How to Maximize Business Value

CFO Fred Burke shares five keys for value creation at custom manufacturer Hamilton Specialty Bar

Fred Burke grew up in the era of Tony Robbins. So Burke has lived by Robbins’s philosophy of CANI, or “constant, never-ending improvement.” The ideology preaches that just by making one small improvement a day, in the space of a year, people can make huge changes in their lives, business, and relationships.

1. Identify the challenge

Fred Burke joined Ontario-based Hamilton Specialty Bar 2007 Inc. (HSB), a manufacturer of specialty steel-bar products, with immense opportunity. Burke was tasked with leading its finance function, enhancing its reporting processes, and identifying opportunities to innovate and maximize company value and earnings before interest, taxes depreciation, and amortization (EBITDA). Canadian steel-industry financial results had suffered greatly due to the 2008 global recession, increased international competition, a weak US dollar, and rising pension obligations. The five-year span of 2007–2012 “was a very tough time to achieve profitability, not just for HSB, but for all steel businesses in Canada,” says Burke, the organization’s CFO.

2. Get involved and learn the business

Prior to joining HSB, Burke spent most of his 30-year career in the food-manufacturing-and-distribution business. According to Burke, the CFO function is easily transferable, but coming into a new industry sector, he had to ask questions and listen intently to the management team in order to understand where actionable opportunities existed. Those questions allowed him to identify business opportunities that had been previously unexplored. “I really feel because I accepted this CFO role with no prior steel-industry knowledge that I was able to make a significant impact and uncover incremental value in this business,” he says.

3. Be fearless in confronting challenges

Every industry and business goes through cycles, and Burke has learned that you can generate maximum and lasting value for a business when it’s close to the bottom of its current cycle. That’s why he left the security of a large multinational, Mars, Inc., to join a small, privately owned company that was close to bankruptcy, Renée’s Gourmet Salad Dressings. “I had enough confidence in myself that the finances of the business could be fixed if the product positioning was correct, and that was apparent with Renée’s,” he says. “The business had an innovative, growing, well-positioned product line with solid brand presence.”

Burke worked with the company’s owners and management team to refinance and restructure the business within his first 12 months. Through a combination of effective planning, debt forgiveness, and supplier support, the company’s finances were put back in the black, which then provided the opportunity of going public and raising significant capital without giving up majority ownership. This move allowed the business to pay down its debt, support exponential growth, compete with larger multinationals, and acquire other strong brands.

4. Go with your gut

Over the years, Burke has learned that if something doesn’t feel right when analyzing a business operation or financial report, especially if restructuring or refinancing is required, one can’t ignore it. “I’m willing to dive deep into areas other finance executives may not want to go, to identify opportunities when they’re manageable,” he says. Burke starts by analyzing the historical financial statement presentation and determines if and how the results can be restated in a way that allows him to compare industries or improve EBITDA. “When I identify a specific cost centre that doesn’t align with the industry, my gut then tells me there’s a potential opportunity to create incremental value,” Burke says.

5. Make business projections a high priority with management

“Placing a high priority on forecasting not only better mitigates business risks, but it is integral to creating incremental value in any business,” Burke says. He advises CFOs to work toward a process that allows the finance team to close the books within the first week of each month so that the team has the remainder of that month to analyze and complete sensitivity analysis for the remaining year. For example, Burke explains that for HSB, “utility costs are one of three primary input costs to making steel, and those expenditures can fluctuate dramatically based on market, weather conditions, and peak-demand periods. By closely monitoring, forecasting, and analyzing utility variances with the assistance of our engineers and brokers, we have a much better handle on when and how to hedge purchase transactions that mitigate major business risk and create value.”