with the new, more stringent BBBEE requirements in place, bringing on new partners might be a necessity. Exchanging equity for cash may be a way to meet those needs and bring in capital for business expansion at the same time.

Securing a loan:

Alternately, you might be so confident of your prospects for growth that you deem it prudent to take out a loan. If so, ensure your business plan is sound and compelling enough to attract the loan you need at an affordable rate. As part of your preparation for approaching banks, carry out your own scenario planning to ensure you can answer the questions that are fired at you. If the interest rate offered on your loan is higher than you had hoped for, reassess. Your dreams of business expansion should not come at the mercy of mercenary bank fees.

If you need assistance in working finance into your business expansion strategy, The Finance Team has a number of experts who can assist. One of our qualified, experienced financial professionals can help you plot a course to attract the finance that is appropriate for your growth plans.

December 2, 2014 / No Comments /

Who needs to oversee your business expansion strategy

All successful businesses grow.

What started out as a two man operation can become an operation that ends up employing hundreds of people. Companies expand at varying rates, some have explosive growth early on and others expand at a very slow and steady rate. The question is “Who needs to oversee your business expansion strategy?”

Expanding your business

Expanding your business is risky. If not done correctly and with professional foresight, your business expansion strategy can become your business destruction strategy. In the early days of running your own business, you learn to be a jack of all trades and you do as much as possible yourself. For a company just starting out it’s the most cost effective, comfortable and sensible way to do things to keep costs low. But as your company grows, you’ll find yourself stretched thinner and thinner. As the company gets more established and profitable itbecomes impossible to oversee operations, sales and marketing, accounting, customer services and the other myriad of management functions necessary to build a successful business.

Engage with an expert

The problem with most entrepreneurial ventures, is not seeking the right advice and guidance when considering a business expansion strategy. Entrepreneurs are so used to doing everything themselves that they embark on expansion strategies that are not well thought out and executed. It’s like bringing a knife to a gun fight. When you reach the point where you think expansion is viable, it’s time to think about bringing other high level managers and professionals on board to help you out. You need to build a senior team that’s able to manage all the critical areas of your business to take it to the next level.

For many businesses, bringing in high level experienced managers for their planned expansion is not financially viable. Often the business cannot afford to engage with these high level managers due to budget constraints. It is a catch 22, because in order to expand successfully and avoid the pit falls or incorrect expansion strategies, you need guidance from managers that have had experience with other company’s expansion exercises.

The other handicap that faces entrepreneurs when they decide to expand their operations is that they don’t know where to go to find the best managers that can guide them. They will often look within their circle of friends and associates to help. There is a solution to both these challenges. There are companies that offer outsourced solutions that can be engaged on a part time or interim basis so as to fit in with even the tightest budget.

Consult with an experienced financial director or financial manager

If a company is in need of an experienced financial manager or financial director, companies such as The Finance Team, outsource experienced financial experts that work on a part time or interim basis that can guide you through the pit falls of an expansion strategy by drawing on their many years of experience that they have gained across a multitude of industries.

Good financial managers or financial directors create budgets and related financing strategies. They can help you make the best financial decisions for your company. They develop control systems that monitor your company’s financial health. You will know when you need the services of an experienced financial manager – you lie awake at night worrying about your company’s finances when you should befocussing on sales / customers and those critical area’s that generate profit and return on investment . As mentioned earlier you may not need a full time financial resource, you may only need the services of an FM or FD three days a week or even less. If you don’t know the difference between cash flow and profit and you are thinking about expanding your business, run to the nearest phone and find yourself an FD or FM that can help you – NOW!

Photo credit: rolandtech.com

September 4, 2014 / No Comments /