A helping Hand of Financial Expertise – The Fahrenheit Story
It all started over a few beers.
Investor and entrepreneur Karen Booth Adams told two of her business contacts, Keith Middleton and Rich Reinecke, that they really should sit down together. She said they might be partners for a financial consulting and recruiting business.
“Karen suggested we meet and determine if we could be business partners, and she said that should take at least two beers,” Reinecke said. “So, we had our introduction at Champps (Americana restaurant) at Stony Point over happy hour. Two beers, nachos and wings.”
At the time in late 2009, Middleton was senior vice president and chief financial officer at Performance Food Service, a unit of Goochland County-based restaurant supplier Performance Food Group. Reinecke was the owner of Career Quest LLC, an accounting and finance search and staffing firm he started in 2002.
Those beers led in January 2010 to the creation of Fahrenheit Finance, a fractional finance firm that has in recent months moved aggressively into strategic consulting and financial development for startups and midsize companies.
Fractional finance companies send their employees to work for and at small or midsize businesses on a partial basis, anywhere from a day or two a month to five days a week. Those employees provide everything from basic bookkeeping services and financial reporting services to high-level financial planning assistance and restructuring.
A growing number of small- and midsize-business owners, many of them entrepreneurs, are looking for more than bookkeeping services, experts say.
Fractional finance companies, which have grown in numbers during recent years, offer businesses high-powered financial expertise without the immediate cost of bringing in full-time employees who have backgrounds in public accounting and larger corporations.
“Fahrenheit and other firms have discovered that the owners of small to midsize businesses are pulled in so many directions and may not have the time or expertise to effectively oversee the financial part of the business as it grows,” said Richard Coughlan, senior associate dean at the University of Richmond’s Robins School of Business who also heads the school’s MBA program.
“These fractional executives often arrive with considerable experience in other businesses that allows them to offer strategic guidance to owners and CEOs, especially in businesses that have taken on outside investors or engaged in fairly complicated transactions with banks or financial institutions.”
When Middleton and Reinecke began the firm, Reinecke said they had not really heard the term “fractional” used as it relates to a consulting firm.
“However, it really resonated as we described the work we wanted to do with our clients and how they would interact with our fractional CFO and controller team,” Reinecke said.
Individuals and certain firms have always provided part-time accounting or CFO support in one way or another, he said. “With the continued increase in startups and middle-market firms looking for ways to survive or grow since the downturn, it appears that the fractional model has really found its way in recent years.”
The fractional accounting and finance practice was not specifically stated in Fahrenheit’s original business plan, Reinecke said.
“But ironically, our first client needed a part-time CFO/controller,” he said. “We then quickly realized the large opportunity in the Richmond marketplace with early-stage and middle-market companies that needed sophisticated financial leadership.”
Fred Moore, the founder and chief executive officer at Richmond-based Big River Advertising, got to know Reinecke through the Virginia Council of CEOs.
The relationship they developed made Moore confident he could trust Fahrenheit to handle his company’s most sensitive financial information.
“We’ve gone through tremendous growth here and are reaching a new stage,” Moore said. “Eventually, we will have our own internal finance team, but it’s been great to have (Fahrenheit’s) experienced people. They are a bridge to where we want to be as we go through the growth.”
Big River has grown from nine employees to more than 30 in the past four years.
The agency has used Fahrenheit for accounting and chief financial officer services, and Moore also used Fahrenheit’s senior managers as sounding boards on management issues, such as employee pay and business structure.
“We want to make the structural decisions wisely, and by working with them, we have the luxury to decide where we need to go in a thoughtful manner,” Moore said.
Fahrenheit shifted gears to provide more financial consulting services.
This fall, it hired Dave Bosher, a veteran financial expert who served as CFO at high-growth Richmond businesses Cadmus Communications, Payerpath Inc. and Snagajob.
“I’ve had big company experience, been through an (initial public offering) with Cadmus and then two high-growth companies where I helped young CEOs build a business,” Bosher said. “That’s what I want to build a practice around now – helping scale businesses and being an adviser.”
Reinecke said Fahrenheit plans to deploy Bosher as a strategic adviser, pairing him with the company’s accountants, controllers and CFOs.
“I’m going to help with business decisions, systems and processes, and where to deploy capital,” Bosher said. “These high-growth companies often require someone who has been there and done that.”
That’s the situation Snagajob founder Shawn Boyer found himself in during the summer of 2006. Boyer, then the CEO, asked for Bosher’s help as the online hourly job-search company sought its first major round of venture capital investment.
