Published January 16, 2023

The value of an experienced CFO

As Finance Partner at GCP, John Marsh is responsible for all aspects of fund finance, tax, operations, and portfolio reporting. He also regularly advises the finance teams of the outstanding growth companies we partner with, sharing best practice and organising portfolio workshops for the teams.

John has worked in finance and M&A for more than 20 years and with this experience has built relationships with many CFOs. He has seen the value that an experienced CFO can bring to a finance function and to the wider business. Here he discusses the value an experienced CFO can bring to an ambitious growth company.

The five important value points that a CFO can bring into the business

When we look to partner with an ambitious management team, we often see founders deeply involved in all aspects of their businesses. Part of the process of scaling a business up is bringing in appropriately qualified functional experts to allow each member of the team to focus on executing the business’ growth plans.

Throughout the 23 years of partnering with management teams, we have seen the impact CFOs can have most clearly in these areas:

  1. Strategic input – contributing to the strategy of the business using the lens of financial analysis to inform decisions.
  2. Technological developments – ensuring the business is using up to date tools to have real-time reporting on revenue pipeline, internal resource availability, client margins, working capital management can be transformational in empowering team members to understand their role in business performance.
  3. Developing a business plan – creating a robust and well-thought through five year plan and annual budget which has had appropriate bottom-up input and top-down challenge can help to sharpen focus around challenging but realistic goals for the business.
  4. Budgeting and forecasting – longer term goals form the backdrop for annual budgeting which should involve clear targets for the year and can be the basis for incentives for the team. Planning carefully what resources will be required in order to reach sales targets improves decision making around recruitment, expansion and funding.
  5. Cash management – even (in fact especially!) fast-growing, profitable businesses need to be mindful of their cash, ensuring they have the resources to continue to develop the business. Effective, pro-active working capital management is an area that deserves significant focus.  

Why a PE partner will want to invest in a business with a professionally run finance function

During the investment process, a business’ accounts, forecasts and tax affairs will be reviewed in detail. Having a CFO who understands the due diligence process and has the information well-ordered and readily available can make the investment run much more smoothly and allow the commercial leaders to focus on running the business.

During a deal there are a variety of structuring opportunities such as share option schemes to incentivise the wider team, follow on funding for further acquisitions, or more tax-efficient capital structures. These are all areas where a good CFO can be invaluable.

Through our Growth Network we have often supported our portfolio partners by helping them to find and recruit the most suitable CFO for their business.

Read more about John Marsh