“When we say fractional, we mean less than full-time or project-based,” partner Rich Reinecke said. Some companies just don’t have enough transactions or the funding that they need a full-time person. That is where we step in.”

Often these organizations are smaller and not yet ready to hire a CFO and other full-time employees at various levels, such as bookkeeping or accounting. Fahrenheit Finance offers growth businesses an opportunity to have superior talent at the CFO level while leveraging other resources at the appropriate skill level and rate, making the combined services affordable.   This approach provides a company the full strength of an accounting and finance department, but on a less than full time basis for each part.  It also gives the CEO better information and an opportunity to make better decisions.  “As the strategic CFO, you’re looking out the front windshield instead of the rearview mirror.  You change the focus to looking down the road and forecasting the where the business is headed versus just the traditional historical view,” partner Keith Middleton explained.

One client commented, "by hiring a fractional CFO, Rainbow Station is getting the highest caliber expert--with the firm's multi-levels of financial advisors behind him--for a price that our mid-size company can afford. It is this type of innovation that will drive our success through the new economy.“ Gail Johnson, CEO Rainbow Station.

Based in Richmond, Virginia, Fahrenheit Finance has been helping companies since 2010. Although the firm is fairly new, the staff is exceptionally experienced. Each employee has extensive backgrounds in corporate management and consulting. By utilizing a staff with a variety of educational and professional skills, Fahrenheit Finance is able to assist their clients at a lower cost while still providing consistent, high-quality service.

“We make sure we get the right resources and the right cost structure that fits a given company,” Reinecke said. “We want clients to have the highest level of experienced resources at an affordable rate. That’s why we created the firm.  This methodology is true across each practice within the firm. 

Fahrenheit’s clientele comprises a diverse range of businesses. Some organizations reach out to the firm to achieve long-term goals, while others seek more immediate assistance. Some of its clients are emerging businesses, while others are more developed, including Fortune 500 companies.

“The industry type doesn’t really matter, and the size of the company doesn’t really matter,” Middleton said. “It’s what they need at their level that counts. The ideal company is one that doesn’t want to be stagnant, but one that wants to move forward.”

Want to learn more?  Contact us: Email Rich, Keith or anyone else on the Fahrenheit Finance team. 

Among the Seven Lessons outlined in a recent Fast Company article, the first obviously warms the heart of a serial startup CFO: Know your numbers (historical or projected). Most investors are experienced at dissecting your numbers to cut through the bull.

However, Lesson #2 should probably be #1: Be a good marketer could be rephrased as - Do your homework about what your prospective customer needs and how to reach them with an attractive solution. Investors want to know that some customers already really like the dog food, but also that your company has the distribution or platform to scale quickly.

One final lesson not mentioned should not be overlooked: Be sure you're ready to swim (fast) when you jump in the Shark Tank.

If you want to talk about your entreprenerial venture and get expert advice connect with Brian Monbouquette or any of the finance experts at Fahrenheit Finance.  804-955-4440

Schedule of Events

April 24, 2012
Virginia Historical Society
Richmond, Virginia

• 7:30-8:30a.m: Registration,  Networking & Coffee
• 8:30-8:45a.m: Wake-Up Call  Daphne Reid, Co-Founder & Principal Partner, New Millennium Studios
• 8:45-9:45a.m: Speed Networking by:

• 9:45-10:00a.m. Networking & Break
• 10:00-11:00a.m: State of the State for New Business Ventures -Moderator: Jim Cheng, Secretary of Commerce and Trade
• 11:00-11:15a.m:  Networking & Break
• 11:15-12:15p.m. Pick one of two discussions:

1.) Finance Your Early Stage Venture From Seed Ground and Beyond -brought to you by the:  Richmond Venture Forum Women’s Initiative

Moderator:  Matthew Austin, Managing Director, Virginia Capital                                                                                                                                                                                                                                          

Panelists:  Brian Carney, Principal & General Partner, Harbert Venture Partners,  Tom Beneditti,  Partner, Blue Heron Capital, Mike McGinley, Managing Partner, New Dominion Angels

2.) Building a Corporate Culture, Maximizing the Journey—and the Exit Value

Moderator:  Gary LeClair, co-founder and Chairman, LeClair Ryan
Panelists:  Brian Callaghan, Founder & Co-CEO - Apex
Scott Walker, CEO - Ironworks Consulting

• 12:15-1:00p.m: Networking & Lunch
• 1:00-1:45p.m: Keynote Speaker:  John May,  Managing Partner, New Vantage Group
• 1:45-3:00p.m:    Five Minute Forum Showdown

Panelists:
John May,  Managing Partner, New Vantage Group
Karen Adams,  Angel Investor
Mike McGinley,  Managing Partner, New Dominion Angels
Steve Hutcherson, Founder & President at VisionairX LLC
Companies Pitching
(Companies to be revealed) 

Table Sponsors

If you think your business has conducted R&D on new or improved products or processes in 2011, and would like to determine your eligibility for these benefits feel free to contact Brian Monbouquette 804-955-4301 / brianm@fahrenheitfinance.com or contact your tax advisor.

