Whenever people think of successful companies, their initial thoughts typical go to the businesses offering then they move onto the leadership of the CEO. Great CEOs like Steve Jobs and Mark Zuckerberg are, or course, invaluable keys to success, but that doesn’t mean we should ever overlook the second most important role—The CFO.
CFO’s do the behind the scenes heavy lifting that sustains businesses and moves them from being good to being great. Here’s an account from one our CFOs that shows this priceless value of good financial oversight.
“Recently, we had an engineering firm as a client. They built the firmware for an invention to help one of their customers. Since our client owned the firmware, their customer had agreed to pay them X amount of dollars for every unit they sold. Due to the lucrative potential of this product, their customer planned on taking it nationwide. In doing so, they wanted to cash our client out rather than give them five years of royalty payments.
Our client asked us to run a (NPV) – net present value analysis on them getting cashed out versus getting a stream of royalty payments over five years. So, our team did this analysis on an Excel spreadsheet, and the following were the results.
If they got cashed out, they would get a meager $20,000. If they took the stream of royalty payments over five years, they would get roughly $188,000 in today’s dollars. So, using NPV, the choice was rather obvious – take the royalty payments and get $168,000 more! This is the power of what a good CFO can do for a firm. This one decision alone was worth $168,000!”
Top level CFOs provide these types of insights in nearly every area of business. Although their role may be overlooked at times, their impact is never missed.
Here at TOP CFOS, one of our biggest values is friendly, personable, and prompt service. We love to serve growing businesses! Learn more about what we value here.