When Do I Need A CFO? Should I Outsource My CFO?

For anyone starting a business, there are those obvious “things” you need for it to run smoothly and effectively. Depending on the size of your business, you may need to hire some people to help you, too.

But how do you know when you need an outsourced chief financial officer (CFO)?

For a lot of companies starting out, it’s easy to identify the people and things that are required upfront. For many businesses, it can be challenging to understand when to hire a CFO.

While the timing may vary for every business, what you should first understand is the value a CFO brings to an organization. So, let’s get your questions answered.

“What does a CFO do?”

A CFO is responsible for reviewing and assessing the company’s financial statements to establish goals and a strategy on how to achieve them. They also help to build a budget and forecast models to understand the company’s financial position at any given time – past, present, and a prediction for the future. They can be a partner in maintaining your business’s rapport with financial institutions and must ensure they are leveraging fair, legal contracts to sustain your business. The CFO is ultimately responsible for mitigating any risk by bringing to light and avoiding any potential, unplanned roadblocks, or anything that might get in the way of your business’ growth.

“Okay, so I get what a CFO does, but how do I know when I need one?”

It’s not as simple as waking up one day, stretching your arms to the sky, and yelling, “It’s time to hire a CFO!” Nope. It’s not always that intuitive or in-your-face, but here are a few areas you need to consider as you evaluate your need for a CFO:

• You aren’t sure if your company is profitable. A CFO will review your margins and be able to tell you how you can optimize your business to either become profitable or maybe even more valuable. Perhaps you’re not charging enough for your product or service, or maybe your expenses are too high. A CFO can help you navigate these topics as a business owner.
• Your business needs a bank loan or a line of credit. Are you sure you’re the person to have this conversation effectively? A CFO is trained to look at all of this data and can help you chart out the best course for your business.
• A professional contact of yours has come to you and suggested the idea of merging their business with yours. You like the sounds of this—it could bring about more business. But wait. There are factors involved: Where is this business located? They may have different tax laws than yours. What assets will this merger bring to the table? Will you be taking on their debt? A CFO knows how to dig into these important questions for you.
• Your small business is experiencing rapid growth and revenue (yahoo!), and you’re ready to hire more people. You know who you want to hire—and what positions need to be filled—

but how does this fit into your overall business model and plan? Is hiring two or ten employees necessary? A CFO can help you to “stand over” the business plan and ensure you’re aligning the right people in the right places at the right time.

“I realize I now need a CFO. How do I know what to look for in a candidate?”

You look for experience.

The ideal candidate should possess years of finance experience. They should be able to demonstrate how they’ve helped to build or sustain a business fiscally. Have them provide you with examples; they should be pretty excited to share their stories.

Also critical is the candidate’s passion for your business’ industry. A great CFO not only knows finance but knows the trends and importance of them to your industry. When it comes to their character and personality, they should also be a great fit culturally with your team members, an effective communicator, and an approachable leader. You’ll know when you found the right fit.

“Should I Outsource My CFO?”

In today’s technology age, another option for your business to explore is the fairly recent option of the outsourced CFO. This option can be an excellent first step for those organizations that want to “experience” the value a CFO delivers and can—in most cases—be a fraction of the cost of hiring a full-time CFO.

These are all the questions—and answers—you’ll want to consider as you balance the need of hiring a CFO. And of course, we can also help you to navigate your decision-making process, too.

Thinking about it? Contact us.