MIGHTY FINANCIAL SUPERHEROES.

CFOs-for-Hire Cash In on Saving the Day

CEO Rand Bleimeister let the ax fall. Late last year, the advertising model that so many Internet startups had built their revenue model upon had collapsed, and for his fledgling video-content syndication company to survive, something had to change. So he axed his full-time CFO.

"There has been a huge decline in overall ad spending," says Bleimeister. "No one is making their numbers right now because the ad dollars are so far below where everybody thought they would be and where they were last year, so we changed our business. Rather than pursue a business model that caused us to rely on advertising revenue, we remade ourselves into a business-to-business company."

In January, Bleimeister embarked on a major reorganization of his Los Angeles-based company, FirstLook.com--cutting his head count and burn rate significantly. "One of the decisions I made was to reorganize the finance and accounting department, so again I have a part-time OFO. I'm back doing what I was doing in the beginning," he says.

That's right--back to the beginning. This was the second time in just a few years that Bleimeister solicited colleagues and associates for leads on a seasoned professional with a broad business background, stellar accounting skills and a strategist's mind-set who could sweep in, save the day and fly off into the sunset.

MORE BANG FOR THE BUCK

Due to the dynamic nature of business in the new economy, the flexibility CFO-for-hire types offer is extremely valuable to companies like Bleimeister's. "No doubt about it," he says. "I could have kept the executive on board who was my full-time director of finance and accounting. But by eliminating that position and bringing in a part-time CFO, I saw an opportunity to save a little bit of money and in the process gain a tremendous amount of experience." Bleimeister adds that in addition to the economic trade-off, bringing in a CFO for-hire, who also is a CPA, brought his company valuable experience, judgment and advice during critical times in its development.

According to David Summers, a Walnut Creek-based CPA who runs his own consulting business that specializes in business turnaround and crisis management, CFOs-for-hire offer more bang for the buck. "On an hourly basis [CFOs-for-hire] are more expensive, but the client typically gets a higher level of expertise, someone with a broader base of knowledge and know-how." Summers adds that often when companies hire full-time CFOs, the individuals only have direct experience in one or two areas and it may take them twice as long to get the job done. "With outsourcing you turn on the switch and get the job done. Then you turn off the switch."

DIVERSITY AND CHALLENGE-FOR THE RIGHT PERSON

The advantages to being a CFO-for-hire--essentially running your own small business--seem obvious: time flexibility and being your own boss. But CFOs-for-hire note other advantages, such as mental challenge, more control over the type of work you do and, well, fun.

"The variety and intellectual challenge were some of the best advantages for me," says CPA Paul Shapiro, who worked as a part-time CFO with more than 20 startups over the past several years.

Although now a full-time CFO for Santa Monica-based NetCatalyst, Shapiro began his consulting career as a financial resource for a public company, working directly with the treasurer, CFO and CEO on acquisition and transactional projects. He also dealt with corporate insurance, SEC reporting and a variety of other areas that provided him with the broad experience and contacts needed to embark on a CFO-for-hire career. "For someone who had never been to business school, I felt that I was getting an MBA education and being paid for it at the same time. It was an incredible experience."

"For me, it's just much more fun having a variety of work," says Jim Stone, CPA, a Thousand Oaks-based CFO-for-hire, who has been a "permanent fixture" for many years with his established, small-business clients.

Stone likes the flexibility consulting offers, "If you don't feel like going to work, nobody is going to chastise you. If you decide to take next week off to go fishing--and there's nothing absolutely critical to finish-there's nobody to tell you 'no.'"

Shapiro says that the sense of control over the type of work performed is empowering. "Basically you get to choose who your client is and the type of work that you do. I can say, 'Well, this company is in manufacturing and I don't know a lot about that, or this one is in Pasadena and I just spent three months going out there and don't want to go that far anymore.'"

While being offered stock options these days may not have the lure it once did, they still can add an attractive element to a compensation package.

"The value is in getting stock in a variety of companies," says Shapiro. "As a consultant, you can diversify your portfolio. I have options in about six companies, and only one has gone out of business. At the acting-CFO level, you can almost always negotiate options."

He adds that CFOs-for-hire, or any consultant, often feel like outsiders in a company, and options can help engender a sense of belonging. "There's something about being an owner of company that gives you a little bit of a different feeling when you walk through the door--even if it's only an option, you still feel like you are an owner."

While a CFO-for-hire career is not for everyone, Stone says the personal satisfaction with this type of work is tremendous, and the financial rewards "ain't bad either." "You can't beat the feeling when the client says with disappointment, 'You can't be here tomorrow morning?' Who ever said that to an auditor?"

THE DOWNSIDE 

While most CFOs-for-hire don't come cheap--an average fee range of $100-$200 an hour may seem quite tantalizing--the downside of outsourcing emerges in the form of the relative financial instability, and some of the headaches that can accompany running your own business.

"You don't have the same steady income month after month that you would have if you were on salary with somebody," says Stone. "You have to pay your own health insurance, self-employment tax, all of those bennies that an employee would normally receive automatically, you don't."

Summers adds that another hurdle is the need to be continually networking. "This is a business driven by referral and one has to constantly keep up on that," he says. "It's easy to get too busy and not market yourself enough."

Since many CFOs-for-hire enter situations in which there is some chaos, says Summers, they often find themselves dealing with people who are unhappy. Depending on your ability to deal with chaos, this can prove mighty stressful.

He adds that running your own business can have trials of its own, "People may not pay you as timely as they should, which then forces you to spend time focused on billing and collecting."

