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TechCXO Returns to Inc 5000 List

August 28, 2024 by Megan Esposito Leave a Comment

TechCXO, the pioneer of on-demand executive leadership services, returns to the Inc. 5000 list of Fastest Growing Private Companies. The company has been on the list for 15 of the last 16 years.

ATLANTA, AUGUST 28, 2024 – In an outstanding affirmation of its enduring excellence and growth, TechCXO, the pioneer in providing on-demand executive leadership, proudly announced its return to the Inc. 5000 list of America’s fastest-growing private companies for 2024. TechCXO’s consistent presence on the Inc. 5000 list for 15 out of the last 16 years is a testament to its unwavering commitment to empowering clients and fueling their growth. The firm appears on other Inc. lists: #199 in Georgia, #500 in Business Products & Services, and #187 in Atlanta.

TechCXO was founded in 2003 on the premise that companies can benefit from having the best executive talent available to serve as their CFOs, CTOs, CSOs, CMOs, CROs, COOs, CHROs and other executives on a fractional, part-time, or project basis. Companies might not otherwise be able to access the talent and experience level of a TechCXO partner and teams due to cost or availability.

Kent Elmer, Managing Partner of TechCXO, expressed his enthusiasm for the company’s latest accomplishment, “Being recognized once again on the Inc. 5000 list is a testament to the hard work and dedication of our team to excellent client service. Over the past 20 years, we’ve been committed to changing the game in fractional executive leadership, and our repeated inclusion in the Inc. 5000 underscores our success in this arena.”

Read Full Press Release

Filed Under: Executive Operations, Finance, Human Capital, News, Product and Technology, Revenue Growth Tagged With: News, Popular

The Start-Up’s Guide to Extending Your Cash Runway

April 10, 2024 by Megan Esposito Leave a Comment

If it’s been a while since you raised funds for your start-up business, and your cash runway is starting to resemble your personal bank account – a bit thin — you’re not alone. There are fewer potential investors and those that are in play are taking longer than ever to make investment decisions, especially in new companies. If you’re barely hanging on, trying to retain your team and make it to that next inflection point for your product or service, here are some simple ideas to extend your runway and avoid finding yourself in a desperate situation.

Control the Outflows

You should have a strict policy on who spends what with signoffs from your CEO or CFO. There are certain expenses such as travel & entertainment and consulting that are the “canaries in the coal mine” and are leading indicators for how you are managing your spend. You should know where every dollar is going before it is committed.

There will be an increasing number of portfolio companies and VCs who need to shut their doors in the coming months

Plan Ahead

If you only have 3 months of cash, it is too late to make meaningful cuts to extend the runway. For example, if you have to make the difficult decision to reduce your staff, the impact of those savings is magnified for each month in which you implement them.

Consider Alternative Means of Fundraising

While VC-led rounds of equity financing are desirable, consider raising money using a SAFE (Simple Agreement for Future Equity) or convertible note. These mechanisms avoid the difficult negotiations involved with a priced round and defer that decision until later. SAFEs and notes offer incentives such as interest and discounts to the next priced round for those who participate. Grants from the government or mission-driven foundations can also be an excellent means of bringing in precious capital.

Milestones

You need to clearly understand your milestones or key inflection points because those will be the triggers for raising capital at increasing valuations. Your cash runway needs to get you, not only to the next milestone, but you need to have 3 to 6 months to review your data and pitch the accomplishment to potential investors.

Pass the Hat

Many VCs are rightfully focused on their existing portfolios and keeping those companies healthy is their primary objective. VCs are scaling back their new company investments and triaging their portfolios. There will be an increasing number of portfolio companies and VCs who need to shut their doors in the coming months. As such, your current investors are the best and most immediate source for emergency funding, but they will want assurances that they are bridging your company to a meaningful milestone on which you can raise additional funds.

These difficult market cycles are just that – cyclical. With some advance planning and by using all the tools at your disposal, you should be able to position yourself for success.

Filed Under: Finance Tagged With: cash management

TechCXO Reports Full-Year Revenue Growth for 2023; 20th Straight Year of Top-Line Growth

March 12, 2024 by Megan Esposito Leave a Comment

ATLANTA, MARCH 12, 2024 – TechCXO, a pioneer in providing industry-relevant, on-demand executives delivering fractional and interim professional services, reported an increase in annual service fees in 2023 over 2022 to $56 million. TechCXO has increased revenue every year since its inception in 2003.

“TechCXO is in the strongest position in our history. We now have more than 120 partners – the most ever. Our partners love our collegial environment and how our model enables them to impact their clients directly and positively,” said J. Kent Elmer, TechCXO’s Managing Partner.

“Today, we’re seeing staffing and search companies, consultants, and business coaches claim to provide fractional executive services. That’s a testament to the success of our model,” Elmer added. “However, we know after two decades in business that the depth of partners’ expertise – every one of whom has been in multiple c-suite roles – and the team of professionals supporting them is a big differentiator.”

TechCXO was founded in 2003 on the premise that companies can benefit from having the best executive talent available and serving as their CFOs, CTOs, CSOs, CMOs, CROs, COOs, CHROs and other executives on a part-time or project basis. Companies might not otherwise be able to access the talent and experience level of a TechCXO partner and teams due to cost or availability.

Read Full Press Release

TechCXO has assisted thousands of start-up and growth-stage clients in its history. In addition to executive support, companies can also outsource their entire Finance, Sales & Marketing, IT, HR, and Operations functions to TechCXO for 50-75% less than it costs to staff full-time, loaded salaries. All TechCXO partners and staff are U.S. and U.K.-based.

About TechCXO

TechCXO is a pioneer in providing high potential companies across the country with industry-relevant interim and part-time executives on-demand. More than 5,000 companies, from startups to the Global 1000, have entrusted TechCXO to help with their critical functions by calling on TechCXO executives and teams as their CFOs, COOs, CSO, CTOs, CMOs, CHROs and other executive roles. TechCXO has appeared on the Inc. 500/5000 Fastest Growing Private list every year since 2008. For more information about the firm, please visit https://www.techcxo.com.

