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Want your company to jump ahead of the pack? Do this!

Some CEOs I speak to don’t seem to spend much time thinking about CFOs and the amazing things they can do to make them and their business more successful.

Some still believe that hiring a great CFO doesn’t make much sense for their business until they achieve “meaningful revenue”, or until the founders and board start planning seriously for an IPO, say 12 to 18 months away from an expected IPO roadshow.

However savvy CEO’s know that if you hold off on hiring a winning CFO until the moment you have an IPO or other milestone in your sights, you’ve waited too long! You’ve missed at least a year’s worth of strategic planning that would benefit your business for years to come. You’ve missed crucial months that could have been spent identifying where to place your biggest bets, your most valuable resources, and your most significant investments. You’ve let decisive opportunities pass by to fund and structure your organisation so it can scale as you bring on new customers, partners, business units and distribution channels.

If you are that savvy CEO, you already understand that a great CFO can do more for you than track and report results, close the books every month, and establish guardrails for spending. A winning CFO will help build strong foundations for your business because they understand the strategic direction of your business model and will create processes for stable growth. What’s more, the CFO of a struggling business will pinpoint financial areas for improvement and turn your company around.

So when should you hire a “great” CFO? What are the signs to recognise?

The short answer is: you can’t afford to not hire one asap. Think F-111 not A380!

Here are a few more signs:

  1. Size: The bigger the company, the more complex its financial needs and the more difficult it is to track performance across multiple operations and keep strategy under control. As a guide, if you are planning for your business to reach a minimum of $5 million to $10 million in revenue, it’s time to bring in a CFO.
  2. Headcount. If a company has 50 employees or is heading in that direction, you will need a CFO. Once you hit 50 employees, certain legal and compliance rules start to kick in.
  3. Complexity. As your business environment increases in complexity, it will not only distract you, the CEO, but will also stretch your ability to stabilise the company as you are more likely to be skilled in the product rather than the finance side. You will need to bring in a CFO to steady the ship, assist with strategy, implement/improve systems and processes, governance, and own mergers and acquisitions.
  4. Fast Growth. If you are growing rapidly at say 20-25 per cent a year or you want to embark on a growth journey, bring on a CFO. An effective CFO will help the business grow safely. They will analyse your company’s current financial position and market trends to enhance financial strategies and profits, while still keeping a lid on costs. By managing the cash conversion cycle, the CFO will help your company improve collections, pricing, and terms resulting in increased liquidity for growth.
  5. External Funding. If you need funding to grow your business, hire a CFO as they know how to work with the banking sector to achieve your funding objectives. Additionally if your company has outside investors (such as VCs, PE Firms, high net worth angels), you need a CFO. Boards will demand good governance and reporting structure!
  6. When profitability needs to improve. Bring on a CFO to control costs, improve productivity, and analyse and suggest pricing strategies. The CFO will also evaluate the productivity of employees in different departments to determine if there are any patterns of bottlenecks or slow-downs in operations.
  7. When the management team is confronted regularly with financial matters. Invariable the team will be inundated with matters beyond their knowledge which will distract them from building the business. Before you know it, the company has instilled poor financial habits that will require unravelling. Once you or your leadership team start to feel the pain, act quickly, because a great CFO will provide tremendous unforeseen support and help avoid some of the growth problems companies face.
  8. Before the CEO becomes stretched beyond their limits. When the CEO is increasingly being distracted away from culture/the team and critical revenue-generating activities to handle financing, compliance, legislative matters or similar issues, it’s time to bring in a CFO to make these things happen. The CFO will also be your sounding board for new ideas, present and sell the financial picture to others and “peek around corners”.

Consider starting with a Virtual CFO (VCFO) to help your business reach your growth goals faster!

You don’t necessarily have to invest in a full-time CFO. Someone who comes in one or two days a week might suffice. You’ll be able to afford the services of an experienced VCFO and you can expand and contract their role as your finances permit without the major ongoing commitment of a full-time staff member on-site.

A VCFO is someone who has been around many types of businesses and have been exposed to many different issues confronting businesses. As they are not embedded in the one company they tend to be more insightful when it comes to strategic direction. A VCFO is not the same as a positioned CFO because they are trained to view and solve the problem from outside-in and are not shackled by the day to day grind of the business. Their mentoring skills are well developed and their ability to traverse from board level to the most junior member of the organisation comes from years of exposure to business.

So a CFO plays a considerably more strategic role these days, taking ownership of the company’s profitability. This not only includes ensuring compliance with regulations and tax strategies, but also addressing more complex financing, banking, insurance issues, and ensuring your business has the systems it needs to grow. A great CFO will look at your business model, identify the opportunities and/or gaps, and whip the company into financial shape.

Get one by your side now!

Rob Lancuba heads up Thought Patrol Finance, who enable CEOs and CFOs and their organisation to realise their full potential. If you are a purpose-driven CEO or CFO we’ll help you become a better business builder and leader, uncover new possibilities and achieve your goals with greater focus, greater energy and greater impact. Make contact and let’s talk strategy! | @Thought_Patrol | @Roblancuba

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