Managing commercial, government, or not-for-profit Customers is one of the most challenging and daunting tasks that Supplies undertake on a daily basis.  The relationship is a continuous cycle of product innovation, marketing, sales, order fulfillment, payments and service.  The cycle requires a focus on execution, delivery and follow-up to maintain a profitable and productive relationship.  Each part of the cycle is a potential point of success or failure in the Supplier’s quest for operational and financial prosperity.  Customers are precious assets in which the Supplier has invested much time and effort, but easily can be lost due to unfulfilled expectations and promises.

Everyone in the Supplier’s chain of command has a responsibility to work together to ensure that the Customer’s expectations are clearly understood and met.  Any impediments to delivery of the Customer’s order must be communicated and resolved internally among the Supplier’s team.  If the impediments cannot on be resolved requiring alternative actions, then prompt and honest discussion with the Customer on a corrective plan of action must occur. 

The internal communications must span all affected functional areas:

• Marketing, sales, procurement, finance, operations, and product development staffs in central and remote offices,
• factories or field operations,
• warehousing and logistics, and
• service functions.

The ability of the Supplier to meet Customers’ expectations is dependent on the effectiveness of the organizational dynamics of the Supplier.  Corporate mission and value statements are prolific among companies.  Unfortunately, many organization fall short of their stated “purpose” due to written or implicit contradictory policies, practices, behaviors, and incentives existing in the Supplier’s workplace.  Often these contradictory activities may be allowed or encouraged by leadership at all levels within a Supplier that disconnect their daily activities from the “purpose” statements.

As an example, certain metrics used for different departments may be conflicting causing unproductive tensions between functional areas.  This tension can change the focus of each functional area’s efforts from taking care of the Customer to protecting “turf”. This protectionism often results in the “silo effect”. In their individual silos, each area may hunker down in a virtual bunker and fight to serve its own means, not the greater good of the organization – meeting the Customer’s needs and expectation.

To avoid the development of or to manage current destructive tensions and dysfunctional attitudes within the organization, the tone and governance of organizational dynamics has to come from top leadership and be infused throughout the organization. Senior leaders must lead collectively with an attitude to “walk the talk” and respond immediately to curb any apparent discord or subversive behaviors.  Everyone in the organization must stayed focus on the Customer and work to resolve issues.

Here are 6 ideas to consider in managing the organizational dynamics:

1. The CEO, CFO and other key senior executive need to speak with one consistent voice to their Customers, suppliers, lenders and associates within their organization.  Senior management must agree upon and believe in a set of strategies and priorities upon which resources are committed.
2. Commitments to Customers for pricing, quantities, delivery schedules and service must be consistent, economically reasonable and deliverable.  Commitments today often reset the relationship for the longer term in regards to pricing, product availiability and service. 
3. Dissension among functional area management teams on tactics, priorities, and resource allocations must be addressed and resolved immediately.  Do not allow disagreements and distain to permeate and become ingrained in the corporate culture.
4. Incentives plans should be heavily weighted on the overall achievement of individual goals that are aligned with the organization’s priorities. As an example, sales incentives should focus on profitability, not gross sales, and encourage collaboration with production and finance to ensure realistic pricing and delivery promises are set for Customers.
5. Sales and production coordination meetings must be held frequently as sales orders are assessed and commitments are determined within the constraints of production capacity, material or staff availability.
6. Regularly scheduled receivables management meetings must be held among sales, collections and senior management to discuss any customers who are stretching credit limits or terms.  Responsibility for resolving issues must be shared by all parties using an agreed upon sales and collection strategy.

In summary, the key to managing organizational dynamics is to set organizational boundaries and guidelines for satisfying the Customers’ needs and expectation on a consistent basis.  Some of the greatest failures in many Suppliers are the inability to:

• manage the internal dynamics of the organization,
• facilitate communications among the constituents within, and
• provide coordinated directions to functional area. As a result, functional areas end up competing rather than collaborating for resources.

