Dealing with changing expectations is common among many new businesses, whether they are prospering or not.
DEALING with changing expectations is common among many new businesses, whether they are prospering or not. This problem tends to polarise into coping with potential failure or runaway success – the ‘zero or hero’ scenario.
In both cases, business control is essential.
The heroes are fast-growing, successful businesses, usually with considerable drive and enthusiasm from business owners. Heroes are clearly going in the right direction and appear to be getting there rapidly. However, like a fast train without good control systems, knowing when to slow down or accelerate and understanding all the signals – a hero business can easily run out of track and suffer a spectacular crash.
The zeroes are those businesses that for some reason are finding life difficult. These can often be potentially great businesses but find themselves in a situation where their viability may be threatened, again by poor business control.
It is immaterial whether businesses fail with a huge fall or sink slowly and uncontrollably; the result is always the same.
Issues facing the business hero
Hero-business owners are often extremely enthusiastic, have great business ideas, products or services and are consumed with ambitions for growth. Such businesses, led by their highly driven business owners, are usually great to work in; customers and suppliers alike are impressed with the never-say-die attitudes.
Prime among the issues for the fast-growing start-up is being under-capitalised – the great idea can often die as a result of just not having enough cash. The enthusiastic owner whose vision drives the business can suffer from a lack of vision for coping with growth.
Dealing with the zero scenario
Zero businesses are strugglers. They can be fallen heroes, however, they are usually businesses that have striven to survive almost from day one. They often adopt a wait-and-see policy, hoping things will get better.
They are usually characterised by a lack of profitability and cash. The constant pressure of trying to juggle cash to make ends meet overshadows the viability of the business and the potential success that lies within.
Avoiding a zero situation
As with so many other things, the business owner should go for an experienced adviser; someone who has been there, seen it and done it. One immediate response is to hand the problem to the accountant but, in reality, most external accountants are not experienced in running a business.
An experienced chief financial officer (CFO) is invaluable in recognising the danger signals and providing solutions; they know how to finance a business, deal with growth, present meaningful monthly numbers and get the best deals from banks. At some point both heroes and zeroes need this experience but they probably don’t need it full time – this is where an outsourced or part-time CFO provides the best solution.
Accountant versus part-time CFO
The reality is, there’s an important place for both in a business, although it’s wise to recognise some of the differences.
For example, while an accountant focuses on saving tax, a part-time CFO will focus on making money; while an accountant is reactive, with advice based on history to help the business perform in the future, the CFO looks to improve business performance in a pro-active manner.
With the part time CFO option, business owners can access a financial management skill set that is experienced in dealing with problems and opportunities, able to organise both the in-house accounts function and get the best value from external accountants, while providing the necessary proactive business advice to help the business owner avoid disaster and drive growth and business value, at a fraction of the cost of a full-time resource.
Rupen Kotecha is Perth regional director for the CFO Centre. Contact Rupen on 1300 447 740 | email@example.com