In the spring of 2018, Rebecca Holderread connected Jim Weber, Managing Partner of ITB Partners, to the CEO for a 30-year-old Atlanta area-based not-for-profit. Rebecca is a member of ITB Partners and a fractional CFO. As she had taken a full-time CFO assignment with one of her clients, she was not able to pursue this engagement herself.
When Jim was introduced to the CEO the extent of his understanding was that this not-for-profit needed a new CFO. After a few email exchanges, Jim and the prospective client scheduled a face-to-face meeting, late in the day at the prospect’s offices. The point was to conduct the meeting without alerting the incumbent Director of Finance. Jim said that the meeting consisted of the CEO and two of her board members. The first part of their meeting was an opportunity for Jim to understand the prospective client’s situation.
The prospect is a non-profit organization [501(c)(3)] established in 1988 by the CEO. This company became Georgia’s first licensed therapeutic foster care agency. In addition to placement and care for foster children, the client provides host home care for adults with developmental and physical disabilities, provides behavioral and life skills coaching for foster youth and adults and through a dedicated program, provides support, guidance, and assistance needed by teen mothers & fathers to succeed as adults and parents.
The CEO told Jim that the current Director of Finance refused to provide financial information in a format that enabled the leadership to effectively manage their business. She went on to say that he had failed to provide analysis to facilitate thoughtful decisions. Additionally, whereas the CEO wanted to install a budgeting process, the incumbent had no interest in accommodating her directive. Furthermore, this gentleman had become belligerent and insubordinate toward leadership. The situation had become intolerable, so a change had to be made
Not surprisingly, there were budgeting constraints on the compensation available for a replacement. Based on his understanding of the situation, Jim pitched them on engaging a fractional CFO. He explained the concept to the prospect, ensuring them that they could achieve their objectives without significantly impacting the P&L. The CEO liked that idea and agreed to interview several highly capable fractional CFOs affiliated with ITB Partners. I was the first on the list and met with the CEO. We connected so well that leadership decided not to talk to anyone else. I was hired for the engagement and their Director of Finance was terminated.
CFO Services Engagement:
When I started the engagement, I understood that the client was looking for better team collaboration and alignment with the fractional CFO. The CEO and the new Board of Directors (BOD) expected me to lead the financial position, to provide more timely and insightful financial statements and analytics, budgeting/forecasting, cash flow management, and strategic planning. What I soon learned that the timing of taking on this assignment and the termination of the Director of Finance was problematic. It was tax and reporting season, so I had to scramble.
Focus Areas and Results to Date:
- Fully conformed financial statements to GAAP
- Transitioned accounting package from desktop to the online version to improve efficiency and data security
- Created a new monthly financial statement package meeting both internal & BOD requirements
- Refined and extended forward view of cash forecasting, with a focus on liquidity management
- Provided counsel/analysis to CEO leading to a favorable outcome in renegotiating a material vendor debt
- Developed financial analysis to evaluate the profitability of various programs
- Partnered with the CEO, to develop strategies and related financial plans for key programs
- Developed annual budget for each dept and consolidated agency
- Improved internal controls
- With CEO, developed components of strategy and management template for execution of a first-ever, multi-year capital campaign
- Ongoing training of new full-time CFO
A year and a half later, I’m still working with the client. I provide ongoing support to the CFO with annual audit, regulatory reporting, cash flow forecasting, monthly financial package, and various financial analyses, as needed. I also participate in BOD meetings, as required.
Jim likes to remind us of the importance of the Fractional CFO. I believe the value-added services I provided for this client proves his point. They were able to achieve their goals to improve the management of their business without compromising their financial resources. Today, they are in a far better position to deliver on their mission.
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Jim Weber, Managing Partner
ITB PARTNERS
I landed a new client this week, referred to me by another of our coaches. The client, John, had recently purchased a franchise for an online business. He reached out to us because he’s having trouble generating revenue. John’s an occupational therapist. This is his first experience as an entrepreneur; however, he has the presence of mind to know that he needs help. As we were getting to know one another over the phone I asked about the training he had received from the franchisor. He provided a brief overview but admitted that he wasn’t comfortable with some aspects of the Brand’s training, especially regarding customer acquisition. That revelation gave me a clear direction for our first meeting. There is obviously a disconnect between John’s desire to have a business and his willingness to follow the franchiser’s model for success. To be helpful, I must understand his rationale for acquiring the franchise compared to his personal strengths and interests.
We recently spent 2 hours explaining to two business partners what their business was worth and why. They were disappointed but excited to understand the value and how they would manage the business going forward.
