The Fears of CFOs

Eliminating Fear

I never come right out and ask it, but I find out from every CEO what keeps them up at night or what pains they wish they could eliminate immediately. Without fail, that’s why they typically hire me almost on the spot after I start giving them solutions to their concerns. You see, I’m helping them to eliminate fear.

How about the part-time CFO? What do they fear? More than 95% of all part-time CFOs have fears. The other 5%? They are lying about not having fears.

Now that we’ve laid the groundwork let’s start eliminating fears.

Various Forms of Fear

Let’s make sure we’re on the same page regarding fear. Let’s do this by looking at fear from perspectives of three different roles.

The CEO/Founder

Most CEO fears that I encounter include the following:

  • Losing a key client/customer or experiencing a significant drop in a customer segment. Put another way, becoming irrelevant is at the heart of this fear.
  • Running out of cash is another fear of CEOs. Who doesn’t have this fear?
  • They won’t always express it, but CEOs fear losing that key employee.
  • Inadequacy to lead and to grow a company is the unspoken fear that I can see right through in my first 5-10 minutes when visiting with a CEO for the first time.

The Shareholder 

I’ve run a CFO consulting practice since 2001, and I’ve only served three clients where I worked for the Board of a small private equity group. Like my last bullet point above with CEOs, their fears are unspoken too, but I know what they are. They are (very) obvious:

  • Shareholders fear losing consistent and predictable cash flow in the form of quarterly and annual payouts from equity.
  • Shareholders especially fear not having a sellable, enviable company that they can sell down the road.
  • Finally, shareholders fear they may not have the right team in place to keep growing their investments. My perception is that this fear rarely goes away.

The Part-Time CFO

So what do the 95% fear and the other 5% who deny having fears worry about?

  • The inability to find clients
  • The inability to get CEOs to say ‘Yes’ to their services
  • The inability to work with 10-15 clients at any given time
  • The inability to keep learning new core skills and being left behind
  • The inability to 1.5x to 2.0x their previous corporate salaries

There are more, but I’ll stop here.

Fear, a powerful emotion, stems from the threat or risk of losing something that is so precious to us–like fear of losing a loved one or losing something that can shake our universes for a period of time.

I’m no psychologist, but a simple exercise can help to reduce or even eliminate some of our fears. Careful now, we don’t want to remove all fears entirely. Fear can also be an incredible source of motivation.

A Class With Drucker

A Class With Drucker

I enjoyed William Cohen’s A Class with Drucker where he includes a short section called Play The Game: “What Will I Do If I Lose My Job Tomorrow.”

The purpose of the question is to be mentally prepared ahead of time if this ever happens. But that’s not the case with us. We serve clients, not one boss. The question can be changed to, “What Will I Do If I Lose My Largest Client?”

Are you fully diversified with ten clients paying you roughly the same amount each month? Then you can weather the storm. But what if you lose that big $50,000/year client? That’s where the question applies. And let’s not discuss the negativities of having a large client.

So what happens if you lose that big one? What if it’s two? By thinking through in your mind ahead of time about this, you can already be formulating a plan. When the inevitable happens, you’ll be prepared, right?

Play the Game Is for Our Clients Too

It goes without saying that Cohen’s simple exercise is for our clients too. As you go through annual scenario planning exercises, your what-if stress testing should include drops from a key customer or two, margin decreases, and overall detriments to the economy. The scenario planning exercise should answer the question, “What will we do if one of these events occurs?”

Looking for some inspiration on this front? Shell is probably the most known company for its use of scenario planning. They even have a page on their website called Shell Scenarios. You can also read more about the history of Shell’s scenario planning process in this HBR article.

The key word here is anticipation. Anticipation cannot eliminate fear, but it will help us to face the challenges when some of your clients’ worst fears are realized.

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