Filed Under: Executive Operations, Finance, Human Capital, News, Product and Technology, Revenue Growth Tagged With: News

HealtheMed Scalability and Growth Transformation

July 10, 2023 by Megan Esposito Leave a Comment

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HealtheMed

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THE OVERVIEW

TechCXO stepped into the exciting and challenging arena of revitalizing a startup called HealtheMed. Harnessing the expertise of their seasoned team, they rolled up their sleeves and set to work – constructing vital processes, building a tech infrastructure with scalability at its core, and handpicking senior leadership talent. The mission? To ignite a sweeping transformation and steer the business towards brighter horizons.

[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container hundred_percent=”no” hundred_percent_height=”no” hundred_percent_height_scroll=”no” hundred_percent_height_center_content=”yes” equal_height_columns=”no” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” status=”published” border_style=”solid” padding_top=”5%” padding_bottom=”5%” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ background_position=”center center” background_repeat=”no-repeat” fade=”no” background_parallax=”none” enable_mobile=”no” parallax_speed=”0.3″ background_blend_mode=”none” video_aspect_ratio=”16:9″ video_loop=”yes” video_mute=”yes” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ type=”flex” background_color=”var(–awb-color2)”][fusion_builder_row][fusion_builder_column type=”1_1″ layout=”1_1″ align_self=”auto” content_layout=”column” align_content=”flex-start” valign_content=”flex-start” content_wrap=”wrap” center_content=”no” target=”_self” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” sticky_display=”normal,sticky” order_medium=”0″ order_small=”0″ hover_type=”none” border_style=”solid” box_shadow=”no” box_shadow_blur=”0″ box_shadow_spread=”0″ background_type=”single” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ background_position=”left top” background_repeat=”no-repeat” background_blend_mode=”none” filter_type=”regular” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ animation_direction=”left” animation_speed=”0.3″ margin_bottom=”0px” last=”true” border_position=”all” element_content=”” first=”true” min_height=”” link=””][fusion_content_boxes layout=”timeline-vertical” columns=”1″ link_type=”text” icon_align=”left” animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”small-visibility,medium-visibility,large-visibility” title_size=”25px” heading_size=”3″ title_color=”var(–awb-custom_color_1)” body_color=”hsla(var(–awb-color8-h),var(–awb-color8-s),var(–awb-color8-l),calc( var(–awb-color8-a) – 33% ))” backgroundcolor=”var(–awb-color1)” iconspin=”no” icon_circle=”yes” icon_circle_radius=”round” circlecolor=”var(–awb-custom_color_1)” circlebordersize=”0″ circlebordercolor=”var(–awb-color1)” outercirclebordersize=”1″ outercirclebordercolor=”var(–awb-color1)” icon_size=”0″ hover_accent_color=”var(–awb-custom_color_2)” margin_bottom=”0″][fusion_content_box title=”Facing the Challenge” linktext=”Read More” animation_direction=”left” animation_speed=”0.3″ icon=”fusion-prefix-classic-flag-solid”]Post-seed-stage investment, HealtheMed encountered substantial challenges. The company had to validate its business model and build robust internal controls. The business was poised for expansion in all areas, requiring detailed capital planning. However, a crucial hurdle was the burn rate, standing at 2.5 times the revenue, coupled with the need to bolster annual revenues that were currently below $500K. The task was cut out – rein in the burn rate and enhance revenues to set a solid foundation for growth.[/fusion_content_box][fusion_content_box title=”The Situation” icon=”fusion-prefix-classic-server” linktext=”Read More” animation_direction=”left” animation_speed=”0.3″]With the existing platform scalability limited and a noticeable absence of a formal organizational structure and accountability, HealtheMed was confronted with several hurdles. There was an immediate need to develop a formal organizational structure, functional Key Performance Indicators (KPIs), and a financial operating model aimed at boosting operating efficiencies and lowering the burn rate, vital prerequisites for a successful Series A funding round.[/fusion_content_box][/fusion_content_boxes][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container hundred_percent=”no” hundred_percent_height=”no” hundred_percent_height_scroll=”no” hundred_percent_height_center_content=”yes” equal_height_columns=”no” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” status=”published” border_style=”solid” padding_top=”5%” padding_bottom=”5%” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ background_position=”center center” background_repeat=”no-repeat” fade=”no” background_parallax=”none” enable_mobile=”no” parallax_speed=”0.3″ background_blend_mode=”none” video_aspect_ratio=”16:9″ video_loop=”yes” video_mute=”yes” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ type=”flex” background_color=”var(–awb-custom_color_1)”][fusion_builder_row][fusion_builder_column type=”1_2″ layout=”1_1″ align_self=”auto” content_layout=”column” align_content=”flex-start” valign_content=”flex-start” content_wrap=”wrap” center_content=”no” target=”_self” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” sticky_display=”normal,sticky” order_medium=”0″ order_small=”0″ hover_type=”none” border_style=”solid” box_shadow=”no” box_shadow_blur=”0″ box_shadow_spread=”0″ background_type=”single” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ background_position=”left top” background_repeat=”no-repeat” background_blend_mode=”none” filter_type=”regular” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ animation_direction=”left” animation_speed=”0.3″ margin_bottom=”0px” last=”false” border_position=”all” element_content=”” first=”true” min_height=”” link=””][fusion_content_boxes layout=”timeline-vertical” columns=”1″ heading_size=”3″ iconspin=”no” icon_align=”left” animation_direction=”left” animation_speed=”0.3″ hide_on_mobile=”small-visibility,medium-visibility,large-visibility” link_type=”text” title_size=”25px” body_color=”hsla(var(–awb-color8-h),var(–awb-color8-s),var(–awb-color8-l),calc( var(–awb-color8-a) – 33% ))” title_color=”var(–awb-custom_color_1)” backgroundcolor=”var(–awb-color1)” icon_circle_radius=”round” circlebordercolor=”var(–awb-color1)” circlebordersize=”0″ outercirclebordersize=”1″ icon_size=”0″ outercirclebordercolor=”var(–awb-color1)” margin_bottom=”0″ circlecolor=”var(–awb-custom_color_1)” icon_circle=”yes” hover_accent_color=”var(–awb-custom_color_2)”][fusion_content_box title=”TechCXO’s Proactive Approach” linktext=”Read More” animation_direction=”left” animation_speed=”0.3″ icon=”fusion-prefix-classic-money-bill-wave-solid”]TechCXO engaged their team experts, Bob Brogan, Ram Sarabu, and Maria Goldsholl, to tackle these challenges head-on. The team took the initiative to establish core processes, implement functional KPIs, and set up an operating model to enhance efficiency. Together, they focused on building a scalable technology platform and recruiting crucial senior leadership roles to enable a substantial business transformation.[/fusion_content_box][/fusion_content_boxes][/fusion_builder_column][fusion_builder_column type=”1_2″ layout=”1_1″ align_self=”auto” content_layout=”column” align_content=”flex-start” valign_content=”flex-start” content_wrap=”wrap” center_content=”no” target=”_self” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” sticky_display=”normal,sticky” order_medium=”0″ order_small=”0″ hover_type=”none” border_style=”solid” box_shadow=”no” box_shadow_blur=”4″ box_shadow_spread=”1″ background_type=”single” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ background_position=”left top” background_repeat=”no-repeat” background_blend_mode=”none” filter_type=”regular” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ animation_direction=”left” animation_speed=”0.3″ margin_bottom=”0px” last=”true” border_position=”all” element_content=”” first=”false” box_shadow_color=”var(–awb-color8)” box_shadow_vertical=”0″ min_height=”” link=””][fusion_content_boxes layout=”timeline-vertical” columns=”1″ link_type=”text” icon_align=”left” animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”small-visibility,medium-visibility,large-visibility” title_size=”25px” heading_size=”3″ title_color=”var(–awb-custom_color_1)” body_color=”hsla(var(–awb-color8-h),var(–awb-color8-s),var(–awb-color8-l),calc( var(–awb-color8-a) – 33% ))” backgroundcolor=”var(–awb-color1)” iconspin=”no” icon_circle=”yes” icon_circle_radius=”round” circlecolor=”var(–awb-custom_color_1)” circlebordersize=”0″ circlebordercolor=”var(–awb-color1)” outercirclebordersize=”1″ outercirclebordercolor=”var(–awb-color1)” icon_size=”0″ hover_accent_color=”var(–awb-custom_color_2)” margin_bottom=”0″][fusion_content_box title=”Measurable Success” icon=”fusion-prefix-classic-globe” linktext=”Read More” animation_direction=”left” animation_speed=”0.3″]