This is not an easy task.  Sometimes, the management team may require additional skill sets on a temporary or permanent basis to assess and address organizational dynamics.  However, once installed and maintained, these management behaviors can increase the probability of future prosperity.

I will admit it…until recently I had not focused on the progress of the proposed “crowdfunding” legislation in Washington.  Maybe the message was drowned out by all of the noise related to government shutdowns, default, gridlock, primary ads and other negative stories.

Crowdfunding, which MacMillandictionary.com defines as “use of the web or another online tool to get a group of people to finance a particular project” has been touted as a way for early stage companies to get funding.  Unfortunately, US Securities laws dating from the 1930’s make it very difficult to do this legally. 

In December, the House overwhelmingly passed a bill that would have eased some of these restrictions, recognizing that the world has changed since the 30’s.  In the Senate, however, two different crowdfunding bills have become stuck in committee.  In general terms, the Senate seems concerned about the potential for fraud without adequate government regulation.  (Interesting.  We all know how successful the massive banking regulatory infrastructure failed to prevent the most recent financial crisis…)

Here is an excellent article on the crowdfunding situation by Scott Edward Walker on Forbes.com.   The Steve Case quote at the end of the article says it all!

Doug Jones is a Director with Fahrenheit Finance, where he works with small and mid-sized businesses on financial and accounting issues.  He can be reached at djones@fahrenheitfinance.com

In their most basic form the proposals call for the elimination of operating leases, which allow for companies to expense lease payments each month of the lease term.  There is currently no balance sheet impact for operating lease transactions.  Under the proposed rules, all leases would need to be booked to the balance sheet:  with an asset, representing the “right to use” the asset being offset by a debt for the future lease payments.  Over the term of the lease the asset would be amortized and the liability would be extinguished via the monthly lease payments, which would be booked to principal and interest.  As is the case with the paying down any debt, interest would be front loaded, which means higher in the early months and lower in the later months.

Although there is no pretax cash impact resulting from the proposals, the ELFF estimates that these changes would increase debt on the books of US companies by 11% and reduce reported income by an average of 2.4%.   The changes would also impact various financial metrics and could impact bank covenant calculations.  You can follow this link to see more. 

Small and mid-sized companies generally do not have the time or budget to follow the accounting standards setting process, and there are likely to be numerous changes to the proposals before they are finalized and an effective date is set.  So what should you be doing about this now?

I suggest that at your next meeting with your banker, you should bring up the following:

• That you understand that certain changes in lease accounting are being proposed.
• That you have not attempted to quantify the impacts of such changes on your financial statements since you understand that the rules have not yet been finalized.
• That to the extent the new rules have any negative unintended consequences on your financial statements or loan covenants, you look forward to the bank’s willingness to work through this transition.

Doug Jones is a Director at Fahrenheit Finance, where he works with small and mid-sized companies as a fractional CFO and on special projects like planning and budgeting.  If you have questions or want to discuss the impact on your business, you can reach Doug via email at djones@fahrenheitfinance.com

Recently I read an excellent article by Mike Periu about getting your financial model “investor-ready”. Mike explains some key “do’s and don’ts” for preparing models for potential investors.  In addition to his fine advice, let me add a few more suggestions about model preparation:

• • It is all about cash flow.  Non cash items like depreciation and amortization are important when preparing complete financial statements, but they are not very meaningful to potential investors.  Also, don’t agonize over whether you should record that trade show registration as a prepaid expense.  It is cash out the door today and that is what is important.
  • Allow for changes to key assumptions over time, and make them visible to the reader.  I admit that I have made the mistake of allowing one input cell for a key variable for all periods, not allowing for changes in future periods.  That can result in the need to “hard code” a change in the model in later periods which eliminates transparency to the reader.  Your production cost today may be high due to low volume, but it may drop in the future as your volume increases and you can produce more efficiently.  Allow for that possibility.
  • Watch the use of percentages.  It is easy and often appropriate to define items as a percentage of sales.  Commissions are a great example…if your average commission rate is 5% of sales, you should project it as 5% of sales.  If your cost of sales for a certain item is 40%, be careful about using that % in your model.  What if you change your sell price without a change in cost?  What if the cost of the item is projected to rise but the market will not accept an increase in price?  Wherever possible use actual per item sales and cost assumptions rather than percentages.  That will allow you to adjust for changes to one of the factors and not the other.

  Happy modeling!