PJS #009: What, When & Why do I need to Hire a CFO?
Updated: Oct 24, 2022
In today’s issue of Profit & Joy Simplified, I’m going to answer some questions I’m asked a lot…and that you may be wondering too:
What is a CFO?
When do I need a CFO?
How can a CFO help my business?
As a business owner, you're passionate about your business & have big goals for it. But you may not know how to interpret your financial results to help you more easily achieve those goals.
As a fractional CFO myself, I want to help simplify this so I’ve answered these 3 questions for ya.
Let’s dive in.
The What, When & How of a CFO on your Team
What is a CFO?
A CFO is a strategic member of your executive team who acts as the business's financial leader. She uses financial and operational data to analyze results, create roadmaps to achieve goals, and help guide the business to take action steps to achieve them.
When Should I Hire a CFO?
You may need a CFO if any of these are true:
You miss your goals regularly
Your cash balance creates issues
Your financials are frequently surprising
You want financial expertise on your team
Your reports are confusing or just a distraction
You aren’t making decisions based on numbers
Your business is growing & you’re ready to scale
You’re tired of being Chief EVERYTHING Officer alone
Typically a business should invest in fractional CFO services (part-time/outsourced) once you have an annual revenue stream of $500,000 - $1 million, are experiencing high growth, or have a complex business model.
Once your revenue exceeds $30 million annually, it’s time to consider a full-time in-house CFO.
If your business makes less than $500K revenue or is a solopreneur business with no external reporting, you may want to consider some CFO consulting on a one-time (or even quarterly) basis (to establish goals, financial roadmaps, and budgets). You may not need a CFO more often than that.
What a CFO Adds to Your Business
Vision -> Action Steps
As a business owner, you have dreams and goals for your business.
But without finance and accounting education, you may not know how to turn that vision into a strategic financial plan to achieve them.
A CFO spends most of her time looking forward, using the financial data you’ve achieved to work with you to plan action steps to achieve your vision of success.
Action Steps -> Accountability
A CFO provides a framework for accountability - of the follow-through on the action steps set to achieve the goals.
The CFO also oversees the internal accounting team in cleaning up the financial records and processes. Additionally, she acts as a liaison with the business’s tax advisors.
Results -> Revised Actions
The goal of numbers is action.
Does your accountant produce a bunch of reports that no one reads, are confusing, or just don’t prompt you to action? A CFO can help you interpret your financial reports & add perspective on how to use them.
Life is never static, so your forecast and roadmap need to be up-to-date so you can navigate the unplanned situations that arise.
As a CEO, you are responsible for your business, but you also probably feel responsible for your employees too. Having an up-to-date forecast allows you to navigate those situations in a way that ensures you are looking out for those you are taking care of.
A CFO monitors your business’s regular financial & operating numbers as a predictor for potential issues. This allows you to prioritize when, where, and how to make changes in the business. It also helps reduce surprises that could have a significant financial impact.
A CFO is a strategic partner by the CEO’s side. You can bounce your ideas off her & be really honest about the numbers. It’s a partnership feeling. Your goals are her goals and she will be all in for them.
But a CFO will also be the voice of reason to help temper your CEO visionary enthusiasm. Data has no drama.
In addition, a CFO should have excellent communication skills so she can help with reporting and communication with external parties (bank, investors, board).
A CFO is a strategic partner that can help give you peace of mind that you’re on track to achieving your goals so you can spend more time focused on running your business.
1. Turns your vision into action steps
2. Manages accountability for action steps
3. Reviews results & helps revise strategies to achieve goals
4. CEO’s strategic partner
Growing a small business can feel like your CEO title stands for Chief EVERYTHING Officer. At some point, you need someone whose primary focus is on financial planning and analysis.
If you think you might be ready for the peace of mind & confidence that comes from taking control of your business finances & are ready for some help, I'd love to hop on a call to see if we might be a good fit to work together.
I offer high-touch fractional CFO services & am passionate about helping my clients optimize profits and create a financial roadmap so they can achieve their personal & business goals.
See you again next week!
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