Our series on the growing OMB sector and unlocking the potential for shareholders has covered an overview of the market, getting the right people on board and planning the timing for an exit. We have been looking at all the considerations for a CFO joining an OMB for a growth journey this week.

These are often the opportunities that appeal to CFO candidates more than others – an immediate opportunity to add value to a business at a positive stage of their cycle; to work with advisers; and to be part of a successful transaction. There is an important list of other considerations for any CFO to consider. We spoke with Alexandra Fogal at EY for her advice first:

Alexandra Fogal is a Partner at EY and has been running EY Private in the North for just over three years now, having joined EY following a successful 17-and-a-half year Corporate Banking career with Barclays Corporate. EY Private looks after entrepreneurial businesses, as well as family, founder-run, PE-backed, AIM listed and fast-growth companies. Alex works with a diverse variety of clients in the private market on a daily basis, providing support on a wide range of business needs.

Alex has also recently joined the Equity Partnership at EY and is thrilled to be helping lead the business in the North, both externally and internally. Alex is passionate about making a difference; diversity, equity and inclusion; and supporting charities that are close to her heart - this is reflected in her work as Chair of Business Beats Cancer Yorkshire (Part of Cancer Research UK).

What is the current outlook for the high-growth SME market? Where are the positive stories?

Many successful high-growth SMEs appear to be focusing on scalability across markets, and while there are growth opportunities, ongoing economic headwinds are causing challenges too. Notably, market trends are changing very quickly, so it is integral for businesses to be able to flex and adapt their strategies accordingly.

The ability to streamline operations in an evolving market against a challenging economic backdrop can be invaluable. Many businesses are focusing on minimising the costs linked to their operating models while fostering innovation to ensure they stay lean, current and dynamic.

One of the most significant investments businesses will make is a new Enterprise Resource Planning (ERP) system, and it seems that many are currently either considering this or going through an implementation round now. These can be very costly, time-consuming projects and must be prepared robustly with a sharp focus on people and change.

Building strong relationships with customers is key – especially after the pandemic-related supply chain issues many have faced in recent times. Having these strong connections allows businesses to work flexibly and collaboratively with their customers. The EY Entrepreneur of the Year 2023 finalists represent fantastic examples of what can be done to foster and accelerate growth.

Some shareholders are sat on growth sales and EBIT numbers with their value stuck in the business – what is the high-level headline advice you see for shareholders in these situations?

It is always a good idea to plan early for any event, speaking to advisors in order to gain access into markets and share sector market intel. This way, a business can give itself the best possible chance of ensuring they stay current in line with movements in the market and expectations.

Having those early discussions helps to build appetite from the investor community and can also provide a useful sense check.

EY is working with many businesses who are in similar positions and planning for an exit event in the future. Businesses need to work through Due Diligence early, bring Environmental, Social and Governance (ESG) into the strategic conversations, and consider what additional value-add the business has so that the Equity story and positioning of that business are sound.

We are also seeing businesses focusing on the people element with numerous management incentive plans underway or in review at the moment, with a view to building future opportunities and ensuring they have the right team secured to take them forward as part of their next chapter.

Mark Overton is a CFO with an outstanding reputation in the North-East and is contributing to the amazing growth story of Phoenix to Retail at the moment (an introduction made by our team). Mark’s previous experience was largely in corporates, so it is interesting to share his experience of transitioning into the fast pace of an OMB:

Phoenix 2 Retail is an owner managed business and was only 2 years old when I was recruited as its first CFO. The business had only really been trading at the current levels for less than a year and the finance function had been fully outsourced.  Having previously worked in large corporates and established businesses, the first challenge was to establish the systems, controls and procedures that the business already had in place - not surprisingly, the business growth which was then at £15m per month had moved a lot quicker than the introduction of governance and controls.  A long list of actions was developed very quickly but it was really a case of setting the short-term priorities and developing a plan of action from there, alongside recruiting the new finance team from scratch.

What is most noticeable is how agile the company is and not only do decisions get made very quickly but those actions are also implemented very quickly - it becomes a challenge to understand and get control of what is happening without stifling the ability of the business to react.  Getting close to the CEO is a key factor, as the majority of decisions go through him. It is a challenge for him and the other senior managers of the business to make sure as CFO I am kept abreast of key decisions and actions.  A lot of decisions can be made without consideration for the cashflow impacts, so as CFO you have to make sure you are visible and at the centre of the decision-making process.

Saying all of this though, it has been a great experience to work in such a newly established business as everyone is like a sponge, they want to learn and suck up as much knowledge and experience as you can give them.

Look out for our next article coming soon.

Our team have a depth of knowledge & experience to advise shareholders. We can also introduce them to the right advisers and plan to ensure that they optimise their people plans to unlock their full potential. Please contact Nik Pratap if we can help you.