In the next of our Tips from the Top series, we speak toEd Lowther who leads The Soke’s Founders Development Programme, a first-of-its-kind course designed to provide vital knowledge, understanding and skills to founders at the helms of fast growth businesses.
When Harvard Business School spoke to its 141 HBS alumni who led start-ups, they asked: “What does someone who aspires to your role need to know?” The research revealed that of all the possible areas to focus on, there are two essential areas that over 80% of the group unanimously agreed on.
At the outset, a founder needs to assemble a founding team – a series of vital decisions around choosing co-founders, appointing key talent, splitting equity, recruiting advisors, and managing a board. These are all vital, but highly demanding tasks that a founder must achieve alongside building their new business that if not done correctly can lead to early failure, no matter how brilliant the idea. Founders reach these decisions through a combination of instinct, experience and the use of trusted advisors or mentors, in combination with key skill development.
Secondly, for those looking for investment, or looking to invest, a founder needs to foster a critical set of leadership skills needed early on, that in turn helps to attract further investment and support the business on its path to success. What’s clear is that early development of specific leadership skills in communication and conflict management is where a founder can really differentiate themselves.
Whilst many founders may believe that they naturally possess the skills to successfully build their business to success, the reality is that few come to the fundraising table with the array of skills needed to successfully lead an organisation from an idea through the teething stages to growth and finally exit. This is particularly the case when founders are required to run a company not purely to satisfy their own ambition (management, creative, financial, or otherwise), but to meet the expectations of investors and other stakeholders, including staff.
So what steps can founders can take to improve their skills in communication and manage conflict with their co-founders or staff?
Your business is founded on a great idea – it does not mean all your ideas are great.
In business journals, strategy reports and insight magazines, much is made of creativity being at the heart of business success and growth. Tesla CEO Elon Musk is vocal in encouraging his employees to think creatively, eager for them to predict future trends and allowing them to share their ideas freely, to improve the prospects of the company. The stratospheric growth of Tesla suggests that his approach is bearing fruit.
For those at the beginning of this journey, the thought of fostering creativity can feel like a luxury, alongside all the other business demands. Innovation is however proven to create growth. Businesses at all stages need to remain nimble as their customers’ needs and demands change. How successfully a founder facilitates the communication of ideas around their business and across functions is a marker for future innovation and adaptability for the business idea to survive in the market.
Create dedicated time for creativity and innovation as part of routine business operations, giving space for open communication between the founder and team members of all functional areas. Foster an environment for the team to be creative and openly communicative, without it all being founder-led, so that ideas are assessed on their own merit, whatever the role of the team member in the company.
Learn to share through building communicative resilience
Once a founder has the fundamentals of their new business in place, the idea is taking hold in the market and revenue is growing, it’s an exhilarating time. Few businesses can grow rapidly through organic growth alone and therefore a founder must also accept the challenge of securing capital through external sources. It can be an exciting but risky time, with a number of factors that can damage a business just as it begins to succeed. Much of the damage comes from the amount of time that is needed, coupled with the energy required to be successful, which takes away a founder’s dedication to their clients. Customers can sense neglect, just at the moment a business wants to secure their lifelong loyalty.
At this moment, a founder will be at their communication limits, often exhausted by the sound of their own voice, as they describe the brilliance of their business, the financial plan and the superb team assembled to make it succeed, to yet another room of potential investors. The key skill to develop here is ‘communicative resilience’, a combination of sustaining a consistent and engaging narrative of the idea, clear understanding of the business strengths and challenges, and a willingness to answer penetrative questions designed to interrogate a founder’s financial shortcomings. This combination tells investors that you can share this with them and make it successful at the same time.
Be mindful that you communicate the strengths of the business in a way that puts the business idea at its heart and that through additional financial support, this idea will flourish. The moment that investors sense that a founder does not want to share and is more interested in their own success irrespective of the idea, the fight for their funding is lost.
Conflict is inevitable – fail to prepare for it, prepare to fail.
It’s likely that as a founder builds their team, they have been successful in recruiting a diverse team, all with unique skills and often varied or differing opinions. In fact, this diversity is often a key ingredient for driving a business forward as these individuals bring perspectives to the founder that they would not otherwise have seen, helping them grow the business successfully.
