Businesses of all sizes continue to live through one of the most turbulent times in recent memory. Those who can quickly make good decisions based on accurate information and sound projections are more likely to come out on top. That’s why part-time expertise is a goldmine for SMBs.
The last couple of years has seen unprecedented disruption in our work and personal lives. This has created many challenges and opportunities in providing goods and services that we all but took for granted. All of this has proven again that SMBs and startups are crucial to our economy.
SMBs are generally more agile and responsive to changes in supply and demand. And startups can recognize a new market and quickly act on it. During COVID-19, the PPP and EIDL loan programs made a lot of money available to these businesses as well.
It sounds like an ideal situation for growth and innovation, and in many cases, it has been. But other SMBs and startups have struggled and failed. So, what has made the difference between companies that succeeded and those that suffered?
Paralyzed by Uncertainty
The economic impact of the global pandemic will be analyzed for years to come. But for those living through it, some trends are already emerging. “We see a lot of small business owners paralyzed by uncertainty and fear,” says Seth Morgan, Founder, and CEO of MLA Companies. MLA is a Fractional CFO and Business Financial Services provider in southwest Ohio (Seth Morgan, President and CEO leads MLA Companies).
“Most owners rely on a gut feel for the condition of their business,” Morgan continues. “That feeling gives them the confidence to make decisions. But when the circumstances change in unexpected ways, they lose that feeling, and anxiety sets in. Then they become paralyzed by uncertainty.”
The answer is to have more clarity about all aspects of your business, beginning with finances. “Knowing how much money you have in the bank does not tell you how that money got there, or where it is going,” Morgan points out. “We see a lot of companies missing opportunities because they are stuck without the knowledge to solve their growing uncertainty.”
You need to know how money moves through your business, and how your decisions now will affect your cash flow in the future. But most SMB and startup owners lack the financial expertise to make reliable financial projections. A 2014 study by Intuit, the maker of QuickBooks software, found that 40% of small business owners consider themselves financially illiterate. And business finance and tax law have only become more complicated since then.
In addition, many financial professionals are not comfortable making predictions about what’s to come. “Accounting is by nature historical record keeping. Necessary and important of course, but historical,” Morgan observes. “But it takes an entirely different set of skills to look into the future based on these past activities. That’s what a good CFO can do.” (Chief Financial Officer (CFO) Defined: Role, Responsibilities and Skills | NetSuite)
What Is a Fractional CFO?
A CFO or Chief Financial Officer is responsible for interpreting financial data in a way that helps business owners make decisions for the future. And a fractional CFO is a finance professional that works in a business only as much as they are needed.
There are many advantages to hiring a fractional CFO. Primarily, he or she can bring a high level of financial expertise to your business, but at a cost, you can afford. A fractional model means that instead of working for one large company, an experienced CFO can work for multiple small companies. At MLA, fractional CFOs work with 3 to 6 companies on average. Even more, a fractional CFO brings a unique and broader perspective formed from working with multiple companies, rather than only one.
Creating An Effective Financial Strategy
A good CFO can take the financial information created by a finance team, verify its accuracy, and then make projections about what it means for the business in the future. It’s that ability to look ahead that sets a CFO apart from other finance roles. They are the ones responsible for creating an effective financial strategy.
Most small to mid-sized businesses can’t afford, nor do they need to hire a full-time, experienced CFO. As a company grows, the finance team grows, and someone needs to coordinate that team. But leading a finance team is not the same as being a CFO. The ability to create an effective financial strategy requires experience, and experience comes at a price. SMBs
An effective financial strategy is both a roadmap for normal times and a gauge against when to assess new opportunities. A business owner shouldn’t have to guess how certain decisions will play out. Your financial strategy should give you a set of variables to play with that help you envision the future state of your company. And even more, that financial strategy has to line up with, support, and enhance the overall business strategy. SMBs
A fractional or outsourced CFO allows a business owner to pay for that ability without the burden of hiring that person full-time. They might only need to meet with a CFO on a weekly, monthly, or quarterly basis, and a fractional model makes that possible. And, as a result of the “Great Resignation” CFOs are leaving their jobs in record numbers. This means that more of these experienced professionals are available for part-time, or fractional work.
A word of caution about hiring a CFO with only big company experience as a fractional CFO is that it requires a different mindset to work as a fractional CFO. Being a fractional member of the team means you need to be able to get up to speed quickly and find places to make your influence felt. It means learning to advise and execute, often simultaneously. Not everyone coming from a full-time CFO background can do that. SMBs
Opportunities for Growth and Innovation
Business owners have to make the decision to change how they approach their business. Sometimes those changes are forced on a business owner, and the option is to adapt or die. But more often they see an opportunity and are in a position to evaluate whether it’s a fit or not. SMBs
No decision can be made with perfect confidence about the future. That’s truer now than it’s ever been. But a business owner should have all the information they can to make these decisions, especially about their own company. SMBs
Money is the fuel of every business, and it takes a good CFO to know exactly where that fuel comes from, and how future decisions will affect it. A good CFO is an indispensable resource to any business owner, and fractional CFOs can provide financial expertise at an affordable price for any business or startup. SMBs
Seth Morgan, founder, and CEO of MLA Companies is a strategic advisor to several companies, bringing insight and accountability to leaders. He also represents sell -and buy-sides in M&A transactions. Under his leadership, MLA has become one of the largest, most recognized CFO outsourcing groups in Southwest Ohio. Prior to establishing MLA Companies, Seth’s path has led through public accounting, private turnaround efforts, and entrepreneurship. Seth is a sought-after speaker, commentator, writer, and policy advisor. Having served as an elected official at both local and state levels, Seth has a unique perspective on policies, people, and the mutual impact they have on each other. Seth has an MBA in Finance from the University of Dayton.
About MLA Companies
MLA Companies is not a CPA firm that also does consult. They are consultants whose customized, the value-driven approach offers processes and services that align with clients’ needs and future growth. Founded in 2006 by CEO Seth Morgan, they are financial experts positioned to understand a client and their business—to protect, guide, and empower. Clients who invest in building relationships with MLA Companies know that their purpose will not change but their service offerings can grow as the business grows. At MLA Companies the discussion with a client is centered around purpose and growth first—then finance and services second. Visit MLA Companies – Let us be your trusted advisor
By Seth Morgan