What You Need to Know with Joe: What is a Fractional CFO?

Do you have a sounding board for your business decisions? Who helps you navigate the financial bad times…and the good times? How will you take your business to the next level? What is the plan to grow from $2 million in revenues to 10 million?

Most business owners spend so much of their day operating their business that they don’t have much time to orchestrate and execute a financial plan. Moreover, they don’t have a full time CFO that makes decisions and prepares a financial strategy due to the cost constraints.

This is where Coveted comes in! As a Fractional CFO, Coveted will help you reach your financial goals without the high costs of a full time CFO. Learn more in our second video.

JOE PRIOLA: A high percent of owners don't make it past seven years and it doesn't make sense to me…I don't really understand it. It's simply because they don't know how to manage their capital and how to leverage it and apply it so they can be sustainable. That's what we're (Coveted is) always talking about and that's what we do with every client.

JEFF BERGER: Tell me how your business came in to be and…and why?

JOE: So about 11 years ago when I was a banker (I had been working for a banks for a long time- 27 years to be exact) at the end of the recession I was spending all my wonderful time helping clients navigate bad times. The banks were putting a lot of pressure on them because things were bad.  Real estate values were closing or where real estate values were going down and people didn't know what to do and their businesses were being hurt. So I had this idea that maybe I’d have more value working on the client side working with owners of businesses. It’s like a banker that you hire, which also is called a fractional CFO.  With Coveted it is always about the money and the financials and how to manage a business to make money …and how to achieve your goals. That's literally what we do with all our clients every day.

JEFF: So basically there's a business that doesn't have a true CFO, they have somebody in charge of the finances but they're not a CFO.  You come in and act as the CFO as far as making decisions and guiding them.  

JOE: Yes we can have a whole conversation about what a CFO is and we should talk a little bit about that because people get confused about that a lot. The nature of that job is a little bit different- it's more about strategy, it's about planning. They don't necessarily do the day-to-day book work, they're not cutting checks or making deposits. They're  trying to navigate a script or a plan, they're trying to figure out where the company wants to go - the vision - and from a finance perspective with capital and money. Plus how to execute it so that the owner can achieve their plan or the management can achieve their plan.  

I would say it's like a pilot who is the owner and the navigator is the CFO. So if you think about an owner he's taking risk every day. They just get up in the morning, put their fighter outfit on and they get in their plane and they go. But there's more to it, there's a plan of what are we trying to accomplish… a map out of how we want to do it. Usually we start at the back and work our way forward.

JEFF: How would you describe somebody who would need a fractional CFO?

JOE: That's a great question. Typically it's a family owned business, more or less, or owned by an individual and they're not necessarily a startup. A startup, unless it's a private equity funded startup, probably doesn’t have the resources to hire a fractional CFO. But someone that's been in business for a few years and now they want to know how to take it to the next level or how to navigate the next part of their business.  Typically it's companies with two to three million in revenue that wants to go to 20 million or 10 million or whatever they're trying to accomplish. It doesn't matter the industry. A high percent of owners don't make it past seven years and it doesn't make sense to me…I don't really understand it. It's simply because they don't know how to manage their capital and how to leverage it and apply it so they can be sustainable.  We teach them what their economic capacity is and how to apply it to have more recurring revenue for them for the future.

JEFF: Are there warning signs for a business owner to know when they might need to contact you?

 JOE: There's a ton of them! Typically we really get engaged when someone's having some kind of a money issue- like they’re having a problem with the bank or they can't pay their loan. Or it could be a good problem but they just don't know how to navigate it.

 It's silly to wait to get us engaged to get good advice and training.  People are concerned because there's a cost for our services.  To that I always say it’s like losing weight.  If a trainer could tell me with mathematical certainty that if I follow their plan I’ll become healthier and lose weight.

I never tell a client to change anything they're doing at the beginning because I have to watch what they're doing right. But then when you document what they're doing and you start to explain to them how the math works it's really not any different than hiring a trainer.

Life is fluid-you can't just look at the numbers and have an explanation- you have to find out what was the cause, what's going on, where are we going… because sometimes math gets out of order, right?  Sometimes you could do something that causes you to lose money, but it's the right thing to do and sometimes you're making money but you need to be careful because there's something about to happen that it's going to cause you to lose money.

We want to help clients execute and to become sustainable financially…we actually want to help them create generational wealth.

If you're going to sell your house you're usually going to have an inspection done after you've got it under contract. But you probably should get the inspection done and pay for it yourself before you even list your house so you know what you need to deal with before you list.  That way you  can make the decisions of what you want to take care of, what you know is going to come up that you may not want to fix but you understand how it affects your math as you're going to sell your house. That basic concept is the same thing for your business, but a business is much more complicated than a house. It doesn't have a roof, it doesn't have a basement, it has financials and the balance sheet that becomes a closet and in that closet is all kinds of stuff that you may or may not want to sell with your house and owners don't understand that. If you don't get them cleaned out before you go to sell, it causes a problem because people will say “I want your Ferrari in the garage because it was in the house when I bought your house” but you're like wait a second I’m not selling my Ferrari. You should have gotten it out of your house before you listed your house and if you tell me what you're trying to accomplish, I’ll help you map out how you do it.