There are several important facets to consider regarding financial and business strategy.
Every business is different and will have unique needs. But no matter the size or industry of your business, most business owners would agree that having a fractional CFO on staff is critical to business and financial strategy. They have the financial expertise to help with financial decisions, improve social good initiatives and streamline other business processes.
But how do fractional CFO services help companies strategize? How exactly do they help grow and maximize the potential of mission-driven businesses?
Let’s explore the purpose and value of a fractional CFO.
The Purpose of Fractional CFO Services
You might think that fractional CFOs only seek to provide financial services and strategy.
But what truly makes a difference in our fractional CFO services is our clients. We focus on the value we can bring to our clients. We are their partners, the support system that allows them to achieve their social impact mission.
We are passionate about our clients’ missions.
That’s why in this article, we’d like to share with you the story of one of our clients: Community Credit Lab.
The Story of Community Credit Lab
Recently, a client of ours achieved a huge milestone. Community Credit Lab, a 501(c)3 nonprofit organization, was acquired by a larger entity, Common Future.
You might ask, "Well, why is it a big deal for me?”
It’s not about the fractional CFO services.
It’s about what we accomplished together. Just to give you a little bit of background information, let us go back in time a bit. In 2019, Community Credit Lab was founded by two colleagues and friends, Sandhya Nakasi and Ryan Glasgo.
They had seen the social injustice in accessing capital lending and recognized the inequity in the United States financial system. So they decided to shift power by facilitating capital through affordable, customized lending programs under the direction of community partners. That’s how they started providing 0% or minimal interest to their borrowers. How amazing is that?
And how do we know this?
We've had the honour of being inside the organization.
Community Credit Lab wasn't created to do CFO work. What they truly wanted was to mobilize capital and build economic power and self-determination in excluded communities.
Why Community Credit Lab Got Fractional CFO Services
Do you feel like you're constantly firefighting, resolving one financial crisis after another? Do you sometimes feel like you're just barely treading water and struggling to keep your business afloat?
Well, it’s time to stop struggling and start thriving.
Investing in fractional CFO services can help your organization grow and scale. In fact, we could say that it's absolutely essential. Any business with a mission deserves to grow and reach more people. And that's the primary reason\ you should get a fractional CFO—and that’s also why we do what we do. We want to help you spread your social impact.
Community Credit Lab came to our firm due to the following reasons.
Right Time for a Fractional CFO
At that time, they didn't know there would even be an acquisition — they wanted to obtain accurate, timely and organized financial statements. Getting your financial documents together is the first step to supporting growth.
Better Budgeting and Financial Forecasts
They already had a budget and a forecast.
But they didn’t believe that the forecasting and budgeting were robust enough for their growing organization. One of the primary jobs of a fractional CFO is to manage cash flow. That includes strengthening and improving your budgets and financial forecasts to create financial stability.
Financial Expertise
A fractional CFO serves as another expert that can help you solve problems within a company. Community Credit Lab wanted someone who understands their mission but at the same time could give a different perspective to solve more significant concerns within their mission and company. If you need another angle on your problems or a valuable partner for brainstorming for solutions, a fractional CFO is the perfect person.
Knowing the Risks
When running a business, it’s always important to know the risks.
Ask yourself these two questions:
What are the risks if you do X, Y, Z versus A, B, C?
What are the implications of your decisions on the financial condition of your business?
Identifying and managing risks is crucial. If and when a possible problem becomes a reality, a well-prepared business can minimize the impact on its finances and performance. It's one of the core parts of strategic business planning.
The Value of Partnering with a Fractional CFO
Partnering with a fractional CFO during the pre and post-acquisition, Community Credit Lab accomplished the following things.
Accurate, organized and timely financial statements
With comprehensive financial statements, the acquirer was able to understand financial results. It allowed Common Future to decide:
What are the risks from an assets and liabilities perspective?
Do they want to move forward with the acquisition?
Of course, the acquirer would want to assess your organization's financial performance. Having accurate financial statements allows them to make informed economic decisions—and it helps you to make smarter business decisions, too!
Implementing best accounting practices
Hiring a fractional CFO allowed Community Credit Lab to integrate best accounting practices in their company before Common Future started the due diligence process.
Without good accounting practices, you wouldn't be able to properly evaluate business performance and create budgets, future projections, and financial statements. Such a thing may be extremely detrimental to your business, especially if you're going through an acquisition.
Better deal structuring
Better budgeting and forecasting enabled Community Credit Lab to structure a deal that benefits all stakeholders. And from the acquirer's perspective, that gives them peace of mind — it allows them to understand how much additional cash they'll need to operate the new company and the costs associated with the acquisition.
Accurate financial data
You already know that fractional CFOs are financial experts.
But what are the things you could do with the financial data they provide? Well, that data allows you to answer any question on time. Moreover, they could ask the right questions to avoid problems after the deal closes. Such questions include:
Have you thought about consolidation after the acquisition?
Does the acquirer need an audited financial statement?
Have you thought about the post-acquisition operational transfer process?
Asking these questions is essential. These are the types of questions that you'll really need as you go through a big project — such as an acquisition.
Lessons from Community Credit Lab
You already know why this is important to us.
So why would it be important to you?
Well, there are three lessons you can take away from the success of Community Credit Lab.
Streamline your financial process as early as now. There’s no time like the present. Don’t wait until a company shows interest in acquiring your business before streamlining your financial processes. Work hard to build and grow your company—then make sure you get the best value when you’re ready for acquisition.
Create accurate, timely and organized financial statements. Having proper financial statements makes the acquirer's decision-making process much faster. No one wants to waste their time doing due diligence only to realize it won't work out, right?
Be proactive. Think about situations and problems you might encounter. That way, you’ll be able to structure the exit agreement as a win-win for all stakeholders.
The value of fractional CFO services is clear.
So when it comes to your business, don’t leave anything up to chance. If you want to see your business grow and succeed, don’t be afraid to invest in fractional CFO services.
It might seem like an unnecessary expense at first, but if you take the time to find a qualified and reputable firm, it can be one of the best decisions you ever make for your company. Businesses of all shapes and sizes can benefit from fractional CFO services, and the sooner you bring on a financial expert, the better off your business will be.
Leveraging the Value of Fractional CFO Services
Our clients make a difference in our work.
That’s why we focus on partnering with businesses and organizations with strong missions. And then, we amplify their impact sustainably. We're proud to be part of Community Credit Lab's journey, and we can't wait to see what's in store for them.
If you want to learn more about investing in a fractional CFO for your business for good, connect with us at www.theprofitreimagined.com/lets-chat. We would love to speak with you about fractional CFO services and how we can bring out the best in your business so that you can grow, thrive, and positively impact the world.
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