See the complete interview below from The Wall Street Transcript
with ED O'SULLIVAN; the Founder and Managing Partner of CFO Connect
®
https://www.twst.com/interview/16636
TWST: Would you start out with a brief history and quick overview of CFO
Connect?
Mr. O'Sullivan: CFO Connect is a business management and financial
advisory services firm. We provide retained part-time CFO assignments,
interim CFO assignments, project-based business management and financial
solutions as well as Board advisory services. Our clients are typically
early stage and mid-stage companies in the technology and life sciences
industries. Our primary mission is to serve as the company's Chief
Financial Officer. This is done through a long-term, part-time
relationship, with the amount of time determined by the needs of the
company. In this role, we will perform all the traditional duties of a
CFO. We work with the Board of Directors, the CEO and the management
team as the senior financial member. We grow with the company on a long-
term basis. We work at the strategic planning level, assisting the
management team in moving the business toward the direction envisioned
by the company's business plan. This approach allows the CEO and the
senior managers to devote their full energies to what they do best and
to do that with a solid foundation of financial information to guide
their decision-making and course of action. We concentrate our expertise
in the San Diego area and provide services nationally through our
affiliate network.
TWST: Why do they come to you for this rather than just hiring a CFO?
Mr. O'Sullivan: It is a value proposition. CFO Connect enables a company
to focus on core competencies while providing the necessary financial
expertise and administrative support tailored to an affordable budget.
With the high cost of capital formation and the difficulties in
acquiring debt, it is becoming more and more difficult for CEOs to
finance all the necessary resources they need in order to grow their
business. Capital is scarce and expensive, so preserving it becomes a
high priority. As a result, many companies are starting to outsource
non-core activities. This is where CFO Connect can add value. Our
clients can take advantage of a part-time senior financial manager with
15 to 20 years of experience and draw upon his or her skill set,
financial acumen and management experience, all at a fraction of the
cost that you would pay a full-time CFO.
TWST: How does it work? Is the person actually onboard part-time or is
it a distance relationship?
Mr. O'Sullivan: Our retained part-time CFOs serve the client's needs
onsite. It is not a distance relationship. Most assignments range from
one to two days per week and can last a few years. Our clients typically
provide us with an office, telephone, IT connection, e-mail address '
everything that a full-time CFO would have. The client will also provide
us business cards designating us as their CFO. We represent ourselves as
the company's CFO to their customers, vendors and their employees. We
participate in all major meetings and oversee staff members to ensure
that all financial and administrative activities are running properly.
In many cases we participate in the company's bonus and equity
incentive plans. Our pool of talented financial executives not only
oversee the financial and administrative activities, but are also quite
capable of managing IT activities, HR activities, operations activities,
facilities, risk management and so forth, depending on the size and
stage of the company.
TWST: Where do you get this pool of talent?
Mr. O'Sullivan: Most of our talent is local to San Diego. Currently our
retained part-time CFO services and interim CFO services are limited to
the San Diego region. However, our Board advisory services extend across
the nation.
TWST: When you do one of these arrangements, is it typically with a
particular individual who is assigned to the company, or doesn't that
come into the equation?
Mr. O'Sullivan: Typically one individual is assigned to a company on a
long-term basis. That way, the company can grow with that individual.
The CFO, CEO and the management team can develop as a team. Ultimately
they develop that cohesive bond that allows them to make more effective
decisions.
TWST: What kind of assurance do you have that that individual is going
to stay with you and with that company?
Mr. O'Sullivan: Even under the best of circumstances, no one can be
assured that an individual will stay or leave. There is no more downside
risk to the client versus if they had hired a full-time CFO themselves.
With CFO Connect, the client has an advantage knowing that we are
interested in retaining the client, so every effort will be made to
replace that individual. In the event the individual wants to work full-
time for the client, the client may elect to hire him after paying a
modest retainer fee.
TWST: Typically how long are the assignments?
Mr. O'Sullivan: It depends on the client's needs and the type of
assignment. Generally, retained part-time CFO assignments can range
from six months to a few years. Interim CFO Assignments typically last
a few months. Board advisory services can last for many years.
TWST: What is the transition at the end of an assignment? Do they go out
and hire somebody?
Mr. O'Sullivan: The client has the option to hire the individual
assigned or we can assist the client in their search for a full-time
replacement.
TWST: But typically at that stage they are ready to transition to full-
time?
Mr. O'Sullivan: Generally, yes. But it's dependent on the activity level
necessary to sustain effective CFO services. In general, we believe you
can take a private company to about $15 to $20 million in revenues and
still retain the value proposition with a part-time CFO. It's how you
manage the infrastructure beneath the CFO to ensure its effectiveness.
With the proper staffing, a part-time CFO can be very effective at
providing top-notch CFO services. Once a company decides to go public or
exceeds $15-$20 million in revenues, the demands on a part-time CFO
become strained. Then it's time to transition to a full-time CFO.