With TechCXO at the helm, HealtheMed managed to increase its client base fourfold to 210 within a year. The team successfully overhauled the entire technology stack, brought the IP in-house, and made it adaptable to the company’s growth objectives. The team brought onboard key management roles that led to a major shift in operations, resulting in HealtheMed successfully raising a $20.0M Series A round in January 2023.

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“TechCXO’s contributions have accelerated HealtheMed’s business immeasurably in all facets of the company. Your contributions have put us in a position to achieve sustainable, profitable growth in the years to come.”

-Steve Pontius
HealtheMed’s president

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For more information, contact TechCXO Partner Bob Brogan, Maria Goldsholl, or Ram Sarabu.

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gradient_type=”linear” radial_direction=”center center” linear_angle=”180″ lazy_load=”avada” background_position=”left top” background_repeat=”no-repeat” background_blend_mode=”none” sticky=”off” sticky_devices=”small-visibility,medium-visibility,large-visibility” filter_type=”regular” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ transform_type=”regular” transform_scale_x=”1″ transform_scale_y=”1″ transform_translate_x=”0″ transform_translate_y=”0″ transform_rotate=”0″ transform_skew_x=”0″ transform_skew_y=”0″ transform_scale_x_hover=”1″ transform_scale_y_hover=”1″ transform_translate_x_hover=”0″ transform_translate_y_hover=”0″ transform_rotate_hover=”0″ 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Filed Under: Finance Tagged With: Case Studies

Fractional Executives During Crisis

March 22, 2023 by Megan Esposito Leave a Comment

During A Crisis, Your Fractional CFO Morphs into a Platoon of Experts

With the right firm, fractional executives quickly extend expertise exponentially

TechCXO and The SVB and PPP Use Cases

In crisis, conflicting information, rumors, speculation — even panic — reign. The ability to find reliable, actionable information is at a premium. In a fractional executive model, a business can quickly turn a quarter or half of a CFO, COO or CTO into 50 experienced, coordinated executives.

SVB & 40 Hours

The Silicon Valley Bank collapse happened in less than 40 hours.  On the night of Wednesday, March 8, SVB publicly announced it was seeking capital to stem concerns about liquidity. By Noon of March 10, federal regulators informed the market and public that SVB had failed and was placed into receivership.

If you banked with SVB or knew someone who did, you knew the mad scramble and chaos that ensued by senior executive teams, CFOs, Controllers and Boards in those days to (1) Get a balance statement of how much was held there, particularly if it exceeded the $250,000 FDIC protection limit;  (2) Find another institution willing to quickly secure your money in a new account; and (3) Get money wired out of the failing banks and into the new institution(s).

The cost benefits of a fractional executive are well known. What’s less well appreciated is how an organization such as TechCXO can exponentially increase access to expertise, information, and connections quickly

At the height of the crisis, conflicting information about slowed down or shut down wire out processes was swirling. There were rumors of FDIC and Federal Reserve intervention, loan deals from “white knights” to rescue SVB and shore up depositors, liquidation of SVB’s Treasury Securities to serve as a dividend for depositors, and even an FDIC portal and hotline to file claims. During all this, trading on First Republic, Signature Bank and Western Alliance halted, adding to the nervousness of full-on banking and financial systems meltdown.

