CFO: need to know
Paths to growth
More than 50% of leading indexes around the world churn every five years, so market leaders of today may not be those of tomorrow.
Today’s economy depends on agile, high-growth companies to grow, prosper and create today’s jobs and tomorrow’s new products and services. In good times and bad, each generation of high-growth companies faces the dual challenges of getting to the top and staying there.
Choosing a path
CFOs of high-growth companies should prepare for options: scaling the business, often through an IPO, or selling the company. Each option presents unique opportunities, risks and rewards. In either scenario, preparation is key – and the CFO, working with the CEO, plays a vital role.
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A CFO’s role to outpace the competition
Preparing the organization
As companies prepare for an IPO, it’s important they start acting like a public company 12 to 24 months prior. Companies that use this approach tend to exceed market returns. It’s not "fake it until you make it,” but “be it before they see it."
High-performing companies also often establish two teams: one to focus on the deal and one to mind the business. Leading CFOs help keep the teams on track and the company focused.
Proper IPO preparation hinges on the CFO’s guidance:
- Organize the right team
Gather the right mix of skills and experience needed to keep moving forward and plan for the stages of going public. Management credibility is the No. 1 concern of institutional investors.
- Communicate, communicate, communicate
A robust communication strategy is vital. Consider the range of potential investors and craft the tailored and compelling business story that will be delivered to them, internal communication with employees, and the board and other stakeholders before, during and after the IPO. Investors will want to know a company has a strong growth story.
- Prepare the organization
Implementing the right processes, establishing an SEC-ready finance function and improving internal controls are critical aspects need to be establish prior to going public.
Don’t sell yourself short
When considering a sale, CFOs should help their companies to:
- Consider a full range of potential buyers
Make sure your options align strategically with the company
- Articulate a compelling growth story for each
Support your story with strong financials year over year, and include projections based on analysis.
- Prepare rigorously in advance
Demonstrate a solid strategy and strong management through preparation.
Despite uncertain economic realities, CFOs must always consider their organization’s salability. Strong companies with solid stories and a clear path to growth can successfully go to market regardless of economic conditions.
The real risk lies in value erosion from a lack of preparation. CFOs can’t control market conditions but they can work to ensure the organization is ready for the right strategic move.
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Viewpoints expressed on this page are exclusive to Ernst & Young GM Limited.