Russel Naisbitt, Consulting CFO with VCFO, joins us to talk about how fractional CFO services can give CEOs an edge over the competition.
Please excuse any typos in this hasty transcript.
Matt Register: Welcome back to the show, Texas Business Radio; TexasBusinessRadio.com is the website. We’re talking about fractional services. There’s all kinds of ways as a business owner you can get expertise into your business beyond what you can afford to hire full-time. Enter, the fractional executive. Enter, the outsourced business service. You can afford to hire a C-level marketing guy or a finance guy on a part-time basis, get that level of expertise into your business, get the benefit of that expertise into your business without having to write the check for that six-figure, you know, high dollar expertise kind of guy.
I’m your host Matt Register. Jay Curry’s sitting over there in the co-host chair; what do you think about it?
Jay Curry: I think you’re exactly right, and CEOs need to think about this. If they’re not focusing totally on their revenue generation and allowing other good, qualified people to take care of the non-revenue generation, then they’re missing the boat. This outsourcing is very important, and it can be very valuable.
Matt Register: Yeah, no doubt about that. Now, business owners are very good at whatever it is they do for a living, right?
Jay Curry: That’s right.
Matt Register: Not very often are they a finance expert on top of that. Not very often are they a marketing expert on top that, right?
Jay Curry: Right too, yeah.
Matt Register: Or IT, or any number of services. We have Russell Naisbitt who is with VCFO, which is a, outsourced, a fractional CFO company. Russell welcome to the show sir.
Russell Naisbitt: Thank you, it’s good to be here Matt.
Matt Register: So talk to me a little bit about VCFO. What do you do, who do you do it to?
Russell Naisbitt: So, VCFO is a 20-year-old company founded in Austin. We have five offices across the country. We employ about, at any given point in time, somewhere around 80 professionals covering CFOs, controllers, and HR director-level people. In addition to our financial practice, we also have an HR practice.
These professionals, these experts in their field, are available to companies on a fractional basis. What that means is that I’m working at any given point in time for a number of companies who are each paying for a part of my time. I have one client that takes about 20 hours a week of my time. I have some that take as little as three or four hours a month of my time. And in addition to the ongoing fractional work, I really enjoy project-type work. I’m a deal guy; I love the thrill of a deal; I love to close a deal. So working on one-off situations where you might need the expertise of a CFO as part of a deal team really is something that I like to do personally.
Matt Register: Yeah. Well no doubt, and that’s a good point, because not only, if you need that just for the daily operations of your business, but especially if, say you have any opportunity to go purchase another company, right?
Russell Naisbitt: Right.
Matt Register: And need somebody with some financial acumen to come in and help get the financing you need and everything else lined up to be able to make that acquisition, you’re the guy, right? This type of service is an answer for that, correct?
Russell Naisbitt: Oh absolutely. Yeah, I mean before you cut that check to make that acquisition you want to be absolutely sure that the numbers are going to work, that, if you’re borrowing money to make the deal, you want to make sure that the cashflows of the combined entity are going to be able to pay off that debt and service it.
Matt Register: And nobody expects a business owner to be an expert in that as well, right? I mean, my background is in machining and machine shops, right? And guys who own machine shops are great at making parts; they’re not necessarily great at figuring out the most efficient capital structure for an acquisition. Right?
Russell Naisbitt: Exactly, yeah.
Matt Register: So how many clients do you have at any give time, roughly. I mean, are we talking 15, we talking two?
Russell Naisbitt: For me personally it fluctuates. It’s normally around four or five ongoing fractional assignments and then maybe one or two, depending on the size of the projects, but one or two projects at any point in time.
Matt Register: Do you normally get the call proactively by somebody that realizes they need help, or do you usually get the call after somebody does something and messes it up? And realizes, looking back, that they needed to have expertise in the deal?
