The BizFilings blog covering business tips and trends.
When is it Time to Hire a CFO?
Published on Jul 24, 2013
Read our article, 'When is it Time to Hire a CFO?' at 'Time to Start Up,' the small business blog by BizFilings.
After initially incorporating your business, you'll surely encounter several roadblocks – online company formation, your first employee, or your first customer or business deal. But when it comes time to hiring senior management, there are several factors to consider to ultimately ensure your incorporation will achieve success – both short-term and long-term. Here, we'll focus on the timing of – and things to remember when – hiring a Chief Financial Officer, or CFO.
The CFO's Importance
What exactly is the CFO's role? They carry out vital tasks: CFOs prepare and interpret financial statements; develop financial strategies with investors and banks; set internal controls to help minimize fraud; carry out tax planning; manage compliance, forecast corporation budgets, and steers mergers and acquisitions, among other responsibilities. A CFO is more often than not an overlooked hire during the small business incorporation process, in part because of the expense and also because the role is misunderstood. Filling the shoes of a CFO may not be the easiest of tasks; CFOs must possess several qualities, such as skills in leadership, accounting, communication and presenting, and deep knowledge into specific industries.
What Hiring a CFO Entails
Is your company growing rapidly, or does it have enormous growth potential? Following business incorporation, when you're busy perfecting your product or service and recruiting customers, don't be so distracted that you allow the CFO hiring process to fall by the wayside. The hiring process could take months – finding someone competent enough and passionate about your business, to properly manage your finances could prove a challenge. Consider using a recruiter for this hiring process, if you have the budget. CFOs don't come cheap – the best candidates out there could demand a salary upwards of $150,000-$250,000 and stock options of 1-3% – which means a recruiter may cost you a large sum as well. This should also probably be a no brainer, but in an attempt to save yourself some money, ask around – does anyone in your professional, personal or social networks know of a worthy candidate? Leverage your connections!
Small Business Incorporation Requirements
When all is said and done, and regardless of how much you may want (or think you need) a CFO, don't get ahead of yourself. Make sure your business is prepared for a CFO by adhering to these basic guidelines. The incorporated company has:
Revenues that are growing quickly and consistently (more than 30% each year)
Not there yet? Consider hiring a part-time CFO, which you can likely find through advisory firms.
In it for the Long Haul
Regardless of the path you take and the tactics you ultimately choose, a CFO is an essential member of small business staff – especially if that small business aims to grow and become more well-established in the near to distant future. Do your research and think thoughtfully – who you ultimately choose will likely play a pivotal role in your company's ultimate success.