Within hours, TechCXO’s 50+ CFOs from around the country had solid, actionable information, and were quickly separating rumor from fact, including:

  • VCs and the LPs (Limited Partners) for many tech portfolio companies were indeed having difficulties with wire out processes. Loan deals in process were likely at risk.
  • Reliable sources said plans to raise capital to save SVB were not successful
  • Updates regarding FDIC phone numbers and claims portal, along with instructions
  • Options to diversify to a secondary bank or to secure a new primary bank were recommended, including reliable references and contact info for specific representatives.
  • Real-time updates related to accessing accounts and the status of wire payments, as well as alternative platforms in FinTech and Cryptocurrency, such as Bitcoin.
  • Posted warnings about fraudulent SVB websites
  • Even supplemental state-led insurance options above FDIC backstops were provided.

The Benefits of Connected, Networked Executives

The benefits of fractional executives in terms of cost savings is well-known, as are the perks of accessing a higher-level of executive talent than your organization might warrant in early stages. What’s less well appreciated is how an organization such as TechCXO can exponentially increase access to expertise, information, and connections quickly.

TechCXO CFO Partners quickly formed a Slack channel and a division of labor to gather information and filter it through a subgroup to be disseminated to all partners. It accessed its vast network of bankers, VCs and PE partners, accountants, company executives, lawyers and others to settle on a reliable set of facts from which to act. Even a large, enterprise-level companies that are well staffed don’t have this level of experienced C-suite executives that the TechCXO partnership represents. Also, new entrants to fractional and interim executive resources, such as large Executive Search firms, don’t have this connected, collegial bench of executives from which to draw knowledge.

PPP As Training Ground

TechCXO had been here before during the COVID outbreak and the subsequent opportunity — and confusion — surrounding The CARES Act Paycheck Protection Program (“PPP”) or 7(a) loans program, as well as the The Small Business Association’s Economic Injury Disaster Loan (EIDL) program, which provided small businesses with working capital loans of up to $2 million.

Similarly, there was much confusion about eligibility, requirements, and restrictions in a constrained time period. Then, as today, TechCXO pooled its intellectual capital and experience to quickly and reliably guide clients through the fog. One product was the decision tree (see graphic) that TechCXO provided its clients, vendors, partners, and colleagues to guide them through programs that were proper for them.

50 for the Price of 1/2

Fractional executives always make sense in times of recession, inflation, labor shortages and fast growth for accessing talent, realizing savings, and gaining efficiency. In times of crisis, accessing a platoon of proven, experienced executives through your one on-demand executive relationship may hold the greatest value of all.

Filed Under: Finance

Incentive Stock Options Guide

May 20, 2021 by Megan Esposito

Creating Incentive Stock Option Plans

The appeal of stock options for startups and earlier-stage companies may not be what they once were, but there remains a high expectation on the part of your best employees that they will one day share in the runaway success of the firm. Stock options, particularly those that are fully vested, are a significant motivator, ensuring that employees are aligned with the long-term goals of the company.

Your chances for attracting and retaining the top tier people you need for success are much better with some up front equity budgeting by founders and careful annual thinking about the equity pool you’ll need going forward for both new hires and merit-based awards to existing key contributors.

Incentive Stock Option (ISO) Plans remain an important retention and motivation strategy. There is room to get creative with ‘synthetic’ options and bonuses tied to successfully completed projects and key milestones. By offering these options, companies can manage the exercise price effectively, ensuring it aligns with the price and the fair market value of the company shares at the time of grant.

Equity Still Matters

As unicorns and IPOs have become more rare, the appeal of stock options for startups may not be what it once was, but ISOs remain table stakes for startups that want to draw exceptionally talented people. The favorable tax treatment of ISOs, especially when compared to the alternative minimum tax, makes them a more attractive option for employees.

There is more inherent power and flexibility in ISOs for recruiting and retention than many founders may realize. Also, a management team can get extraordinarily creative in using synthetic and restrictive options based on the successful completion of a particular project or initiative. This creativity can extend to managing the expiration date of options to maximize their benefit to both the company and the employee.

Founders’ Equity

Founders are generally good at thinking through equity allocations among themselves, but something easily overlooked in the early capitalization structure is model options for new employees. Understanding the impact of equity grants on future dilutive events is crucial, particularly in how they relate to qualified stock options and their tax implications, including long-term capital gains considerations.

The size of the initial option pool you need available depends on the executive team you have on hand and those you will need. For example, if among your founders you already have your CEO, COO, CTO, and other key executive team members, you may only need a pool of 10-12% of fully diluted shares available to create a suitable equity compensation plan. However, if you are yet to bring on several key members of your executive team, you may need 15-17% or more of fully diluted equity in the equity pool. I’ve seen founders caught off guard because they needed to come up with 5% equity for the CEO they really wanted.

The earlier an equity incentive plan reserve can be built into an equity strategy, the sooner it can be leveraged, usually in the form of winning a star employee through the draw of equity (in exchange for a lower salary).

Budgeting for Equity

Building the Organization You Want

In addition to the executive team, you will need to think through your organization as it is and how you ideally want it to be. A good practice is to map out an entire organization chart and then do a bottoms-up budget for granting equity throughout the entire organization. Budget out at least two years or to the next anticipated equity raise, ensuring the income tax rate implications are considered for each equity grant.

One example – and this is merely an illustration as equity grants have many moving parts and variables – is if you anticipate the need for a great software engineering team, you may allocate for your Engineering VP 1%; a senior engineer 0.5%, and a line employee 0.25% (of fully diluted shares outstanding). Go through the same exercise for sales, marketing, operations, and other functions. To avoid confusion at the time of future dilutive events, it is always prudent to detail option grants as a specific number of shares versus a percentage.

Again, not only do you want to create a pool of equity for new hires, but for merit awards; particularly if your horizons for major events (such as IPO or an M&A transaction) stretch beyond 3-5 years.

Common Forms of Equity Incentives

The most common forms of equity incentives for the employees of startups are stock option plans, stock grants, and stock purchase plans.

