As the financial markets began to unravel late in summer of 2008, many financial institutions stopped funding new investments. This directly impacted all sorts of companies and their ability to get new financing. For us, a corporate financial consulting firm that raises capital for growing companies, this was a particularly worrisome challenge because we work on an hourly fee only basis rather than a brokerage and investment banking approach, which relies on big ‘success fees’ upon closing. Believing in our hourly based approach (which offers much lower fees and better objectivity), we now had a new pressing challenge. How do we help our clients quickly answer: 1) Is financing available, and 2) at what general terms? Especially, if we weren’t success based. In order to bring more peace of mind to our clients (and ourselves!) since we were not working on a contingency basis to raise capital, we came up with this “What if.”
For the previous 17 years, our financial process was like any other advisors’. We started our firm by creating a high quality business plan with high quality financials. Then, we distributed that business plan to numerous financing sources and waited for their initial feedback. A recurring problem with this approach, was clients would spend time and expenses before they had answers to those key questions. The challenge was even more magnified the higher the hourly billing rates, or the harder the deal was to achieve. Meaning, clients that didn’t qualify to get funding, or got less than expected results became more than just a little disappointed. If a deal couldn’t get done, it wasn’t because we didn’t exhaust the same resources as any other advisor, it was because the rules for getting deals funded had changed, the investment criteria had changed, and the banks were holding back on funding businesses. Before 2008, it was the consultant’s obligation to set reasonable expectations, but with ‘the sky is falling” in 2008, and knowing that bankers could waste a lot of people’s time just trying to stay involved in the opportunity in case their rules “changed”, times were anything but reasonable.
So to reengineer our process and remain committed to our hourly based approach, we decided to change how we did financial planning. First, instead of launching into a big (and expensive) business planning exercise that had a possibility of not yielding interest from institutions, we began creating first a high level strategy and then a more detailed financial plan. Once that was complete, we could then go out and talk ‘doctor to doctor’ to funding sources we thought would have an interest to fund our clients. After talking with those groups, we would share the feedback with our clients and articulate the financing that (at that point of time) their company was qualified to achieve at that point of time and was attainable. No bias, no conflicts, not commitments, just the straight facts. No one was locked in to anyone, we were all charged with achieving the same thing for our client: The best financing options for the best terms. No conflicts of interest, no referral fees, no lock periods. If our findings weren’t positive during the assessment phase, we could then help the client reset expectations, or set alternative strategies and goals should they decide to investigate other routes or opportunities.
As we hoped, this redefined corporate financial planning process enabled us to significantly reduce the probability of coming up short of our client’s expectations, and has accomplished amazing client satisfaction results. In fact, since implementing our new corporate financial planning process, we have delivered financing proposals 100% of the time for clients that continued on with their engagements post assessment feedback. Equally important, the assessment process was done quickly (usually within two weeks) and proved a very cost and time efficient way to:
•Increase client confidence,
•Shorten the overall planning time,
•Keep all our clients’ funding options open, and
•Gain valuable input on likely future financing terms.
While the jury is still out whether our corporate financial planning approach will drive the internal growth of our firm that many of our clients enjoy, we have proven to ourselves and to our clients, that we have found a creative and possibly even disruptive way to bring entrepreneurial companies greater value. If their deal can get funded, we can get it funded. Our growth is starting to come from clients and word of mouth, that appreciate the value and have referred us to others. It has become really exciting.