How to Get a Yes! From the CFO

Over the years I have had many a department head approach me to either support their project and/or seek approval for funding their beloved venture. ?We CFOs and other high-level decision makers know that we have to account tomorrow for decisions we make today. We must be able to show we made a good decision, using information available at the time. Your job is to provide proof of value and your proposal should always address what happens if we take this, or that action….and what happens if we take no action!

Following are the key things I considered each time and the advice I would give anyone seeking a Yes! From their CFO.

?Is it all about the ROI?

CFO’s and other senior decision-makers want concrete evidence and a credible rationale that shows convincingly why giving the go-ahead would be a great business decision.

Quite often we consider the return on investment (ROI), where projected costs are compared to the projected returns. But we know that ROI only predicts what happens if things go as the department head hopes. This means that the ROI metric, by itself says nothing about the likelihood of seeing those returns. And, ROI by itself says nothing about what it takes to bring in returns or the risks they face.

If you bring a funding request you must realise that a high ROI figures alone will not win the “Yes” you want from the CFO. What else does it take?

What the CFO is looking for is a high ROI and a business case that:

1. Provides practical value with information that gives decision-makers confidence to act
2. Scores high in credibility. The case is believed.
3. Predicts what actually happens

Following is what a “CFO-friendly” business case should include. ?Failure on any point can sink the case……when your proposal fails to address one or more of these points, case credibility, practical value, and accuracy suffer.

1.?Address important business objectives?

Quantify the benefits of your solution. ?Your proposal may address business objectives that go well beyond a high ROI. ?The value of business case benefits should represent the worth of tangible contributions to meeting business objectives.

2.?Compare your proposal against different action scenarios

The proof that your proposal is the better business decision rests on a compelling scenario comparison. Each scenario in the case predicts business costs and benefits that should follow under one course of action. A scenario for implementing your proposal should compare favourably to alternate scenarios, including a “Business as usual” scenario.

3.?Make non-financial benefits tangible and assign value to them

Your proposal should meet important non-financial business objectives such as:

• Lowering risk
• Improving branding
• Improving product quality or customer satisfaction

Reference benchmark studies, analyst reports, industry statistics, or any other third-party data to help convince the CFO that your solution is a worthy investment.

4.?Provide complete financial metrics for each scenario’s financial outcomes

Financial metrics such as:

a) Return on investment (ROI)

• should be positive each time and greater than say 10% meaning that returns will exceed costs

b)?Net present value (NPV)

• Places realism to returns expected in future years
• It is a discounted cash flow metric that addresses questions like: What is the value today of a $1,000 cash inflow to be received seven years from now? With a discount rate (interest rate) of 5%, the PV formula answers this question: ?$1,000 / (1.0 + 0.05)7?= $711

c) Internal rate of return (IRR)

• The minimum percentage rate of return that incoming proposals must reach or exceed to qualify for approval and funding. ?It is set above the borrowing rate at say 10%

d) Payback period

• In how many days, months or years will we recover the investment outlay required

CFOs often develop strong individual preferences for one or more of these metrics, based on their experience in the company and the industry. As a result, in pays to find out their individual views and preferences on financial metrics……before submitting your proposal.

5.?Build cost estimates from a valid cost model for the case

Cost estimates for your proposal must apply a single cost model to all your proposal scenarios. This is because CFO and decision-makers need to assure themselves that:

a)?all scenarios were compared fairly with each other

b)?all relevant costs are included and only relevant costs are included

c)?no unpleasant cost surprises are in store, later, as proposal implementation begins.

6.?Provide a thorough, credible risk and sensitivity analysis

Whilst CFOs realise that actual results will always differ somewhat from your predictions presented in your proposal and that you cannot eliminate all uncertainty from your predictions, we expect you to consider the risks of your proposal. ?Your aim is not to provide a perfect picture, your job is to provide an accurate and realistic perspective. Be up front about the potential downsides or drawbacks to investing in your solution. If the CFO thinks you’re hiding something, you will definitely lose credibility.

7.?Your conclusions and recommendations must point to business objectives

Show why your solution is a good use of funds. ?Your proposal will be viewed favourably if the impacts and outcomes from implementing your proposal have real value to the organisation….meaning your proposal contributes to meeting business objectives. ?So your case have real value only if you establish and measure these contributions in concrete terms.

Treating your CFO to nice dinners or a round of golf might be pleasant and enjoyable, but ultimately those activities are not going to help close a deal if the CFO doesn't see a sound business case for investing in your proposal.

CFOS will always be looking for hard facts and evidence that the company should free up funds to purchase your solution. That means your proof of value has to be unbiased, polished, and persuasive.

Rob Lancuba is a partner at CFO on Call, a leadership advisor, problem solver, Growth Specialist and Strategist. He helps businesses boost their profits, wipe out their competition, nail their perfect customer and put their business in a position of dominance! He has been through it before in much bigger organisations and can help you with each step of the way to the success you’ve been dreaming about! Email: [email protected] or call 0457 555 787

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