The Case for an Outsourced CFO
On November 25, 2003 I met with Rick Alden for the first time – in his home in Park City, Utah where he had been running Skullcandy for about a year. His business was modest but his vision was anything but. As we talked in his living room that doubled as his office, Rick explained how the idea for Skullcandy came to him on a chairlift in Park City – he was listening to music when his phone rang. The existing technology required that he take off the earphones & turn off the MP3 player, find his phone and answer it in order to talk. Rick decided that there must be a better way and Skullcandy was born with a spliced earphone jack that could be used for a phone and an MP3 player at the same time and a switch to go between the two!
I never cease to be amazed at the creativity and persistence that always seems to exist within successful entrepreneurs and Rick possessed these characteristics in spades! One of my fondest memories of that first meeting was the revelation that Skullcandy’s accounting records were contained within his personal bank account which his wife, Holly maintained for them.
Once engaged, we helped Rick separate the business from his personal finances, start to track and better control inventory, purchasing and collections. Over the course of the five years that we were engaged at Skullcandy, Advanced CFO Solutions provided an outsourced Controller and CFO, helped the Company set up its first accounts receivable factoring line, secure equity capital from local angel investors, forecast cash flows and operational growth, and manage revenue growth of over 7200% – often exceeding 300% annual growth rates! We also helped Skullcandy secure its first traditional bank line of credit with Zion’s First National Bank, just months after completing its first profitable year of operations. While this was not an easy process, the most challenging aspect to the relationship occurred when just a few weeks after getting the line approved and in place, we called the Bank to request a $2 million over-line because Target unexpectedly decided to roll out the Skullcandy line in all stores instead of just 50 and issued a huge purchase order that we were afraid we could not fulfill. Zion’s came through after intense meetings and the rest, as they say, is history!
At Advanced CFO, we believe that an effective CFO, whether full or part-time, must thoroughly understand all aspects of the business and develop relationships with the executive team in order to become the Company’s strategic financial partner. I knew that I had accomplished this objective when I received calls from Rick at 9:30 PM to discuss important, strategic ideas or decisions. We worked well together, along with Jeremy Andrus, the COO who was instrumental in “keeping the wheels on the bus” during those haughty growth years. In the end, Skullcandy’s growth became too much for an outsourced CFO to handle so after discussing the need to replace me with a full-time employee and nothing happening because everyone was so busy running the business that no one had time to recruit and interview candidates, I decided to do it on my own – because it was in the Company’s best interest. Rick’s response when I presented him two great candidates for the VP Finance, was, “Kent, you can’t leave, you’re my “Rent-A-FO”. I did and Skullcandy continues to grow and innovate.
Kent Thomas is the Founding Partner of Advanced CFO. In that role he has served as the outsourced CFO of over 75 different businesses. Kent is a licensed CPA and recently served as the President of the Utah Association of CPA’s. He was a founding member of the Olympus Angel Investors and is active in the Utah entrepreneurial community where he advises companies, associations, and educational institutions and is a frequent speaker on finance, accounting and entrepreneurship. Kent is married to Kim Ericson – between them they have eight children and eight grandchildren. They enjoy running, hiking, water sports (especially Lake Powell) and international travel.