Convergence occurred when I remembered a conversation the prior week with another consultant, Faith. She had told me about an adverse situation created when a patient received a new heart, but the system hadn’t been updated to reflect the candidate’s eligibility for a transplant. That breakdown in the process created a question as to who’s responsible for the $1.4 million approximate costs of the procedure. Faith explained that this glitch was an administrative error as the candidate still needed the heart and was qualified to receive the transplant, however, an updated authorization wasn’t secured. I can only imagine how bad the situation could have been if the patient had died, prevented from receiving the transplant due to an administrative mistake. It occurred to me that the system has a fundamental flaw that can be mitigated with a technical solution. Faith continued by providing an overview of additional risk and complexity created by Federal Agencies and Laws regulating the Health Care Industry.
Last week, one of my clients filed for Chapter 11 Reorganization. Now, two of my clients are in Chapter 11, working to find a path back to solvency. In April, I was engaged by a new client to help them find a way out of Chapter 11. In the case of the two former clients, I can honestly say that I wasn’t responsible for the circumstances leading to their demise. In other words, I didn’t place any executives who caused these problems, and I haven’t been involved in consulting projects that resulted in adverse consequences. To the contrary, I placed an executive to help one client navigate through Chapter 11. Regarding the other client, I placed an executive to help them avoid business failure. Regrettably, Senior Executives sometimes fail to heed sound advice. In each of these situations, failure was predictable. Management failed to adequately penetrate their home markets before moving into new territory.
I’ve witnessed the results of many crazy decisions during my career. Some noteworthy situations include an ice cream brand selling franchises beyond their distribution capabilities. Or a California-based brand that tried to move into the Southeast with a single location. I’ve seen Southeastern brands sell franchises on the West Coast, thousands of miles beyond their management reach and distribution network. A Northern barbecue chain leap-frogged into Georgia with a few restaurants placed across the state. That decision was funny, in a sad way, as barbecue has a distinct regional appeal. Another brand added drive-throughs to dogs with the hope of turning them into profitable restaurants. Sadly, they created dogs with a drive-through. From my perspective, the most egregious yet consistent mistake is the urge for start-ups to enter new markets before adequately penetrating their home base. To be sure, many of those mistakes were made by rookies, entrepreneurs lacking experience or solid advice. However, these mistakes continue to be made by experienced leaders who should know better.
I can speak with authority on this subject as I spent most of my career working on retail expansion. I began my career as a financial analyst assigned to the new store development group. In this role, I performed analytical work on capital expenditures for new stores and other investments. I learned how to evaluate the prospects for a new store, and the penetration required to optimize the return from a larger market, i.e. city, SMSA, or region. I became a strategic analyst and planner shaping retail store development strategy for several national brands. Finally, I held general management positions where I was accountable for return on investment. In fact, one of my first assignments as a senior executive was to identify and prioritize markets for focused development. As a result, I am confident in my ability to build a retail brand, especially, food-service brands. I appreciate the value of achieving significant market share before developing new markets. Believe me, engaging in the development of a new market, before adequately developing a home market can be fatal to a business, especially so for a start-up.
So, if significant penetration of a home market is fundamental for success, why does management continue to violate this well-established rule? Over the years, I have asked this question of countless CEOs, CFOs, and Chief Development Officers. The only consistent response is “sometimes, management becomes so enamored of expansion that sound business practices are ignored.” Imagine, human emotions getting the better of Senior Executives. Who knew? The only solution is to hire accomplished retail development executives, among others, who won’t hesitate to tell the “Emperor that he has no clothes.”
We have advisors and coaches in all facets of life. But in this most important area for our future, for our family and for our retirement, most business owners are pretty much just “winging it”. Oh, they may have an accountant but not much more of a team to focus on exit planning in all its complexities. An advisory team is critical for successful succession planning.
As the primary business reason for our meeting was to discuss his presentation, we got right into that topic. Paul wanted to know how to position his talk as the audience wouldn’t be his typical prospects. I told him that there were two main points to consider. First, the members want to learn about him. They want to know his background and how he came to be involved in his current situation. Secondly, they want to know about his employer and the product he’s selling. I said, “keep the discussion at 40,000 feet.” They don’t need to get into the details, they just need enough information to make good referrals. Also, I told him that I had adopted the 
Having heard of Paul’s recent successes, I reminded him that we are prepared to leverage his efforts through our social media and public relations platform. He said he had forgotten about those benefits. So, I spent the next few minutes reminding him about our capabilities. He was sold. My thoughts moved to other possible referrals. By the end of our conversation, I had a long list of connections to make on his behalf.
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