The CFOs Keys to Success: succeeding in a natural resources start-up
Uncertainty here, uncertainty there, uncertainty everywhere.
Deloitte’s latest CFO Survey reported that confidence amongst the 89 finance leaders who took part in the survey has dipped and within the large corporate’s, that they are battening down the hatches, preserving cash and cutting back on capex. The irony won’t be lost on many that the UKs political future will be rectified by the time Halloween 2019 arrives.
At our early Spring breakfast roundtable, we were joined at The Game Bird at The Stafford by a selection of senior executive finance leaders and advisors from the natural resources and energy sectors, to learn that all is not lost.
Despite the political issues currently engulfing the UK there is still a genuine desire from natural resources and energy leaders to grow their businesses from the UK. London’s pull in terms of access to talent and capital markets is still the primary driver, even if the process has become more challenging.
Buoyed by fresh coffee and a breakfast befitting the audience, opinions were voiced, quick-witted humour flowed, and we all quickly agreed that Brexit is certainly not our no.1 concern. More pressing in the world of the Start-up, is the need of the modern CFO to wear many hats, do more with less and be more than purely responsible for the financial stewardship of a company.
Within the start-up environment and early stage of a company’s life, expect the unexpected. Here, we provide insight to four key areas on how to get it right and why you need to be a chameleon.
The Plan – be agile, be open
It is critical that the CFO can adapt to changing scenarios.
Setting up a business when the price is high only to see it then tumble, means you need to have an agile mindset and acknowledge there is an ebb and flow, often outside of your control (cue Mr Trump and Generation Twitter). What succeeded in the past may not now be appropriate. A rigid CFO who does not manage ambition and avoids harsh realities, will see their business suffer.
The CFO should learn from past events to create a brighter future. They should be unflappable in even the most chaotic of situations. Evaluate risk, define it and explain how you will manage it. Effective communication is a must.
How will you deal with adversity, how do you keep your story going and retain / attract investors? The CFO must provide a depth of analysis in their chosen market, be it price, geography or technology, which is sound and explanatory. With a bunch of other players doing what you say you’ll do and competing for the same capital, make your plan stand out for the right reasons.
Without a plan you can’t sell anything, and a plan is only good if it’s controlled.
Don’t Run Before You Can Walk – power of relationships
Investors know a team when they meet one.
The chemistry between CEO and CFO, the entwined togetherness and natural overlap of responsibilities, creates an environment of trust, and whilst respect is earned, knowing who you are going in to battle with is the first step.
Whilst one must be the story seller, the other must have an intimate relationship with the facts and figures. Be blunt, a start-up is not the environment to hide under the covers or create a merry dance around issues; provide the truth when asked. Master body language, emotional intelligence and anticipate what is coming around the corner.
A start-up goes beyond a ‘normal’ job. Having a meaningful impact on a business in a short space of time, without the layers of bureaucracy often found in a large corporate, can be liberating. Though the buck stops with you and if you don’t do it, it won’t get done. It is important to demonstrate these trustworthy qualities to your principals.
Equally important, is to leverage off your network. Roll up your sleeves, call in ‘free’ favours from those in the know as this will keep a lid on costs so they don’t spiral before your revenue streams take off.
Funding – access the right people with the right story
The CFO must know their numbers; without this knowledge, nothing can be completed.
Within the established natural resource sectors, traditional bank lines are no more. Simply securing the most amount of money on offer, with unfavourable terms, will also do you no good. Private Equity has developed industry focused, strategic platforms and manage capital more actively.
Patient capital, in the form of Family Offices or Private UHNW Investors, play a pivotal role in the alternative funding landscape. The right backers for your business will support you through thick and thin. Forging a successful relationship, can be the differentiator between those who go overnight and those who are the next unicorn.
Your message needs to be different, creative and structured. It must deliver a compelling message, which can be understood by the person you are pitching to; have multiple presentations and pitches to turn to. We should remember that this person in turn is likely then retelling your story to a family or investment committee.
Whichever funding route is applicable, one common denominator remains true; know your audience.
Hiring – for now and for tomorrow
You want the best.
Depending on the stage of evolution your organisation is at, paramount to success is having the optimal headcount, with the correct skill sets and personalities to get you to the next step. There are inventors. There are fundraisers. There are execution specialists. There are those who can develop a concept and ones who can run a company in production mode. The teams must change.
Enabling your function to stand out against competitor employment offers, in a risk averse candidate market, is tricky. The original team and their reputation in the market is a marketing tool to retain people and to attract new talent. Knowing when to hire and how to hire comes with experience. Too soon and the talent is not utilised whilst the purse strings become tight. Too late, and your grey hairs are many and your personal life has already suffered.
Leveraging off an established internal network or utilising a trusted recruitment advisor when the timing is right, can transform the company’s capabilities.
Conclusion
Investors are reviewing so many opportunities to share their capital, so if you want to get your business off the ground and moving towards becoming the next success story, you need to stand out. There is a military maxim that the best made plans are fine until they come up against the enemy and therefore need to be flexible. Think beyond the product; we’ve all got the same solar, wind, oil, minerals; and get the right team. A strong partnership between CEO and CFO, and wider senior leadership team with an exceptional track record in the industry is a starter for ten.
Author: Nick Connor, Associate Director, HedgerWay