There comes a time in a company’s life spanwhen it needs to expand it’s C suite for growth and guidance. No matter the size of the company, a CFO can provide a wealth of advantages. But how to know when to hire a CFO? Many clients and colleagues have asked me if their companies are too small to have a CFO? The answer is, “it depends.”
Knowing there is a lot to consider when answering this question, I decided to take a different approach and created a set of questions that can help guide a company to the answer – is it time to hire a CFO? I created a series of questions a CEO and managing partners can use to evaluate their business to determine their CFO needs. Full-time, Part-time or project-based.
Questions to determine the need for a CFO (not in order):
How complex is the business model?
Does the company have a single product or service (e.g., consulting) or multiple products (e.g., distributors)?
Is there a single or multiple locations?
Are there significant compliance or tax issues (e.g., healthcare)?
Does the company need external funding?
CFO’s can undoubtedly help the company raise money; after all, it is one of the essential functions of the role. Is it a matter of cash management and discipline?
What are the current risks?
CFO’s can undoubtedly help the company raise money; after all, it is one of the essential functions of the role. Is it a matter of cash management and discipline?
What are the current challenges?
We can’t ignore what is happening in the business today. If we are not getting monthly financial statements or KPI’sor if the company is facing an IRS audit or customers are complaining, the company needs to address these issues right away. Perhaps the owner needs the help of an experienced right-hand person to solve these issues so he/she can continue to dedicate his/her time in finder activities.
How is the company organized?
This relates to how well the system of people, processes, and technology is working throughout the company. Does the company have a clear understanding of the customer delivery process? Is the company executing its priorities?
Where in the company in the typical business cycle?
Start-up
Growth
Maturity
Decline
What is the revenue size?
Size does matter; a company with $1.0 million probably can get away without the services of an experienced CFO. On the other hand, a $10 million company possibly cannot.
What is the volume of transactions?
Does the company have less than 100 transactions, customers, or vendors a month? Choose the item with the highest volume to answer the question.
For example, a company that refurbishes airplane engines may only have a few customers and a few transactions a month, but they may need 1000’s of parts to refurbish an engine. In this example, the volume criteria are “High.”
What is the competitive landscape?
Is the company facing many competitors or not? Are the competitors taking market share? Do they have a better, cheaper, more innovative product? What is the industry outlook?
