High-growth companies are burdened with high-growth decisions. Unfortunately most startups or companies with rapid growth spikes lack the funding necessary to hire the right help during a time when it is critically needed. This could include business development, sales, bookkeeping, employee management and even the assistance of at least a part-time CFO (chief financial officer). When companies reach the growth inflection point that begs for the assistance of a seasoned professional, there is often a disconnect between what is needed and what the company can rightly afford. Having the right C-level executive to work with you on critical growth and financing initiatives is paramount to your company’s ultimate success.
Many small, growth oriented businesses are heavily focused on growth and sales, to the exclusion of nearly everything else in the business–including the finances. But, as your company grows, the need for an experienced and knowledgeable professional will also increase. This is especially true for companies that may shortly require debt or equity financing to help take their business to the next level.
Here are some critical components that an outsourced or virtual CFO can assist with as your company moves from point A to point B:
- Company establishment consulting for C-corp, S-corp or LLC
- Fundraising and M&A support, including support in investment banking activities
- Evaluating owner protection in equity-based infusions
- Maintaining GAAP-compliant financial statements
- Keeping all other C-level executives informed on cost and revenue issues within the business
- Profitability enhancement options, including revenue strategies for growth
- Capital table projections and assistance for equity budgeting
- 409a valuation metrics for employee stock ownership
- Comprehensive financial modeling and forecasting
- Profit and loss analysis and feedback
- Compliance for federal, state and local taxes
- Dashboards for tracking key metrics using the latest KPIs
Unfortunately, hiring a CFO at the beginning stages of a business is not a good fit. When the company has not yet completely established its appropriate direction it can be premature to hire a CFO to help steer the ship, especially if the founders are still it test and pivot stage of a highly-scalable product. In this same vein, a full-time CFO may not be on the same page as the founders of the company when it comes to the direction of the business. It may take months of executive searching to find the right fit. In addition, most truly-seasoned CFOs are not willing to take the inherent risks associated with joining and running a startup or high-growth company.
Here are a few of the reasons having a seasoned C-level financial executive on a part-time basis join your firm is the right strategy.
- An experienced finance exec can help you get your financial plan on track and more quickly moving in the right direction, helping you to better measure key statistics within the organization.
- Interim and part-time CFOs can be very motivated by doing the work required in a startup scenario as this work often leads to greater opportunities as the business grows. Many CFOs are more willing to try-before-you-buy when it comes to picking the startups they will and won’t work with.
- By having a CFO that can bring in the right accounting and financial systems, the business will be better equipped to handle the larger influx of both customers and employees that will be expected as the business continues to grow.
- Interim CFOs have typically seen the ins-and-outs of numerous other businesses in different sectors which can quickly help them navigate complex situations as the business grows.
- An virtual CFO will know GAAP best practices, typically has a CPA background and can help put the right policies and procedures in place at the outset to ensure the business is on the right track.
- An interim CFO typically likes the “hired gun” role and while they may remain on the company board after a transition to a full-time CFO, they are typically happy to move on to the next engagement.
Hiring a part-time, virtual CFO is much less expensive and ultimately much less risky than taking a gamble on the wrong full-time candidate. A virtual employee does not require a full-time salary, will not need to negotiate stock-options and will typically provide a huge, experienced boon to the company as it grows. While there are always pros and cons to between either hiring a full-time employee and an virtual, interim employee, most growing companies opt for the latter for at least some of the reasons discussed above.