CFOs are increasingly are playing a larger role in the management of pricing decisions and profitability at many growth and middle market companies. CEOs and owners of these companies view pricing trends as a primary competitive challenge. Historically CFO focus has predominantly been on the administrative side of pricing – tracking and reporting, managing exceptions and enforcing policies. But within some industries, especially Manufacturing, Retail/Wholesale and Services, finance is playing a more strategic role around aligning pricing with corporate strategies, driving pricing approaches and getting value out of customer-specific investments.
CFOs at growth and midsize organizations retain their core financial planning and analytical responsibilities as they are increasingly taking on responsibility for a larger number of organization-wide activities. At the core, the CFO is responsible to the company’s owners and management team for all accounting and financial matters. The CFO core functions include managing risk and providing a foundation for success by establishing company-wide objectives, policies, procedures, processes, programs, and practices to assure the company of a continuously sound financial management and reporting structure. This article addresses the key core CFO responsibilities that enable growth and success.
In most portfolio companies, no executive other than the CEO plays as significant a role in the success of the venture as the CFO. Partner to the CEO and the private equity sponsor, the CFO has a uniquely challenging position, requiring exceptional technical skills, an entrepreneurial mindset and a hands-on, get-the-job-done orientation. There are a lot of factors to consider in your CFO search for a private equity portfolio company.
The CFO plays a critical role in the success of any private equity (PE) portfolio company. A CFO with the right technical skills, entrepreneurial mindset and leadership capabilities can translate into significant additional value for the PE sponsors; conversely, a CFO without the operational discipline or sense of urgency can be a significant impediment to the company’s ability to reach financial targets and achieve desired returns.
In most private equity (PE) portfolio companies, no executive other than the CEO plays as significant a role in the success of the venture as the CFO. Partner to the CEO and the PE sponsor, the CFO has a uniquely challenging position, requiring exceptional technical skills, an entrepreneurial mindset and a hands-on, get-the-job- done orientation. This article presents critical factors for CFO success in a portfolio company.
It is no exaggeration to say that growth and middle-market companies live and die by their cash. During the past recession and preceding financial crisis, the cash that formed the lifeblood of these businesses nearly stopped flowing. The 2008 global financial crisis, which slowed commerce dramatically and placed severe constraints on credit, forced many growth and middle-market companies to manage through more serious and more frequent liquidity crises than ever before. This experience motivated many companies to make lasting changes in the way they approach the financing of their businesses including increased attention to the fundamentals of funding their companies and ensuring financial soundness and stability. As a result of the financial hardships experienced during the economic downturn, leading companies have become more financially disciplined as they are more likely to maintain a lean cost structure, a strong balance sheet, and optimal levels of cash and liquidity than prior to the economic crisis and recession that followed.
What are the qualities of a successful interim CFO? Substantial change and transition implementation experience and the personal attributes to make it happen are essential. Without strong interpersonal and communication skills, gravitas and team leadership capabilities, interim CFO’s are unlikely to succeed, however strong their technical background might be. The demonstration of these qualities is paramount, especially when an interim is parachuted into a crisis situation requiring a fast turnaround.
The role of the CFO has rapidly changed in the past decade, propelled by M&A activity, quickly shifting economic sands, and heightened regulatory scrutiny. What was once considered a number-crunching role has morphed into a critical post, essential to the trajectory of the business. For CFOs at middle market companies, their job duties have expanded even more rapidly than most, given the growth in the sector.
Today’s increasingly unpredictable economic conditions create business challenges that must be managed. These same conditions can also create business opportunities for companies who have the internal processes and disciplines that enable them to respond quickly and more intelligently than less-prepared competitors. CFOs are increasingly playing a more strategic role in applying financial modeling and analysis to assess and plan for potential risks and opportunities. However many small to middle-market companies lack the financial skills, disciplines and processes to conduct adequate financial planning and analysis.
Companies are continuously confronted with a difficult dilemma. On one hand, there needs to be an ongoing focus on reducing costs and structure/create/modify operations to deliver profits and ongoing value. On the other hand, there needs to be a focus on investment and innovation to create long-term value for shareholders, customers, employees and other stakeholders. The CFO plays a key role in managing these seemingly opposing goals that are both required to grow company value.
The role of the CFO in a successful turnaround can be more important than at any other time in the corporate life cycle. The CFO’s importance is based on the harsh realities of difficult financial circumstances. Severe external and internal pressures cause this time to be one of test and challenge. Successful turnaround CFOs know that their role is much broader and more creative than a mere hatchet man or super cost cutter. Instead, the organization requires that financial perspective be injected into every area of decision-making and strategy. Financial management tasks differ during the emergency, stabilization, and return-to-growth stages of the turnaround.