The Rent-To-Own CFO Program
Think you can't afford to bring on a CFO? No problem: Rent one instead.
Published February 2004
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COMMENT ON THIS ARTICLEArni Halling always considered himself pretty handy with numbers. So in 1998, when his stepdaughter Christine Dimmick asked him to oversee finances at her New York City home products start-up, Good Home Co., Halling, a marketing consultant and former director of consumer promotions for Disney, figured he was up to the job. He certainly had what it took to create a basic accounting and bookkeeping system and get Good Home set up on QuickBooks. And for a few years, that was enough. Selling its line of home cleaning and laundry products through retailers such as Nordstrom and Restoration Hardware, Good Home's sales grew steadily, reaching $2.1 million in 2001.
Then, in September 2002, Dimmick appeared on QVC, the cable shopping network. In one night, she sold some $300,000 worth of merchandise, more than the company had been selling in a typical month. It was a coup for Good Home but a crisis for Halling, who somehow had to come up with $200,000 to fill all those orders--and those costs wouldn't be recouped for months. "It was a killer from a cash-flow standpoint," Halling says. "Where the hell was the money going to come from?" He tried juggling things himself, renegotiating payment terms with creditors. But within a couple of months, Halling threw up his hands: "I said, 'I can't do this anymore--I'm not smart enough.'"
Good Home's problem was plain enough: It needed a savvy financial pro on staff. But for small companies, bringing on a full-time chief financial officer can be an awfully big step to take. The salary alone--generally between $100,000 and $150,000 a year--often is more than what the CEO takes home. Then there's the matter of control. Obviously, hiring a CFO means giving up some measure of authority over the finances and spending decisions of your business. What's more, the return on investment on a CFO is hard to measure. "Most entrepreneurs feel like there's no revenue associated with a CFO," says University of Texas business professor Jim Nolen. "They're thinking, 'Why spend money on a CFO, when I'm not sure how I'm going to get that back?'" he says. It's no wonder that so many people stick with QuickBooks.
But there is an alternative: Rent a temp. After all the corporate downsizing of the past few years, the rent-a-CFO business is booming, with at least two dozen companies specializing in temp CFOs scattered across the U.S. Many temps have decades of financial experience and can help you arrange financing or credit or a budget. Just as important, he or she can serve as a clear-headed strategic planner--something that will help ensure that a CEO's growth plans actually make financial sense. "He's the sanity check to the CEO's strategies," says David Gilmore, a managing director of Atlanta-based Tatum Partners, one of the biggest providers of temp CFOs to small and midsize companies nationwide.
Such services don't come cheap. While rates vary from city to city, a part-time temp can cost at least $1,000 a day--though you might get a break by hiring someone for, say, a one- or two-month (or longer) stretch. But the investment can be well worth it, says Good Home's Halling. After trying to deal with the company's cash-flow problems himself, he contacted the local chapter of the Young Entrepreneurs' Organization and asked for a reference for a part-time CFO. Based on that recommendation, Halling hired Jerry Charlup, founder of CFO Associates, based in Stamford, Conn., and a finance pro who had more than 20 years of experience.
Charlup's prescription: a cash-flow forecasting system, something Halling had heard of but lacked the technical expertise to design himself. Charlup put it together for $6,000. "He designed it in Excel, so we can plug in costs, like payroll and overhead," says Halling. The new program, he says, has given Good Home, which now has revenue of more than $4 million, a far clearer fix on how much operating capital it needs at any given time.
