There’s one role in an organization that most entrepreneurs and business owners’ don’t really understand.
It’s not the Marketing Manager. That’s pretty easy. The Marketing Manager is in charge of marketing the company’s products. It’s not the Sales Manager. Or the Operations manager either. These roles are also quite evident.
But the CFO (Chief Financial Officer) role confuses most entrepreneurs.
In fact, most don’t really understand what a CFO does, or think that the CFO role doesn’t apply to their business until they’re much bigger.
Well, recently I had the opportunity to learn more about the CFO role when I interviewed Jonathan Weiss.
Unlike many of the interviews I’ve done, Jonathan is not a famous author, investor or renowned entrepreneur.
No, Jonathan was simply a classmate of mine when I went to business school at UCLA (The Anderson School). But when I started speaking with him at our 10-year class reunion a few months back, I realized he had some special expertise.
You see, Jonathan had recently been the CFO of a small company, LA Rose, which manufactures fashionable uniforms for healthcare workers.
The company had been around for a few years and was generating $3 million in annual revenues when he joined it.
But in short order, Jonathan helped grow revenues from $3 million to $10 million, and then he helped sell the company for a nice multiple.
I listened to Jonathan’s story in amazement, and the questions started flowing. What did he do as the CFO of that company? Do all businesses need a CFO? What should my clients be doing to replicate his success?
But rather than monopolize Jonathan’s time at the reunion, I requested a telephone interview to ask these questions, and he was kind enough to oblige.
Here's an excerpt of my interview with Jonathan:
Click here to listen to and/or download the full interview and/or transcript.
Now, before I brief you on some of the interview’s highlights, let me explain the core role of the CFO.
As the title implies, a CFO or Chief Financial Officer is responsible for helping the company achieve it’s financial objectives.
Specifically, the CFO:
Ensures that key financial metrics (e.g., last month’s sales, current inventory levels, etc.) are reported in a timely manner.
Ensures that the company has enough cash to fund its growth
Helps improve the profitability and efficiency of the company
Figures out where assets should be invested
So, for example, some specific things that Jonathan did at LA Rose were as follows:
1. He created a financial dashboard. This dashboard showed the business owners exactly how the company was fairing on key metrics such as month-over-month sales, inventory levels, etc. This helped the company set and accomplish goals. Importantly, he also put key financial figures in terms that the business owners could understand so that they were able to make better decisions.
2. He improved the profitability of the business by better focusing the owners’ time. For example, one owner was amazing at designing new uniforms. But, she was only spending 10% of her time doing that (and spent her other time managing customers, employees, etc.). When those other roles were delegated and she focused more of her time on design, sales and profits skyrocketed.
3. Product sourcing. Jonathan boosted profits by finding new suppliers to manufacture the same quality uniforms at a lower cost.
4. New financing. Jonathan identified that much of the company’s capital was tied up in receivables (e.g., money owed to it by customers). He used a unique combination of factoring and receivables insurance to get this money from third parties at a low cost. The money was then reinvested in the company, and sales went up dramatically.
5. Investments. Jonathan made investments in IT that helped streamline operations and cut costs, boosting long-term profitability.
Whether your company needs to hire a CFO right now is up to you. But clearly someone needs to be performing the CFO role if you hope to really grow your revenues and profits.
To hear Jonathan tell his story and reveal his best CFO tactics, click here to listen to and/or download the full interview and/or transcript.