The differences in this team that exist through individual variances of cultural background, learning styles, personality and many more factors besides, overlaid with managerial expectations, accountability issues and communication styles, will inevitably lead to conflict. And at this point, the founder needs to establish a pathway that is neither a hierarchy of opinions, where ‘I win because I’m more senior,’ or that a conflict is simply ignored. Without establishing this early on, conflicts cannot be resolved satisfactorily and can lead to increased stress and decreased performance in the team, which will impact business growth.
Plan to navigate conflict by setting out a framework for all employees to identify and resolve issues between each other, building a culture that celebrates diverse perspectives with a way to manage the conflict that this diversity can bring. It will help shape the best outcomes for the business and build genuine trust and respect between team members, managers, and the founder.
Each month, we share a selection of stand out companies that our team have picked out as particularly exciting, or high potential. This month we have selected the following:
Immersify Education is a learning app, initially creating a totally novel experience for dentistry students, but ultimately a comprehensive solution that makes it much easier for students to learn across disciplines.
Immersify fast tracks the pace of learning by combining rich multimedia content and an AR experience that gives the students the sensation that they are working on a patient right in the dentist’s chair.
– The founder is an award winning edtech entrepreneur with an exit in the dental education space
– 100% recommendation for the B2B offering
– Rated 5 Stars on the app store
Immersify Education are raising £1.2 million and have SEIS and EIS relief available.
Matthew Sarre shares the story behind JumpStart in this month’s SixtySecondStartUp:
What does your company do?
Jumpstart is the UK’s only start-up graduate programme. We find exceptional graduates (the top 1% applicants), train them up, match them with start-ups, and then provide ongoing, mentorship and a peer network.
Why did you set up this company?
To stop the brightest and most ambitious graduates from sleepwalking out of university and into big corporate grad schemes to go ‘sell their soul’. Instead, we get them to go and have an impact in a start-up and build something meaningful. Basically, my co-founder (Kabir Bali) and I built a programme that we would have wanted to do when we left university.
How did you get your first customer?
We set up the company in the depths of the pandemic, so it was not easy to find start-ups to pitch to. But, at the end of every zoom call with friends & former colleagues, I would ask: “are there any start-ups that you can introduce me to” and follow it up with awkward silence until they made an introduction… Good advice for anyone who wants to build out a customer base.
We knew we were onto something when?
We thought we were onto something when we got 10 applications to our programme on our very first day live. This was, of course, very misguided. But, we are now trending upwards of 1500+ applicants a month and have carved out a niche that seems to work: we place graduates in Founder Associate roles to take B and C tasks off the founders’ plates so that they can focus on A tasks.
Our business model:
We’re a little like ambulance chasers in the sense that we operate a “no win, no fee” model! That means that we only charge a fee if the graduate is still in role 3 months after they have started.
Our most effective marketing channel has been:
Word of mouth referrals. Which, I am reliably told is a good sign!
What we look for when selecting our candidates:
It boils down to attitude. Sure they are smart, but we look for ‘hungry’ go-getters who have done something interesting like founding a company or society while at university.
The biggest mistake that I’ve made is:
I once allowed someone into my Zoom meeting who I thought was a founder and ‘pitched’ them as if they were a start-up. It turns out that they were a graduate applying for the scheme…
We think that there’s growth in this sector because:
There is a growing trend away from traditional career paths and a rapid acceleration of the start-up scene in the UK.
We worked with AIN because:
They have an exceptional network of start-ups.
Keen to hear more?
If you would like to see what other companies are up to on Angel Investment Network, or are interested in raising funding yourself, you can find your local network here.
Addition offer a suite of financial services, from bookkeeping to growth funding. Their CEO Graham Davies explains in the guest article below how start-ups can benefit from having a portfolio CFO working alongside them.
When it comes to multi-tasking, entrepreneurs take the crown. Wearing a plethora of hats is pretty much a given. Not all roles can be juggled, however. A jack of all trades is a master of none – which is why a growing number of startups are choosing to outsource certain company tasks.
The average self-employed person spends an average of 12 working days a year on tax compliance alone. Time is golddust to entrepreneurs, and 12 days worth of drumming up new leads (or spending time with loved ones) is a lot of time to spend on something you may not even fully understand.
