Lesson #319: How to Pitch a Business Investment Case to Your CFO

Chief Financial Officers are often the “gatekeepers” to the company’s cash coffers.  And, as you can imagine, the have a lot of people tugging on their sleeves looking for investments into various projects within the company.  But, CFO’s need to prioritize their spend, based on what is in the best interests of the company.  This post will help you learn to think like a CFO and how best to pitch your business investment case with the highest odds of success.

First of all, there are many different scenarios in which the business may require capital.  Perhaps the CEO wants to make a big strategic acquisition.  Or, the CMO needs to scale up the company’s sales and marketing efforts.  Or, the head of product wants to launch a new business line.  Or, the CTO needs to develop new technologies for the business.  Or, the head of HR needs to make a few new hires.  The ways capital can be invested in the business are limitless, and the asks from the team are endless.  So, you better make sure your pitch resonates to break through the clutter.

Here are examples of the best ways to pitch for internal funds, for each of the scenarios above:

Pitching for Strategic Capital

Like in any investment, your CFO is going to be most focused on the potential return on investment (ROI).  It is no different than pitching a venture capitalist for outside funds; now you are pitching your inside team for internal funds with an “ROI First” mindset.  Let’s say the CEO wants to invest $5MM into an acquisition of a competitor.  The business case he would want to make is: (i) it adds $10MM of revenues and $1MM in annual cash flow to the business; (ii) it removes a big competitor, making it easy to price our products and grow our margins; (iii) it grows our market share in the space; (iv) it will help us accelerate revenue growth by cross-selling our respective products into non-overlapping industries; and (v) it will help us to achieve a 10x return on the invested capital within the next five years, based on these reasonable financial assumptions.

Pitching for Marketing Growth Capital

Your CMO may be looking for capital to spend on $1MM on additional marketing activities or to expand the sales team.  So, she is going to have to communicate things like: (i) I am expecting a 5x return on my advertising spend, adding $5MM in revenues; (ii) the investment should realize a return of funds invested within 6 months of the spend; (iii) my expected cost of customer acquisition is $250, well below our expected gross profit of $1,000 per transaction; or (iv) we will be able to sell into twice as many regions or sectors than we are today, increasing our potential reach and ability to scale the business.

Pitching for Product R&D Capital

Your head of product research and development may want to invest $1MM into launching a new product line.  So, she is going to have emphasize points like: (i) by doubling our product line, we should be able to double our sales, by increasing our average order size; (ii) the new product line will be a “first mover” in the space, with limited competition; (iii) it will make us less dependent on our original product suppliers, better diversifying our vendor concentration risk; (iv) we have researched our customers, and 75% of them said they would buy this new product if it was available for sale; and (v) I expect the investment to allow to build $10MM in additional revenues, a 10x ROI, within the first three years.

Pitching for Technology Capital

The process is exactly the same for your CTO, when asking for $1MM to develop and upgrade the companies systems in the next year.  He is going to have to impress your CFO with information like: (i) our old technology can crash at any time and is putting our current $10MM in revenues at risk if the site goes down (saving a -10x loss); (ii) by improving our user experience on the website, I expect to reduce our abandoned cart percentage by 25%, theoretically adding $2.5MM in new revenues  (a 2.5x ROI); and (iii) if we don’t make this investment, hackers will be able to get into our systems and get access to all of our customer data, which we don’t want to happen to our customers or ourselves for competitive reasons.

Pitching for Human Capital

Adding $1MM of payroll happens throughout the organization, by department, but adding human resources to the organization requires the same ROI-driven financial disciplines: (i) we need that new salesperson because we are under capacity, with more leads than we can reasonably handle today, and we expect to close $1MM of new sales from that $250K investment in a new salesperson (4x ROI); (ii) our employees are on the “hamster wheel”, getting burned out working at 110% capacity; if we don’t add additional staff members, 25% of our current team is going to quit, taking those relationships and institutional knowledge with them; and (iii) to improve our recruiting, retention and morale, we are going to have to upgrade our employee benefits offering, which should improve our hiring time by 25% (helping us drive efficiencies and revenues faster) and reduce our employee turnover rate by 30% (which stops the revolving door we have with talent, and the inefficiencies and lost revenues that come with that—aggregating around a 5x ROI).

