Firms Outsource a Top Job as Cheaper Than Hiring Their Own Executive
By RAYMUND FLANDEZ
This past year, Al Lovata, chief executive of Be Our
Guest Inc., cut expenses for his party-equipment rental
business by laying off staff and reducing workers’
salaries. He credits an “outsourced” chief financial
officer with helping him prepare for the worst of the
economic downturn.
The Boston-based company had sales growth in the
double digits for the past few years, when revenue fell
flat last fall. Now, thanks to the part-time CFO’s
guidance, the company is stable with revenue down 20%
to 30%, but profitability higher than in the previous
months, he says.
If we hadn’t had this service, “we would still be
struggling,” Mr. Lovata says.
Brian Weitzel
Mike Loria of Re.Source Partners Asset Management, in
Detroit, consults his CFO, Sheri Pawlik of B2B CFO.
Some small-business owners in need of accounting help
to balance their books and guide them out of a financial
black hole are renting CFOs rather than hiring them. The
strategy comes at a time when the deep recession has
forced small companies to look for money-saving
alternatives that can yield good returns yet avoid
substantial overhead costs.
“They’re looking for ways to streamline and be efficient
as they can,” says Glenn Dunlap, a co-founder of
Milestone Advisors LLC, a small-business consulting
firm in Indianapolis that provides CFO services.
The average annual salary for a full-time CFO in a
small- to medium-size businesses ranges from $94,250
to $175,750, according to a 2009 Salary Guide by
Robert Half International Inc., a Menlo Park, Calif.,
staffing services firm that serves the accounting and
finance fields. Renting one can be significantly cheaper.
B2B CFO Partners LLC, a Phoenix, Ariz., firm that has
over 100 CFOs-for-rent, charges at least $300 to $400
per month for the service. The company has doubled the
number of small- to mid-size business clients to 650
since 2007, says Jerry L. Mills, founder and chief
executive.
Business owners often want such a service when their
company’s finances are getting more complex and need
someone with more financial expertise, says Germain
Böer, professor of management and director of the
Owen Entrepreneurship Center at Vanderbilt University
in Nashville.
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Still, he cautions that some small businesses that have
simple financial structures or are completely self-
financed may find renting a CFO not so useful. But “if
you have a loan in the bank or an outside investor,
something like this is well worth considering,” he says.
These CFOs have a bigger role than accountants, who
mainly keep track of the company’s books. They work
with business owners to manage their accounting and
finance departments, connect them with business
sources that can help them grow and provide financial
data to help make strategic long-term or day-to-day
decisions. Many are certified public accountants.
The payment structure varies. Some are on project-
oriented deals, such as developing financial projections,
assisting with raising capital or completing a business
plan. Some are on-going in nature and can be based on
an hourly or flat monthly fee.
Concerns regarding privacy from such consultants can
easily be mitigated by nondisclosure agreements,
experts say. Mr. Mills suggests that small businesses
interview at least three CFO candidates, assess the
quality of the firm they work for and avoid long-term
contracts, if possible.
Ruthann P. Lacey
Some business owners turn to CFOs to establish proper
bookkeeping systems. Ruthann P. Lacey, owner of a law
practice in Tucker, Ga., brought in a part-time CFO in
October. Before, an office manager handled bookkeeping
while she also turned to her husband for ad-hoc
financial and tax-preparation advice. “I didn’t really
know what the big picture was,” she says. “I only knew
we made payroll every month.”
Upon the advice of her rented CFO, she installed
QuickBooks software, hired an accountant and sorted
out the company’s accounts-receivable system, billing
those customers who owed the company.
Ms. Lacey also began reviewing monthly reports about
cash flow and profitability that’s making it easier for her
to make hiring decisions or put more into the marketing
budget. She says she’s quite happy paying the rented
CFO’s $185 per-hour rate about 15 to 20 hours per
month, because she can’t afford a full-time executive.
“This is something I should have done a long time ago,”
she says.
Entrepreneur Bob Compton, founder and chief executive
of Vontoo Inc., an Indianapolis-based voice-messaging
company, says he has rented CFOs for six companies he
has started or been a lead investor in. “To hire a CFO in
the early-going is a waste of money,” Mr. Compton
says. “It’s much better to invest that money in engineers
and sales people.”
For Vontoo, he pays $5,000 a month for the CFO’s
strategic advice, bookkeeping services and accounting
expertise. “It’s a tremendous cost-saving,” he says.
A company outsider can also help deliver a reality check.
Re.Source Partners Asset Management Inc., a reseller of
technology products in Detroit, has used cash to fuel
growth since 2001 but is now using a line of credit for
the first time, and needed help managing the new
financing. In 2007, Mike Loria, the company vice
president, brought in a part-time CFO who advised the
company to rein in aggressive plans for growth and
prepare for flat sales this year of about $9 million.
The CFO is more objective and “someone who can
prevent us from making any bad decisions,” Mr. Loria
says. “It has really given us a level of confidence that we
did not have in decision making.”
Write to Raymund Flandez at raymund.flandez@wsj.
comPrinted in The Wall Street Journal, page B7
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SEPTEMBER 22, 2009