Accounts management as suggested by Archimedia Accounts and strategic outsourcing are beneficial in many ways. It isn’t only about saving time. Strategic outsourcing is usually a money-saver, too. This is especially true when it comes to accounting and financial planning. According to Glassdoor, the average CFO wage in the UK is £121,443 per annum. Taking on a full-time Chief Finance Officer is far too costly for most startups. However, they still look for these insights and advice to help them plot a course for growth.
This is why portfolio CFOs have started to become increasingly attractive.
But let’s take a closer look at this on-trend dynamic.
What Is a Chief Financial Officer?
A chief financial officer (CFO) is a senior executive who manages the financial actions of a business. Their duties typically include:
– Tracking cash flow
– Financial planning
– Analysing and acting on financial strengths and weaknesses
Essentially, a CFO oversees every aspect of your company’s accounts, finances and compliance. Their job is to ensure informed decisions are made to support the financial wellbeing of the business.
What is a Portfolio CFO?
Many startups choose to outsource their financial management to a third-party CFO. These high-qualified individuals usually work with agencies or freelance, and will manage multiple company accounts – or portfolios – at once. They will typically have extensive experience in their field, and offer dedicated services at a much more affordable rate.
Why are Portfolio CFOs so popular?
Startups are becoming increasingly attracted to Portfolio CFOs. But what is the chief driver behind this surge in popularity?
John Miller, Chief Operations Officer at Addition, links this rise to one simple factor: cost. Having previously served as CFO in green tech startup Spring, John now manages Addition’s CFO services. “Startups don’t require a CFO on a full-time basis,” He reasons, “as the cost is arguably not worth it. At £80k – £150k+ for a full time CFO in a startup to a medium company, this expense is often hard to justify.”
Of course, hiring a portfolio CFO is still an expense. However, the investment is well worth the cost. “The aim for all back-office roles, like finance, is to pay for yourself.” Says John, “Therefore, having a CFO on a part-time basis makes this easier in a small business. At £3k per month, it’s almost a third of the cost, whereas I would argue the benefits will not be a third of the size.”
Are Portfolio CFOs similar to Accountants?
As your startup grows, you’ll likely be advised to hire an accountant. This is definitely sound advice. Accountants will help with your tax compliance, bookkeeping and reports. But once the ball gets rolling faster and you’re looking to drive growth, a CFO can work wonders.
In order to appreciate what each of these roles brings to the table, you need to understand exactly what it is they do. “An Accountant or bookkeeper is focussed on implementing the rules and guidelines set out in the accounting standards for companies.” John explains, “This includes ensuring your company meets its statutory and tax obligations, accounts filed, returns processed etc.”
A CFO, meanwhile, is a strategic position in a company with the aim of driving the business towards its goals. “CFOs need a particular set of skills to do their job that accountants generally don’t.” says John, “One of the main skills needed is agile thinking – the ability to understand the ramifications from proposed or imposed decisions very quickly. For example: should business A start offering their online english tutoring business to China? The Portfolio CFO needs to quickly think about the ramifications of selling in China and the tax implications. They need to consider legislation, marketing the service in a different language, hidden charges and how to monitor progress. The role of a CFO goes beyond following the letter of the law – it involves creating strategic opportunities for growth.”
Portfolio or not, the CFO supports the startup on its journey and drives it forward in the most effective way possible. “Ultimately, an accountant and CFO work hand in hand.” John acknowledges, “It’s a symbiotic relationship, which is why at Addition we have a team made up of portfolio CFOs and bookkeepers. This gives our clients access to both elements required and is more economical to use both roles where they are best suited. There is no point in paying a CFO day rate to complete bookkeeping tasks.”
What does a Portfolio CFO do?
They might not be a full-time employee, but make no mistake: portfolio CFOs are definitely on your team.
During their contracted hours, a portfolio CFO will work as strategically and diligently for you as any of their full-time colleagues. Here are five of their main areas of focus:
1. Financial Management and Strategic Planning
Your portfolio CFO will implement controls so funds can be spent easily, but with solid regulations. They’ll help you determine where the business wants to go, and what it needs to get there. Finally, they’ll turn this understanding into a financial strategic plan.