Russell Naisbitt: Well we actually get both situations. So, I was recently involved in a transaction as a transaction CFO on an acquisition of a software company where we were brought in at the behest of the investment bank who realized that the company that was being acquired didn’t have its act together in terms of its financial accounting, and wasn’t really ready to do the deal. But the deal was already in motion.
You know, we’re happy to assist in that situation, but it’s much more sensible to get involved at a much earlier stage. So if a company is considering selling itself, a year before they think they might go out to market is a great time to start talking to a CFO about how they can help them through that process.
Matt Register: You know as a deal guy myself, it’s really not too early, ever to get-
Russell Naisbitt: It’s never too early. Yeah.
Matt Register: Right. Now, as a CEO, how will I as a CEO know that it’s time to bring you in? I mean, what are some of the questions I need to ask myself as a CEO that will let me know that your level of expertise is what I need in my business?
Russell Naisbitt: Well I think, one situation where it’s definitely worth thinking about, is if the business is going through a major transition. If they’re looking at acquiring another company, being acquired, making major capital expenditures, acquiring property, that kind of thing. It’s definitely good to have the advice and counsel of a CFO on those kind of transactions.
Another situation would be if, he or she is feeling like they’re maybe starting to lose control of the business; they’re not really sure about what’s going on and they’re not understanding some of the drivers of the business. Typically that manifests itself in things like, you know, “I think I’m making a profit, but I’m not seeing the cash in my bank account; why?” And we can come in and, first of all, confirm that they are in fact trading profitably, but also explain where that cash is going.
Matt Register: It’s all in the working capital that’s flowing out.
Russell Naisbitt: Yeah, right. Typically that’s the case.
Jay Curry: So, who is your normal client from the point of view, like you’re very good at doing this special projects and mergers and acquisitions and things of that sort. You mentioned where someone else brings you in, not the company, not necessarily; do you come in as a neutral person, you come in as a person representing the company? Are you coming on as a personal representing, who’s your client in that situation?
Russell Naisbitt: In a situation like that, the company is our client. So, it’s rare for us to be working for the investment bank or broker or other party in the deal to be out client.
Jay Curry: You could actually find yourself, if you took it the other way, working against the sell, trying to get too much money for it, and what you want to do is actually figure out what the company’s really worth. Does that make sense?
Russell Naisbitt: Yeah, just using this last transaction as an example, it was the investment bank that did an awesome job of creating a competitive bid situation and was able to get a massive multiple on revenue, not profit, not cashflow, but revenue for this target company. So, that’s their job. And we like to stay in our lane; our job was to …
Matt Register: They’ve got to pass due diligence at some point, right?
Russell Naisbitt: Yeah, we were heavily involved in the sell side due diligence, making sure that there was nothing there that was going to derail what was an extremely good deal. And that everything just ran smooth.
Matt Register: Well sometimes when you’re going for big loans, you’re going for financing, you’re going out for capital, you can not inspire confidence sometimes if you’re not together. And just having somebody that speaks the right language and can put the package together in a way that the investor understands, can make all the difference in the world, right?
Russell Naisbitt: Absolutely. Confidence plays a huge part in a deal.
Matt Register: What is the easiest way for someone to get in touch with you should somebody need to?
Russell Naisbitt: Probably the easiest way is to go to our website, www.vcfo.com. And there’s a contact page there. So, that’s probably the easiest and quickest way to reach us.
Matt Register: Got it, vcfo.com. We will have that link directly from TexasBusinessRadio.com. If you’re driving and can’t take notes just go to the website and we’ll have it linked directly from there.
Russell Naisbitt is a consulting CFO with VCFO; thank you very much for joining us.
Russell Naisbitt: Thanks Matt. It’s been my pleasure to be here.
Matt Register: Yeah, you know, this has been very, very interesting. We do have to go take a break; we do have to pay a couple of our own bills, but we’re going to be back right after this with a whole lot more fractional services. Don’t go anywhere; we’ll be right back.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.