The Genesis of the ‘Fractional’ CFO

 

Through junior high and high school, Jim Goode wanted to be just like his Uncle Jimmy, a war-hero fighter pilot in the Pacific during World War II who tragically died in a test flight during the war.

Goode, who planned to attend — and was accepted to — the U.S. Air Force Academy contingent on passing the physical exam, was a high school tennis star, so he knew he would easily pass physical exams and endurance tests from the Academy. Yet, he never even got the chance. An early screening revealed that he was red/green colorblind “It was a devastating surprise to me. All I wanted to do was fly an airplane,” he recalls.

The world, of course, works in mysterious ways. After attending UC Berkeley — and two services in the U.S. Army Security Agency — Goode transferred to UCLA, majoring in accounting. He graduated at the top of his undergrad and MBA classes and went to work for the Arthur Young & Co. (later to become Ernst & Young) as a CPA auditor for eight years in Los Angeles and San Diego.

For the ensuing 13 years, he worked as a full-time CFO for three companies in San Diego. It was there that he detected a need in the early-stage technology market: young, start-up companies couldn’t always afford to pay for a full-time experienced CFO, “but did they really need to?” Goode thought to himself. “What if a burgeoning company could contract the financial side of their business out on a part-time basis so it could concentrate on its product?”

It was 1985 and Goode was ready for “a new challenge.” He had just quit smoking when his father passed and he started running road races, first 5K’s and 10K’s, then marathons. He ran the Boston Marathon six times in a row, leading to triathlons and the completion of nine Ironman Triathlons.

His professional life was also at a crossroads too. “At the time, there were only two people in San Diego doing ‘fractional’ CFO consulting,” Goode notes. “I interviewed with them, but the pay grade was too low, so I thought, ‘ok, why can’t I do it on my own?”

So Goode started – what else? — The Goode Company. “I’ve been busy since Day One,” he says, touting the fact that he is “old-school” and doesn’t have a comprehensive website (a single web page lists his phone and email). All business is from referrals.

Up until the recession in 2008, Goode worked exclusively with venture capitalists on relatively larger companies, but after the crash, he opted to focus on early-stage mostly tech firms. “It was a completely different niche and approach,” he says.

Small, early-stage companies that “VC firms won’t touch because the funding required is often way too small for them” are some of his most intriguing and wonderful clients. Goode’s financing strategy (if appropriate for the client) is to structure, if needed, a two-stage financing consisting of Convertible Notes that optionally convert into a relatively small Series A Preferred financing round – then build the company into profitable operations and sell it.

“The terms of the Convertible Notes are very friendly to Note Holders,” Goode says. The target investors are High-Net-Worth SEC Individual-Accredited Potential Investors for the Convertible Note round and also the Series A Preferred round. “Upon a successful exit, investors can have an abnormally high return and the founder(s) also benefit by retaining ownership control of the business, if everything goes as planned,” he says. “The goal is to make sure that the founder(s) retains control for as long as possible.”

Goode’s seasoned eye for potential financial trouble makes him a valuable asset, particularly for new and early stage businesses. His successful fund-raising strategy is a function of active networking by all members of the client’s team to introduce the investment opportunity to high-net-worth potential individuals, no matter where they are located.

Securing funds is often the longest and hardest step for new businesses. “It is all about active networking,” he says. “The good thing is that when a potential investor is seriously interested, they usually bring in a friend or two: ‘Share the risk, share the reward.’”

Goode is currently working with five clients, helping them raise funding through his two-stage strategy. “These are our terms,” he tells prospective investors. “This is an opportunity, not an obligation.”

In today’s wildly complicated digital-driven world, thousands of financial and management consultants offer similar services, yet “I feel that I am amongst the best,” Goode says with glowing confidence. “I become a mentor to my clients. The most important thing is strategically formatting the client’s future finances by proactively having a protective approach for both the founders and the investors.”

His active involvement runs throughout all of his clients. He attends all management and board meetings – and he prepares all the financials and budgets and is actively involved in strategic management and growth decisions.

The proud father of two successful sons — and the grandfather of two young delightful granddaughters – Goode is still his own boss and his businesses’ only employee after 30 years. His clients range from the medical technology sector to an Ag Bio client, a young distillery that started by making award-winning vodka and a waffle company. “The diversity is intriguing and exciting,” he says.

Life may not always go as planned, but Goode has always found opportunities, even when it seemed that none existed. Now he’s helping young companies do the same. “It’s worked,” he says. “It’s worked very well.”

Copyright © 2019 California Business Journal. All Rights Reserved.