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Gearing Up And Managing A Successful Scale

Up

This article is useful to CXO’s of High Growth companies

who want to lead their companies to the next level of growth

and recognize that they need modern, experienced and

professional finance skill sets to support their vision. This is

particularly true for CXO’s of companies, which are PE/VC

invested and where existing Finance and IT systems have not

kept up pace with the rapid scaling of the business.

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Can Robin’s energy and passion alone get him to scale up his

business in a sustainable manner? Here’s how Robin managed

to do this by investing the right time, energy and bringing

people who could relate to his vision.

Robin was getting increasingly anxious. He had started

‘Organic Food’ an organic food company which procures,

stores, processes and sells organic produce from farmers to

wholesalers. ‘Organic Food began 5 years ago and is now an

INR 500 Crore company. The growth has been phenomenal

and Robin has also managed to attract a leading Private

Equity investor to fund the company. The business was high

on volumes and operated on thin margins. The company was

also exposed to currency and commodity price fluctuations,

which had the potential to put the business at risk. In pursuit

of high growth, Organic Food was also leveraged and had to

service the interest costs. There was pressure on the cash

flows and Robin was increasingly uneasy on whether his

products are making profits, his visibility on cash availability

was restricted to about 2 weeks, he could not foresee the

impact on his business in case there were major foreign

exchange or currency movements and to top it he did not

have a CFO who could work on some of these areas. His

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investors were also getting slightly nervous on Robin’s ability

to manage the scale up.

After months of sleepless nights and after a lot of

deliberation, Robin decided to look for a CFO services partner

who could start actioning all the pain points of the company

simultaneously and play the role of a partner to Robin and

the business. The role of the CFO services partner was to

ensure that there was a transition to a Controller who would

be groomed either from within the company or would be

brought in from outside once the ‘high intensity’ role is

completed. The role was to ‘Build, Operate for a while and

then Transfer’ it back to the company.

Robin wanted to focus on the business growth over the next

3-5 years and the left the entire finance and operational

aspects of the finance department to the CFO services

company. As part of the key action plan, the company

implemented an ERP system along with a Business

Intelligence tool, which provided improved visibility to

Robin, implemented a risk management framework, robust

costing models were developed with an emphasis on

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considering interest on working capital as part of the product

cost which resulted in better calculation of profit margins and

more importantly also got the company focused on setting

credit limits for customers, collecting receivables on time,

bring better controls on inventory through the ERP etc.

Robin and his team have had to work very hard over the last

15 months to achieve this. He still continues to run very hard

and be very ambitious but today he is much more relaxed.

The currency continues to be volatile and the operational

challenges exist, what gives Robin the comfort is the thought

process and the team that he has built over the last 15 months

which has made his job much easier. He gets to know the ‘red

flags’ well in advance and take decisions much more based on

facts rather than on gut feel.

Robin is now looking to take his company public in the next

12-18 months, has set up distribution centers for expansion in

Europe and plans to diversify into retail by launching his own

brand.

By Deepak Narayanan

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Read the full article here: http://mycfo.in/blog/?p=147

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