PART-TIME CFOS
Bradlee Howe is a chief financial officer who carries his office in his briefcase. Inside the lid are pictures of his family. The briefcase also contains a stapler, paper clips, spreadsheets, computer printouts, scotch tape-most of the items normally found on an executive's desk.
In the past two years Howe has been the CFO at more than 10 companies, companies with revenues ranging from noth ing at all to about $5 million a year. His portable office and multiple employers aren't a sign of his inability to hold down a job. If anything, they are a sign of his success.
Howe is a forerunner in a field he thinks will become more common: the part-time CFO. He is one of three New Englanders who in the past few years have set themselves up as traveling CFOs for companies that don't have the cash for a full-time CFO or haven't grown to the point where they need one.
Although Howe's briefcase is his headquarters, he does have an answering service and mailbox at Financial Managers in Cambridge, Mass.
For a monthly retainer fee ranging between $1,500 and $2,000, Howe visits his clients either once or twice a week, de pending on the company's needs. He is also on call at all times to provide advice.
Howe points to two credentials that make him a natural for the job. First is his background as an administrator at Har vard University. The second is that he was a partner in a failed business venture, a newspaper called The Cambridge Express, which lasted three years. Thus he's been where his clients don't want to go, knows the turf and, presumably, how to avoid it. His clients know what it is to be close to the edge and believe that he can identify more closely with their needs.
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This is no business for the faint of heart. When Howe takes on a client, the first project is to organize the client's books, set budgets and regulate cash flow. He then must make sure financial statements are done on a timely basis.
If that sounds easy, bear in mind that some of Howe's clients' financial records consist of scribblings on the backs of enve lopes, upon which the president would jot figures and calculations, all leading to the overwhelming question: Will we meet the week's payroll? Full general ledger records are often nonexistent.
"They are so busy fighting the fires each day that cash management tends to take a back seat to the things a CEO has to do," explains Howe. Clearly, one of the key jobs of a chief financial officer is to get clients to think beyond the end of the month.
In addition to developing basic financial controls, part-time CFOs tend to work closely with chief executives, help ing with strategic planning and acquisition of capital.
For example, Howe is putting together a study on whether Laser Industries of Lawrence, Mass., a machine shop that uses lasers rather than milling machines, should relocate, and if so, when and where. For another client, Ben Olken Inc. of Cambridge, he developed a stock re-capitalization plan to pave the way for a transfer of ownership from one generation to the next.
A part-time CFO "is involved across the board in all of the things a chief financial officer would normally do," explains Arnold McCalmont, president of Technical Communications Corp. in Concord, Mass. At McCalmont's company, the part-time CFO is James L. Woodward. Woodward's specialty is working with the banks and the venture capital community.
"Nothing I do is magic," maintains Woodward. He explains that he does things the chief executive was doing al ready, but either wasn't doing very well or was taking much too long with. "I'm taking things off his plate that otherwise he would have to do," Woodward says.
McCalmont explains further, "These were duties which were sort of handled ad hoc before. It's always been systematic. But now it's focused in one person."
According to Woodward and Howe, one aspect of their role-and in some cases a major part of their job-is dealing with a chief executive who needs to bounce ideas off someone. These aren't necessarily financial ideas. They usually have lunch with the chief executive and go over what they are working on, along with anything else the chief executive is interested in discussing.
Howe sees himself as a sounding board, and his clients agree. "He's the kind of person I could talk to about things I couldn't talk with my direct employees about," says John R. Blutt, president of Laser Industries.
Further, he explains that since he doesn't have the money to hire a full-time
CFO for his $1.5 million company, a parttimer is a perfect solution.
Howe's current client list of eight companies ranges from a small software company to an appliance parts and ser vice business which recorded its first sale in October. He says he will know he's done a good job when his clients outgrow him and hire a full-time person.
The part-time CFO does not take the place of either inside or outside accountants and bookkeepers; instead the job is to provide the strategic overview of a consultant and the hands-on familiarity of an employee. Neither Howe nor Woodward is a CPA.
According to Howe, the profession of part-time CFO is generally short-lived. He explains that part-timers are usually between jobs and looking for a new position.
But Howe adds that even though he can't find enough hours in the day to get everything done and finds it difficult jug gling eight balls at once, he plans to continue as a full-time part-timer. Woodward set out a year ago with the same intention. This former vice president of high technology loans at State Street Bank Corp. in Boston says he found banking too restrictive and really wanted to "be a part of something." He left his job at State Street and became a part-time CFO last November. As it turns out, Woodward is considering becoming a permanent CFO-not because he doesn't like what he's doing, but because he has an offer from a client, Iris Graphics Inc. of Stoneham, Mass., which he finds difficult to resist.
Woodward's portfolio averaged eight clients. He is now serving four and may phase three of them out before moving into a full-time position with the fourth.
Howe and Woodward agree that there is a ripe market for part-time CFOs. They feel a company generally needs rev enues ranging from $4 million to $20 million to merit hiring a full-time CFO, leaving plenty for the part-timers.
But just because the opportunity exists doesn't mean that everyone has what it takes to succeed. They also contend that a part-time CFO has to be a good "people person" to succeed.
Graham R. Briggs, now chief financial officer of the $20 million Charles River Data Systems of Needham, Mass., was the first contract CFO in New England to operate as a business. In 1979 Briggs started his one-man operation, called Financial Managers Inc., in Cambridge.
This business grew, and soon Briggs took on Howe as an associate. In 1983 Briggs sold the business to Howe, who renamed it Financial Managers Trust. When Howe took over, the company had revenues of $100,000 a year. Howe's current revenues are more than $150,000, and he's planning to increase the staff to three.
Although Briggs enjoyed the diversity and challenge of the business, he believes he doesn't have what it takes to survive. He sees himself as being very skilled financially, but he considers that he has a poor bedside manner.
Briggs explains that the part-time CFO needs to be a fairly good psychologist, a good persuader. His self-assess ment that he lacked these skills was one factor in his decision to take the permanent position with Charles River Data Systems.
Howe views part-time CFOs as almost a special hybrid. "It is unusual to find a good financial person with a strong entrepreneurial flair, experience in smallcompany finances and a marketing flair," he says.
Finally, skills aren't the only necessity. Contacts are also crucial. Woodward claims, "It takes a fair base of referral ser vices to find the clients. I've advised people who just didn't have any real contacts that they have to look very long and hard at whether they can make a living."
Woodward and Howe say their referrals come from a wide mix of people: bankers, lawyers, venture capitalists, friends and family.
Since he isn't in a corporate environment, Howe doesn't have stock options, a company car or an expense account. He does have some perks, though. When he spends a day working as CFO at LaRonga Bakery in Somerville, Mass., Howe brings home a loaf or two of bread still hot from the oven.
From New England Business, November 4, 1985
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