Small business owners who thrive in their field of expertise—be that cooking, designing websites, or building houses—may still need a financial wingman to help grow their business.
Even if you are an entrepreneur with a head for numbers, hiring a Chief Financial Officer (CFO) can be a decision that does not just pay dividends, but completely reshapes the integrity and operational power of your enterprise.
Read on to learn more about the responsibilities of a CFO, and what the criteria is for when and how to find your own CFO for your startup.
Responsibilities of a CFO
A CFO is responsible for executing a company’s big-picture goals. While they typically report to the company’s CEO, they retain their own autonomy within the CFO works with all the branches of a company to ensure long-term success. This could look like advising the marketing team on a new campaign or helping the CEO with procuring funds for a new project.
CFOs not only possess finely tuned financial knowledge, a dexterous CFOs also possess a keen insight into how their industry functions.
Day-to-day responsibilities of the CFO typically include:
- Building financial models
- Working in a managerial role and attending numerous meetings
- Preparing financial statements
- Reconciling a company’s debit and credit
- Determining where to concentrate sales efforts
- Cash flow management
- Reviewing collections
- Sales forecasting
Given the importance of these responsibilities, many startups adopt a “do it all” mentality, only for their foundational structures to weaken as they scale. It is almost always budget restraints that keep a startup from bringing in a CFO, when utilizing one can often push the evolution from startup to an established business… which leads us directly to our next point:
When Should a Startup Hire a CFO?
According to Matthew Bud, managing partner of The Financial Executives Consulting Group, many companies do not hire a CFO because they do not want to spend the money.
“What many entrepreneurs don’t realize is that they’re already spending that money in lost profits and misspending,” said Bud in an interview with Inc. “They’re not seeing the dynamics of the business from an educated financial point of view.”
Many startups are also under the illusion that a company must be making a certain amount of money to warrant the need of a CFO.
But Bud claims that there is no specific revenue mark that a company needs to hit before hiring a CFO.
“Bring on your CEO when you need to do critical forward planning—when your business is up and running with many spinning plates, but you’re not sure where to take it next.”
Specifically, ask yourself the following questions when considering whether it’s time to hire a CFO:
- Is there someone supervising the finance team?
- Your finance team is the backbone (and fuel) of your company. But even the smartest and most independent fiance teams still need oversight. If there is no one in place to provide this supervision, you may want to invest in a CFO, one who will see to it that your team is performing at their highest capacity.
- How sophisticated is your financial reporting and interpretation?
- Like we have noted, CFOs possess a broad range of skills, not limited to the minutiae of accounting. The best CFOs are versatile, from keeping their knowledge of ERPs up to date to obtaining an MBA or some other form of higher education degree. If you have the accounting side of the business covered but need a more flexible, forward-thinking person to take the lead on developing your enterprise, then a CFO is the perfect fit.
- Are you having trouble raising capital?
- Raising capital is one of the key components when it comes to successful startups. If you find yourself in a “treading water” situation where you cannot seem to drum up any new capital, a CFO could help you take that extra step. CFOs are in the thick of data flow and they also must understand reporting requirements for banks and investors. This visibility helps you and the CFO craft a clear pitch to potential investors (you have the vision, they understand the language).
- Are you looking to expand into markets outside the country?
- Is the product or service your startup offers something that will thrive in markets outside of the U.S.? If so, it could be in your best interest to expand and fill these potentially lucrative niches. If you do not have a CFO, you may find yourself mired in the details of new operating procedures, tariffs, shipping costs, different country regulations, and more. A CFO will take on all of this responsibility and ensure that your company’s expansion is actually a smart investment for the long term.
According to PlayVS Gabi Loeb, his role as CFO looks like a (financially savvy) Robin to the CEO’s Batman.
“Generally, the CEO needs to focus on product, go-to-market, fundraising/investor relations, and talent acquisition,” said Loeb in an Inc interview. “I consider it my job as CFO to support these efforts in any way necessary and to help make the best decisions possible along the way.”
How to Find a CFO for a Startup
Once you have decided that hiring a CFO is in the best interest of your company, you will need to start your job search for the top candidates. You will have to decide whether or not your CFO will be outsourced, full-time, or part-time.
While CFOs can be an expensive resource—especially for startups just getting off the ground—do not assume that your company is not developed or big enough for a CFO.
“You can’t let yourself get caught up in the idea that they are working beneath their dignity,” advises Bud. “To work on a project where they see measurable results is a real pleasure and as long as they are being paid it can really work.”
When hunting for a CFO, ask yourself the following questions:
- Is this a person who will grow with the company?
- Can this person produce useful reports previously unavailable to us?
- Does this person believe in our mission?
- Is this person going to be an invaluable asset to the CEO?
To make your company more appealing to a veteran CFO, many startups think they need to woo one with an at-scale salary and equity compensation. What they fail to realize is that the CFO position has evolved well past the six-figure-making traditional role from previous decades.
Today, startups can outsource their CFO (sometimes even an entire team) for a fraction of the cost.
Find Your Next CFO with CFO Hub
Deciding whether or not to hire a CFO for your startup is an important decision, and one that should not be taken lightly. But when it comes to the hiring process and budgetary restraints of a startup, that’s where we come in.
At CFO Hub, we outsource contracted CFOs, controller services, accounting support, and financial consulting. We understand how critical chief financial officers can be to the long-term success of a startup, and we work with your budget and needs to position the perfect candidate. In fact, in many instances, we provide a “plug in” CFO that helps your business scale to a point where it necessitates the traditional, in-house role.
Ready to learn a bit more about what we can do for your startup? Reach out to us today!