When To Hire A CFO For Your Startup
So you’ve got a new startup. You’re the CEO and you’ve got a partner and a small team. You are managing the finances of your business because no one else knows how to, but your only experience is from a few courses in college and many YouTube videos. How do you know when to bring on a finance team member or hire an outsourced financial services company? Here’s everything you need to know about bringing in financial help.
Why Your Startup Needs a CFO
According to an article on TechCrunch, the ‘old rule’ for hiring a CFO was to wait until the business reaches around $100M in revenue, or is preparing for an IPO. However, new best practices show that this is no longer the case for most startups. Nowadays, finance departments contribute more to the company than ever before. Once “bean counters”, CFOs are now expected to not only acquire and package the right data, but also to model, forecast, and strategize across the organization.
Because of these major changes in the finance department of all businesses, startups can especially benefit from hiring a CFO early. Because of the key role a good CFO plays in strategizing and planning, hiring early can allow your startup to take advantage of opportunities and avoid threats early on. This additional financial planning and analysis can be the difference between a failed startup and a successful one.
Hire Early, But Not Too Early
Working for a startup often means loose job descriptions and working in several different areas of the business. Many founders start by doing their books themselves, while managing the business. Dave Chase, CEO of Advanced CFO says,
“CEOs have to be honest with themselves in how they should be spending their time. If they could have a greater impact and provide more value doing something else, get out of the financials.”
As CEO of a startup, ask yourself, am I really contributing the most value by spending my time working through the financials?
While it is important to hire a CFO early, it is possible to hire too early. Because many startups are cash-strapped, it may be appropriate for a founder or other key team member to handle the finances of the business for a time. However, as Dave Chase recommends, once their expertise, experience and time is better used elsewhere, it’s time to bring on someone else. CEOs should consider their funding and make a decision based on the experience of their team and the expertise needed to succeed.
Explore Outsourced Services
Another great option for startups are outsourced CFOs. Outsourced CFOs are experienced CFOs who work on an hourly or fixed basis. Most do part-time, full-time, and interim CFO work, depending on your company’s needs. With the average CFO making a salary of $300,000+ a year, most startups don’t have the luxury (or need) to hire a full-time CFO.
Not only will Outsourced CFOs save you money in the long run, but you’ll also get access to experienced professionals who have worked with several other startups. They’ll be even more equipped to spot opportunities and threats, then to act accordingly. Hiring this way puts the experience of the experts in your hands, giving you the best bang for your buck.
Advanced CFO offers the full suite of financial services, from CFOs to Controllers and Bookkeepers. You can trust that your business is in the hands of seasoned veterans, ready to take your startup to the next level.
When it comes to your startup, hiring the right CFO at the right time is crucial. Once your time as a founder is better spent running the business, rather than managing the books, you should start considering hiring on a CFO. Whether outsourced or in house, a good CFO can be a game changer for your business.