Rinse and Repeat This Process Within Departments

And, this logic needs to flow all the way down to the department level, as well.  Your CMO needs to have their heads of search engine marketing, social media marketing and display advertising each make their ROI case to her, so she can prioritize her overall marketing spend. And, your CTO needs to prioritize the 100 technology improvement requests from the technology team, based on the expected ROI of each one, so he knows which projects to tackle first.  You get the point.

Concluding Thoughts

So, as you can see, if you know how to ask for capital from your CFO, in the language that he is used thinking about it (with an ROI mindset), you should materially improve your odds of securing it.  Your company should develop a template business investment case form that everyone asking for capital should fill in.  First, that will require everyone to “think” before they ask; and second, that will help your CFO to better prioritize the investments based on the expected ROIs from each one. 

But, just because you ask, and have a well-thought plan, does not necessarily mean you will get the capital.  You never know what other competing forces are out there, tugging on the company’s purse strings.  Your CFO’s job is to keep the company liquid and out of trouble, and their job is to make sure all investments are made within the overall budget of the company.  You can count on the CFO to prioritize his spend based on the amount of the ask, the expected timeframe to return the funds and the expected ROI from that investment.

So, based on the above examples: (i) the CEO asked for $5MM to return 10x in five years; (ii) the CMO asked for $1MM to return 5x in six months; (iii) the head of product asked for $1MM to return 10x in three years; (iv) the CTO asked for $1MM to protect 10x and add 2.5x in one year; and (v) the head of HR asked for $1MM to add 4x ROI on the new hire and 5x ROI by making the current hires happier and more efficient.  So, you decide; put on your CFO hat and tell me how you would prioritize the spend?  I have a hint for you:  the CEO’s acquisition would not be my first choice.  (Gulp!)  I’ll let you tell him that!

For future posts, please follow me on Twitter at: @georgedeeb.

Should I Bootstrap or Look for Investors?

I was recently interviewed by the U.S. Chamber of Commerce for my thoughts on the big question:  should I bootstrap finance my business or look for investors?  I figured this was an important enough topic to share my answer with all of you.  You can read the full article at this link at the U.S. Chamber of Commerce website.

For future posts, please follow me at: @georgedeeb.

Lesson #318: A New Workforce Optimization Algorithm

I was recently introduced to Todd Zaugg, the CEO at Matrix Achievement, a consulting firm that helps companies improve their sales.  In our discussions, Todd made it clear that optimizing your workforce is a vital component to maximizing your sales.  So much so, that he actually created a workforce optimization algorithm that he believes all companies should follow.  It was so interesting to me, that I had to share it with all of you.

The Changing Employment Market Demands Different Thinking

The demands of today's workplace environment are real and intense, and the Age of the Employee is clearly upon us. There are several workforce trends that proving this point, including a war for talent, compressed on-boarding times, generally disengaged employees, and declining retention rates.  What can organizations do in order to maintain its competitive advantage? Follow this workforce algorithm for success: MEEE=SV™ (Manager + Empathy + Engagement Mechanisms + Employee Assistance Programs = Shareholder Value).  Let's break this down.

M = Manager.

Employees leave companies because of their managers. Does your organization have an effective performance coaching effort that provides managers with the insights and skills to retain key talent while driving performance?  Have they been trained to build “emotional bank accounts” with employees during the hiring and onboarding process that will help the manager push when necessary? Do they have a road map to help onboard quickly and compress the employee’s feeling of competency and success (hint: if you are experiencing higher than the industry average turnover, then you have a problem)? Do managers focus solely on the results (retrospective) versus focusing on the best practices of activities (proactive)? We have all heard that culture trumps strategy; the key is that Managers are the guardians of culture as well as process execution and therefore everything starts and ends with them. Organizations are very quickly going to have the revelation that for every action there is a reaction and the “Age of the Employee” creates “the Age of the Manager”.

