This article is useful to CXO’s of High Growth companies who want to lead their companies to the next level of growth and recognize that they need modern, experienced and professional finance skill sets to support their vision. This is particularly true for CXO’s of companies, which are PE/VC invested and where existing Finance and IT systems have not kept up pace with the rapid scaling of the business.
Can Robin’s energy and passion alone get him to scale up his business in a sustainable manner? Here’s how Robin managed to do this by investing the right time, energy and bringing people who could relate to his vision.
Robin was getting increasingly anxious. He had started ‘Organic Food’ an organic food company which procures, stores, processes and sells organic produce from farmers to wholesalers. ‘Organic Food began 5 years ago and is now an INR 500 Crore company. The growth has been phenomenal and Robin has also managed to attract a leading Private Equity investor to fund the company. The business was high on volumes and operated on thin margins. The company was also exposed to currency and commodity price fluctuations, which had the potential to put the business at risk. In pursuit of high growth, Organic Food was also leveraged and had to service the interest costs. There was pressure on the cash flows and Robin was increasingly uneasy on whether his products are making profits, his visibility on cash availability was restricted to about 2 weeks, he could not foresee the impact on his business in case there were major foreign exchange or currency movements and to top it he did not have a CFO who could work on some of these areas. His investors were also getting slightly nervous on Robin’s ability to manage the scale up.
After months of sleepless nights and after a lot of deliberation, Robin decided to look for a CFO services partner who could start actioning all the pain points of the company simultaneously and play the role of a partner to Robin and the business. The role of the CFO services partner was to ensure that there was a transition to a Controller who would be groomed either from within the company or would be brought in from outside once the ‘high intensity’ role is completed. The role was to ‘Build, Operate for a while and then Transfer’ it back to the company.
Robin wanted to focus on the business growth over the next 3-5 years and the left the entire finance and operational aspects of the finance department to the CFO services company. As part of the key action plan, the company implemented an ERP system along with a Business Intelligence tool, which provided improved visibility to Robin, implemented a risk management framework, robust costing models were developed with an emphasis on considering interest on working capital as part of the product cost which resulted in better calculation of profit margins and more importantly also got the company focused on setting credit limits for customers, collecting receivables on time, bring better controls on inventory through the ERP etc.
Robin and his team have had to work very hard over the last 15 months to achieve this. He still continues to run very hard and be very ambitious but today he is much more relaxed. The currency continues to be volatile and the operational challenges exist, what gives Robin the comfort is the thought process and the team that he has built over the last 15 months which has made his job much easier. He gets to know the ‘red flags’ well in advance and take decisions much more based on facts rather than on gut feel.
Robin is now looking to take his company public in the next 12-18 months, has set up distribution centers for expansion in Europe and plans to diversify into retail by launching his own brand.
Deepak Narayanan (firstname.lastname@example.org)