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Finance and Legal Topics

Hiring a CFO Reports and Metrics
Budgeting and Business Planning Stock Purchase Options
Legal Services Fund Raising

 

Hiring a CFO

The CFO tends to be the business counterpart to the CEO. Unlike the rest of the leadership team, the CFO has the pulse of the financial health of the business. The CFO is often in the know on confidential items before other leadership team members. The CFO takes a lead in making sure the company is always ready to be bought (if that's a defined business goal), the CFO is the watch dog for rules and regulations related to finance (especially tax law), the CFO helps lead global expansion, the CFO spends lots of time servicing Board members. Most small scale technology companies do not need a CFO (they need a top Controller at minimum). We'll explore the CFO role in more detail and how it can help the CEO achieve critical strategic objectives More

Reports and Metrics

Finance tends to be the hub of many data points for the business. Aside from providing a standard set of reports needed for tax filings, investors and the like, Finance should also serve the specific analytical needs of each business operational area. As an example, all team leaders should be fully aware of how they are doing compared to budget - even for the smallest of companies this is a valuable discipline to follow (it assumes you create a formal budget, shame on you if you don't). As is mentioned in many places on InsideSpin.com, defining and tracking operational metrics is a key measure of business health -- many of the analysis and reporting would fall to Finance to produce. There is a long list of possible reports and metrics that can be useful measures of health, we'll explore a good collection of them More

Budgeting and Business Planning

There is a dichotomy building as to whether formalized annual plans is the best method to manage a business or a more flexible quarter-by-quarter planning process with annual guidelines. The annual approach is taken by most companies, it aligns with fiscal year reporting needs and tends to be about the length of time anyone can be asked to predict business behavior with any measure of accuracy. Having said that, businesses and the markets around them seem subject to change so frequently, shorter term planning may be a better approach. The draw-back tends to be the time needed to do regular short term budget and business planning -- the draw-back to the annual method tends to be the challenge of measuring performance against plan when it comes to compensation (everyone's bottom line subject) given that a lot can change in a modern 12-month operating period. We'll explore the pros and cons of both approaches and some of the key activities that should be undertaken to make sure budgets and the operating plans around them are sound guides leading the business down a path of excellence More

Stock Purchase Options

Quality people tend to want to work for a startup venture for the chance to financially share in its long term success. They are willing to sacrifice high salaries, extensive support infrastructure and job security to realize the benefits of exercised stock options. Finance is the hub of managing the option plan and making sure the capitalization table (cap table) is accurate so that it can be managed by the Board. Unfortunately most option programs produce little in the way of return as many companies never realize a meaningful exit to pay out to the Common shareholders more than what was invested. This section explores at a high level what typically needs to be done to institute and manage a stock option program as well as explore the pros and cons of even having one versus instituting ideas like a cash bonus program instead More

Legal Services

Too much or too little is not an uncommon debate in most organizations. The legal process tends to be a drag on sales momentum, let alone a cost often charged to sales profits. Nonetheless, prudence does require proper review of relevant documents, often a process managed within Finance. Small companies tend to outsource most legal functions as it's uncommon to be able to justify a permanent full-time staff member nor be able to find one who is qualified to do contract, corporate, tax and employment law all with one individual. A key requirement is to find a firm that is experienced working with technology companies and who ideally is familiar with the broad market segment you are selling into (or at least knows how to work with the kinds of companies you are selling to). Keep in the mind that the job of most lawyers is to help you manage risk and that their recommendations often fall on a very conservative framework -- it's up to you to decide how to handle the advice given and make sure you are keeping the Board and other relevant parties informed if you stray away from that advice. Establishing some risk guidelines jointly with the Board is a good way to approach this. In this section we'll look at a variety of legal services typically required in a technology business and some of the methods you may want to use to handle managing them so that it represents as small a business impediment as possible. More

Fund Raising

Finance plays a key role in the overall fund raising activity. Investors look for detailed financial plans, historical reports, effective money management practices, sound legal structure, dirt-free book keeping, etc.

Growing businesses often involve the CFO in sales forecasting activities, one of the essential outputs prospective investors want to measure. As such, the CEO and CFO (or equivalent) often work together to raise investment. The CFO does a lot of the grunt work while the CEO is responsible for bringing people to the door. We'll look at some of the key finance deliverables for investors and how the CFO can help (or hinder) the successful raising of investment funds (the least of which is managing cash flow effectively). More

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