By Brian E. Christian
Entrepreneurs, business owners, chief executive officers (CEOs) pour their heart and soul into their companies and are integrally important to their employees, shareholders, lenders, investors, communities and, as a collective whole, the economy of our great nation. They are also the reason B2B CFO® was born of humble beginnings over 25 years ago and as a result…we, as Partners in the firm, continue our daily mission to improve their lives.
Today, B2B CFO® is a national firm with 232 partners covering 46 states. Our partners are accomplished, experienced, insightful, savvy business professionals. Our experience is not monolithic across the firm. Indeed, a lot of our partners have strong accounting backgrounds and are licensed CPAs, forensic accountants and certified fraud examiners. Some of them have strong information technology backgrounds, some have juris doctorate degrees and are former attorneys and some of them are former CEOs and entrepreneurs themselves. However, the one experience we all share is that every one of us has had to have served as the Chief Financial Officer (CFO) of a large middle market, privately held company at one or more points in our careers.
We improve the lives of entrepreneurs, business owners and CEOs by removing barriers that get in their way. Among a host of things, chief among them are providing them with insight into the financial direction of their company, identifying ways to improve their profitability and measure, forecast, and improve their cash flow. Here are some real life examples:
- In September of last year, using accurate income statement and balance sheet projections of what their year-end would look like, I worked closely with the client’s CPA to project their income tax liability. By proactively addressing this issue in September, we had plenty of time to evaluate alternatives to reduce their 2016 tax liability. A key component of these measures was pre-paying some of their 2017 operating expenses before the end of 2016. In order to accomplish this objective, we needed to access additional working capital in the form of increasing their line of credit financing- which the financial projections became very important in securing. The result was a 66% reduction in their tax liability.
- In evaluating the alternatives for a client whose objective is to exit their business in the next 3 years, we talked to various industry specific merger and acquisition (M&A) firms and private equity firms. Each one of these discussions resulted in common client concerns:
- “We’re not large enough to fit the M&A firms’ profile.”
- “The PE firms don’t seem to see our value the same way I do…I think we’re an ideal strategic acquisition that can be added onto, but they don’t see us that way…and we don’t have the capital to execute that strategy ourselves.”
- As a credible alternative, I introduced the client to a very well respected employee benefits attorney that specializes in Employee Stock Ownership Plans (ESOPs). He discussed the very real ways that this alternative can allow the client to monetize their life’s blood, sweat and tears and also to have an ongoing hand in the future direction of the company after the ownership transfer.
- A client acquired their company in 2016 with little to no ability to do credible due diligence on the acquisition because the seller did not want any of his employees to know he was selling the company. They knew they were acquiring an $11 million project backlog and they financed the purchase with a $5 million term loan (interest only for 6 months and then quarterly principal payments of $250,000 each and a $1 million line of credit. The new CEO, being concerned about future cash flow asked me to “find out if we have a systemic problem with how this company is financed”. Laying out the project backlog in chronological order and projecting the billings, cash receipts and on-going fixed expenses of the company (along with their debt service), we are able to forecast the company’s forward looking cash position and borrowing base position over the next 2 years…which allows us to address the issue with plenty of time to make needed adjustments to operations and, if necessary open discussions with the company’s investors and lenders.
These examples illustrate different barriers and different challenges, with different solutions but a common value proposition to people that are vitally important to their employees, shareholders, lenders, investors, local communities and our nation as a whole. This is what we, as partners in B2B CFO®, have a passion for and love to do every day…if you know of an entrepreneur, business owner or CEO that can benefit from some form of the above, please contact us today.