The CFO'S Perspective

Are you thinking about selling your business? Some business owners hear this question and respond, “No… well, not any time soon anyway.” But, if the answer is yes, even if you don’t plan on selling it soon, the time to start planning is now. If you think that selling your business might be in your 3-year, 5-year, or even 10-year plan, start getting the pieces in place now. Preparing ahead of time makes the process go more smoothly and quite often helps owners to get more value out of the sale of their business.

It’s never too early to plan for selling a business because there are a lot of steps that need to happen before coming to the table to sign the paperwork. Getting your financial house in order involves cleaning up your books, assessing the overall financial health of your business, putting together the information that buyers will need to enter into an agreement, working through the details of the deal, and then closing out the sale. From the early planning stage to final sale completion, the whole process can take several years to complete.

Uncertainty, a term frequently mentioned by business leaders today, essentially refers to business risk - an area CFOs often focus on. Let's delve into the various types of risk a business may face.

We’re trying something new today by giving our readers access to insights from an internal conversation we’ve been having! In a recent team meeting our experienced CFOs were discussing what organizations can do to get ready for a recession or economic downturn. The list of tips that our team came up with to prepare your business for a recession offers great advice for for-profit and non-profit entities alike, no matter what the future holds. Below is the result of that brainstorming session.

While some economists and business analysts claim we are already in a recession, many more believe we will be in one by the end of the year. The general consensus is that whether we are already there, or it is coming soon, for-profit and non-profit organizations alike will be affected. The question is how will they be affected and what will those effects look like? Essentially, what should they expect and to what degree should they expect to be affected?

Obviously, nonprofit organizations will feel the effects of a recession differently than the private sector, but the types of issues they are dealing with right now are the same: changing consumer behavior (purchasing and donating), increased costs, labor market changes, and increased reputational risk. How will nonprofits be affected?

When talking with colleagues these days it is common to hear people discussing the effectiveness of remote work, especially regarding consulting work. We hear partners and clients saying things like, “I just don’t think we can replicate the kind of interpersonal relationships we used to have virtually.” Yet, at the same time, we hear their employees expressing little desire ever to return to the office full-time, opting instead for fully remote or hybrid work arrangements. This dichotomy begs the question, “Which is better, in-person or remote?”

It is being mentioned on the news, among coworkers in team chats, and over dinner with family day after day. It is keeping Americans (especially business leaders) up at night. In fact, every client meeting we have these days has some discussion around it. What is it? Uncertainty.

Today’s culture is wrought with uncertainty that is absolutely sweeping through every industry. Rising inflation, COVID surges, interest rate hikes, a dramatic increase in the cost of living, the war in Ukraine, and a potential recession all have business leadership mired in a constant state of uncertainty. From professional services and hospitality to tech and manufacturing, uncertainty is taking a toll. And unfortunately, it does not show any signs of dissipating any time soon.

In response, many organizations have begun leaning even more heavily on their CEOs and CFOs to guide them through these tumultuous waters. Consumption patterns have changed, new buying trends have emerged, and supply chains have become murky, reducing confidence levels in business forecasts. And amid it all, CFOs are being asked to manage cash flow, oversee new business priorities, and aid in constantly shifting strategic planning initiatives.

A large part of any Chief Financial Officer (CFO) role is strategic decision support, whether those decisions are related to staffing, pricing, selling, manufacturing, or any other area of the business. A CFO’s forward-looking point of view combined with their financial acumen makes them ideally suited to provide actionable information to their CEOs and other corporate decision makers and integral to the success of the organization.

Leaning on a CFO for strategic decision making support offers the following benefits:

• Adding value to the company in the short-term as well as the long-term
• Providing data-driven guidance during business shifts
• Aiding in weathering a crisis or downturn

In 2018 we published an article titled “How a CFO Will prepare Your Business for Unexpected Events.” In it we outlined 19 types of unanticipated events that could negatively affect your business and provided advice on how to develop a contingency strategy that would help your company prepare for any kind of disaster or disruption it might encounter.

Do you know what was not included in that list? A pandemic.

This was not simply an oversight. It was an indication that a global health issue was not on anyone’s radar. It was unthinkable in 2018 that one highly contagious illness could sweep through country after country, shutting down economies and causing destruction. No one was preparing for a global pandemic.

And yet, another interesting observation stands out to us. While the word “pandemic” was never used to address that specific kind of business disruption, the many outcomes of the pandemic were addressed. Loss of a business owner, financial hardship, loss of customers, new government regulations, political unrest, supply chain disruptions, loss of salespeople, and transportation issues were all named as possible unexpected events that could have a significant impact on a company.