I’m pleased to introduce our entrepreneur and family-owned business interview series.
These interviews are designed to help entrepreneurs and family-owned businesses think through the benefits, implications, and consequences of taking outside investment.
As part of this project, I am interviewing private equity fund managers, middle market investment bankers, attorneys, accountants, and consultants that advise privately held firms.
This first published interview is with Jim Elgart, CPA, who has over 20 years experience advising small and medium-sized businesses. Over his career, he has served in many roles, including: CFO, founder, and investor in multiple entities.
Jim is a partner with MarthonCFO, an on-demand, outsourced financial services firm.
Some key points that Jim highlights include:
- Impinging freedoms: why owners might not be ready to give up their unfettered control;
- Private company expenses: many business owners run significant personal expenses through their company. Once outside investors are brought in, this practice will be discontinued;
- Lack of clarity about big picture, finish line goals: Jim sees this as a common problem between investors and entrepreneurs;
- Being able to recreate a workflow to explain how the firm makes money: surprisingly, many firms find it difficult to articulate how their process results in profits;
- Financial reporting that mirror the workflow story: closely tied to the workflow narrative are tight financials that tell the same story in numbers;
- Financials are a looking glass into how seriously an owner takes the tax code: this might be an important indicator for potential investors;
- Different levels of financials: compiled, reviewed, audited, and why reviews a more cost efficient, and;
- The Quality of Earnings Report: from the owner’s perspective, unpacking a recurring, repeatable, scalable, and profitable revenue stream.
You can access the interview transcript here.