Building A Brand In The CFO Services Space

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Building A Brand In The CFO Services Space
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Deepak Narayanan and S. Venkats entrepreneurial
journey commenced in the year 2007 when a number
of companies from international markets were
trying to set up business in India. The larger
ones would go to larger consulting firms like EY
and KPMG to help with India entry strategies, but
what about the midmarket companies? These
companies are neither too small nor too big to be
able to approach large organisations without
being ignored, points out Deepak Narayan. Hence,
they held on to this niche and setup Wealthtree
Partners, to offer India entry strategy
consulting to companies from around the
world. Both partners were so bored of their
finance functions in their previous organisations
that they did not want to get into it. However,
as luck might have it, they stumbled upon the
idea of setting up MyCFO, a network of CFOs to
offer corporate finance implementation services
to clients. The recession in 2008 taught us that
we were relying too much on companies which are
coming from outside India, states Narayanan.
The gap that the duo identified was while
companies were scaling up, the finance and
accounts functions were light-years behind. And
most companies didnt have a CFO or even if they
had one, they were so caught up in day-to-day
cash flow, finance and accounting operations.
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Sometimes you need people who have seen
companies scale from a Rs 50 crore company to a
Rs. 500 crore company. It will depend on the
aspirations of the person on the ground Hence,
they got into this space and engaged with a few
of these companies. One thing led to another and
eventually, three years back, we branded this
service as MyCFO, states Narayanan. MyCFO is now
a part of Wealthtree Partners. Today, MyCFO is a
prominent CFO services firm in India, which
provides CFO and finance effectiveness services
to clients across industry verticals and size.
The companys CFOs do not sign balance sheets,
but actively get involved in all other tasks,
which a CFO does and also provide strategic level
inputs. Their typical engagement period is now
one year and above. Three years back it used to
be below six months, then it moved to nine
months. Now it is 12 months and above. Maximum we
have worked with a client is four and a half
years, recalls Narayanan.
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MyCFO currently services clients pan India with a
team size of 130 people spread across seven
cities including Mumbai, Delhi, Bangalore,
Hyderabad, Pune, Chennai and Coimbatore. The
market opportunity for the companys business is
large, as many listed companies do not have a CFO
(almost 2,000 out of 6,000). The company is also
working with around 36 PE and VC funds to aid
their portfolio companies. It has a current
client base of 90 and has serviced almost 225
companies in the last three years. The founders
did not raise any external capital when they set
up the company. They brought in Rs. 1 lakh when
they started and won their first client when they
started the service. The company is debt free
even today.
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Into The Finer Nuances
MyCFO works with companies to plug the wide gap
that exists between the demand for high quality
finance services felt by high growth companies
and the inadequate supply of such services at the
right levels of ownership, quality, timelines and
more importantly, one that aligns with the
companys vision. With a number of companies
sprouting, companies growing, and family-managed
businesses becoming PE invested, how does one
fill the huge gap? We are in a space not as a
company that body shops but as people who will
take on responsibilities of a CFO and service it
through a team of people on the ground, says
Narayanan. The engagement model is a tight
onsite model which allows companies to see that
it is taking a lot more responsibility and is
present when it actually scales up or
down. Hence, the two roles that the company
plays are that of a CFO (business plan, MIS,
budgeting and cash flows) and support role
(helping CFOs improve finance effectiveness
within the organisation by designing ideal
organisational structure, internal controls,
implementation of ERP systems and more). The
company also helps its clients get exit ready,
prepare for initial public offering and
strengthen internal processes and practices of
listed companies.
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What may vary in our model is the number of days
in a week that we engage with the client. For
example, if its an extremely small company, it
may need just three days in a week. Then, that
CFO will be assigned to another project he or she
can work on in parallel. The challenges with
smaller organisations lie in providing high
quality CFO input at the cost they can bite.
Therefore, the shared concept helps, says
Narayanan. For midcap companies, the team is
larger around three people will be assigned to
handle the project. MyCFO doesnt position
itself as an outsourced service firm because it
doesnt operate on a cost plus model. With this
model, there will probably be a 15 to 20 per cent
savings for the client. Moreover, the CFO that
they hire might take six months to really hit the
ground and start running. But in our case, since
we have seen the situation and we come in as a
team, we will be able to do it much quicker,
says Narayanan. Secondly, when companies scale
up, they will be able to bring the right team
more quickly than when they identify someone and
hire them. MyCFO does not allow its client
companies to choose the team or candidates and
its entire business model is built on trust and
reputation. We have given up clients who insist
on looking at the candidates before placing them
there. It does not gel well with the philosophy
for which this brand has been built, states
Narayanan.
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Meeting The Challenges
If a company needs to move to the next level and
if you have people who have worked only with
start-ups and not organisations that have scaled
up, that in itself is a problem, states
Narayanan. He continues, Sometimes you need
people who have seen companies scale from a Rs 50
crore company to a Rs. 500 crore company. It will
depend on the aspirations of the person on the
ground. So how does one deal with a situation
like this? One needs a very strong team, a good
project management system and the ability to
cross leverage learnings. Two other challenges
the company faces, apart from business challenges
in terms of expansion and foraying into other
services are, one, non-standardisation of
services and two, getting the team which has the
mindset to be able to deliver. What I mean by
mindset is, if you typically look at an audit or
consulting firm, they have the mindset to be able
to look at multiple clients and change companies
within a period of six months. They have a
better sense of what it takes to work with
multiple clients but they lack functional skills.
They have always been advisors and they are used
to a culture where they ask companies for
information and never get into the details,
states Narayanan. On the other hand, those from
the industry, may not have worked with multiple
clients, but are functionally about 80 per cent
better than someone from audit background. They
are more hands on and our preference is to tilt
towards the latter, says Narayanan. The company
does not recruit freshers as the time taken to
orient them is high. It typically looks for
people with an experience ranging from 3 to 30
years. We recently got the CFO of BASF and
Hiranandani to join us. They are a part of the
leadership team, states Narayanan.
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Going Forward
We dont sponsor any events, but we are called
to speak at forums, says Narayanan. He is also a
part of several mentorship networks such as
NEN, GenNext Ventures, TIE and more. Even though
start ups are just 15 per cent of overall company
revenues, we still engage with them because it
gives us a satisfaction of giving something back.
We dont work only from a revenue stand point,
says Narayanan. These apart, the ecosystem is
strong now and, many CFOs know them. The company
may not enter new markets, as it believes that
seven cities constitute 85 per cent of its market
in India. It will only get deeper in each of
these cities. It has about 20 clients in each of
the cities, other than Mumbai and aims to get 100
clients in the next three years in each city.
We may also look at overseas expansions by
providing services in markets like Africa and
Middle East where the skill deficit is higher as
compared to India, says he. Additionally, MyCFO
aims to grow its team size from the current 125
to 1,000 in the next three years.
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Going Forward
We may even get into products at some point of
time, states Narayanan. One of them could be the
automation of MIS services. Currently, the
company supervises 2000 people across all clients
in finance and accounts space. Can we provide
intervention and curriculum that will help an
entry level person to become a better finance
manager and soon? And, how do we bring such
practical level interventions? There are some
possibilities we are looking at over the next
three years, says Narayanan on a parting note.
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