What is the Role of a MicroCap CFO?
By Wesley Ramjeet, CPA
In today’s business world, it is more important than ever to find a capable chief financial officer (“CFO”). These leaders are responsible for the financial well-being of companies. While there isn’t a one-size-fits-all answer to finding the perfect CFO, there are several qualities that should be looked for in any potential candidate. In this article, we will discuss the qualities needed in a Microcap CFO and how they can help a company succeed.
A Microcap company is defined as a public company with less than $300 million in
market capitalization. Typically, they are undercapitalized and need capital for growth and expansion. The qualities of a microcap CFO are quite different than a fortune 1000 company as typically a microcap company has fewer resources to fill a complete financing and accounting team. As a result, the Microcap CFO has to wear multiple hats and pitch in to solve financial and operational issues.
A microcap CFO must be a great partner with the CEO to plan and execute the vision of the company.
The CEO lays out the vision and the CFO works on the planning to execute the vision. One of the most important points is how much capital is required to execute the vision and how to get the right capital to fund the vision.
Raising capital is a critical need for most microcap companies. A microcap CFO must be well versed in the different structures and impacts on the microcap company’s future. I have seen too many companies raise capital with toxic convertible features that decimate the company’s stock price and capitalization table. A microcap CFO must be able to navigate these toxic financings so that existing shareholders and management do not get blown up.
INTEGRITY AND TRUST
When you are responsible for a company that has a market capitalization of less than $300 million, there are a lot of things that can go wrong. The CFO must be the voice of reason and compliance. The microcap CFO must ensure communication with shareholders, management and other constituencies be truthful and above board. This means disclosing all relevant information, both good and bad promptly through appropriate channels. A CFO must have integrity and ethical values to be successful in this role. They must be able to make sound financial decisions that are in the best interest of the company, even if it means making tough choices. They must also be able to maintain high standards of ethical behavior and set an example for others in the organization.
In larger organizations, the CFO has an army of accountants and finance professionals that are responsible for all financial statement preparation, SEC filings, Budgets Technical Accounting Research, Reviewing Contracts, and signing off on payments. The larger company’s CFO has oversight but does not typically get involved in the details. A typical microcap CFO has to be able to dive into the details and has to deal with new pronouncements, drafting 10Ks and 10Qs, and be very involved with the external auditors and other issues without the resources of an army of accountants and financial professionals.
A microcap CFO is a critical member of the executive team and must be able to think strategically. They must be able to see the big picture and help guide the company in the right direction. They need to understand where the company is today, where it wants to go, and how it plans to get there. They also need to be able to manage financial resources efficiently and make sound financial decisions that will benefit the company in the long run.
A microcap CFO must have the financial acumen to be successful in the role. Financial acumen includes an understanding of financial statements, cash flow, and budgeting. The Microcap CFO is responsible for ensuring that the company has enough cash to
cover its expenses and that it is making smart investments with its money. Additionally, the CFO must be able to communicate effectively with investors and other members of the executive team about the company’s financial status.
To quote Neil Levine, Partner at Friedman LLP, “The CFO of a microcap company should provide qualified financial controls and guidance to help the CEO execute his business plan accordingly. It is very difficult to come back from hasty decisions in the eyes of the investors.”
Too often I see good Microcap Companies miss their SEC filing deadlines, take on toxic financing that leads to the demise of the company. A great microcap CFO is worth his/her weight in gold take the time to find a good one.
Wesley Ramjeet is the founder and CEO of PPMT Strategic Group, a consulting firm that provides Management and CFO consulting services. Mr. Ramjeet is the Founder and Chairman of MD Logic Health a nutritional supplements company. Mr. Ramjeet is also the Chairman of SNN, Inc a financial media company that covers the micro-cap market. Mr. Ramjeet received his bachelor’s degree in accounting from St. John’s University and is a CPA.
Email Wesley@ppmgroup.com www.ppmtgroup.com