E = Empathy.

Harvard has proven that Emotional Quotient is a far greater indicator of success than IQ. The great news is that your EQ can be increased with proper training and your front-line managers need this training yesterday in order to help balance results with retention.

E = Engagement Mechanisms.

There are at least 15 ways to drive higher engagement. New employees are demanding to be trained. Millennials were raised during a period of time in which they are used to receiving consistent feedback, coaching, and recognition. This will require organizations to be purposeful in their engagement touchpoints. Some of those touchpoints can be automated. But keep in mind that with more technology, a counterbalance will be an increased need for human interaction. One of the powerful areas of employee engagement impact is related to helping the employee connect to a purpose. Having the employee take a tactical journey in the self-discovery of their “story”, values, strengths, and positivity is an accelerator and sustainer for corporate performance. The years of research on mindset paradigms is moving some areas of our human work experience from what at one time may have been considered the New Age to now being noted as the New Normal. Positivity is one of those. To help prove this point, below are some key statistics from Shawn Achor’s The Happiness Advantage:

• Doctors put in a positive mood before making a diagnosis show almost 3 times more intelligence and creativity than doctors in a neutral state, and they make accurate diagnosis 19 percent faster.
• Optimistic salespeople outsell their pessimistic counterparts by 56 percent.
• Students primed to feel happy before taking math achievement tests far outperform their neutral peers.
• It turns out that our brains are literally hardwired to perform at their best not when they are negative or even neutral, but when they are positive.

Positivity directly correlates to business impact. Here are additional research data points from Dr. Sonja Lyubomirsky that scream about the following impacts related to developing happier people:

• Earn more money.
• Better leaders.
• More fulfilling marriages.
• More friends.
• More philanthropic.
• Cope better with stress and trauma.
• Healthier, stronger immune systems.
• Live longer.
• Perform better at work.

Having a positive or negative lens can have a ripple effect impacting the internal and external personnel that employees’ interface with and has a direct line to commercialization success. Meghan Forsey, the National Training Educator for Zimmer Biomet Canada experienced some of this training and stated “We were looking for something that helped us focus on the individual connecting themselves personally to the company's mission, their specific personal and business goals as well as the day-to-day activities that drive results. Training our sales managers and a cross-section of our sales team had a positive ripple impact on engagement, customer experience, and customer loyalty. Participant feedback showed how hungry individuals are to find the intersection between personal meaning and work. What we found most surprising was that the group that seemed to benefit the most were our self-described skeptics," Forsey said. "One of these skeptics is an analytical-minded and vocal sales manager who thought the program would be a waste of time and was sharing that opinion with others. He was surprised by the amount of data that exists supporting how a positive mindset can directly impact performance. By making a shift in his thought process, his team did as well. It quickly became clear that the trickle-down effect was real. The key was to provide an actionable architecture for the individual and the manager”.

E = Employee Assistance Programs (EAP).

Approximately 50% of employees state that their stress is high to overwhelming. EAP programs are being updated to include life coaches and the emergence of para-professionals that can help employees navigate critical milestones and unanticipated life events that have the potential to derail their performance at work (check out the emerging platform LifeGuides as an example).  The days of asking an employee to compartmentalize their personal life from work life are going the way of the caveman. Very few people can compartmentalize, and it leads to unproductive, or even worse, counter-productive behaviors.

Concluding Thoughts

In some ways, the next wave of your competitive advantage is really just an updated augmentation of known insights---your people are your competitive advantage. The MEEE=SV™ is a commercialization algorithm because nothing else in the organization matters more than engaged employees with an emphasis on having meaningful interactions with prospects and customers.  The algorithm is a good baseline scorecard that has a lot of sub-categories that are being defined and built out by high performing organizations. It may be time to ask how you measure up to this scorecard and your readiness for the Age of the Employee/Age of the Manager.

