Hiring a CFO: 5 steps to take your business to the next level
As your business grows, part of your strategy is deciding which kinds of hires to make next. A chief financial officer (CFO) is probably not on your list right now. But, in reality, there's a chance you should have hired a CFO yesterday.
Like many corporate positions, CFOs are often miscategorized as more of a board position with limited utility. This is selling them short. In this guide, you’ll learn how hiring a CFO can boost your business. You’ll also gain insights to determine whether you need one, and the best ways to make the right hire. But first, let’s review what a CFO does.
What does a CFO do?
Your current financial team may include a bookkeeper, accountant, or financial advisor. Each of these roles is important, and brings something unique to the table. Now imagine a person at the top who oversees everything related to your company’s cash flow and finances. This is your full-time CFO.
More specifically, a CFO helps you stay on top of your finances by monitoring accounts receivable issues, pricing strategies, and financial planning. An effective CFO guides business decisions and corrective actions that keep your company out of the red.
CFOs also help manage investment opportunities as they relate to your financial strategy. This can include traditional investments as well as equipment or tools your business needs.
A CFO's financial management also includes supervising and handling campaign spending. For example, say there's a marketing campaign you want to run. In that case, the CFO will examine the typical customer lifecycle and campaign cost to determine if it's worth the investment. Think of a CFO as a financial risk management specialist and financial systems superstar all in one.
How to determine if you need a CFO
A CFO is great for analyzing a company's financial strengths and weaknesses, and offering strategic solutions. But not every company needs a CFO role in their current stage. Before hiring a CFO, there are a few questions to ask yourself:
- How complicated are your finances right now? If you have basic financial statements and can do most of your bookkeeping with little to no help, you may not need a CFO.
- Are you experiencing a period of growth? If your company is in the midst of rapid growth — such as exponential sales or aggressive hiring — a CFO can help you avoid overspending or making bad investments.
- Do you have cash flow or profitability problems and no solution? Cash flow problems befall most businesses. But if you have cash flow or profitability challenges and haven't been able to solve them, even an outsourced CFO can help you remedy the situation.
- Are you considering selling your company or is it being acquired? Selling your company or going through an acquisition is a stressful and intense time. Hiring a CFO can help you navigate this demanding process and ensure you don't make a bad deal. (A CFO can also help you buy a company.)
If you can answer "yes" to any of the above questions, it might be time to consider hiring a CFO. Of course, you must have the funds to do so. If you have sufficient funding but don't fit any of the above criteria, a CFO can still help your business in many ways.
Hiring a CFO in 5 steps
The right CFO can make your financial woes a thing of the past and help your business thrive. But the wrong CFO can steer your business in an improper direction. Here are five steps you can take before and during the hiring process to ensure a good fit.
1. Check your internal network
There are countless job boards and hiring networks (more on this in a bit), but check your own professional network first. Skim through your social connections and see if any of your contacts are currently a CFO or have financial experience.
LinkedIn is a good place to start, as it allows you to make connections through mutual contacts as well as find new people who have the professional experience you want.
Don’t hesitate to reach out to people you've met at professional meet-ups and other such events (either online or in person) to discuss potential CFO contacts they may know. This can be especially helpful when talking to someone who works at a larger company.
Lastly, don’t neglect your good old-fashioned personal network. Talk to your friends, family, and previous coworkers to see if they know a potential candidate. You never know until you ask.
2. Follow local company acquisitions
Set up a Google Alert for your area with terms like "acquisition" or "company sale" to see if any local companies are being acquired. If there's a local acquisition or sale, there's also a good chance the company’s CFO is now looking for a new venture.
Once you've found a company that's being acquired or sold, reach out to their CFO via LinkedIn and make an introduction. Keep things casual and friendly, and ask them if they're interested in speaking further about potentially working with you.
If the person isn’t on LinkedIn and you’re feeling particularly bold, you can even use an email hunting tool to find their professional email. Once you have their email, draft up a professional but friendly introduction, and tell them about your company and why you’re interested in hiring a CFO.
If the conversation isn’t taking off, don’t force it. This approach isn’t widespread (unless you’re in the outreach industry), so some people may not be too keen on having you contact them from out of the blue.
3. Use an executive recruiter
If your professional network and Google Alerts have yielded no results, consider hiring an executive search firm or CFO headhunter. This type of firm specializes in matching companies with executives who align with their needs. While most executive recruiters charge a percentage of a successful hire’s first year salary, this service can prove invaluable when you're struggling to find a qualified CFO.
4. Focus on candidates with industry experience
CFO experience isn’t one-size-fits-all. In other words, just because a CFO was successful in one industry doesn’t mean that will automatically transfer to another.
For example, let’s say you run a digital marketing company. Onboarding a new CFO with extensive marketing experience would likely be a lot different (and less intense) than hiring a CFO without any experience in your industry.
As such, focus on candidates who understand your niche and have relevant experience. If you can’t find someone with industry experience but have found someone that’s an otherwise great fit, be prepared for an in-depth and extensive training process.
5. Don't hesitate to get a part-time CFO
A freelance, part-time, or remote CFO might sound strange, but they can be quite useful for companies with a limited budget or need.
Part-time CFOs will still get to know your company like a full-time CFO, but they’ll have a more limited scope of work. This option is particularly useful if you have a smaller budget or only need a CFO to help with a business transition or sale, financial hardship, or tidying up your general finances.
Executive headhunters can also help with hiring a freelance CFO, but just keep in mind that there are fees attached. You can also consider a remote or part-time financial manager to save money and still get the help you need.
While a part-time CFO will likely be professional, there’s always the risk for someone to share confidential financial information. If you’re hiring a CFO on a part-time basis, have them sign a non-disclosure agreement (NDA) so your company’s information is legally protected.
Find financial success with a CFO
Your life as a business owner is jam-packed with numerous responsibilities. Hiring a CFO can help you gain insights into your company's financial strengths and weaknesses, foresee and avoid potential pitfalls, improve your cash flow, and move toward successful solutions.
If you feel your startup is ready for a CFO, take your time during the hiring process. The right CFO can learn and grow with your business for the long haul. While you might dread the time it takes to research, interview, and hire a great CFO, your efforts can be rewarded with a bright financial future.