Do you need a CFO?

you may need bench strength, but you may not need a cfo.

As a corporate finance consultant and outsourced CFO, I am in the business of solving problems for privately held companies worldwide. I’ve been called a Chief Problem Solver, as I work with companies confronted with difficult challenges on the spectrum between high finance (raising capital) to operational (designing HR processes). I’ve also played the role of CFO both in my history as a FTE for high-tech firms and today in an on-demand capacity.

From where I sit, taking companies through many stages of their life cycle, it’s evident that not every company actually needs a CFO.

How to know if you need a CFO.

Though I have worked alongside literal rocket scientists in my past, identifying the right time to hire a CFO is not rocket science. It can actually be quite simple. I assess an organization’s “CFO readiness” by asking this question:

Is the team building a product or a company?

Not sure how to answer that one? Try these:

  • Are clients using the product right now?

  • Has there been an increase in clients and client usage over time?

  • Are non-founders leading sales and marketing efforts?

If you answer “yes” to most or all of the above, you may be in company-building mode and could be ready for a CFO.

Otherwise, you are probably still building product and you do not need a CFO. In other words, save your money. 

6 things you really need (instead of a CFO).

If you are still in the product-building phase, you might feel the pressure to establish a “minimum viable back office.” This can be done without hiring a CFO to do it for you. All you need is:

  1. A solid accountant to prepare your financial statements and pay your bills.

  2. A reliable local tax accountant to prepare your state, local and federal taxes (such as income, sales & use, etc.)

  3. Access to your accounts so you can see what you have in the bank every hour of the day.

  4. A very reliable data entry perfectionist to key in the actual financial results into your financial model (the one that a freelance FP&A resource spent 3 days building for you.)

  5. A professional employment organization or freelance HR consultant to help you hire, fire, and administer benefits.

  6. Access to on-demand financial expertise to help with the heavy lifting.

Let’s talk about that last one a little more in depth. There are big challenges young companies face which require CFO-level expertise, but not necessarily on a full-time basis.

When an on-demand financial expert makes sense.

Some of my favorite engagements are with clients who really do not need a CFO. They need information and strategies for how to get where they want to go. We focus on solving a key problem or series of problems that are impeding progress.

Engaging with an on-demand financial expert makes sense when founders are grappling with one or more of the following common questions:

  • Why don’t VCs want to hear from me again until I have $1,000,000 in annual revenue?

  • Why I am the only person who can sell this product?

  • Should I charge for this product or give it away?

  • How can I build subscription revenue stream?

  • Should I charge per-seat, per-click, per-use, or per-feature?

  • How do I structure my pitch to be less than 36 slides?

  • How much cash will have in the bank 90, 180, or 365 days from now?

  • How do I set up HR and Accounting processes, and how do I know the work is getting done properly?

(By the way, if any of these questions are indeed on your mind, let’s talk.)