Thanks again, Todd, for your wisdom and inspiration for this post.  I think most entrepreneurs are simply too busy building out their products, that they don't know they need to be investing an equal amount of time investing in the development of their teams.  If you need any help here, Todd has made himself available through the contact form on his website.

For future posts, please follow me on Twitter at: @georgedeeb.

The Rise of Account Based Marketing

I've witnessed many evolutions in marketing best practices, from the rise of digital and social media marketing to automation technologies replacing human tasks. And now there's a new trend that is starting to take off called Account Based Marketing (ABM), and it has the potential to change everything for B2B professionals.

Most B2B marketing campaigns have traditionally been designed to support the B2B sales team, which includes building all internal collateral materials and performing both inbound “pull” marketing and outbound “push” marketing efforts. The goal has always been to make everyone and anyone that could be interested in your product or service aware of your company. The problem is not all companies in an industry are created equal. You may need to better focus on companies of a certain revenue size that can afford your product or service, or others within a certain geographic region. Otherwise, there may be a lot of wasted effort and spending.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #317: The Best Employees Have These '31 Flavors'

Having good employees will make or break a company’s success.  I have previously written about how best to read resumes and screen employee candidates, but that is before they are actually working for the company and you get a chance to see their “true colors” when they are not “on show” during the interview process.  This post is designed to help you identify the best traits that most successful employees share, so you can “double down” on those best employees and “weed out” the rest, as nothing can take down a company faster than a bunch of toxic employees that don’t beat to the company’s drum.  The best employees have these “31 Flavors” blended into one.

The Basics for the Job

1. The Right Skillsets—Obviously, they have to have the basic knowledge and experience in how to do their job.  You can’t put a square peg in a round hole.

2. Smart Intelligence—The right combination of “book smarts” and “street smarts” should yield good business instincts to help manage the business.

3. Good Attitude and Passion—Someone that is passionate about their job will do much better than someone that is simply looking for a paycheck.  And you want someone whose enthusiasm as infectious to others.

4. A Good Communicator—Clear communications is at the core of every company.  You need someone that can clearly articulate their needs and listens well to others.

5. Detail Oriented and Organized—In most businesses, there are many moving pieces.  Whether you are managing a project or working your sales leads, the better organized a person is, the better odds they won’t let any of the needed details slip through the cracks.

6. Confident, But Knows Their Limits—Someone that feels confident in their own abilities is a lot better than someone that is unsure of themselves, provided they are not over-confident to the point of “driving right off the cliff”.

A Good Fit for the Company

7. Fits the Culture—Every business has unique drivers of the company culture.  You want employees that embrace the company culture and works well with others.

8. A Team Player—As the old adage goes, there is no “I” in “TEAM”.  Lone wolves that only listen to themselves and prefer to work alone won’t have a long life inside a company, where good team dynamics are critical and must thrive.

9. Hungry & Driven—I love employees that have something to prove, or are working for some grander cause outside of the office.  Nothing beats a good “fire in the belly”.

10. Loyal & Dedicated—Good employees know to put the needs of the business, before the needs of themselves.  They are loyal to the business in good times and in bad . . . especially the bad.

11. Can Neutralize Toxic Peers—Good employees do not engage with the “fire stoking” behaviors of toxic employees.  And, better yet, they know how to neutralize them, not allowing them an open forum for public criticisms.

12. Never Publicly Complains—If you have something on your mind that is bothering you, take it up with your manager.  Don’t take it up in the next all-company meeting, bringing everyone else down with you.

A Good Fit for the Manager

13. Highly Dependable—When a good employee is given a task, you can trust they are actually going to get the job done, on time and on budget.

