At certain stages of growth, many companies find themselves in the awkward situation of needing the services of an experienced CFO, but feel they can’t afford to hire one.
Yes, a good CFO with the depth of knowledge and experience you need can come at a steep price. And – no offense intended – there may not even be enough to keep a good CFO challenged and interested on a full-time basis at this stage of the company’s growth. So what are the options?
Try to hire a CFO who may or may not find the job satisfying and lucrative enough to stick around for a while.
Hire a slightly stronger accountant at a slightly higher salary, and hope that he or she can rise to the challenge of a job far beyond his or her education and experience level.
Redirect your attention away from running and growing your business to focus on the CFO role yourself.
Ignore the financial needs of the company, and hope for the best.
Divide up the CFO role and ask your other executives to take care of it in their spare time.
Hire a part-time CFO at a fraction of the cost of a full-time CFO.
What Will a CFO Do for You?
In collaboration with you and your management team, an experienced CFO will quickly assess the company’s finance, accounting and control needs, and lay them out in order of priority. Areas that he or she will be considering include:
Project the future needs of the company based on achievable growth plans – resources, facilities, and the associated costs.
Identify and quantify financing needs to achieve the business plan – both short term and long term.
Develop relationships with financing sources – debt and equity – that are important to the company’s ability to operate and grow today, as well as to support long term growth and development.
Evaluate and make recommendations regarding the strength of the existing accounting staff.
Evaluate and make recommendations on accounting and information systems.
Oversee the preparation of financial statements, ensuring that the best professionals are chosen to provide auditing, tax and other outside services.
Lead the preparation of operating budgets to keep the company on track to achieve its short term goals.
Introduce the management disciplines and internal control structure necessary for the next level of growth.
Advise on the most appropriate methods and rates of growth – including acquisitions.
Conduct due diligence on acquisitions, and satisfy due diligence requirements of investors and lenders.
Lead programs and efforts to contain and reduce costs while still fostering growth.
Strategize on potential exit strategies – sale of the business for example – and help attract investors and buyers.
What to Look For
The more experience a CFO brings to the table, the more widely that experience is likely to vary among the candidates you speak with. All the more reason to have an idea of the qualities that are most important to you and your business. Here are a few thoughts:
Do you feel comfortable talking to the CFO? We all work better with people we like and trust.
Does the CFO seem to find your business interesting? Of course you find it interesting, but you can’t just assume that others do too.
Is a CPA important? Yes, it probably is. It demonstrates a minimum intellectual standard and level of accounting knowledge, and like the top business schools, the top accounting firms tend (with clear exceptions) to attract the best talent.
Does the CFO have a wide variety of experience in which he or she had to show resourcefulness and flexibility, as well as the willingness to learn on the job? How has he or she performed in situations similar to those likely to arise in your company? References come in handy here.
Has the CFO worked with companies similar in size to yours? I can tell you that working for a Fortune 100 company is very different from the environment of an owner-operated entrepreneurial venture. If you are planning to grow rapidly, does the CFO have rapid growth experience?
How about industry experience? Unless you are in a wildly specialized business like banking or insurance, industry experience is probably not critical. CFOs and CPAs are famous for their transferrable skills, and should be expected to learn your business quickly. On the other hand, some businesses like real estate have a steep learning curve, and some prior experience can make a big difference.
Why would a CFO want a part-time position? If this is a temporary move while he or she is looking for a full-time job, it doesn’t have much long-term potential. On the other hand, there are plenty of financial executives who like the flexibility of a part-time situation, and who enjoy working with a variety of interesting clients, each with its own challenges and rewards.
As the company grows in size and complexity, would the CFO potentially be interested in turning a part-time arrangement into a full-time position?
Do you know who to call to discuss hiring a part-time CFO?