Stock options are the most common and preferred form of equity-based compensation. A stock option gives the employee the right to purchase stock of the employer or its parent corporation. Stock options typically are granted to employees subject to vesting requirements, which prohibit exercise of the unvested portion of the option prior to completion of specified employment or service requirements (or may permit immediate exercise but with the stock subject to a repurchase right on the employer’s part that lapses over the vesting period in a manner similar to restricted stock).

An employee will generally receive one of two types of stock options: Incentive Stock Options (ISOs) or Nonqualified Stock Options (NSOs).

ISOs

Employees are typically granted ISOs, which must be granted subject to a formal stock option plan and are subject to certain restrictions. ISOs have favorable tax treatment for the recipient in most cases, often leading to long-term capital gain taxation rather than ordinary income tax rates. To ensure ISO treatment of option grants by the IRS, the company should follow certain rules to properly grant stock options to its employees including but not limited to having a valuation of its common stock performed on at least an annual basis or more often if material changes to the business have occurred. Improper option issuances may lead to unintended tax liabilities for both the company and the employee.

NSOs

NSOs are often issued to non-employees such as consultants, who are not eligible to receive ISOs or participate in statutory employee stock purchase plans, and to key employees or directors to whom the company wishes to grant options.

Assuming that the NSO does not have a “readily ascertainable value” at the time of grant (and virtually no NSOs do), there are no tax consequences for the optionee at the time of grant.

Rules of the Road for ISOs

  1. Stock Option Plan must be in writing;
  2. Stock Option Plan must be approved by the shareholders of the company within twelve months of the plan’s adoption by the board of directors (the plan may also be approved up to twelve months prior to adoption by the board);
  3. Options must be granted within ten years of the formal approval of the option plan;
  4. Options must expire less than ten years from issuance (or five years from issuance for any holders of more than 10% of the company’s stock);
  5. Options must be granted only to employees of the company (not to directors or consultants);
  6. Options must be exercised within ninety days of termination of employee status or one year following the death or disability of the employee;
  7. The value of the stock to vest in any one year under the option (based on the value at the grant date) shall not exceed $100,000; and
  8. Options may not be transferable except in the event of death by will or laws of distribution of assets.

Incentive Projects

For companies with major milestones such as clinical trials and securing regulatory approval, incentives, and stock options can help motivate and direct work toward specific outcomes.

Whether you incentivize key contributors or energize projects, Incentive Stock Option Plans remain an important retention and motivation strategy. For detailed plan development, schedule a call with us.

Filed Under: Finance Tagged With: Equity Accounting, Equity Management

CFO Survey – Would you add Bitcoin to your balance sheet?

April 27, 2021 by Megan Esposito Leave a Comment

Bitcoin as a store of value and payment mechanism has been growing in acceptance as evidenced by some publicly traded companies putting a portion of their cash reserves into the cryptocurrency.

Tesla invested more than $1.5 billion in Bitcoin to its corporate balance sheet, noting that the purchase was made with cash not needed for operations.  Time Magazine, owned by salesforce.com inc.,  said it would also add Bitcoin to its balance sheet.  MicroStrategy has aggressively urged companies to shift corporate cash into cryptocurrencies like Bitcoin, and also announced it would be paying Board Members in Bitcoin.

TechCXO wanted to know where its CFO partners stood on the issue, so we surveyed 25 CFOs.  Many TechCXO clients are privately-held technology startups, and we asked them:

Resistance to Risk, Preserving Limited Cash

By a wide margin, TechCXO CFOs said they would not put cryptocurrencies onto client companies balance sheets. There were 21 “No”; 3 “Yes” and 1 “Maybe”.

When looking at the comments, the resistance was not necessarily due to not seeing crypto or Bitcoin as a legitimate asset, but more in response to their clients’ current cash and risk profiles. Some of the  comments added are below.

Currently I would not. Bitcoins are accounted for as intangible assets in the U.S. You cannot recognize gains until you sell but do have to write-down impairment if the price drops. Most of my current companies have limited cash resources. As such, they are risk averse.

Cash requirements precluded consideration:

Crypto is volatile. Our clients’ main goal with their funds is principal protection. Not until they have significant excess cash would I consider this as an investment thesis.

And:

The volatility of cryptocurrency erodes the ability to preserve capital. Most of my companies do not have enough capital to put it at risk.

However, some with more significant cash reserves would consider higher risk investments, even amending policies to do so:

One of my current clients, publicly traded, has raised a significant amount of equity that we have difficulty investing for any type of return. We have discussed amending our Investment Policy to allow up to 10% of investable cash for higher risk/higher reward investments, like Bitcoin.

Still others are ready to go:

One client I have has indicated he wants 5% – 10% of fundraising proceeds to be deposited in Bitcoin.

Filed Under: Finance Tagged With: cash management, CFO, Equity Management

Social Enterprises

February 1, 2021 by Megan Esposito

Paul Sansone, TechCXO partner and former CFO of the Boys and Girls Clubs of America and Better World Books, is an expert in social enterprises, social entrepreneurship and B Corps. Paul also serves as a member of the CASE (Center for Advanced Social Entrepreneurship) Advisory Council at Duke University.

Social entrepreneurship is the process of recognizing and resourcefully pursuing opportunities to create social value. With decades of experience in financials for social ventures, Paul knows what it takes for social ventures to raise capital. Learn what impact investors are looking for in their investments, raising capital as a B Corp, and trends he sees in social entrepreneurship. View Paul Sansone’s full bio.

Update: Issues for Non Profits in 2021

Recently, Paul also conducted a radio interview that included a discussion of issues Non Profits are facing in 2021. Starting at the 5:50 mark and through 9:00, he details some of the resource development and fundraising issues Non Profits faced in 2020 and the innovative strategy pivots they need to pursue in 2021 to carry out their mission. This may including some M&A activity among Non Profits. He goes on to talk about the entrepreneurship tactics of organizations like Goodwill and Habitat for Humanity.

