Like many entrepreneurs of young, growing businesses, Spencer Gallagher needed a finance director for his corporate website operator, Bluhalo, but did not think he had the money to pay one.
So, he found himself a promising accountant, Peter Hoole, and set him a challenge: the finance director’s job is yours, if you can pay for yourself within a year.
With hindsight, Gallagher should not have been so worried as Hoole managed to find enough new business and tax breaks to cover his five-figure starting salary within three months.
“I didn’t really want to give away equity because I didn’t know if I could trust the guy,” Gallagher admits, before adding that his second-in-command now has a much more generous package than when he started.
The Home Counties entrepreneur, whose business is now among the UK’s fastest-growing technology companies, with a customer list including Tottenham Hotspur football club and Sony, believes that he is not uncommon in having avoided the question of hiring a full-time finance director until the last minute.
“You look at it as a cost or something you don’t have to deal with. I also had this perception that all accountants would be balding 60-year-old men and not necessarily people who knew about running businesses,” he says.
Go Ape, a national network of high wire assault courses, shares its finance director, Paul Rossiter, a former managing director, with several other fast growth businesses. Tristram Mayhew, Go Ape’s co-founder, claims the one day a week Rossiter initially spent with the business was worth seven days with a younger less experienced executive.
Rossiter, who began his portfolio career after taking early retirement from a defence business, continues to provide his services to a variety of companies, sometimes just a day a month.
“The other clients keep me fresh,” he says. “It helps me be a business, and position myself, rather than the hired hand of a company.”
As Go Ape has grown, Rossiter has expanded his time to four days a week, and is now a minority shareholder. “He brings gravitas,” says Mayhew. It also helps that Rossiter plays golf with Go Ape’s bank manager.
Entrepreneurs are seldom also good finance directors, but it is often the skill they most need, according to Gerard Burke, director of Cranfield School of Management’s Business Growth and Development Programme. “The vast majority of successful businesses have sound financial data, systems and expertise in place. Conversely, the vast majority of failing businesses do not, so it’s surprising to find so many owner-managers who say they’re not very good with the numbers,” says Burke.
Finances are never a priority until you hit a crisis, according to Harry Briggs, co-founder of Firefly Tonics, the health drinks business.
Last year, the London-based business scaled back a big marketing push after fretting over the cost of a new van. It would have been a different story, Briggs insists, if the company had bitten the bullet earlier and appointed a full-time finance director. It has now done so, luring a bright, recently qualified accountant from EasyJet last September.
Firefly had tried a part-time finance director but it did not work, according to Briggs. “We weren’t enough of a focus for him, and we ended up having to chase him, rather than vice versa.”
Firefly had to do a fair amount of wooing to lure its new finance director away from a much larger business, but Briggs notes that he and his co-founder Marcus Waley-Cohen each have 20 per cent more time to focus on strategy now they are not managing the books.
Jon Thornes, whose business Cool Milk administers the supply of a daily classroom drink to 250,000 school children, admits he would have appointed a finance director sooner if he had realised how much easier it made his role as entrepreneur.
Accounting did not come high on the agenda when he quit his job at a Lincolnshire dairy to start Cool Milk a decade ago, Thornes admits.
He handed the job of bookkeeping to his wife, who then learnt the role on the job, and she only handed over responsibility to a full-time finance director four years ago when the business was turning over several million pounds a year. “When you set up a business you have so much to do, and the last thing you want to do is manage the accounts,” Thorne says. “With hindsight I realise that was wrong.”
Cool Milk’s computer systems handle the administration of school deliveries on behalf of local authorities. The company is growing fast: turnover has risen from £3m three years ago to £10m this year, and is forecast to hit £15m in 2011.
Thornes claims the main benefit of a finance director has been to strengthen Cool Milk’s hand with its bank and enable the business to make bigger investments because it has a handle on its future cash flow.
Bluhalo’s finance director also provides a lot more than an understanding of the numbers. Gallagher claims that his relationship with his bank has been enhanced because he now has someone who can talk the same language as his account handler.
“Bank managers don’t know as much as they think they know. They always know more than the entrepreneur, but in this case they didn’t know as much as the finance director.”
Having a finance director also saved Gallagher from himself, he admits. For instance, Hoole explained that Gallagher was much better doubling his overdraft when business was good to ensure he had credit in the future instead of following his instinct and attempting to pay it off. “ If I were to form another business, one of the first people I would recruit would be a dedicated person to manage the accounts,” Gallagher says.
