Part-time CFO also known as Interim CFO, Virtual CFO and Fractional CFO provides businesses who don’t require a full time CFO an excellent alternative. John Lafferty can be reached for a free consultation at 630-269-7646 or by email at firstname.lastname@example.org
This interview with John Y. Lafferty of CFO-Pro explores some of the most beneficial services he offers his clients. John is one of the most experienced Interim CFOs in the country.
Kersten: Hi and welcome back to the show. Today we’re going to be talking about CFOs and start up businesses in general and how do you get involved in starting up a company properly with proper financial support. We have a special guest today, John Lafferty. He runs a company called CFO Pro and his business is specializing in essentially fractional CFO services. John, thanks very much for joining us on the show today.
Kersten: Today we’re going to be talking about this whole idea of outsourcing a CFO. First of all, give us a little background about your business. First of all, how did you get into this business and did you always want to be a CFO? Give our audience a little bit more information on what you’re about.
John: I started my career in public accounting with Arthur Andersen. I had no idea that I would eventually be a CFO type, but after a number of years there, I went into venture capital, which at the time was the largest institution VC firm in the country. After several years there, I decided to peel off in the industry and be the financial guy and was in a number of privately held enterprises. I also had the opportunity to run some businesses during that time. Eventually it became pretty clear to me that the hours I was putting in on a salaried basis were just too much, so I thought ‘why don’t I go out on my own, do what I do, what I knew how to do best and provide financial management services to business owners.’ That’s what I’ve done.
Kersten: It’s interesting because a lot of companies go out and they’ll hire a mediocre CFO and they’ll pay them full time and they really don’t need that; they need somebody focused on the most important things. Maybe you can give our audience a few tips on what’s there to be appreciated when it comes to high quality CFO services and how can a fractional CFO person like yourself really get a company properly on track?
John: I’m going in and focusing on what is bothering that business owners; what does he feel his key issues are on the financial side of the business. One of the things that they don’t pay any attention to is break even sales. They don’t know ‘at what point do I have even sales to cover all of my expenses.’ Beyond that, that becomes profits. They don’t understand the formula nor how to calculate it. That’s something I can help them in a matter of minutes because when I look at their P&L statement, I can quickly see that there may be some line items that are misclassified. They’re going to need to be above what they call the line or below the line; that’s the gross profit line. Once they’ve understood that, then I say lets assume you wanted to spend $10,000 on a marketing initiative, the same formula is going to answer the question ‘how much in sales do I have to generate to cover that cost.’
Another item that I look at real quickly is to see how many day of sales are in accounts receivable and also in accounts payable. The larger that gap is, the tighter their cash flow is. If they’re collecting receivables in 70 days and paying vendors in 30, that’s a wide gap and so I encourage them to chase those receivables, get that down to 45 days, stretch your vendors a little bit, maybe up to 40 days. There’s one other item that I point out and the way I approach it is lets assume you can improve your margin my 1% and if you got $10 million in annual sales, that 1% is worth $100,000. If you improve that margin by 1%, that’s $100,000 to your bottom-line. Maybe you don’t need it in the business or you take it out and invest it elsewhere. That’s a key thing to begin to understand in terms of watching your margins, manage them and know what it really means to do them.
Kersten: A lot of experience, 17 years of experience in the business, maybe just in closing here you can give our audience the biggest thing you’ve learned over your years of experience that could benefit a business.
Kersten: It’s the art of listening, isn’t it? John, great having you on the show. Thanks very much for sharing a lot of your experience with us today.
Kersten: Check out the website at CFOPro.com. Once again, thanks very much for joining us. Stay tuned again real soon and we’ll get John on the show again real soon.