Filed Under: Finance Tagged With: CFO

The Power of Compound Decision Making – Part 2

January 7, 2021 by Megan Esposito Leave a Comment

CEOs of private, mostly venture-backed growth companies know all too well the burden of high expectations, both in the milestones and scale they are trying to achieve.  Quality decision making is at a premium. In, Part 2 of “The Power of Compound Decision-Making” (PDF) we examine how to push high-velocity decision making deeper into your organization.

You can download Part 1 here (PDF).

Filed Under: Finance Tagged With: Business Model, Business Planning for Startups, CFO

Thoughts and Takeaways from SaaStr 2018

December 1, 2020 by Megan Esposito Leave a Comment

Last week I attended the annual SaaStr conference, where thousands of people in the SaaS community – Founder CEOs, VC & PE investors, operators and service providers of all stripes – descend upon San Francisco’s Hilton Union Square to learn, hear from and network with some of the most exciting upstart software companies in the world. This year, juxtaposed against the conference was the backdrop of a major stock market correction, where the DJIA dropped over 2,000 points in a single week amid concerns over rising interest rates. Having professionally invested through the 1999-2001 tech wreck and now as a CFO operator to my SaaS clients, the question running through my mind was what were the implications for an industry that has seen non-stop growth over the past decade?

Original article appeared February 2018. See notes from 2019 SaaStr conference, too.

Of course, a well-built business will survive, and oftentimes thrive – no matter the macro volatility. After attending about 20 sessions over 3 days, and hearing from many inspirational and battle-hardened entrepreneurs, there were several common themes that emerged from the conference. Below are my 3 big
takeaways:

Viraj Parikh TechCXO

Viraj Parikh is TechCXO’s Managing Partner in Nashville

  1. Software penetration is still very low – it is still early innings: Don’t let stock market volatility distract from this fundamental revolution. Tomasz Tunguz, a well-followed VC blogger, believes SaaS M&A will be very strong in 2018, after a weak 2017. Big cap tech companies flush with cash need to continue fueling their growth engines, and they are competing with PE funds that raised over $343 billion in 2017. That money will be put to work to continuously penetrate every corner of the global economy with cloud-based software. The median multiple is 7x forward ARR…growth is alive and well.
  1. A SaaS company’s journey to relevance is an exercise in de-risking the company To acquire a VC investment or become an attractive acquisition target, your company must begin with relevance. There are 3 stages in every start-up’s journey to a relevant state: a) product-market fit, b) search for a repeatable, scalable and profitable growth model, and c) scaling the model.

A. How does a CEO know whether they have achieved a Product-Market fit? They must meet two criteria:

    1. The company has a number of referenceable customer who have purchased the product
    2. Customers are happy, as evidenced by:
      • Product usage
      • A reluctance to give it up
      • Expanded usage
      • Low churn

B. After product-market fit is established, the startup must quickly transition to the search for a repeatable, scalable and profitable growth model:

    • Don’t try to boil the ocean – pick one target market with a single use case and benefit
    • Quickly close your early access sales
    • Invest in customer success to ensure your customers are accomplishing their goals
    • Build a buyer personae – what do they buy and what do they care about? – find a predictable and repeatable motion, and then begin scaling that process. For example, predictable sales bookings can be simplified to the number of sales reps times sales productivity
    • Understand your unit economics, and make it profitable.

C. Scaling the model through proper management of the sales and marketing function to achieve maximum sales bookings velocity, including:

    • Hire enough sales people, and pay up for great ones. Too many companies make the mistake of underspending here to conserve cash…that can be a big mistake
      • Set ambitious but achievable sales quotas that inform and roll up to the company’s revenue
      objectives
      • Regularly track the productivity of each sales rep, e.g. what % is achieving > 70% of their quota,
      and > 100% of their quota
      Accomplishing a, b & c will undoubtedly result in a terrific story, but in the eyes of an investor, it is
      fundamentally about risk mitigation. The lower the risk, the more likely you will attract capital.
    1. Run your company around Annual Recurring Revenue (ARR) This may seem like an obvious point to longtime observers of SaaS companies, but plenty of entrepreneurs still fail this basic test when pitching to venture capitalists. The first slide of every investor deck should include ending ARR (and its trajectory over time), which is the single most important valuation metric.
      • Break down ARR into its component parts:
        • Starting ARR
        • New ARR bookings
        • Expansion ARR
        • Churn ARR
        • Ending ARR – if this does not continually grow, it is a red flag that sales have stalled
      • Growing Bookings is the key sign that you are making it as a company. For SaaS companies, bookings are defined as Net New ARR (New + Expansion – Churned). Never count bookings if it does not convert to cash within 90 days

Conclusion

If last week’s stock market bungee jump made you want to vomit, the SaaStr conference was the perfect antidote. The industry’s abundance of capital, intelligence, creativity, discipline (through trackable metrics), and unwavering confidence that software will rule the world, is the envy of every other sector of the economy. Entrepreneurs who are armed with the right toolkit, as outlined above, can and will be building great SaaS businesses for many years to come, irrespective of the business cycle and stock market gyrations.

Filed Under: Finance Tagged With: Business Model, Business Planning for Startups, CFO

Term Sheets

November 24, 2020 by Megan Esposito Leave a Comment

Congratulations.  You’ve made a compelling case for your company to receive funding, investors are interested, they’ve done a couple of rounds of due diligence and probably visited you and your team at your site – if there is one.

Next step is a Term Sheet.  Here are the pressure points within the term sheet that you and your lead (such as TechCXO) need to be prepared for:

Leverage

The simple truth is that your early-stage investors typically have more leverage than you.  They look at hundreds of deals and fund a handful.  However, you’re not necessarily weak.  Having interest from multiple suitors greatly strengthens your hand.  Just remember not to dig into your position too hard.  Investors are used to walking away from deals and you want that capital.  Word travels fast in this small community, too and you don’t want to be cast as a hard case.

Ownership

Our guidelines remain: no more than a 25% equity for investors in the Angel/Seed Round and no more than 30% equity in the Early VC or Series A stage.

