A CFO brings high-level expertise and strategy to an organization. A CFO’s primary role is to elevate financial strategy, streamline operations, trim fat, and maximize sustainable growth. But how do you know if your company is ready for a CFO?
How do you know if your company is ready for a CFO?
The easiest way to know if your company is ready for a CFO is your company’s growth. If your company is generating annual revenues of over $4-5M or have over 30-40 employees, your company most likely needs a part-time CFO. You should not require the services of a full-time, in-house CFO until your revenues are above $25-40M and your number of employees is over 150+.
Hiring a full-time, in-house CFO is expensive. Full-time salaries are high for an experienced CFO, sometimes reaching near or over $200k, depending on your location. In addition, full-time CFOs will be subject to benefits and bonuses that drive additional costs for the business. Until you have an actual need for a full-time, in-house CFO, this can be a financial burden your company may not yet be ready for.
For these in-between stages, the smartest decision a company can make is to hire an outsourced part-time CFO. This eliminates the costs of benefits and bonuses, reduces the annual financial burden by as much as half, and ensures a higher level of expertise than you could expect by hiring an in-house part-time CFO (usually a low-level CFO just dipping their feet in the water) or relying on a Controller or CPA for high-level financial strategies.
4 Additional Signs Your Company is Ready for a Part-Time CFO
However, regardless of company size, if your company is experiencing any of the following symptoms then it is time to consider hiring a part-time CFO:
1 – You don’t have easy answers to your questions
How easy is it for you to make financial or strategic decisions? Most major business decisions require detailed financial knowledge. If your current accountant or financial team is unable to give you the detailed information you need to make important or strategic decisions, it may be time to hire a part-time CFO. A CFO’s primary goal is to make sure your company can engage in a higher level of strategy for sustainable growth. Strategy first and foremost requires access to the answers you need to make educated decisions.
2 – It feels like your company is hemorrhaging money–but you’re not sure from where
If it feels like your company spending is out of control and you’re not sure which costs to cut or how to make those cuts, then it may be time to hire a part-time CFO. While the age-old adage of “you have to spend money to make money” is somewhat true, the key to success is strategic spending. Strategic spending often takes financial analysis, projections, and checks and balances that most executives simply don’t have time for.
Having your cash flow analyzed by a CFO can often be one of the most beneficial moves your company can in immediate financial impact. Not only will a part-time CFO help to eliminate unnecessary spending, they will also have extensive knowledge in benchmarks and will have vendor relationships or knowledge that can optimize your existing spends and help keep you competitive in your market.
3 – You’re raising capital – especially if it’s a series C or later
If you’re raising capital, you may want to have the help of a part-time CFO. This is especially true if you:
- Aren’t sure how much you need to raise
- Don’t have a strategy for the right debt-to-equity ratio
- Are raising a series C or later
A part-time CFO will have extensive experience raising money for companies in similar lifecycle stages and industries. In addition, they will already have the relationships and credibility that can help you achieve your goals. Part-time CFOs not only help determine the right type of financing to acquire (and how much), but they also help answer tough questions during due-diligence, analyze and negotiate contract terms, and can attend meetings to help provide financial expertise and insight.
4 – You have gaps in your AP or AR
If you have significant gaps in your accounts payable or accounts receivable, it may be a sign that something within your systems is out of whack. Are there cash flow issues that need to be addressed? Are there ineffective billing, collections, or payment processes? A part-time CO can help you pinpoint the problem and develop solutions to resolve it.
5 – You feel like your departments lack checks and balances
If it sometimes feels like your other departments are operating on a different planet—or acting autonomously—then it may be time to call in some reinforcement. A successful company requires all pieces of the machine working together smoothly and effectively. If your systems don’t work well together (or at all), then a CFO can help. Far from simple number-crunchers, CFOs are experienced in the operations and systems that go into an effective organization. From sales and marketing to purchasing or manufacturing, your CFO can help you optimize each department and bring the systems together for a more functional, cohesive whole.
6 – Your Board of Directors is asking tough questions
If your board is asking questions that you don’t have the information to answer—whether that’s identifying a problem, addressing a problem, analyzing an opportunity, or validating a decision—then you may want a CFO to help give you the information you need. A CFO can help answer tough questions and can help empower you with the high-level financial knowledge you need to discern your own answers.
7 – You don’t have a long-term financial strategy
When your company first started or raised funds for the first time, you probably put together a financial forecast. However, it’s also highly likely that this forecast has rarely (if ever) been looked at since, let alone revised and kept up-to-date. A part-time CFO is pro at making educated financial projections based on your historical data, industry trends, and data from companies in a similar lifecycle stage. If you don’t have a long-term financial strategy—or not one you feel you can have confidence in—then a part-time CFO can help you create a realistic financial blueprint to help you achieve your goals.
How can we help?
Are you interested in learning more about a how a part-time CFO can help take your business to the next level? Preferred CFO is one of the most experienced outsourced CFO firms in the United States. We’ve helped hundreds of companies accelerate their growth and success while building strategies that help them reach their financial goals–faster. Talk with a CFO today by contacting us via our website or by calling (801) 804-5800.
About the author
Michael Flint, CFO
Michael Flint is an experienced CFO with over 20 years in financial management. His expertise includes budgeting and forecasting, business process and systems improvement/automation, and technical accounting compliance. Michael is a VentureCapital.org Mentor and holds a Master’s in Accounting from Brigham Young Utah.
Deciding whether and when to sell your business is a significant and complex decision that should not be undertaken lightly. If the timing is right, the offer is right, and the necessary work is done correctly, selling your business can be highly beneficial. However,...
12 Things Investors Look for in an Investment Opportunity Being funded by a VC fund has been glamorized in the past 10 years—and it’s no wonder why. Venture capitalists not only provide funding for young and innovative businesses, but also bring a partnership with...
Business growth requires both organic and inorganic growth. Each method carries its own set of advantages, challenges, and implications for the trajectory of a company. Whether you are a startup or established enterprise, understanding the dynamics of organic and...
This episode of Management Development Unlocked marks the 50th episode! Eric’s guest is Tom Applegarth. Tom’s entire career has been spent in human resources at multiple companies, both big and small. Today, he is the Vice President of Human Resources for Preferred...
Recognizing Cash Flow Problems & How to Solve Them We know that the majority of small businesses fail within the first five years, but a study by Jessie Hagen, previously with U.S. Bank, drilled down into the reasons why this occurs. In her study, she found that...
In today's dynamic business landscape, having a strategic financial perspective is more crucial than ever. However, not all businesses can afford to have a full-time Chief Financial Officer (CFO) on their roster. Many choose instead to utilize virtual CFO services – a...