Once upon a time, the only way to own a car was to buy it. Then leasing offered car buyers another option, giving them a way to save money on a monthly basis as well as the ability to test drive the car to see if they wanted to purchase it at the end of the lease.
The buying framework in the art world is changing, too. Leasing art is now a new way to test drive expensive paintings. Prospective buyers can hang the painting in their home or office and see if they like it before writing a check. Art owners like the leasing idea because it gives them a new source of revenue that wasn’t available before, according to Ian Peck, president and CEO of Fine Art Lease in Manhattan.
The Internet has become a virtual showroom. Museums and private collectors have a way to showcase their art without having buyers troop through their warehouses or homes. Buyers, the majority of them corporations, can let their fingers do the walking to select what they want. Fine Art Lease, a dot.com company in Manhattan, has created an interactive art marketplace using the Internet. It has a searchable database of paintings and sculpture ranging from the Renaissance to the present. Buyers can either lease the art for as little as a day or purchase the art outright.
Fine Art Lease even has financing packages available. In addition, it can facilitate sale leasebacks, which allow an art owner to sell his art and enjoy it, too.
Staffers are available to help art lovers assemble their own collections. Even the delivery people are skilled art experts. They will hang or install any purchase for the buyers if they wish.
Outsourcing The CFO Function
This new company, which started in March 1999, is composed of artistes who see things in broad brush strokes. They realized they didn’t have the mindset to crunch the numbers. So the executives hired an accounting firm to fill in the revenue projections for its business plan.
This relationship didn’t work out. The unhappy experience caused the executives to decide it would be better to outsource all its accounting and back office functions. Fine Art Lease selected Martin Geller, a Manhattan firm specializing in accounting outsourcing services.
The outsourcing decision centered around the realization that Fine Art Lease did not want to hire its own chief financial officer in the beginning. Instead, during the formative stages, the clicks and mortar company decided to let its outsourcing supplier provide a CFO on an “as needed” basis. Whenever Peck needed to discuss projections at an investor meeting, Martin Geller sent one of its accountants to make the presentation. “Martin Geller’s accountant was able to answer all the questions from the venture capitalists,” Peck reports.
Cost was a factor in the choice to outsource. Peck says outsourcing the CFO function allowed the company to use its scant cash to get its core business going. Outsourcing gave the new company more flexibility with limited capital. “There were no additional costs on the front end,” he says.
But the tight job market was another factor in this carefully chiseled decision. “Even if money were not problem, we couldn’t have found the right person instantly. But that didn’t change the fact that we did needed CFO services right away,” Peck explains. It was “safer” because the additional time gave the company time to canvas the market and increase the odds of finding the right match.
Outsourcing the CFO function also made sense because Fine Art Lease didn’t have enough work on its palette to keep its own financial executive busy full time while it was assembling its art collection and building its Web site, which went live January 1, 2000. The only assignment for the CFO at that stage was to help the company approach the capital markets to raise money.
Providing Breathing Room
“Outsourcing the financial function gave us the breathing room we needed. It was like using an elephant gun to kill a mouse,” says Peck.
Now that the company is exhibiting a colorful Web business, it decided to hire its own CFO. Having an in-house financial officer became important as the company faced its next round of financing. It is certainly a necessity if the company considers an initial public offering.† “Having your own CFO adds credibility and gives you an air of professionalism,” says Peck. But the company still prefers to outsource all other financial functions to Martin Geller.
Peck meets with his accountants every three weeks. He established no formal metrics, so the two parties discuss the progress and any problems. “We look to them to help us,” says the art dealer. Peck says “outsourcing gave us more bang for our buck.” Color that decision green.
Lessons from the Outsourcing Primer:
- Outsourcing allows young companies to be more flexible by conserving their cash.
- Outsourcing provides small companies with a Chief Financial Officer on an “as needed” basis.
- Outsourcing helps start up companies deal with potential investors.