Valuation

Using traditional industry comparables as you would for M&A transactions is tricky for start-ups.  Generally, the more mature your company and its metrics, the better the valuation.  Some metrics such as cash flow and revenue may apply.  Some metrics may not be available and you will need your Structure and Performance hurdles to aid valuation.  The assumptions made and agreed to within those hurdles such as customer acquisition, revenue, retention, profitability, etc. will help set your valuation.

Board Composition

One to two Board seats to investors is the norm. There is an increasing trend of an equal number of board seats going to independent members, with the founder/CEO as the “odd” member of the new Board.

The Option Pool

The purpose of the option pool is to provide incentive for management, key employees, and advisors. This range can vary based on how many of the management members are also founders and have founders stock.

Many firms provide options for all early employees – typically under the assumption that they are being paid below market cash compensation and are in a volatile employment environment. With each new raise, the option pool is refreshed to ensure that there are adequate incentives for key new hires.

For stock option plan composition, a good rule of thumb is for 15-20% of the capital structure reserved for the option pool at this stage.  Even better is if you can get this post-closing, so the new investors and founders share in the dilution.  With further rounds of financing, this pool may get down to 10%.    Target half of the pool for the leadership team (CEO, Board Members and direct reports to the CEO).

Key Rights and Preferences

Rights and preferences can get you down into the weeds. You’ll certainly need advisors to help you sift through this. Here are some quick highlights:

  • Liquidate preference – usually 1X original investment
  • Participation – conversion to common after the payment of the liquidation preference in order to “participate in the remainder of liquidation proceeds”
  • Anti-dilution rights – to protect against future issuance of equity securities at a price below the price the current investors are paying
  • Board of Directors participation – either board seat or observation right depending on the size of the investment and % of the company owned post investment
  • Veto rights on certain corporate transactions – preferreds vote as a separate class on things like senior debt, issuing additional securities, liquidation
  • Information rights – monthly/quarterly/annual reporting of financial results to investors
  • Registration rights – ability to register shares in the event of a public offering

Structure and Performance Hurdles

The primary questions to be answered are: how big is your market and how much of it can you capture…and in what time frame.  This is why we stress defining market niches so much during your preparation for funding. Other considerations such as the development of new applications and adding key team members can be factored in but there’s no getting around competing and winning in your defined market.

Filed Under: Finance Tagged With: CFO, Equity Management, Mergers and Acquisitions

The Power of Compound Decision Making

November 24, 2020 by Megan Esposito

CEOs of private, mostly venture-backed growth companies know all too well the burden of high expectations, both in the milestones and scale they are trying to achieve. Attached is Part 1 of “The Power of Compound Decision-Making” – a management piece that I hope will stimulate productive thoughts among aspirational business builders and leaders.

Power of Compound Decision Making (Part 1)_Viraj Parikh_TechCXO

Filed Under: Finance Tagged With: Business Planning for Startups, CFO

Before the (Banker) Bake-Off, Cultivate a Great Chef or Two

November 1, 2020 by Megan Esposito

They were immortalized in literature by Tom Wolfe as “Masters of the Universe” in Bonfire of the Vanities.

Michael Lewis described them as “…a breed apart, a member of a master race of dealmakers” with “vast, almost unimaginable talent and ambition” in his book, Liars Poker.

At one time, 44% of Harvard’s MBAs went into finance and more than 1 in 10 became investment bankers.

But, following the financial collapse in 2007, and the dissolution of famous firms like Salomon Brothers and Bear Stearns, a lot of talent left moved to hedge funds and private equity. Venture capitalists replaced investment bankers as the media’s celebrated dealmakers.

The Economist even wrote stores like “Banks? No, thanks!” detailing how graduates from leading business schools were more drawn to consulting and tech firms than investment banking.

While they may not be seen as the other-worldly beings that they were in times past, I continually promote investment bankers as a wonderful resource for entrepreneurs, executives, board members and investors. Moreover, having worked a variety of bulge bracket and boutique firms, I find investment bankers to be among the most generous in sharing their knowledge and insights to develop long-term relationships with prospective clients.

I find investment bankers to be among the most generous in sharing their knowledge and insights…

If you want to know what’s really going on in your industry, talk to an investment banker. And, while most business people think about investment bankers demonstrating value in the context of transaction execution, you should cultivate these really smart people before the bake-off… that is, a capital event like an IPO or a sale.

Here are six reasons why.

1. Information about industry trends. Investment banking firms tend to organize their marketing efforts around an industry focus, they have likely competed for engagements or potentially represented similar firms in your sector. The preparation for these projects is intense and requires significant research and background information. Meetings with bankers can provide an opportunity to learn about important industry trends and recent events and these discussions provide you with a low-pressure opportunity to learn more about their qualifications.

2. Insight about your competitors. Investment banking firms frequently attend industry events and may meet with management teams of businesses that compete with your business (whether they win the mandate or not) and often have insight into the business of your competitors.

3. Advice on your business strategy. Investment bankers see lots of businesses and exits. This experience provides them with a knowledge base to render sage advice on strategy, positioning, pricing, and distribution, etc. Coupled with their knowledge on the values of the businesses upon exit, investment bankers can be an excellent source for advice on strategy.

4. Introduction to executives. Investment bankers active in your industry sector are networked with executives or aware of executive changes. As your business grows and evolves, you may be looking to add an executive to your team. Investment bankers can be an excellent source for introductions to potential hires.

5. Referrals to sources of capital. Venture capital and private equity firms frequently engage investment bankers to work with their portfolio companies. As a result, they have a significant number of contacts with these capital sources. As a growing business, you may find that you require additional capital that does not warrant an engagement of an investment banker. Bankers are happy to provide referral to potential sources of capital as it endears them to you as a prospective client and equity sources for providing a potential opportunity.

6. Feedback on your pitch. Since Investment bankers have the opportunity to review plenty of company pitches, they can provide great feedback on the company presentations. Sharing your pitch while developing a relationship with an investment banker is an excellent opportunity to learn about their qualifications in potentially representing your business in the future.

Take note of tombstones for recent transactions in your sector as to which firms are active and target developing relationships with these firms. In addition, BankerAdvisor is a resource for discovering and learning about investment banking and M&A advisory firms that may help you identify firms with a track record focused on your industry sector.


