The rise of the part-time FD
What are the benefits of hiring a part-time FD to your company?
More and more fast-growing companies are employing finance directors on a part-time basis, saving on the considerable expense of a full-time version. Whether hired in for a specific task or taken on to consult on future direction, businesses like yours are increasingly turning to these unlikely superheroes
B rilliant Weekends was about two years old when founder and managing director Richard Dennys began to worry about a lack of financial expertise in the management team. The Bristol-based tour operator, specialising in stag and hen party breaks, had plenty of potential for growth, but needed funds to invest in the technology that would allow it to ramp up its sales. As Dennys recalls: “My skill was in marketing, but we really needed someone with financial experience.”
The obvious answer was to take on a finance director (FD), but a full-time appointment wasn't really an option. Individuals who combine financial skills with demonstrable commercial expertise are much-coveted players in the business world but their services don't come cheap. As Dennys says bluntly: “We couldn't afford to pay an FD upwards of £70,000 a year.”
However, there was an alternative. Rather than taking on a full-time FD, Brilliant Weekends hired part-time finance specialist Mark Winter on a consultancy basis through FD service provider FDUK. He enabled the company to raise the funds it needed and develop a business plan that would underpin growth over the next few years. With his help, Brilliant Weekends has expanded its product offering, and raised turnover from £1.5m to £4m over the last three years.
Winter is just one of a growing army of part-time FDs available on a long or short-term basis to businesses like yours. Often they are sourced through business service providers like FDUK and work on a daily rate. Typically, they'll spend an agreed number of days at the office every month, combining high-level accountancy and financial skills with the kind of genuine commercial savoir faire that can help a business fulfil its true potential. But what does that mean in practice?
The role of FD is often misrepresented. To the department head seeking an increase in resources, it's all too easy to characterise them as the person who zealously guards the company purse strings. But a good FD is far from the bean counter of popular imagination. In fact, if your company needs to spend more money to grow, finding the cash will be far easier if you've got an experienced finance chief who can talk to banks and venture capitalists, prepare the business for investment and work on forward-looking financial plans.
As Robin Deller, managing director of Virgin Holidays, points out, an experienced FD should be able to take a long, cool look at the business and tell you where you should be channelling people and cash to get maximum return. Deller cites his experience of working with a part-time FD when growing his own company, Fast Track Holidays. “On his advice, we quadrupled our spending on marketing,” he reveals. “It had a very positive impact, but we probably wouldn't have had the confidence to do that without him there to encourage us.”
The FD is there to help you make decisions based on rigorous financial analysis, rather than simply functioning as a kind of uber-bookkeeper. Indeed, given that the majority of companies will already have a bookkeeper or management accountant handling the day-to-day number crunching, what you really want from your FD is someone who can take the numbers and add value. “Very often a founder won't be getting the financial information he needs,” says Ash Mehta, chief executive of FD service provider Orchard Growth Partners. “That's because the numbers provided by the bookkeeper tend to be historical. What the FD can do is interpret those numbers and help you move the business forward.”
Mike Pawley, managing director of FDUK, agrees, saying: “A good FD will interpret the numbers, create forecasts and help the company to plan for the future.”
An FD's presence can also influence the external perception of your business. “If investors or lenders see good management, a strategic plan and a sound financial function, they tend to be very reassured,” says Tim Waine, managing director of part-time FD provider Secantor.
All of which begs the question: if FDs are so important, why opt for someone who will only be there a few days every month?
The obvious answer is cost. A part-timer will charge anything between £600 and £1,200 a day, depending on experience, geography and the complexity of the task at hand. If the arrangement extends to a few days a month, that's considerably cheaper than employing someone at £70,000 to £100,000 a year. Part-time FD providers tend to aim their offering at businesses turning over between £1m and £15m.
But it's not just a question of cash. By hiring on a consultancy basis, you can draw on the experience of FDs who have a track record of working on the boards of major league companies. “What we're aiming to do is offer top-quality FDs to small and medium-sized companies at a price they can afford,” says Colin Mills, founder and chief executive of The FD Centre. It's an objective echoed by the other FD providers.
There are a few caveats to all this. When you source your specialist from a third-party provider, what you tend to get is a consultant rather than a director in the accepted sense of the word. And while the various providers would reject the suggestion that the consultants they supply are anything less than engaged with client businesses, you have to accept that your FD may be working elsewhere when you need them.
“You have to learn to trust them,” says Sara Tye, founder of communications business RedheadPR, which has successfully used a part-time FD for several years. “There are times when I'll ring my FD with a question and he won't get back to me for three days. That was frustrating at first, but if the relationship is to work, you have to trust them enough to know that if something is really urgent, they will get in touch quickly.”
As Tye stresses, if the FD is only around for a few days a month, then you have to make sure your day-to-day number crunching is taken care of. “If your basic finance function is efficient, the FD can do their job very quickly,” she says. “If it isn't, you will need a lot more of their time.”
