FAQ How long does it take to raise capital for my company? What is the value of my company? What is the best funding source? What is the difference between a business model and a business plan? What is the difference between a budget and a forecast? What is the most important thing an owner or a CEO needs to know? Can a CEO create value without going public? What is the role of the CFO? What is the difference between a Controller and a CFO? Should my company go public and when should it do it? What is the value of CyberCFO to my company?   How long does it take to raise capital for my company? The process of raising capital is dependent upon several variables. Some are controlled by the actions of the owner, and others are a function of the marketplace. The variables critical to the success of the process of raising capital include: The market for your products and/or services; The investment market for companies in your investment group; The acceptance of your products and/or services in the marketplace (your current revenue and its growth pattern); Your management team; The expectations of the investor and the owner(s); and The level of effort put into the capital process (business plans, calls to capital groups, meetings and presentations). Raising capital is not an ancillary activity. It takes a high level of effort, of research, and a persistent focus on achieving the goal. This process can take as little as a few months to several years based upon the variables previously stated. What is the value of my company? The value of a company is based on the variables of raising capital. The following variables are ranked in order of value: The presentation of the variables in a clearly-stated economic model/business model/ business plan; The expectations of the buyer/investor; The market for your product/services; The investment market for companies in your benchmark category; The acceptance of your products/services in the marketplace; and The management team and its experience. Applying the business model to these value variables derives the value of any company. Each variable has a different weight when considering the uses of the valuations. Defining the purpose for the valuations is as important as assigning a value to a company. Benchmarking companies on a value basis is an objective process translated to subjective interests. Assigning a value to a company should not be undertaken without a proper understanding of the process by the owners of a company. There are many methods of valuation, and each has differing results. The objective is to be realistic about the values in the face of market and economic constraints. What is the best funding source? Again, a thorough analysis of the value variables is needed to choose the right investor. The determining factor will be the population of investment alternatives that you can choose from, given the weights placed on these criteria. The population of investment alternatives is primarily related to the stage of growth of the company. Start-ups ($0-$2M in revenue) are candidates for angel funding, bank financing and some early-stage venture capitalists. Emerging growth companies ($2M-$10M) are candidates for later-stage venture money. Accelerating growth companies ($10M and greater) are candidates for various bridge financing and initial public offerings. The best money is not always the most money for the least amount of your company. The goal is to find the money partner that will help you reach your objective (creating the most value for your company), whether that lies in getting an IPO, selling the company, merging with another company, or getting acquired. Determining the exit strategy of the company is critical to this process. What is the difference between a business model and a business plan? A business model looks at the economics of creating the products and services, delivering those products and services, and the evolution (including revenue, profit and value creation) of the components of the business model. A business plan is most often written for an external event, such as raising capital, starting a company, etc. and then not revisited until another external event creates the need for a revision. A business plan usually includes the business model; however, it usually does not work the model through the various stages of growth, nor does it anticipate changes in the economics of the products and services being delivered over a period of time. A business plan is also the tactical document by which a company is going to achieve a level of growth. This plan does not usually extend to all of the stages of growth of a company. A business plans helps to achieve short-term objectives. A business model helps to ensure long-term shareholder value creation. For example, suppose a company wants to create a technology that will help change the way people learn. This technology will also have a large amount of training content. Initially, the company wants to develop its own content and use this technology to train people on the content. This is a product development and service model. However, after the gains some level of market acceptance for the technology, the company wants to be able to let others create content for this technology. In addition, the company does not want to provide the services (training and support) for this content. This becomes a license model. The former model, if continued, requires more capital, stronger management, and the creation of various levels of infrastructure. The margins are different for each product, and each service, and the ultimate goal of changing the way people learn is constrained. The new model leverages the talents of other entrepreneurs and creates a simple model for fulfilling the goal. The business plan should show this evolution, but most plans do not. The business model and its evolution require constant updating and attention to see if the original assumptions were correct. A business plan is not revisited unless an external force requires the revisitation. What is the difference between a budget and a forecast? A