DO YOU NEED A CFO?

Presented by Judith Miller, J. Miller & Company

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Sponsored by:

I - INTRODUCTIONS Who am I?

In construction since 1985 2nd Master Builder national trainer Written “Benchmark” column for Remodeling Magazine since 2005 Facilitator for Business Networks for 6 years, including 3 restoration

peer groups Facilitator for Remodelers Advantage since 2002 Speaker at National construction conferences Author of 2 QuickBooks manuals for construction – published Author of RSI – The Remodelers Success Index – in final edit

My goals for this hour: To clarify the considerations involved in hiring a CFO To identify the primary & secondary benefits of such a hire To define a good hiring/training/evaluation process

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BUT FIRST, WHERE IS YOUR COMPANY?

5 STAGES & 2 PHASES - no matter what you make or how every company goes through (up to) 5 predictable stages of growth:

Stage 1: owner does it all Stage 2: owner begins to delegate Stage 3: owner delegates everything except sales Stage 4: owner delegates everything Stage 5: owner handles strategy

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5 STAGES – continued Each stage consists of 2 phases:

Evolutionary - systems are developed to manage effectively at that stage

Revolutionary - systems become insufficient for current level of activity

This is important because the complexity of the systems you develop increases with each stage

Evolutionary

Revolutionary

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STAGE 3: the sweet spot! Owners of mature Stage 3

companies ONLY sell, maybe estimate

All other company functions are successfully delegated to ‘right’ employees with the ‘right’ skills & attitudes & trained using company developed standard systems

Owner then manages customer & employee relations, maintaining high satisfaction in each

Owner, & company, can enjoy significant profits & success

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M ARKET&SELL

PRODUCTION

FINANCEADMIN

RESOURCES

LEADERSHIP

F O U N D A T I O N = S Y S T E M S

OWNER–only Sells/Estimates

STAGE 4: complexity increases Owners of mature Stage 4

companies ONLY coach, train & mentor the departmental heads

The department heads then manage, hire, train & motivate their reports

A successful sales force manages customer relations, maintaining high satisfaction

A successful Board of Directors manages company culture, expectations & profits through department heads.

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F O U N D A T I O N = S Y S T E M S

PARETO’S PRINCIPLE - Also known as “the 80 / 20 rule” or “the

rule of the vital few” states that 80% of the value is derived from 20% of the input

Define the 20% in every department & establish standardized systems to produce predictable results over time

Manage the rest by exception For example: if you use

labor/materials/subs/equipment/other to produce the work, which 20% produces the greatest risk?

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II - THE HEART OF THE MATTER Financial literacy, the ability to make

informed personal & business decisions based on financial information, is vital to both personal & business success

However, it is the rare entrepreneur who started a restoration company because they loved finance

Hiring & training financial managers appropriate to the company stage of growth is vital to long term success

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THE BIG ?-DO YOU NEED A CFO?

Is your banker (or are you) confused by your financial reports?

Can you define profitability by product line, sales person, lead or line item of work?

Are sales up but cash flow down? Are you getting the numbers you need

from your accounting department? Do you need a new accounting or

estimating system but don’t know how to start?

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5 FINANCIAL POSITIONS - There are 5 primary types of financial positions:

DATA ENTRY CLERK – enters data into a pre-defined system; typically has 2 years of experience & a working vocabulary of the industry. Works under immediate supervision & does not require exercising independent judgment. Salary range: $24K - $30K [source: Salary.com]

FULL CHARGE BOOKKEEPER – maintains records, balances ledgers & prepares reports. Typically has associate degree & >5 years experience in the industry. Relies on experience & judgment to accomplish goals. Works under general supervision. Salary range: $33K - $43 K

ACCOUNTANT – prepares profit/loss, balance sheet & other financial reports; analyzes costs & trends. Typically has Bachelor’s Degree > 10 years experience in the industry. Works under general supervision. Salary range: $40K-$49K

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& FINALLY, A REAL CFO - CHIEF FINANCIAL OFFICER – responsible

for directing entire organization’s financial policies; oversees all financial functions including accounting, budgeting, trend analysis, asset protection, statistical data reliability & reporting. Typically has Bachelor’s Degree, often a CPA &/or MBA, & over 15 years experience in the industry. Enjoys a wide degree of latitude & is expected to act creatively to bring the financial performance of the company to its optimum levels. Salary range: $250K - $400K - WOW!

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WAIT THERE’S MORE -If $250,000 to $400,000 sounds like a lot of money (and at

40% gross profit margin you’d need to sell an additional $812,500 to cover the salary alone before burden) –

CONSIDER a …..

SENIOR ACCOUNTANT – prepares all financial reports; also analyzes trends to predict future revenues & expenses; reports company finances to management & suggests strategies. Bachelor’s Degree with > 8 years experience in the industry. Reports to management & enjoys a great detail of latitude. $57K - $72K

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DO YOU NEED A CFO ? - You probably don’t need a

CFO but might well need a Senior Accountant

This is important: the ability to clearly define the position, write a good job description & develop clear expectations will produce better results.

Next, let’s answer the vital questions: why/when/who & how?

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WHEN?

When the degree of financial complexity & amount of data flowing through the system requires greater control: Stage 1 – the owner can do it all Stage 2 – data entry clerk Stage 3 – full charge bookkeeper with

the owner reviewing all reporting & handling strategic financial issues

Stage 4 – senior accountant Stage 5 – senior accountant OR CFO

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WHY? Ask yourself a few questions?

