When To Hire A CFO For Your Startup

November 29, 2021 By Dave Chase

So you’ve got a new startup. You’re the CEO, and you’ve got a partner and a small team. You are managing your business’s finances because no one else knows how to, but your only experience is from a few courses in college and quite a few YouTube videos. 

How do you know when to bring on a finance team member or hire an outsourced financial services company? Here’s everything you need to know about when to hire a CFO.

Is Having a CFO Necessary for a Startup?

Let me phrase the question a little differently, “Is it ever too early to have access to a financial thought leader in your business?”  To be frank, the need for a full-time CFO depends entirely on the current needs of your startup. But if you’re ready to expand and grow your business, then a CFO can be an incredible ally. 

Here are some essential tasks CFOs complete regularly. If you are not familiar with or trained in these tasks, then finding a CFO should be a top priority.

  • Managing cash flow: CFOs identify reliable sources of capital coming into the business and offer suggestions on where that capital should go. Doing so helps minimize financial emergencies, pay employees on time, and ensure you have enough liquidity (perhaps the single most important role of a CFO) to achieve your goals.
  • Analyzing (and producing) financial reports: CFOs create financial reports that go over your company’s fiscal wellness and efficiencies. They also analyze the reports and pinpoint areas of improvement. If you don’t have the proper training, it is very difficult to identify those opportunities, even if you have an amazingly detailed report sitting in front of you.
  • Setting realistic goals: While it is your job as the CEO to create and finalize company goals, the CFO offers a lens of financial achievability on those goals. In doing so, they can create an operating plan that allows you to better align your financial strategy with those goals.

How Do I Know If I Need a CFO?

If you have trouble with the above concepts (cash flow management, finance analytics, and financial goal setting), you could seriously benefit from hiring a CFO. Aside from that, there are other questions you may want to consider to determine if your startup needs a CFO:

  • Could you benefit from a more experienced business perspective? CFOs offer a profound understanding of business practices. This perspective could keep your business from making the same rookie mistakes as other startups.
  • Is managing your finances becoming unmanageable? It’s very common for CEOs or controllers to manage a business’s initial finance and accounting.  But at a certain point, your business’ growth may make those finances unmanageable for the uninitiated. Having a CFO can give you a competitive advantage.
  • Do you need help figuring out how to allocate your investment funds? CFOs offer rich insights into how you should use your funds from all rounds of funding. So if you don’t have a set plan, CFOs will help you establish one.

Do I Need a Full-Time CFO?

You may see these benefits and reasons to hire a CFO and think, “I simply cannot afford a full-time CFO.” We have good news for you: There’s no need to hire a full-time CFO. Hiring a CFO that’s part-time or fractional allows startups to achieve better financials with less expense.

Outsourced CFOs

In your early stages, there isn’t much need to have a CFO in the office at all times. They’ll mostly help you establish a working financial plan and offer suggestions on how you can improve your business’s financial performance. That does not require a full-time commitment—even a couple of meetings a month will do.

Outsourced CFOs are experienced CFOs who work on an hourly or fixed basis. Most perform part-time, full-time, and interim CFO work, depending on your company’s needs. With the average CFO making a salary of nearly $400,000 a year, most startups don’t have the luxury (or need) to hire a full-time CFO.

Not only will outsourced CFOs save you money in the long run, but you’ll also get access to experienced professionals who have worked with several other startups or early stage businesses. They’ll be even more equipped to spot opportunities and threats, then act accordingly. Hiring this way puts the experience of the experts in your hands, giving you the best bang for your buck.

When Should Startups Get a CFO?

According to TechCrunch, the old rule of when to hire a CFO was to wait until the business reaches around $100M in revenue, or is preparing for an IPO. However, new best practices show that this is no longer the case for most startups. 

Nowadays, finance departments contribute more to the company than ever before. Once “bean counters,” CFOs not only acquire and package the right data, but also model, forecast, and strategize across the organization.

Because of these major changes in the finance department of all businesses, startups can especially benefit from hiring a CFO early. Since the key role of a good CFO involves strategizing and planning, hiring early can allow your startup to take advantage of opportunities and avoid threats from the beginning. This additional financial planning and analysis can be the difference between a failed startup and a successful one.

Hire Early, But Not Too Early

Working for a startup often means loose job descriptions, which can lead to having too much responsibility. Many founders start by doing the books themselves while also managing the business. Dave Chase, CEO of Amplēo, says,

CEOs have to be honest with themselves in how they should be spending their time. If they could have a greater impact and provide more value doing something else, get out of the financials.”

As CEO of a startup, ask yourself, “Am I really contributing the most value by spending my time working through the financials?”

While it is important to hire a CFO early, it is possible to hire too early. Because many startups are cash-strapped, it may be appropriate for a founder or other key team member to handle the finances of the business for a time. 

However, as Dave Chase recommends, once their expertise, experience, and time are better used elsewhere, it’s time to bring on a professional. CEOs should consider their funding and make a decision weighing the experience of their team against the expertise needed to succeed.

What Should I Look for When Hiring a CFO?

How do you hire a CFO? The process can be particularly puzzling if it’s your first time dealing with one. There are several qualities you should consider when looking for a CFO for your startup. Here are a handful of qualities that can make a CFO successful at your company.

  • Is a strategic thinker, not just a strong technical accountant
  • Passion and/or experience with your industry
  • Strong communication skills—especially if your CFO is working remotely or part-time
  • Fits your company culture
  • Has worked in a variety of industries, so they know how the same financial practices apply to different scenarios

When you work with an agency that finds a CFO for you, you can rest assured knowing every candidate is incredibly experienced and qualified to be your CFO. 

Questions to Ask CFO Candidates

If you wish to hire a CFO but aren’t sure what kind of questions you should ask in the interview, consider trying out some of the following:

  • How did the financial roadmap you developed for your previous company help them to succeed?
  • What challenges do you anticipate our company facing during the growth stage?
  • What might you put on the agenda for a finance meeting?
  • What is an example of one thing you would do to improve our finance team?
  • How would you ensure our company achieves its financial goals?

Explore Outsourced Services

When it comes to your startup, hiring the right CFO at the right time is crucial. Once your time as a founder is better spent running the business rather than managing the books, you should consider hiring a CFO. Whether outsourced or in-house, a good CFO can be a game-changer for your business.

Amplēo offers the full suite of financial services, from CFOs to controllers, accountants and bookkeepers. You can trust that your business is in the hands of seasoned veterans, ready to take your startup to the next level. Contact us today to find the perfect fractional CFO.

Are you ready to make finance

a competitive advantage?