A sense of isolation from the company also can be a source of frustration. "With a full-time job you don't have the blinders on that you have when you come in once or twice a week," says Shapiro. "With a part-time job you are merely focused on what you have to get done for those couple of days and not involved with the behind-the-scene meetings. You're not necessarily part of the fabric of the company. You're the consultant. The bottom line is you're not in on the inside jokes, you don't know whose birthday it is and you are only involved in the meetings to which you are specifically invited. This really can make the job more difficult."

The level of job difficulty often depends on the type of company. Startups have different issues than mom-and-pop businesses, while serving as acting-CFO for a large, public company is quite different than working for a small private company.

"If you're in a large or public company, the responsibility you have to your shareholders or the investment community is much greater than when you are working for three guys who start an Internet company and they own 90 percent of the stock," says Shapiro.

Stone adds, "You may be asked to read contracts or consider other legal questions and tell them what you think. It is essential to be able to determine for yourself when you're sure of something and when it's time to call an attorney because you just don't have the answers. Keep yourself out of trouble. I always say, 'I think [this or that], but you should pass this by your attorney anyway just in case I missed something.'"

DON'T QUIT YOUR DAY JOB

Does the CFO-for-hire career track sound too good to pass up and the disadvantages seem manageable? Before you quit your day job, consider if you have what it takes to walk down this exciting, yet uneven, road.

There is a certain skillset that leads to CFO-for-hire success, says Shapiro. "If you have a good network and jack-of-all-trades type skills that helps. After working at many small companies, I had the advantage of being able to do many different things--I had a chance to learn about inventory, sales and marketing, and technology. These experiences widened my market of potential clients."

Stone adds, "You're going to have a variety of clients, so you better have a variety of experience. You end up consulting not only on financial matters, but also human resource and computer issues, and any sort of administrative thing the owner chooses to ask you about. You need to know about banking and insurance. If you don't know these things, you at least need to know somebody that you can call who can help you, so networking is very important. The wider, broader experience you have under your belt before you start, the more likely you are to be successful."

Shapiro recommends that if you want to break in as a CFO-for-hire, you should try to do it part-time, on nights or weekends, while you still have your day job. He says, "Unless you have no financial responsibilities, when you commit to working as a consultant, you put your livelihood at risk."

Financial reward should not be the driving force behind transitioning to CFO-for-hire work. "As an outsourced person, your income can be all over the map," cautions Summers. "It is a question of stability versus diversity and excitement. One must like constant newness. I developed an addiction to having new experiences, so this line of work is ideal for me."

A REFERRAL-DRIVEN BUSINESS

Networking is the key marketing tool employed by CFOs-for-hire. "The best way to do it, and the way I did it, was through networking," says Stone. "I never advertised for this--never. Essentially, it was all word-of-mouth, referrals." He adds that through his involvement with CalCPA he made many friends that in turn resulted in many referrals.

"If someone is going to make a referral, they're going to refer someone they know and have confidence in, says Stone. "They're not just going to throw a dart at the Yellow Pages."

Getting involved with professional organizations is another way to meet potential clients, or simply to make friends who will happily refer clients to you. Attending monthly meetings for a couple of hours a month is a small time commitment that can result in substantial rewards.

"I swim with the sharks," says Summers. "I go to a lot of meetings, maintain a contact base--take them out to ball-games or lunch. I try to have a one-to-one encounter with everyone on my contact list at least once a year. The trick is staying in recent memory so that when a situation comes up and they need your kind of services, they immediately think of you."

Shapiro adds that previous clients are a terrific source of referrals: "Every time you work with a client you build your network. You will meet people there who are smart--people who may need your help down the road." He notes that when an existing client referred him to other clients, it was a clear acknowledgement of a job well done.

According to Stone, bankers can provide a good source of clients. "If you have a relationship with bankers whose clients have financial difficulties or otherwise can't get things together to keep the banker happy, they might refer you to these people to try and help solve their difficulties."

"There is a certain satisfaction in setting something up and then watching it run. And, there is a certain satisfaction in setting things up and watching someone else run it," concludes Shapiro. Deciding which you prefer, may help you to determine if a "CFO-for-hire" sign should hang on your door.

THE VIRTUAL CFO: WEB-BASED SERVICES

Sometimes, for small companies in need of accounting services and CFO guidance, a Web-based "virtual CFO" program may be just the thing. These services relieve your small-business clients of the burden of building and maintaining an internal bookkeeping and accounting department by facilitating online record keeping. These programs typically work in tandem with CFO-for-hires and CPAs who serve as the businesses' primary advisers. Following are some such services:

VirtualGrowth.com

New York City-based VirtualGrowth.com features a program called Virtual Accountant"--a Web-based bookkeeping and accounting service for small to medium-sized businesses. Services include: online bill payment, automatic document imaging, invoicing, payroll recording, time tracking and bank account reconciliations. Accountants and bookkeepers oversee accounts, and VirtualGrowth.com offers a CPA partnership program. For more information, go to :http://www.virtualgrowth.com.

Groco.com

Groco.com, a San Francisco Bay Area-based virtual CFO program, is designed for companies with one to five employees. Their Webbased program works with other programs to track a company's financial activities and every piece of business transacted with customers, vendors and employees. An online demo and more information is available at: http://www.groco.com/cfo.html.

California Manufacturing Technology Center

The California Manufacturing Technology Center is a nonprofit organization that provides reduced-cost assistance (post-funding) for small or mid-sized companies in the manufacturing industry. Their Virtual CFO program also provides on-site financial guidance and support. Visit them on the Web at: http://www.cmtc.com.