Do you have a startup business that’s gaining traction?
You’ll need a CFO on your dream team. This top-level executive takes on the responsibility of all things related to finance, leaving you to focus on the rest of the business operations.
In this article, we’ll explore the role that the CFO plays and answer the following questions:
- What exactly is a CFO and what do they do? Do you need one for your startup?
- When is the right time for you to hire a CFO?
- How do I find the right person for the role?
For a position as pivotal as the CFO, there’s no time to waste — so let’s get cracking!
What Is a CFO?
A CFO (Chief Financial Officer) is tasked with managing the finances of a group such as a company or a startup.
CFO duties include balancing the books, preparing budgets, and giving financial advice. This takes the pressure off of the CEO and ensures that everything is running smoothly in terms of cash flow.
Needless to say, the CFO is a crucial role that’ll help maintain and improve your startup’s financial health.
Responsibilities of a CFO
The exact duties of a CFO vary for each company, but here are the general responsibilities that a CFO plays:
- Monitoring cash flow. CFOs identify unnecessary spending and ensure product pricing is feasible
- Helping you budget. Ascertaining what should be spent, invested, and saved
- Preparing forecasts. Based on past data, your CFO can determine where you are heading financially
- Organising fundraising opportunities. This depends a lot on the company, but it may involve marketing partnerships or seeking out investors.
Do Startups Need CFOs?
Every startup should strongly consider hiring a CFO. In the early stages of the game, every pound counts. You need a dedicated person to manage where your money is heading and what you’re receiving for your labour/product.
Then, if your startup starts growing and gaining traction, your CFO can help you to continue on that trajectory. Know that it’s never a disadvantage to have a financial expert on your side.
When Does Your Startup Need a CFO?
You should now have a better appreciation for the role of a CFO, but when exactly should you look for one? Here are several situations that suggest you already need one in your team.
As Early as Possible, for Financial Stability
Once you have a solid business idea in place, start looking for a CFO immediately. You’ll want them to participate in your business from the beginning and help you put your coins in the right place.
As soon as you can afford it, bring a CFO on board.
When You’re Raising Capital
When your capital starts piling up, you need to know what to do with it. A CFO can adequately inform and advise you where the money should go and how much should be spent.
Making risky investments can be daunting when you’re doing it alone. A CFO gives you expert advice on what to do and what to avoid. In this way, you have the best chance of increasing your capital while minimising risk.
This is, after all, the overarching goal of most startups.
When Finances Become Complex
It’s not as simple as “income in, expenses out”. There’s a lot of detail in your startup’s bank statement, from income streams and wages to taxes, and things can become quickly confusing along the way.
If you don’t have prior experience in business (a lot of startup teams don’t), a CFO’s wise words are incredibly valuable. You don’t want to be caught in a situation where bills aren’t paid.
Alternatively, if your startup isn’t growing as fast as you’d hoped, having a CFO on your team can get the ball rolling. If your personal strategy didn’t work, it’s beneficial to see what an expert recommends.
During Significant Growth
If you ever win the lottery, hire a financial advisor immediately. It’s the same story if your startup’s earnings are catapulting — you need advice on what to do with all that cash.
Significant business growth is an incredible feeling, but along with it comes more responsibility and more crucial decisions to make.
It’s best if you already had a CFO prior to this growth. If you didn’t, now’s the right time to hire one.
For Seamless Regulatory Compliance
If you’re a novice to finances, a CFO could be the difference between you and accidental tax fraud that’ll invite the HMRC on your tail.
Regulatory compliance refers to the rules and procedures you need to follow in order for your startup to be above board. That means paying the right people on time, filling out the right documents, and ensuring all business practices are adhering to the law.
How to Find a CFO for a Startup
Not sure how to hire a CFO? Here are the general steps for you to follow in finding the best candidate for the position.
Define the CFO Role and Responsibilities
Every startup has individual goals, the most important of which is to make a profit. To find a CFO who suits your needs, first think about what gap they will fill.
You might have an overall goal for them to help you achieve. This could be gaining 10% more profit within a year or launching a new line of products.
Outline to your prospective CFOs the specific components of your finances you need help with. These will differ slightly from startup to startup, so the skillset required will also differ from CFO to CFO.
Determine the Required Qualifications and Experience
Becoming a CFO is not a walk-in job; you need to have prior education and experience.
When fielding applicants, look for those with a degree in business, accounting, or similar educational backgrounds. A master’s degree in these fields is even better.
Look at your applicants’ prior job history too. Are they just starting out in junior roles or have they been in the industry for a long time?
Before you invite people to apply for the role, make a list of requirements to help you sort them. From there, select the people with the best credentials and who will render their services for a price you can afford.
Seek Referrals From Your Network
Despite the job-hunting world being very much online, a word-of-mouth referral is as powerful as ever.
People involved in startups tend to be well-versed in networking. Flip through your (figurative) Rolodex to see if there’s anyone suitable or if there’s anyone who knows someone great.
Look for Candidates with Startup Experience
Unlike well-established companies, startups are tumultuous and risky. Look for a CFO who has been in that boat before.
In particular, look for instances where they have successfully helped a startup soar into success. Maybe they can make that happen for you too.
The Bottom Line
When it comes down to it, startups are all about managing money — how much you’re earning versus how much you’re spending.
It’s highly recommended that you hire a CFO to join you on this journey. A great CFO will analyse your past finances and advise you on how to improve in the coming year.
With this valuable knowledge, your chances of succeeding as a startup are that much higher.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.