When the venture capital process was completed, Bosher joined Snagajob as CFO, serving until this past summer, shortly after Boyer stepped down as CEO and became the company’s chairman.
During those seven years, Snagajob’s revenue grew to more than 10 times the 2006 figure, and Bosher helped lead two more rounds of institutional investment from venture capitalists.
“If you get a good CFO, they help you create the financial blueprint for a business,” Boyer said. “Dave helped me think about the model to really scale the business. That makes you look at market opportunity … and think about what revenue model needs to look like.”
Bosher also brought the experience needed to develop the infrastructure that allows a business to quickly add employees and clients, Boyer said.
Having someone who had been through past meetings with venture capitalists was critical, Boyer said.
“He really helped us through everything from modeling to telling the story of your business,” Boyer said. “And on top of being a very good CFO, he is just an extraordinary person and a really good friend. We talk all the time. I’m a big fan of his.”
Bosher came to Snagajob from serving as CFO of Payerpath, a health care-claims clearinghouse. The business was bought by a North Carolina firm in February 2006 for $49 million after experiencing rapid revenue growth.
“I’ve spent the past 10 years learning to help people with rapid growth,” Bosher said.
But despite working with two high-profile startups, Bosher said he has been surprised to discover how much was happening in the local startup sector.
“In the past five or six years, I have been so focused on Snagajob,” he said. “When I joined them in 2006, there wasn’t much other startup activity.”
Central Virginia has struggled at times to attract investment capital. West Coast venture capitalists are always leery of investing in a business that’s 3,000 miles away, but Bosher said that the anxiety can be conquered with a compelling business case and story.
“I think the bigger issue is the availability of talent, especially on the product-development side,” he said.
In Bosher’s prior roles, he served on the operational side of companies.
Serving on the consulting side – coaching a CFO rather than acting as one – is a challenge Bosher said he is looking forward to.
“We have a relationship-driven approach, and we focus on bringing expertise back into companies,” Middleton said.
Adams said she suggested Middleton and Reinecke get together for those beers because she thought they had complementary skill sets: Middleton’s finance background and Reinecke’s recruiting expertise.
“When starting a solutions-based consulting business, it is a tremendous asset to have someone with a recruiting background that really understands the staffing and services side of things,” she said.
Fahrenheit has grown, now employing 25 professionals who work as CFOs, controllers and accounting managers.
About a quarter of Fahrenheit’s business comes from doing actual accounting work, Reinecke said.
“We are not a licensed CPA firm, although several of our employees are CPAs. We do not perform audits or reviews, but help many companies prepare for and lead the process with their CPA firm,” Reinecke said.
Adams said she also was excited to see Middleton’s business acumen spread to lots of local companies. Reinecke and Middleton bought out Adams and other initial investors in May 2012.
“Keith is a really, really smart business guy,” Adams said. “He has tremendous insight on a wide range of business models and problems, and he’s very creative at coming up with different ways to solve those problems.”
John Austin worked closely with Middleton at Performance Food Group.
Austin spent six years as the food distributor’s chief financial officer, and Middleton was the company’s controller during much of that time.
When Austin became CFO of The Chefs’ Warehouse Inc., a Connecticut-based specialty food products distributor that went public in 2011, Middleton was a natural person to call for help.
“I already knew he was very sharp, and there was a trust and a knowledge of his capabilities,” he said.
Middleton consults with The Chefs’ Warehouse on issues related to the Sarbanes-Oxley Act, which governs accounting standards for public companies. Middleton was a key player during Performance Food Group’s initial work on Sarbanes-Oxley compliance, Austin said.
Fahrenheit’s accounting employees also work at several The Chefs’ Warehouse locations across the country.
Middleton said he and Reinecke feel blessed by the support they’ve received from other small businesses during the past four years and now want to return the favor with other companies.
“We want to try to put it back into that startup ecosystem,” Middleton said. “I spent eight years in Goochland (County) or an airplane (for Performance Food Group). I didn’t know what the startup ecosystem was because I never came up for air.”
Jacob Geiger is director of Work It, Richmond. He can be reached at firstname.lastname@example.org or (804) 649-6874.
Founded: January 2010
Headquarters: 1700 Bayberry Court in Henrico County
Top executives: Keith Middleton and Rich Reinecke
Ownership: Middleton and Reinecke (Karen Booth Adams was an initial investor, but Middleton and Reinecke bought out her interest in May 2012. She serves as an adviser.)
Number of employees: 25
Revenue: The privately held company doesn’t disclose financial results, but executives say the firm has been profitable since the third month in business and profitability has grown incrementally each year. Sales have increased between 20 and 95 percent annually.