There comes a time in every business’s life when they need to hire a CFO. But what are the specific reasons you might need one, and what can they do for your company?
To help you make an informed business decision as to whether or not to bring a CFO on board, let’s break down when you need a CFO and why, what the benefits are, and how you can get the hiring process started.
What are the benefits of hiring a CFO?
A CFO’s primary responsibilities include developing a financial strategy, overseeing financial operations, and preparing financial reports. While the role of a CFO can vary depending on the size and type of company, the position is generally considered to be one of the most important members of a company’s executive team.
The top benefits of a CFO include:
- Focus on Long-Term Goals: While Controllers and the accounting department focus on what happened in the past, CFOs focus on the future and what could and should happen. They focus on the long-term goals of the organization and develop the roadmap of how to achieve them over the next 3-5 years.
- Strategic Planning: Focusing on the long-term requires the development of financial forecasts to support the quarterly, yearly, and 3-5 year plans. From these forecasts, budgets and 13-week cash flow forecasts are developed for accountability and variance visibility to allow for corrections as needed. Part of this strategic planning process also includes assessments of the financial viability of new products, services, customer segments, markets, etc. in light of company capabilities.
- CEO Partner: CEOs need a right-hand person to help them manage the organization so they can focus on ensuring their vision comes to fruition. A CFO is the most appropriate person to do this as they have the next broadest view of all aspects of the business. CFOs are also the most appropriate person to deliver and discuss results with investors and other key stakeholders.
- Agent of Change & Innovation: A strategic CFO acts as an agent of change and champions innovation that can lead to not only efficiency but increased revenue, as well. A good CFO educates employees on how their actions affect the financial performance of the company so that everyone is aware of how they win as a team.
- Cash & Capital Expertise: CFOs build relationships with bankers and investors through open and frequent communication of company performance. This builds the foundation for easier conversations in the future should company performance dip or need capital to fund new projects.
Related Content: Should I outsource my CFO?
When do you need a CFO?
Companies of all sizes can benefit from hiring a CFO, but there are certain circumstances when it becomes essential to bring on this level of financial expertise. Let’s take a look at some of the most common situations that would require the expertise of a CFO.
- Need to Drive Performance & Growth: Has your business’ performance or growth stagnated? Do you need the expertise to assess underlying causes and develop corrective plans to jumpstart it?
- Financial Challenges: Are you facing decreased margin or cash flow issues? Are costs of goods increasing? Maybe you need help determining how to cut costs or restructure.
- Forecasting: Monthly, quarterly, and yearly forecasts by line item on the Balance Sheet and Income Statement are a must to ensure your best chance of success. Accounting doesn’t create these – Finance does, overseen by the CFO. (Learn more about the advantages of financial forecasting.)
- Strategic 3-5 Year Planning: Do you have a road map for the future based on economic forecasts, company capabilities today and into the future, and consumer/customer trends? If not, you need a CFO.
- System & Process Optimization: How efficient are your operations? Are key metrics improving or declining? For example, what is your revenue per headcount trend? If it’s declining, you are probably throwing bodies at an inefficient process or system that could be improved by implementing technology.
Related Content: The main types of virtual CFO packages
How to hire a CFO for your business
It’s not just about hiring a CFO – it’s about hiring the right CFO for your business. To do this, you’ll need to consider responsibilities, budget, experience, and cultural fit.
- Determine Time & Responsibility Needs: Do you have enough work for a full-time CFO? Typically, if your company revenues are below $75M, it makes sense to hire a factional or virtual CFO as you probably don’t have enough work to justify a full-time CFO salary of $200k+. A fractional CFO would cost much less, typically $5,000 – $7500 per month depending on needs.
- Determine Budget for Position: As mentioned above, a full-time CFO would cost over $200k annually. And this is before benefits such as healthcare, bonuses, profit sharing, etc.
- Evaluate Desired Experience: Do you want someone with exact industry and company size experience, or do you want a bit broader experience that might be able to bring best practices from more than one industry?
- Engage Your Network & Consider Experienced Recruiter: Use your network to get leads on experienced CFOs and also consider hiring a recruiter in the finance field to help you vet candidates. This saves you time in the long run as recruiters can do a lot of the leg work for you.
- Interview for Experience & Cultural Fit: Do not underestimate the value of cultural fit! A candidate with fantastic education and experience will still not be successful if they are not fit in your organization’s culture. Consider utilizing assessment tools such as Culture Index or Predictive Index to guide this aspect.
Need help getting started with a CFO?
A CFO can be a valuable asset to any company, regardless of its size. If you’re looking for assistance in financial planning and analysis, cash flow management, budgeting, and forecasting, or investor relations, contact us today. Our team of experts can help you grow your business and make sound financial decisions that will benefit your bottom line.
Here’s everything you need to know about CFO fees and rates
