Financial Technology

Financial Technology

May 03, 2017

5 Signs Your Startup Should Hire a CFO

By Special Guest
Lisa Froelings, Business and Productivity Consultant ,

There comes a time in every young startup’s life when they start to think of where their next paycheck will be coming from. Preparing for funding is a part of growing up that early stage startups must embrace once they’ve gotten a sense of who they are and where they want to go with their business.

If you’ve reached a point where your company is currently seeking VC funding or is steadily growing both in size and in revenue, financial matters become more complex. This could be a great time to start looking for a CFO.

1. You’re earning more money

An increase in revenue is an occasion worth celebrating, but it also means you have a lot of work ahead of you. An uptick in incoming cash flow means you are doing a lot more than just covering the basics, and keeping track of your financial activity is about to become a lot more complex. Whether you’ve just received an investment, or are entering a new growth stage, working with an experienced chief financial officer can help you evaluate your current KPIS and adjust them accordingly. Having a clear idea of your budget at each stage of growth is key to developing a strong financial forecast.

2. You’ve got a strong team in place

Even if there are only a few of you, every startup needs to reach a point where they are so connected they are finishing one another’s sentences. Okay, maybe not that connected, but it’s vital that team members communicate fluidly and are open to feedback. Many startups aim to maintain a flat hierarchical structure, so before you even consider bringing someone else on board, make sure that each member of your team is comfortable in his or her role and considers success to be a group effort.

3. You’re ready for a fresh perspective

Working with a CFO doesn’t necessarily mean making room for one more at the office. Today with the development of reliable freelance platforms, there are a wealth of highly skilled chief financial officers available for hire. Outsourcing increases your chance of finding a CFO that specializes in your industry, and simultaneously expands your network, potentially on a global level. Going outside of your internal network greatly contributes to improving and nurturing a more innovative company culture, which is a great way to prepare for bigger expansions in the future.

4. You’re considering a merger

If you’ve reached the point in our startup career that you have decided to merge with another company or are considering a buyout, having a CFO by your side will make this process a whole lot easier. A chief financial officer will be in charge of bolstering a strategic plan that will lead to a smooth interaction for both parties.

In addition to providing accurate financial models, they will also identify objectives and future expectations from the merger. This means understanding the culture of each organization involved in the process, making sure there are no fundamental differences in each company culture that would dismantle a smooth takeover.  

5. You’re seeking additional investment

For startups that already have an initial seed investment, acquiring a second round of funding can prove to be a bit more challenging. Getting a hold of series A backing means you need to be in a position where you can prove scalable growth so that investors feel confident that you will be a worthwhile investment.

There are many elements that contribute to a great pitch, from viable market research to a well-crafted team. But perhaps one of the most important components is a robust financial strategy. A CFO will make sure you are fully prepared when it comes time to pitch, providing an in-depth history of past financial successes in addition to a bright forecast for the future.

About the Author

Lisa Froelings is a business and productivity consultant with over four years of experience in human resources working for a major retailer in the country before she decided to build her own business. Her interests include technology, mindfulness as well as time management. 

Edited by Alicia Young

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