budget is typically a yearly exercise to negotiate between management and operations. It includes the costs for delivering, marketing and financing products and services. A forecast is the financial outcome that management is predicting, given its experience delivering products and services and the expected market forces in the upcoming period. A forecast needs to be revisited quarterly, if not monthly, so that the objectives of management and shareholders are met. Budgets are more effective at those larger companies that have more sophisticated delivery systems and infrastructures. Forecasts, and the updating of those forecasts, are critical to all companies, regardless of size. What is the most important thing an owner or a CEO needs to know? The owner, especially when acting as the CEO, needs to be focused on the delivery of the business plan and on the relevancy of the business model to the creation of value in the future. A forward-thinking CEO is creating the plans today that will effect the value of the company two to three years from today. A CEO who micromanages the day-to-day activities of the company will not be able to adjust quickly to changes in the marketplace, and will be relegated to the slow growth model that is indicative of this kind of CEO. A CEO needs to have a set schedule whereby he spends equal time on the current business activities and their relationship to the business plan and the business model, as well as the strategic activities of a growth model. Can a CEO create value without going public? Yes. A CEO can create value by: Acquiring other businesses; Forming strategic alliances; and Acquiring the intellectual property of other businessesand other strategic vehicles necessary to increase revenue and to increase the profitability of that revenue. To create this value, the CEO needs to incorporate these new assets into the business model and benchmark that value against the value of internal growth and the value of capital. There are many consolidation strategies currently being utilized in this country and around the world. The economics of these strategies is usually not complex; however, determining the value of these entities, as well as the synergy of all of the components, is extremely complex and warrants a significant amount of strategic analysis. What is the role of the CFO? There are three roles a CFO plays in growth companies: the active role, the advisor role, and the compliance role. The role that creates the most value is the CFO in the active role. An active CFO is a key part of the management team and in most cases, part of the ownership of the company. An active CFO helps develop the business model, is part of all strategic discussions and a leader in the formulation of the long-term strategic financing and growth models. An active CFO will be part of the team that looks at mergers and acquisitions, public offerings, pricing models, separation and definition of business lines, divestitures and other business model related issues. An active CFO is viewed by the rest of the company as one of the leaders of the company's future. The CFO role with the next greatest value is the one in the advisor role. This is the role the CFO fulfills when the CEO just wants advice on decisions that are usually 80% made in the CEO's mind. This puts the CFO in the negative role of trying to stop an idea that is ill timed or unsuited for the business model. The CFO is put into a reactive mode rather than a proactive mode. This role prevents the loss of value and helps create some value by supporting the decision making process of the CEO. The least valuable is the compliance role. The CFO playing this role makes sure those external forces such as bank relationships, the IRS, the federal government, state and local governments, employees, vendors, and clients do not find reason to cause disruption to the business. The compliance role, while necessary, does not create exponential value. What is the difference between a Controller and a CFO? A controller usually deals with compliance issues, with the management of the accounting function and with the preparation of the financial reporting. The controller deals with more day-to-day accounting issues such as cash flow in the near term, closing the books, implementing accounting systems, and vendor and client relationships. This is why the compliance CFO is usually a controller with significant industry experience. A controller is usually less expensive than a CFO, and with the right education and experience, is capable of growing into the CFO role. Should my company go public and when should it do it? Going public is one of the best ways of getting large amounts of capital for companies who are expanding particularly into national and international markets. Initial Public Offering (IPO) money is usually needed for the creation of infrastructures to support accelerated growth models. IPO money can be a method for some of the ownership and the investors to get some of the value that they have created out of the company. The downside to going public is meeting the expectations of the marketplace and exposing the company to very selfish and shortsighted investors (the public). Also, if you are not successful in either the short term or the long term, everyone will know about it. This process is not for the weak of mind or spirit or ego. What is the value of CyberCFO to my company? The professionals at CyberCFO know how to create value in your company. We understand the growth process and we are experts at navigating this process. We know what is important to creating value and what is not. We start by creating the business model in the image of the owners. We then lead the owners and the management team through the phases of growth and we keep the owners and the management thinking and rethinking the growth and business models. We become a knowledge database of all of the company's most important corporate information, and then use this information to implement the company's strategic goals. We learn about your business; what we discover you need is what we become.