When to hire a start-up CFO?

Companies often ask “Do I need a CFO?” and if so, when do I need one. In many cases, they are too streamlined to hire an employee for the sole CFO role as such a start-up CFO is an alternative!

A start-up CFO benefits your company greatly in many ways. Your businesses can benefit in the following ways:

  • Cost savings on salaries (average full-time CFO salary $250,000 or more)
  • Independent and fresh viewpoints due to deep experience in diverse areas of businesses
  • Financials advice such as how to better price products/services and manage cost
  • Efficient accounting systems to streamline processes resulting in cost savings
  • Precise and professional financial statements which are critical for business performance reviews
  • Fund capital improvements through cost-cutting strategies

You must be thinking since a start-up CFO provides so many benefits to businesses when should I hire one? Well here are a few ways you can access if it is time for your company to hire a start-up CFO.

Complexity of business

A key question to ask yourself is whether your business is complicated. A simple business that sells one product to a small fixed set of customers probably does not require a start-up CFO. However, if your business involves multiple products sold through various sales channels to multiple customers in several geographical locations – it is considered complex! Such businesses would thoroughly benefit from a start-up CFO, if they do not already have one.

Lack of capabilities

Demand for goods and services are driven by a need. If your business cannot perform the roles that CFOs provide then there is an evident need for it. In most start-ups, manpower is very streamlined as such CFO roles are often neglected due to the high cost of hiring a full-time CFO. However, CFO role such as bookkeeping, financial planning and advising is especially important for start-ups. Therefore, if your business lacks such crucial capabilities, it is highly recommended to consider hiring a start-up CFO.

Size of company

As your company grows in operations, headcount, sales or in any other metrics, its financial needs naturally become more complicated. An important metric to consider before hiring a start-up CFO is the headcount of your company. In some countries, reaching a certain headcount of employees requires the company to hire a CFO by law. In another context, a team of 20 is a ball-park figure to estimate when you should strongly consider hiring a start-up CFO. A CFO will assist your business in pay-roll and cost-restructuring. Redundant and inefficiencies can also be pointed out by the start-up CFO to reduce headcount or change operations to increase efficiency and profitability.

Growth stage of company

A start-up CFO’s role is considerably more strategic. It not only handles the basic financials of your business but acts as a consultant by taking up responsibility of company’s profitability. Hence, understanding where your company’s growth stage is currently at will aid in deciding to hire a start-up CFO. In cases where your company is planning to expand, raise funds, consider new product introduction, a start-up CFO will greatly support your company in your growth plans. As many start-ups are either in the rapid growth stage or preparing to enter this stage, prudent financial planning and advise is extremely beneficial. Therefore, a start-up CFO’s experience in managing finance cost, projections and market intelligence will be pivotal to your company’s growth success at a fraction of cost.

Preparing for mergers & acquisitions

Mergers and acquisitions is another good indicator that a business should hire a CFO. A start-up CFO will provide advice on the correct target company that will provide cost and revenue synergies after the deal. Furthermore, a CFO will be the best person to interpret due diligence reports by the prospective company in the deal. Additionally, a CFO can represent your company in preparing information and anticipate questions that industry experts will often ask; something a layman might not understand. If your company is considering any M&A deals, it is highly recommended to hire a start-up CFO to aid in your decision process.

Financing needed to facilitate growth

Bank financing is often obtained to facilitate growth and such loans often come with many obligations. These obligations go beyond the basic paying of interest and principal such as reporting of financial information on a monthly, quarterly or yearly basis. In such cases, a start-up CFO can deal with such pertinent issues that are not of utmost importance to your business’ progression. A start-up CFO will keep track of such obligations to ensure no hiccups occur as you focus on growing and improving your business operations.

 

Understanding the need and timing of hiring a start-up CFO is crucial for start-ups to strive in this ever-competitive business landscape. By understanding certain key indicators such as size and growth stage of your company, you can better evaluate the need for a CFO.