When Should a Startup Hire a CFO

Running any startup of comes with a lot of risk. Many times, part of that risk comes from thinking that your company is performing better or worse than it actually is, particularly when it comes to profits. One of the most important decisions that you will make while working to have your startup gain sustainability is figuring out a clear picture of your financials. If you know exactly how much money your business is bringing in and spending each month, you will be able to have a more informed conversation about when it is a good idea to scale your company up.

Hiring a Chief Financial Officer, or CFO, is one step that you can take when working towards laying the groundwork for sound financial procedures. Here are a few things to keep in mind when determining when it is a good idea to hire a CFO.

What does a CFO do?

The first thing to realize is what Chief Financial Officer will and won’t do for your startup. While CFOs have considerable financial and accounting prowess, they cannot wave a magic wand and make months or years of bad decisions go away. A CFO is responsible for getting a firm understanding of your business’ financial practices. While a CFO will often be monitoring your income and expenditures, they are also involved in larger, big-picture planning such as how to invest in your company’s future.

Beyond looking into the future, a CFO will also be responsible for analyzing where your company excels in matters of finance and where certain weaknesses might be. As an executive-level position, they have a great amount of sway within the company and are a key decision-maker. This is another factor to consider if you’re the one who launched your startup, since you will need to share some power with the CFO.

When to hire a CFO?

When to hire a CFO in your startup can vary from business to business. For example, if you’ve started off on the wrong foot financially, a CFO may be able to help steer you towards a strategy that leverages your assets. Other times, you may be hoping to make a big move and want to make sure that you’re on financially sound footing before you do so. A CFO can look at your goals as well as where you’re currently at, and advise you on when the best time is to pull the trigger. Sometimes, your startup is feeling stretched too thin by not having a CFO. Even though other people on staff may be capable of handling the duties of a CFO, if it’s getting in the way of strategic planning or their other day-to-day functions, it may be valuable to start a search for a CFO.

Other options

If your business isn’t quite yet ready to hire a full-time CFO, but still wants financial guidance, it may be worth looking into professional. Services, such as the fully accountable CFO advisory services, are a great way to get a third-party perspective on your business and its operations without having to pay for the other fees associated with hiring a full-time staff member. Many CFO advisories take a proactive approach to learning about your company and are able to handle a wide range of analysis. They can also suggest and help you execute strategies for fiscal growth, even as an outsourced entity. CFO advisories often contain teams of professionals rather than a sole individual, which can also be beneficial. A CFO advisory is particularly useful if you are looking for a wide range of ideas about your business’s health and how to grow its cash flow.

Ultimately, when and how to hire a CFO is a matter of timing within the business. If you want to gradually transition into using a CFO, working with a CFO advisory can be a great way to see how your startup responds to the presence of a chief financial officer. There’s no one-size-fits-all solution to this question; however, there are several situations that may require a CFO in order to have peace of mind. Be honest with yourself and your employees, and you’ll make the right decision every time.

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