2. Forecasting and Budgeting
This involves breaking the overall strategic plan into nuts and bolts. Your CFO might ask questions like, “How much are we going to spend – and hopefully earn – on all elements?” They’ll help adjust your budget to reflect this,
3. KPI and Performance Tracking
KPIs are vital to financial growth. A portfolio CFO will implement automated ways to periodically track performance to plan. They’ll help answer questions like, “What do we need to do more of – or less of? Do we need to do something completely different?”
4. Cash Flow Management
Cash is king for all startups. Staying on top of what is coming in and what is going out is vital for survival as well as success. Your portfolio CFO will help you utilise your cash-flow efficiently.
What Can a Portfolio CFO do for my small business?
While anyone can make use of a portfolio CFO’s services, the best fit are small to medium startups- especially ones who are focussed on operational delivery direct to customers.
You may wonder what scale ‘small to medium’ is operating on. “Once a business gets to a certain size,” says John, “let’s say 50 full-time employees and £25m+ revenue, getting a full-time CFO would be more economical.”
For John, this is due to the complexity of the organisation. “Someone who is fully focussed in the CFO role would be able to add the most value to that entity. Therefore businesses who are smaller than that, I would argue, may not get the full benefits for the cost of a full-time CFO.”
Establishing when the time is right isn’t always straightforward. For some helpful context, here are some examples of startups who’ve hired portfolio CFOS:
Example 1: A restaurant group with several sites. They’ll obviously have experience when it comes to running the restaurant profitably. However, a portfolio CFO could help with raising money to open a new site.
Example 2: A startup which has seed investment (before PE where it gets serious – a PE firm may want a 100%-focussed CFO to guard their investment and drive growth their way). This business is still in its infancy. The experience of a part-time CFO to guide the founders ideas will be vital to success.
Example 3: A hairdresser who is looking to expand into another site. A part-time CFO could spend some time working out a business plan for the new site. This would be presented to a bank to help raise the funds. The CFO could then track the performance of the site to make sure it is delivering the plan (and if not, help with what to do next).
Example 4: An online tutoring startup which may offer English courses all over the world. The tax treatments need to be carefully managed.
Example 5: A gym or fitness centre looking to sell. A CFO can support with financial reporting to give to potential buyers, as well as projections to support the valuation.
All of the above examples are in need of good financial management and leadership. However, they aren’t large or complex enough to require a full-time CFO within the business. Their main focus is on operationally delivering for their clients. This means a bank-office role such as a CFO isn’t needed daily.
“The CFO doesn’t help these example startups to cut more hair, offer more classes, or clean more flats.” John analyses, “Therefore in order to maximise profits, why not take on a part-time CFO?”
What Makes a Good Portfolio CFO?
When it comes to key traits and talents, portfolio CFOs and in-house CFOs fall under the same umbrella. Demonstrable experience and qualifications are obviously important. However, with portfolio CFOs managing multiple clients at once, commitment and dedication to each customer is more important than ever.
A stand-out portfolio CFO should be:
“When it comes to numbers, the CFO’s analysis and guidance needs to be true and actionable for the client on the journey to achieving their goals.” Says John, “Due to the portfolio nature of the role, this is a challenge. Dipping in and out of several businesses means focus cannot be 100% 24-7 – unlike that of the client with their business. Therefore, it’s about building solid advice on the facts of the business.”
A catalogue of prior experience with startups and goals similar to yours is key, according to John. “I’ve found that providing experience of how events have played out in historical scenarios really helps clients understand ramifications.” He says, “Failing that, it’s about drawing on the diligence disposition of a CFO to research, investigate and provide insight, as well as drawing on the network of contacts.”
3. A team player
As mentioned before, you’re not paying a CFO day rate for them to replace your bookkeepers. That being said, they should be working closely alongside your bookkeeper.
“30% of my day is spent with bookkeepers to ensure that all base financial data is strong, solid and makes sense.” Says John, “No analysis works without good foundations, which is why our Portfolio CFO’s are supported by a team of bookkeepers.”