Choosing the right person
There are many reasons why you might seek to take on either a part-time or full-time FD. “It could be in response to a particular problem,” says Mills. “For instance, rising sales could be causing cashflow problems and creating the need for tighter controls, or it could be that the business has hit a sticky patch and requires expert help.”
Equally, the spur could be a transaction of some kind.
“People often come to us ahead of an event, such as fundraising or a listing,” says Waine.
Whatever the reason, it's important to have a clear understanding of why you need an FD and what you expect them to deliver. According to Pawley, that means setting objectives and a timeframe for realisation. “It's very important that our clients can see they are getting a return for their money,” he says. “It's important to agree on a brief, and we would always seek to try to deliver wins in three or six months.”
The brief may put a clear limit on the longevity of the relationship. For instance, Brilliant Weekends wanted a part-time FD to advise on fundraising issues, and once those had been resolved, there was no further requirement. In other cases, the client will require an ongoing service.
The good news is that the engagement contract offered by most providers should allow you to increase and decrease the number of days worked (and paid for) according to your own needs at any given time. “The part-time offering is very flexible,” says Waine.
As with hiring a full-timer, it's important to select a part-time FD carefully. Personal chemistry is important, as is the right experience, so choose someone you feel you can work with and who meets your needs. “All FDs should have the core skills,” says Mehta, “but specialist skills in, say, flotations and fundraising can be important.”
Above all, don't be afraid to say what you do and don't want from your candidate. And remember, a part-time FD will be as important to your company as someone who takes the role full time.
Does your FD qualify?
You should expect your full or part-time finance director (FD) to have both commercial experience and an accountancy qualification. Accrediting bodies include the Institute of Chartered Accountants of England and Wales (chartered accountants), Association of Chartered and Certified Accounts (certified accountants) and the Chartered Institute of Management Accountants (management accountants). Many part-time FDs will also have MBAs and second degrees.
Robin Deller Founder, Fast Track Holidays
“We had an accounts department, but it couldn't advise us on strategic issues,” says Robin Deller, then managing director of ski and cruise agent Fast Track Holidays, which was acquired by Virgin Holidays last year. This prompted him to seek specialist financial help. A full-time FD would have been too costly, so Deller contacted The FD Centre about access to part-time expertise. “The company came in and carried out a review of who we were and where we were going,” says Deller.
The next stage was a long-term business plan and a re-tuning of the company. Bucket-and-spade holidays were dropped, allowing staff to be moved to the more profitable cruise and ski sectors, while marketing spend was increased. However, Deller stresses that it wasn't a question of outsiders coming in to tell him and his team how to run the business. “One of the key things we learned was that we were spending too much time ‘in the businesses',” he says. “We had to think more strategically. We knew the answers, but we weren't asking the right questions.”
A new focus
Mick Sargeant Managing director, IT Freedom
Founded in 2002, software company IT Freedom provides solutions to the insurance industry. In the early days, the focus was on research and development (R&D), but when the board conducted a review of the business in 2007, it was clear that the company had reached a watershed. “We had done the development, now we had to get our products out to the market,” says managing director Mick Sargeant.
The review also underlined a potential weakness in the management team: no one had a professional accountancy qualification. Sargeant approached Orchard Growth Partners, a provider of part-time FDs. “I was looking for advice on managing cashflow and outside investment,” he says.
IT Freedom chose Orchard associate Harvey Mitchell, not least because he had software market experience. Mitchell's first task was reviewing the company's progress. “His key recommendation was to shift the focus from R&D to marketing,” says Sargeant. As a result, IT Freedom hired more marketing staff, increased sales and set about selling its way out of its cashflow problems.
Mitchell is still working with IT freedom, fulfilling a role between FD and management consultant, and helping to plan the next phase for the company.
Chris Beighton Managing director, Westleigh Developments Ltd.
Westleigh Developments provide the total property package, from concept to completion, for sale to the private owner, institutions and industrial or commercial clients.
In September 2003, Westleigh sourced part-time FD Malcolm Evans through Secantor. Already an established and respected developer, Westleigh had a turnover of £24m and a healthy level of profit. In addition to creating accurate, timely and easy to understand management information, Malcolm's involvement led to a complete re-engineering of the company's performance measures, facilitating much tighter cost control. Thanks to effective forecasting techniques, borrowings are now more efficiently managed to fund the stream of major developments.
According to Chris Beighton, managing director at Westleigh, Malcolm's part-time credentials didn't affect his interaction with the rest of the team. “Despite being part-time Malcolm quickly became a highly valued member of our team. His overall contribution has been far higher than I ever imagined possible.”
In recent years Westleigh has enjoyed continued growth, doubling turnover and increasing profitability by an enviable 500%.