Your business is growing faster than you ever thought possible. Sales have never been higher and your products are flying off the shelves. The problem? You are clueless about your cash flow, you have investors knocking on your door, you haven’t made projections for how your business will be doing a year from now (never mind five years) and you are too busy to dedicate time to the financial intricacies of your business operations.
Sound familiar? If so, it might be time to hire a CFO.
“There is the cliché that many companies go out of business the year after they achieve record sales,” says Arnold Lee, managing director of CFO Growth Advisors, a Bay Area firm that provides part-time CFO services. “When a company is growing rapidly, they grow out of the way they are doing business every three, six, and twelve months; and if they haven’t designed a strategic financial model for moving forward, they can get into trouble.”
Still not sure you need a CFO? If you say yes to any of the following questions, it may be time to start looking:
Is your company in rapid growth mode?
A period of fast growth is a signal to enlist the help of a CFO. That person can help you speak with your board of directors, provide financial projections and handle meetings around outside investment and potential acquisition.
“If you have any institutional investors on your board, you better have a CFO because they will want monthly meetings and there are expectations in terms of reporting,” says Ryan Keating, managing partner and founder of Keating Consulting Group, an interim CFO firm in San Mateo, California. “If you want to raise money, a CFO can be a huge help. That person can help you navigate the first meeting, second meeting, what to do when you get a term sheet and so on.”
Are you struggling to manage your company’s finances?
Every entrepreneur starts his or her company with the mastery of a skill—usually to build a product or service better than any other company on the market. This skill doesn’t always involve financial expertise. And while you may want to handle it all on your own, it pays to have a frank conversation with yourself about items that may be falling through the cracks. A CFO can help catch those items and steer your company on a path to profitability.
Do you have a cash flow problem?
“Cash is the life blood of a business,” says Madhur Dayal, founder and CEO of JMD Financial Partners, an interim CFO company based in the Bay Area. “When a company gets more complex it can help to have a finance arm to make sure you have the funds you need to continue to grow and the ability to make projections.”
CFO help doesn’t need to cost you a fortune, even at the interim level. Hourly rates can vary wildly so be sure to shop around, but as Dayal says, help is affordable for even the most cash-strapped companies.
“There are ways to get the help you need; some of our clients pay $500 for us to be a sounding board,” he says. “A little can go a long way.”
Now that you’re convinced you need CFO help, its time to find the right person for the job. Here are a few things to look for in your search.
Similar “stage” experience
Focus on a candidate who has experience working with companies at your similar stage, advises Keating. Going through a seed round? Find someone who has done that a dozen times. Need to talk to your board for the first time? There are plenty of CFO candidates with that experience. Find them and start the interview process.
The best CFOs are strategic partners who work in tandem with the CEO of a company. This is a person you need to like enough to invite to dinner and respect enough to be open to their criticism.
“One of the biggest mistakes I see is that people like to hire people like themselves,” says Dayal. “You want them to complement your skills. You don’t want them to be a ‘yes man.’ Hire someone who will talk you through the reality of your business and you will be well on your way to a successful partnership.”
Kapitus provides needed operating funds to small businesses. Kapitus has helped hundreds of Industries including: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.