Stability In Uncertain Times

TerraGo is a venture-backed, geospatial software company that delivers a wide range of applications which help organizations consume and collaborate with geospatial assets in a connected or disconnected mobile environment. The company’s clients include every Federal-Civilian agency in the U.S. government, several intelligence agencies and all branches of the U.S. armed forces. The company also works with hundreds of state and local governments as well as public safety, utility, energy and natural resources organizations around the world.

Challenge

Like many venture-backed startups, the company invested heavily in people and infrastructure before the economic downturn which began in 2008. Poor execution, economic forces and over-building had taken a toll on the company when the board made the decision to hire a new CEO. With the company’s cash reserves depleting rapidly, management focused its efforts on dramatic cost reduction, operational execution and raising additional capital. At a critical stage in its fight for survival, the company was suddenly faced with the unexpected departure of its VP of Finance and Controller.

The problems in the Finance department were already prevalent before the exit of key personnel. With a skeleton staff in finance, receivables were growing and were straining cash flow. Financials were not being produced in a timely manner, so the CEO not only lacked visibility into historical financial performance, but also where the company was heading.

“We called AcuityCFO”, said Rick Cobb, CEO.  “They had a terrific reputation and were highly regarded as extremely ethical, professional and experienced. They provided a timely and reliable team that was higher in caliber than anything we could have acquired on our own. The quality of our financial organization increased tremendously and did not cost any more than it would have for us to hire direct employees.”

Solution

To address its challenges in finance, the company engaged AcuityCFO not only to provide stability, but ultimately to provide more visibility and transparency into the financial operations of the business.

We went from zero to first-class in finance with one quick move. Overnight we had an experienced team in place and were able to start working on solutions.

The first step in this process was to get a handle on where the company was operating from the standpoint of profitability and cash flow. This included establishing a standard set of month-end close procedures and implementing a 5-business day close cycle.

The next step was to develop a reliable operating and cash flow forecast to anticipate where the business was heading. AcuityCFO was able to utilize it’s SONAR tool to provide a view into expected future profitability and the impact on capital structure and cash burn rates.

Improving and extending cash flow was a critical strategy for the company to get through the recessionary environment. By implementing a proactive collections strategy, DSO (Days Sales Outstanding) was reduced from over 100 days to under 40. Similar improvements were made through direct cost reduction, including the re-negotiation of the office lease, saving the company nearly $100,000 over a 12-month period.

“They were very clear communicators and their background allowed them to understand my situation almost instantly.”

The turnover in Finance was a huge disruption during a critical time  the company was negotiating Series B financing as well as a new line of credit through a venture banking partner; instability in the Finance department was not a welcome sign to the investors or the bank. AcuityCFO successfully led both initiatives through to successful, timely closing. Acuity later led an over-subscribed follow-on to the B-round a year later, a round which included all existing investors, a new venture capital partner and two major strategic investors. Along the way, they also upgraded the back-office infrastructure, positioning the company for scalable growth.

Result

By engaging the AcuityCFO team, TerraGo obtained a highly-competent, well-functioning Finance organization literally overnight. Instead of struggling for survival and lacking visibility, the company is well capitalized and the CEO now has a clear understanding of the company’s financial performance, both historically and prospectively. Armed with financial confidence, the CEO now has the ability to make decisions that drive business growth.

“We treat the AcuityCFO team as  for all intents and purposes, they are – TerraGo management when they are here”, Cobb shared. “They’re not just a great value and resource when things are going poorly. When things are going well, you’ve got a team that brings best practices and has a bench behind them comprised of people who are trustworthy and have some of the best expertise in their field. I see them playing a strong role with TerraGo for the foreseeable future.”

In the two years since AcuityCFO became part of the team, TerraGo has more than doubled their revenue, dramatically improved earnings, and is now positioned for sustainable growth.