Interview with Brad Denton of Trident Financial

BizPlanIt recently spoke with Brad Denton, Principal of Trident Financial. Mr. Denton serves as an Interim, virtual CFO for several high growth companies in the Southwest and West Coast. For additional information about Trident Financial, please contact Mr. Denton at hbdenton@msn.com.

BizPlanIt: Thank you for your time this morning. Please tell us a little about your current company, Trident Financial.

Denton: Trident Financial is an LLC that I recently formed for the purpose of providing interim, outsourced CFO services to small and mid-sized companies. The CFO services we provide run the gamut from helping a client put together an appropriate capital structure, to raising capital, to the things a CPA would do, including all the way down to the nuts and bolts of getting the accounting and financial systems put in place.

BizPlanIt: What are the primary differences between a CFO and a controller within most companies?

Denton: That is a really good question. Most people are not familiar with the differences that separate the duties of a controller to those of a CFO. Everyone pretty much knows what a controller’s function is - to oversee the entire accounting function of a company. The difference between a controller and a CFO is that the CFO gets more involved in the capital formation, the financial structure, the debt equity mix, as well as every aspect of a company’s capitalization. The CFO takes a more macro perspective of the business, often getting heavily involved in both the finance and operational functions of a company.

BizPlanIt: As a company grows, at what point is it appropriate to bring on a CFO?

Mr. Denton: There is no right answer - every company is unique. There are companies that are pre-revenue that would need a CFO. There are also companies that may have $50 million in sales but because their operations, growth plans and capital structure are very rudimentary, a good controller is more than sufficient. But, I do think to the extent that you have venture capital money, you are doing a private placement or you have the potential for an IPO, it would be appropriate to have a CFO.

BizPlanIt: How did you get into this type of work?

Denton: Steady progression in my career. I started out as a CPA with one of the Big 5 Accounting Firms. I received my MBA and went to work on Wall Street as an investment banker. After moving back to Arizona, I have been the CFO for three companies.

BizPlanIt: What are some of your thoughts on the current status of the venture capital market?

Denton: I don’t care if we are in a depression, recession or in absolute boom times like we were from 1998 to 2000, if a deal makes sense it can get funded. There are a lot of VC’s out there right now sitting on hundreds of millions of un-deployed dollars that they want to invest in the near-term. Their investors do not want treasury returns on this idle cash. This is risk capital that must be deployed into operating companies. As a matter of fact, one of the VC's from my last endeavor is sitting on a half a billion dollars of un-deployed capital. To the extent a deal makes sense the money will always be available.

BizPlanIt: In terms of the business planning process, what are some of the most important things you include in the business plans you present to investors?

Denton: I might not be the very best person to ask because of my analytical CPA background. I like diving into the financial statements and assumptions, and I am probably not normal in that regard. What we did when I raised 2 rounds ($41 million) of VC capital was put together a concise business plan, about 20 to 25 pages and then also prepared a very detailed, quite lengthy supplement. Most investors did not want the supplement, but those that requested it dug into it in a great amount depth. I think most people try and put everything into the standalone business plan. However, I think we had success raising money because we made it simple for the investors.

BizPlanIt: As an early stage company, what are some of the most important things to focus on when preparing financial projections?

Denton: Reasonableness. Most entrepreneurs tend to employ the hockey stick approach to financials that sophisticated investors put little credence in. This is most likely not reasonable. Presenting reasonable numbers helps provide credibility to the management team. Whenever I see numbers that show astronomical and exponential growth, it often raises questions in my mind.

BizPlanIt: What are some of the main differences between how an investor looks at financial projections versus how a CEO or CFO might look at them?

Denton: Investors usually begin by looking at the top-level numbers and then drilling down into the details. As a CFO, I would do the exact opposite starting from the bottom or the details and working my way up to the top line. I always start with the assumptions behind each of the business drivers and then build up into the top-line numbers.

BizPlanIt: What are your thoughts about including valuations within a business plan?

Denton: My best advice is to leave the valuation open by not presenting it within the plan. Have it prepared, but don’t present it in the plan. It becomes critical during the pricing negotiations with investors.

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