From the colonial era to the present day, small businesses have been an integral part of America’s economy. In fact, pre-pandemic, more than 99 percent of America’s 24.8 million firms were small businesses. A strong market, and the need for independence and self-satisfaction, have been key contributors to the consistent growth of the business sector. While the expansion resulted in increased sales, the strategies to accommodate the advancement differed for small business owners, compared to their bigger counterparts.
As of April 2022, 21.6 percent of surveyed small businesses claimed that the pandemic had a large negative effect on small businesses and their growth. In addition to the collapsing economy and imbalance of product supply and demand, workforce availability even became scarce. While most small businesses already lacked the much-needed resources, they’re now struggling even harder with restricted working capital. It became evident that business owners need to put an additional focus into financial and data analytics.
Most small business owners start their journey after prior work experience, which motivates them to strike out on their own. They often envision themselves working in their own company, focused on doing what they love, without understanding just how many hats they would have to wear before their business became successful. It is neither efficient nor advisable to fight a battle on multiple fronts.
Often due to time constraints, the business owner focuses primarily on sales, leaving their financial position to chance. Other financial aspects remained difficult to analyze or understand. Statistics say that 60 percent of small business owners feel they aren’t knowledgeable about accounting and finance. Market instability in the last few years has made it even more evident that these struggling owners need more strategic help to interpret and analyze their numbers.
As an outsourced CFO, I have worked with numerous small business owners. The question I heard most, regardless of the industry: “My sales keep increasing, so where is all the money going to?” More and more, this is now turning into: “While our business is still struggling, how do I measure my cost and find skilled resources?”
To those within the accounting profession, the image of a multitasking small business owner is very familiar. While the thought of an overworked business owner who’s stretched too thin amidst economic crumble may scare many of my peers, I see it as a great opportunity to introduce the benefits of outsourced CFO services.
To explain my persistence, I must first help define what it means to be an outsourced CFO for a company. According to Wikipedia, a fractional or virtual CFO “is an outsourced service provider, offering high skill assistance in financial requirements of an organization, just like a chief financial officer does for large organizations.”
Depending on the needs of the company we are working with, the tasks required can vary greatly. While improving a company’s cash flow and spend analysis is always important, there are often tasks that are just as important to ensure the business’s success.
Here are some of those tasks:
- Process improvement
- Technology implementation
- Financial literacy training
- Break even analysis
- Capital Acquisition
- Budget vs actual reporting
- Capital structure
- Merger & acquisition activities
- Financial strategy and advisory
- Exit strategy
- Business remodeling