4. A visionary
Once they have the necessary information, a good CFOs should make the most of it. “I use informed insights about my client’s business to give them actions that, when put in place, help them achieve their goals.” John explains. “Your CFO should be modelling out the future for your business, and helping set a course for the future. This could be help with raising money; working out which hires to make; whether to add a new product line and many other strategic decisions for small business.”
5. Clued in
A good CFO (portfolio or not) should always be aware of the latest financial guidance pertaining to your business. “10% of my day is spent researching the latest guidance from the government.” John states, “This is to ensure that we can provide insight on the latest legislation, as well as which grants could be claimed for.”
Advising multiple clients calls for an extra set of scruples. This is especially true when it comes to any potential conflict of interest.
“We have one set of clients where there could be room for connection. In order to ensure ethical practices, we divide the work between myself and my business partner.” Says John, “Were either of us in a situation where we were working on our own, we would not take on the work if we believed there was a conflict of interest. Our integrity is worth more than the paycheck.”
A good CFO should also keep on top of their ethical and professional requirements – as part of their membership to the relevant accounting bodies.
We all know how frustrating it can be to wait on a response from someone – especially where money is concerned. Along with the cost-effective perks of a portfolio CFO comes the fact that they can’t be on call 24-7.
“A portfolio CFO cannot serve all clients at the same time and immediately.” Says John, “Some startups value this more than the cost of full-time versus part-time. The biggest challenge as a Portfolio CFO is staying on top of multiple clients and prioritising effectively. The way we get around this at Addition is by having two portfolio CFOs to share the load. We also have a team of highly qualified accountants and bookkeepers to ensure the financial information is clean, robust and clearly presented.”
AIN members can obtain the following offers in our Perks & Benefits section.
1. Annual Budgets & Forecasting
Addition helps you plan your business’ journey for the next 12 months and transform your vision into an actionable finance plan. £1,500 per scenario – Angel Investment Network members get 20% off.
2. Financial Modelling
Every business decision has a financial impact. Addition creates a dynamic model for your company, based on today’s needs and tomorrow’s goals. £500 per scenario – Angel Investment Network members get 20% off.
3. Financial Pitch Deck Review
Addition has helped startups from pre-seed to to Series A and beyond. They know what investors are looking for when it comes to financial reporting and projections in your pitch deck. £650 per review – Angel Investment Network members get 20% off.
At Angel Investment Network we are continually forming partnerships so that we can help start up founders with fundraising and key issues they encounter.
One of the challenges that we see time and time again is the ability to recruit the right tech talent.
And that’s why we are excited to collaborate with Silicon Roundabout and the UK Government to train junior tech and startup enthusiasts between the age of 18-24 seeking to start a career in tech start ups.
As part of the programme, entry-level candidates, will be available to startups for 6 Month placements fully paid for by the UK Government.
This also covers the training for these candidates, which will be run by our partners at Silicon Roundabout. The project seeks to help tech companies by offering a diverse pool of junior staff, whilst helping these candidates gain work experience, particularly valuable given the current pandemic.
One of the aims is to increase diversity in tech and to serve as a gateway into the industry for young people from a broad range of backgrounds.
Startups in this programme will receive funding to hire candidates graduating from our training bootcamp, which are aimed specifically at tech startups.
Funding for successful Startup applicants will cover the entire cost of a placement for the duration of 6 months. To apply, please fill the following form: http://bit.ly/sr-placements
Closing date for applications: Sunday November 8th at 4pm GMT. Further details about the scheme are attached below:
Silicon Rhino Tech Start Up Placements
▪ A 6 weeks intensive bootcamp with Silicon Roundabout, before the start of the programme
▪ National Minimum Wage for 25 hours a week (Companies can offer more hours and/or a higher wage, if they wish, at their own cost)
▪ National Insurance contributions and employer minimum automatic enrolment contributions
At the end of the placement, startups will have the opportunity but not the obligation to offer the candidate a job in their company
Qualifying companies will receive available candidates on a first-come-first basis.
Please note that the candidates’ wages will need to be paid by the company as with any normal employee and that the funding to cover these will be paid out by the Government within 4-5 weeks.
Available fields that the programme will be training for and that startups can request:
– Digital Marketing for Tech Startups
– Sales and Business Development for Tech Startups