TWST: Are there other companies out there doing this in that
marketplace?
Mr. O'Sullivan: There are a few. We differentiate ourselves from the
competition by providing our clients with the very best CFO service
available. We also make it a point to ensure that our CFOs have a
business perspective that goes beyond accounting and finance. Our
clients must receive real value from our CFOs, not just an accounting
service.
TWST: Why San Diego and why not beyond that?
Mr. O'Sullivan: Certainly we expect to move beyond San Diego. Our goal
is to put together a very high-quality group of seasoned CFOs who have
all the necessary experience and bandwidth to handle the range of
startup organizations as well as larger corporations. To ensure we
maintain the highest quality service, we want to manage our growth
carefully. But we fully expect to grow CFO Connect to a national level.
TWST: Has finding those people been a roadblock for you?
Mr. O'Sullivan: It has not been a roadblock. Those people are out there
and there is certainly a good pool of talent in San Diego that we are
taking advantage of right now.
TWST: How do you attract somebody to that position?
Mr. O'Sullivan: We look for CFOs who have all the necessary experience
but also have the right mindset, personality and management style.
Generally, those CFOs who we attract are very confident in their
abilities, enjoy working for more than one company and are able to lead
and manage effectively.
TWST: When you take on one of these assignments, what is the risk side
of the equation? What happens if the person you put in there doesn't
work out?
Mr. O'Sullivan: CFO Connect is a service firm, so it is very interested
in ensuring that the client is fully satisfied. We are very careful with
the people we select. We match our talent pool with the requirements of
the client. If the client is unsatisfied with an individual, of course
we will replace that individual. There is a lot less downside to
engaging the services of a part-time CFO through CFO Connect than hiring
a full-time CFO. We can be dismissed if we are doing a poor job with
little or no consequence. With a full-time employee, a termination is
slightly more complicated.
TWST: So there are some real pluses then?
Mr. O'Sullivan: Yes.
TWST: Given the potential here, what is to keep competition from coming
into the marketplace?
Mr. O'Sullivan: The way we keep our competition to a minimum is to
ensure we provide the highest quality service, maintain a high ethical
standard, and develop a reputation as the best in the business.
TWST: Given that orientation, how do you extend this franchise into
other markets?
Mr. O'Sullivan: We will grow our business in the San Diego market first
and establish our presence there. The next logical steps would be to
expand into the Orange County and Los Angeles areas. Beyond that, into
San Francisco, and other major cities in California, Nevada, Arizona,
Oregon and Seattle. I expect our growth to be organic at first, through
networking and reputation; then later we'll focus on specific
acquisitions that complement our business. We believe our services for
part-time CFOs and Board advisory services will be the fastest growing
segments of our business. Sarbanes-Oxley legislation has heightened the
awareness for fiscal responsibility and accountability. As a result, we
believe those companies, which may have previously gone without a CFO,
will be compelled to secure the services of a part-time CFO. Sarbanes-
Oxley also requires public companies to comply with stringent reporting
and internal control requirements as well as ensuring the appointment of
Audit Committee financial experts. We feel CFO Connect is in a good
position to accommodate those companies that are in need of Audit
Committee financial experts. Privately held, venture-backed companies
are also finding it prudent to comply with the major elements of
Sarbanes-Oxley. More and more of these companies are now requiring that
their Boards and financial activities are run as if they were public
companies and that corporate governance, financial reporting and
internal controls are taken care of properly, mitigating any compliance
issues in the event of a planned IPO.
TWST: Are there other ways you can add value while serving on a Board?
Mr. O'Sullivan: Absolutely. In addition to just providing financial
expertise to the Audit Committee, we also provide and lend our business
and managerial experience to those companies. Hence, we're offering a
better value proposition than just the finance and accounting equation.
TWST: So it is really a broader package?
Mr. O'Sullivan: Yes.
TWST: Are there any other services that you need to offer or is this
broad enough to keep you out of trouble for a while?
Mr. O'Sullivan: In addition to part-time CFO services, Board advisory
services and interim CFO services, we offer project-based solutions. A
few examples might be administering the due diligence process for a sale
or acquisition, the establishment of international subsidiaries,
negotiating strategic alliances or large vendor contracts, identifying
and evaluating exit strategies, and evaluating prospective companies for
VC investments. The list goes on.
TWST: There is really a broad financial approach to this.
Mr. O'Sullivan. Yes. CFO Connect is there to add value and help
businesses grow.
TWST: Thank you. (TJM)
Copyright 2003 The Wall Street Transcript Corporation
All Rights Reserved
To
connect with Ed O’Sullivan and CFO Connect® just send an e-mail or give us a call.
CFO
Connect, LLC
Tel: (858) 216-4541
Fax: (866) 525-2258
