Is My Business Ready to Hire a CFO?

 
The expansion and substantiation of the accounting and finance departments are clear indicators of healthy growth. However, there comes a tipping point where that division can no longer operate in a self-sustaining manner—even with the guidance of a financial controller.
 
As a company scales, its financial problems and needs correspondingly become more complex. When that happens, hiring a Chief Financial Officer (CFO)—a financial professional who can guide the company forward—becomes a matter of necessity.
 
But how do you know that you have reached that point? What are the signs that you are ready to hire a CFO?
 

CFO Hiring Indicators

 
Selecting the right CFO for the job is often a matter of timing. If you try to hire too soon, they may cost more than the value they can provide the business at that stage. But if you wait too long, you pay the opportunity cost of not having their expertise and guidance during critical decisions and key growth inflection points.
 
The most generalized sign that you should hire a full-time CFO is when your company is making $50 million in revenue. However, if you consider hiring a part-time CFO, you could start enjoying the advantages at a much lower revenue point—say, $1 to $2 million.
 
The truth is, the ideal time to hire is different for every business.
 
Factors like the industry, market, team, and growth opportunities will dictate when onboarding a CFO becomes imperative. That said, here are four common scenarios where having a CFO would be incredibly beneficial:
 

1. You Require a Financial Strategist

 
What truly separates a CFO from a controller or another leader comes down to their financial acumen, particularly in regard to strategy and forecasting. In their role, a CFO’s ultimate duty is to maximize shareholder value by deriving the highest possible ROI on capital and assets.
 
As the leader of the financial planning and analysis (FP&A) team, a CFO can work with analysts to review the business financial statements and then perform forecasting. This data informs future decision-making and strategically investing or reallocating funds.
 
According to Deloitte, a CFO can answer questions like:
 

• Are the company’s financial goals viable?
• What products and markets show the greatest promise of ROI?
• What is the best organization and structure for financing key investments?
• What structures or processes can help the company gain a competitive advantage?
• What financial reporting does management require to deliver on their job?

 
Armed with such data and insights, a CFO can then outline and install a financial strategy to guide the company forward.
 

2. Help with Fundraising

 
Fundraising is about financing growth and creating value over the long term to generate impactful ROI. Whether you need to acquire a bank loan, line of credit, or a cash infusion from outside investors, a CFO can help guide you throughout that process in several ways:
 

• Determining the cash needed – It is essential that you not only raise money but the right amount of money. A CFO can help you crunch the numbers to determine the company’s cash needs, whether you aim to secure a loan, Series A raise, or an IPO.

 

• Finding investors – A CFO can broker relationships and lean on their existing industry contacts to evaluate investment options, land meetings, and support the CEO throughout the pitch process.

 

• Handling due diligence – Companies must be careful about how much of the curtain they pull back when meeting with investors. A CFO can determine what data is relevant and what should be kept private. They can also double-check the financial modeling to verify that any data cleared for presentation is accurate and easy to follow.

 

• Compliance – Whenever new investors come on board, there is a spate of compliance issues that you must address. And this is especially true when a company goes public. A CFO can ensure that the business complies with all applicable rules and regulations.

3. Lack of Profitability

 
Is your company driving revenue but operating on slim profit margins?
 
That could indicate a misalignment within your cost structure, business plan, or consumer base. A CFO can bring financial insights a company needs to increase profits by maximizing cash flow, reducing costs, and shifting strategies.
 
According to Matthew Bud, managing partner of the Financial Executives Consulting Group:
 
“Many small businesses say yes to a new client, but don’t understand how to evaluate the costs associated with servicing that customer. A CFO can determine the cost structure of each new piece of business and—more important—what your company needs to charge to actually make money on the work you’re doing.”
 
One of a CFO’s primary responsibilities is to ensure the business remains sufficiently liquid and able to fulfill its financial obligations. As overseer of the treasury group, a CFO has ultimate visibility over both the company’s strong and weak points and can thus adjust strategy to address the pressing issues that inversely impact profitability.
 

4. Tax Oversight, Compliance, and Strategy

 
Despite the positives, growth and maturation increasingly complicate a company’s requirements for meeting financial and tax obligations. Failure to comply with the reporting rules and regulations can result in costly repercussions like:
 

• Fines
• Fees
• Business delays
• Legal issues
• Reputational harm

 
At the most basic level, a CFO has the accounting and financial expertise to ensure that the accounting department delivers accurate and prompt financial reports. But beyond that, forward-thinking companies rely on their CFO and tax teams to advise and consent. Per Harvard Business Review:
 
“Now tax teams are being called into action to help their companies navigate new territory, from partnering with HR to assess the impact of displaced workers and remote models, to understanding financial resilience… As stewards of how evolving tax policy will impact business forecasting and profitability—tax leaders will continue to play an increasingly strategic role with the C-suite.”
The right CFO brings financial expertise that surpasses baseline compliance requirements. They should also be able to leverage that information to determine how to create the most strategic value through optimally deploying their tax and analysis departments.
 

Hiring Your CFO

 
In the past, most companies wouldn’t begin asking, “Do I need to hire a CFO?” until they were making tens of millions of dollars in revenue, even if they were dealing with the issues above.
 
But that has changed.