Driving & Navigating Growth: How Virtual CFO Services Help Small Businesses Grow

By Jeff Heybruck
January 2021

Every milestone in small business growth comes with a series of decisions and calculations that can be scary, even risky, without the help of a strategic financial resource. While most small businesses can’t afford to add a full-time strategic financial resource (eg. CFO) to the payroll, fractional, virtual CFO options can make access to strategic help affordable.

Leveraging a professional CFO resource will increase the chances of success (vs. a DIY financial strategy) where strategic growth is the goal. This rings true whether your business is still in startup mode or has arrived at the next milestone and is facing some big financial decisions. In fact, leveraging a virtual CFO can help small businesses both drive and navigate small business growth.

How A Virtual CFO Can Drive Growth

A virtual CFO can help to drive business growth by proactively identifying opportunities for optimization – such as improving cash flow or achieving healthier margins – that free up resources to reinvest in and grow the business. Too many business owners focus only on top-line revenue growth and don’t pay enough attention to their gross profit or net income growth. This type of strategic support looks at the business’ overall financial operations to improve processes and lay the financial groundwork for the future.

Understanding and optimizing margins may be one the most core elements to a small business’ financial health. Poor margins will make it inherently more difficult to resolve other financial challenges and to grow the business. Conversely, just a small increase in margin can make a huge impact to the business’ bottom line and cash flow. It should come as no surprise that a companies reporting healthy gross profits also typically report good cash flow, adequate reserves and well-designed processes.

A good virtual CFO resource can help to ensure that your business is well-oiled for growth by:

• Providing Accurate Reporting & Establishing KPIs– A virtual CFO can help provide key financial metrics like COGS (cost of goods sold), gross profit and margin. Even more important, for job-based businesses especially, is the timing and accuracy of these calculations. For example, a job may be completed, but some expenses (paying out subcontractors) aren’t reflected on the books, meaning that numbers pulled at that point in time would not be accurate. How should overhead be accounted for on a per job basis? A good CFO can help to provide answers to all of these types of reporting questions.
• Determining Margin Drivers – An experienced virtual CFO will help perform analysis to determine the primary drivers for margins for a specific business model and industry. This might include a product or service-based profit margin analysis to really pin point the culprit in the case of unhealthy business margins and determine where change most help to drive business growth.
• Advising in Implementing Change – This is really where the virtual CFO helps to drive growth: leveraging actionable data from the reporting. The CFO resource helps to interpret the data and advises a business owner or management on how to implement change. In the event that you do implement changes, historical reporting will also be important to understand how far the business has gone to try to improve margins, cash flow or other KPIs.

Navigating Growth with a Virtual CFO

A virtual CFO can also helps navigate growth by answering the big “what if” questions using data-backed analysis.

“What if I hire a new employee?” “What if I buy a new piece of equipment?” “Should I open my next location?” All too often, small business owners evaluate critical business decisions based on intuition, not numbers. When it comes to business growth, these types of questions intrinsically come up at key milestones.

A good CFO resource will be able to help determine if the ROI is there to justify a purchase, filling that new role, or opening that new location across town. They will be able to determine benchmarks regarding the amount of additional revenue needed in order to say “yes” to the decision. In the case of a new employee, for example, what revenue and billable hours will that employee generate? Too often, business owners will make these decisions for tax reasons, pride, or any reason other than an ROI justification.

Formally, we call this a cost-benefit analysis (CBA) and it will detail the risks and gains of a decision for understanding short-term and long-term financial consequences. At the end of a formal CBA, a business owner will be able to make the decision confidently. A proper CBA takes into account both tangible and intangible costs for a true view into the potential ROI of the financial decision.

Ready to explore Virtual CFO services to achieve your strategic growth plans?
It’s time you met our team of financial professionals. Lucrum’s fractional CFO services give access to highly qualified experts with the industry experience your business demands – available on your terms, without the price tag and commitment of a full-time hire. Lucrum’s cost-effective services start at just $499/month for virtual CFO help. Our CFOs give you confidence in the numbers to help you track cash flow, analyze performance and crucially, to help you manage growth and plan for future growth.