Has the economic landscape changed, for better or for worse, in the last 2 years?

How much time do I spend wondering if my financial & job cost reports are correct?

Do I use more than 5 spreadsheets to manage the company or jobs?

What’s the trend for profitability for the next 3 years? Does the company intend to grow? How much cash do I need to grow double my business? Which component of my business is most profitable? Which

is least? Do I want to sell or transfer ownership?

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BECAUSE - A seasoned Senior Accountant can:

Develop financial controls that work; Create & update business plans & budgets; Write processes and procedures for his/her position & others

in the department; Develop key metrics & dashboards; Manage cash – both receivables, payables and lines of credit; Analyze risk management strategies & suggest methods for

mitigating the most dangerous; And last but not least: protect one of the company’s most

vital assets – CASH! “An accountant can tell you something’s wrong – a Senior

Accountant or CFO can tell you how to fix it.”

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WHO?

Such a sensitive position requires concerted efforts to define the personal qualities of the right applicant as well as the job description

Personality types play a big role: DISC testing defines 4 personal

behavioral styles & anticipates how each style ‘blends’ with others.

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WHO INDEED - D = dominant: these people want to be in control. Many

entrepreneurs are high D personalities. I = influencing: these people want to be liked. Many

successful sales people are high I. S = steady: these people want to take care of others.

Many good teachers are high S. C = compliant: these people want to be right. Good

accountants are high C.

Therefore, the perfect Senior Accountant would be high C; a bit of D would assure that the work begun was finished.

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WHO INDEED, redeux - Company culture and personality fit:

The best applicant with the best skills, properly vetted, tested and interviewed will FAIL if the company culture exhibits signs of dysfunction.

Read Patrick Lencioni’s “The FIVE Dysfunctions of a Team” to see if your team exhibits any of the 5 problematic dysfunctions: Absence of trust Fear of conflict Lack of commitment Avoidance of accountability Inattention to results.

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HOW?

5 steps to the right hire: Define the job description as

well as the personality characteristics

Write a good ad & place it appropriately

Script the interview to be sure you’re asking all the important questions

Develop a system to choose the best from among all candidates

Set up an effective on-boarding & training process

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STEP #1 -

Define the job description: Position title Reports to Primary accountabilities:

Management Transaction control Reporting Compliance

Qualifications Personal attributes Salary & benefit range

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STEP #2 -

Write a good ad: Job Summary: this position is responsible for

general bookkeeping, applying accounting principles and procedures to analyze financial information, prepare accurate and timely financial reports and statements and ensure appropriate accounting control for Company X and associated operating companies.

Essential functions Education and experience Key competencies Salary & benefit range

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STEP #3 - Script the interview:

Why do you want this job? What are the most valuable skills you would bring to our

company? If you stayed with your current company, what would be

your next move? Tell me your greatest accomplishment How many hours a week do you need to work to get your

job done? Give me an example of a time when you took the time to

share a co-worker's achievement with others. What makes you stand out from others?" Source: “The Hiring & Firing Question & Answer Book” by

Paul Falcone

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STEP #4 - Develop a system to choose the best candidate:

Build a matrix to grade the following, on a scale of 1 to 5, 5 being the best: Letter – clear, concise and direct Resume – appropriate for job Responsibility #1 – manage all accounting functions Responsibility #2 – produce accurate/complete reports Responsibility #3 – analyze & predict future Duty #1 – assure timely processing of AR/AP Duty #2 – produce weekly payroll & manage pr taxes Duty #3 – reconcile bank/credit card/vendor statements Skills #1 – QuickBooks/Exactimate/ExactAccount Skills #2 – Excel proficiency Skills #3 – strong communication abilities

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STEP #5 - Set up an effective on-boarding & training process

On boarding: the process by which a new employee is brought into the company Offer letter Employee manual Office tour, introductions; mentors (?)

Training & expectations Week 1 & 2 Weeks 3 & 4 Month 2 Month 3 Review and evaluation; next steps

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AND FINALLY -

“Don't ever hire on the spot. Withhold your decision until you can review enough information to make a rational decision. If you don't, you might end up putting someone in a job where they're just going to fail.“

Most hiring decisions are made in the first 7 to 9 minutes, according to an HR expert. Take your time & hire the right person.

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NOW WHAT? Hiring is difficult, training is

even more so. With the new hire, establish

specific accountabilities for the 90 day probationary period: First week – meet and learn about

the key players in the management team; understand company mission, vision, learn vocabulary, the filing systems

Second week – review historic financial records, work with current accounting staff to learn their methods – what works, what doesn’t and why

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TRAINING, CONTINUED - Third & fourth weeks – learn the

basics of accounting processes: AR/AP/Payroll – determine specific system training requirements

Month 2 – learn month end close processes, including current reporting capabilities

Month 3 – begin to develop suggestions for system improvements; write report re state of company financial management for end of probationary period/evaluation & goal setting for next 3 months

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III – IN SUMMARY

Do you need a CFO? Maybe, maybe not. What you do need is a “numbers guru” who

lives and breathes financial and job cost information, who can anticipate the future based on the past, who can hire, train and fire, when necessary, good employees for this very important department!

This person will change the entire company! You need this person, regardless of title!

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QUESTIONS & ANSWERS -

Thank you for your attention! Thank you to Business

Mentors for inviting me to speak with you today.

Contact me at: jfmiller@remodelservices.

com www.remodelservices.com

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