Mike Casey

Mike Casey

Mike Casey is TechCXO’s co-founder and a partner in the Finance/Operations practice. See his full bio.

Filed Under: Finance Tagged With: CFO, Raising Capital, Transaction Readiness

Catabasis Pharmaceuticals

October 30, 2020 by Megan Esposito

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Catabasis Pharmaceuticals

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THE CHALLENGE

Building and financing a drug discovery platform company.

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THE SITUATION

Within two months of creating Catabasis Pharmaceuticals, the company’s two founders had developed an innovative approach to drug discovery and development.

Catabasis wanted to build a portfolio of new medicines for their focus area.

Catabasis had initially funded the company through a round of convertible debt but needed a financing plan, an infrastructure and systems to move forward.

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TECHCXO INTERVENTION

TechCXO provided overall strategic direction as well as finance and operations systems — everything from cash management to budgeting and forecasting to advising on organizational and employee needs.

TechCXO helped to hire the company’s full-time in 2013 and has continued to provide financial leadership through the recent IPO.

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THE OUTCOME

Catabasis raised several rounds of equity financing to fund its development and expansion. TechCXO helped to develop the company’s financial and operational capabilities. Catabasis had its initial public offering in June 2015 (CATB) and now has two Ph2 assets in the clinic as well as a robust portfolio of investigational new medicines for the treatment of various disease indications.

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“TechCXO has led finance and key operational functions from our founding, through early capital raises, to our IPO.”

Jill Milne, Founder & CEO

Catabasis Pharmaceuticals

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Filed Under: Finance Tagged With: Case Studies, CFO, Equity Financing, Raising Capital, Transaction Readiness

All we need is a million dollars, and we will be unstoppable

October 30, 2020 by Megan Esposito

All we need is a million dollars, and we will be unstoppable! (A cautionary tale)

Keith Heffron is a TechCXO Partner and an innovative financial leader, business owner and transformative CFO who scales emerging companies. See his full bio

At TechCXO, we’re fond of saying that part of the CFO’s job is not to save money but to spend it. Spend it, that is, to fund the scaling and acceleration of a company in ways that increase enterprise value.

As business owners, we all fall in love with the idea of our business growing into a huge success. Thinking big is a good thing.

You also have every right to ask your CFO to model an aggressive growth plan and to help secure the capital to help that plan take flight. That’s what we’re here for.

However, the same amount of energy and forethought you put into the concept of “How fast could we grow if we had an additional $1M investment?” should be applied to asking “How fast can we grow without sacrificing quality, our reputation, or our values?” And, “What, if any, additional investment is required to achieve this level of growth?”

The best approach is to build a Marketing, Sales, and Operational plan to support the financial plan growth you are targeting. Then, consolidate these individual department plans into an integrated financial model. The resulting cash flow projection will tell you how much of an investment you might need and the timing of that need. It will also allow you to modify your plans based on constraints. The result should be an integrated financial and operational plan that the entire organization understands and is confident of achieving.

Remember when you got your first 10 customers? Everyone was all over them! Everyone knew what was going on, hand-offs were well communicated, and you had your arms around all of it. Things didn’t go perfectly but you were able to react quickly and course-correct well. But then 10 became 20 and you experienced your first growing pains. Everyone was in everything, ownership and hand-offs weren’t clear, and the cost of breakage wasn’t something you had planned for.

Time to assign positions, ownership, metrics, and invest in hiring and systems. While these are all good and necessary things, each requires its own plan and considerations. I further suggest to you that this process of re-evaluating as you grow should be a non-stop process that you should dedicate time to every month with your team.

If you are making plans to solve your many current problems, you are already behind. Are you considering the impact of growth on all areas and are you prepared to pull the necessary levers when that growth comes? Does every person in your organization know how their job will be impacted if customer volume doubles? Let’s work through an illustration to clarify.

Bob is in customer service. He has amazing rapport on the phones and customers love him! He can handle any problem and knows how to make customers feel appreciated. Sure, he has to work a bit of overtime on heavy days but he always keeps customers happy. He’s the kind of employee you can build a company around.

Now imagine that customer volume doubles. Bob can’t keep up and each call is taking longer. He is spending too much time apologizing for delays, he is tired and his quality is slipping. Complaints are getting back to you from others in the organization and you need to get Bob some help. You can quickly hire someone and count on Bob to get them up to speed but it will be another month before the new person is proficient. You hope you can survive until then and not lose any more customers…

Fast forward three months. The new guy is OK but he and Bob aren’t getting along well. Bob is a perfectionist that doesn’t want to let go of control and the new guy is frustrated. You think he may quit. You are still getting customer complaints. Wasn’t this hire going to solve the problem? And why is this happening in other departments as well? Will this cycle never end?

What if……three months before this became a problem, you sat down with Bob and a couple of other key employees for just an hour and asked the question, “What would break down if we doubled in volume?”

Questions you might ask include:

1. What should the customer service organization look like with the increased volume?
2. Do we need a Supervisor for this group?
3. Is Bob capable of being the Supervisor and does he even want that role?
4. How can we identify candidates now?
5. At what point will we need to make the hires?
6. What key skills does the hire need to have?
7. What does the training and on-boarding process need to be?
8. How do we make sure this is not felt by our customers?
9. Can our paper tracking system handle the volume or should we look into a CRM?

This kind of planning for growth is critical to the near-term success of the company and the process is also key to building a long-term successful, evolving enterprise. Further, it suggests a different order to your growth decisions.

There are few things as exciting as growing your business, but you must take some time and understand the cost of that growth. I’m not just talking about dollars, although all roads ultimately lead back to that. There are massive impacts to your people, your ability to execute the additional volume, and an opportunity cost to everything you choose. To start down this road without a clear plan risks all that you have built so far.

Using that $1 million investment to fuel manageable growth is far better than throwing money at problems caused by inadequate planning. Now you have a plan for success.

Filed Under: Finance Tagged With: Business Planning for Startups, CFO

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