14. A Strong Work Ethic—Good employees are hard-workers at their core.  They don’t mess around surfing the web while at work, or watching the clock, waiting for the hours to pass by.

15. Action-Oriented, Problem Solving Leader—The best employees are the ones that can identify problems within their domain, and actually fix them.  They don’t need to ask for permission or ask for help to improve the business.

16. Takes Direction Well—Good employees respect the chain of command inside a company, and follows the direction of their managers, who are presumably more experienced in their departments.

17. Autonomous & Self Motivated—Good employees don’t need their hands held.  They can work well on their own with limited supervision by their managers.

18. Focused—Good employees will stay focused on the goal at hand and are not easily distracted by the “flavors of the month”.

19. Accountable—Good employees take responsibilities for their own actions, even when something goes wrong.  It is not about trying to get an employee in trouble, it is more important how they learn from those mistakes and take the business forward.

20. Not Afraid to Speak Up—If something is on your mind, say it.  The worst thing that can happen is if you bury hard feelings or strong desires deep down inside, where no one knows about them, and can solve for them.

A Good Fit as a Person

21. Likable Personality—Nobody wants to work with mean people or hermits.  They want to be surrounded by nice people that are easy to work with.

22. Honest With Integrity—There is no room for dishonest people or criminal behavior in your business.  Period!  If you can’t trust your employees, they need to go.

23. Flexible & Adaptable—Most businesses, especially startups, are pivoting to take advantage of new market opportunities.  Your employees need to be nimble in their thinking to be able to “go with the flow”.

24. Humble—Good employees never put themselves first or brag about their successes.  There is fine line between confidence and cockiness.

25. Optimistic—Always look for employees that can see the glass as “half full” and not “half empty”.  Good employees see the opportunity to improve a situation and not harp on what they are missing, with a positive mental attitude.

26. Creative—Business solutions are not always easily identified. Employees that can creatively think “out of the box” are the ones that often have the biggest impact on moving a business forward in new directions.

A Good Fit Emotionally

27. Okay With Delayed Gratification—This generation has become too driven by immediate gratification, without actually putting the hard work in that is required to achieve that “pay day”.   It is less about, “what can you do for me today”, and more about “what can you do for me next year” in building a long-term and meaningful pay day for all involved.  Patience, young Jedi!!

28. Can Tolerate Conflict—Things don’t always go smoothly in business, and often times, personalities can clash.  Conflict can often be good, as it often means people are passionate about the issue.  But, the best employees can easily endure and solve for conflicts inside the business.

29. Doesn’t Need Ego Stroked—Good employees do their jobs without the constant need for being complimented.  Good managers will praise their employees for jobs well done, but don’t expect to have your ego stroked for every action you do.  Good work is normally well rewarded in the long run.

30. Never Settles for the Status Quo—When things are going smoothly, it is really easy to sit back and do nothing, or simply keep running in place on the same “hamster wheel”.  Good employees are always looking for improvements, tinkering and fiddling with the business with each iteration of their role.

31. Willing to Take Smart Bets—Yes, businesses need good “lead-off hitters” that are capable of getting on base with “singles”.  But, sometimes, you need a good “clean-up hitter” to “swing for the fences”, taking calculated gambles with a high odds of paying off for the company.



Phew, what a list.  The odds of finding all “31 Flavors” in one person is the equivalent of trying to find a needle in a haystack.  But, if you can find as many of these traits as you can in your employees, the company’s performance and morale will certainly benefit from it.  And, when necessary, you must prune out the “bad apples”, before they spoil the whole “bushel”.  After writing this post, I suddenly have a  hankering for some Baskin & Robbins ice cream!!  ;-)

[VIDEO] George Deeb Discusses Entrepreneurial Mindsets for Success on ASBN

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about how to choose the right entrepreneurial mindset to maximize the odds of success.  This includes comparing the differences between "driven to win" vs. "fear of failure".  I thought this video turned out great, and I wanted to share it with all of you, to help you assess your startup's "psychology".  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.