How to Know When It’s Time to Hire a CFO
Updated: Sep 15, 2021
If you’ve been in business for a while or have scaled your business to a high-income spot and want to take it to the next level, it may be time to hire a CFO. This is a big step for business owners and entrepreneurs, so I understand wanting to do your due diligence and be comfortable in making this decision.
Let’s answer your common questions about working with a CFO, what we could do together, and whether it’s really time to think about including a CFO as part of your trusted team in your business.
What’s a CFO?
A CFO, or Chief Financial Officer, is responsible for the financial actions in your company. You have likely been operating as your own CFO, though perhaps without the depth and analysis that a CFO usually provides. This position focuses on day-to-day tasks, like managing cash flow, as well as forward-thinking actions to analyze and consult on financial strengths, decisions, and trends so you can make sense of what the numbers in your business are telling you.
Basically, when you hire a CFO, you’re filling a position as a trusted business partner in your business. They provide financial expertise and guidance to help you make decisions based on what you can do now as well as think about the future vision and how to make that happen.
What Can a CFO Do for My Business?
A CFO can do a lot for your business - and I’m not just saying that because one of the roles I fill for entrepreneurs is that of a Virtual CFO!
Virtual CFO services can be project-based (short-term) or an ongoing position with in-depth analysis that’s tailored to your and your business. Either way, when you hire a CFO, your package could include:
In-depth financial reviews of revenue trends, profit margins and expenses
Creation and tracking of metrics for your unique business
Cash flow modeling and forecasting
Budget vs actual analysis
Regular assessment of HR programs and policies
Availability for ad-hoc analyses and questions
I wrote a post outlining 25 ways you can work with a Virtual CFO and it goes into more detail on what these short-term and ongoing relationships could look like.
Bottom line, a CFO can provide valuable insight to help you maximize your revenue, prepare your business to scale, assist you in daily financial help and be an advisor who understands where you’re headed and how to take you there with the most financial security possible
When Is It Time to Hire a CFO?
You’ve got questions that center around finances — so it’s time to hire a CFO (either for a project or long-term relationship) to think about whether it really makes sense.
Your finances have grown up.
As you grow, so too do your finances. You’re not just looking at a P&L and filing taxes as a sole proprietor anymore! You want more analytics and data to help you grow your business.
Now is a great time to bring in a CFO onto your team! You’ll have a greater depth of insights and can really take advantage of the information that comes from understanding the power of your numbers with interpretation from a pro.
For example: You want to hone in on the services that are bringing you the most income. It’s time to do a profit margin analysis (which, incidentally, is a great tool for understanding your profitability and something I highly consider you do if you’re at or close to that 6-figure mark). A CFO can provide that for you.
You’re thinking about hiring a team.
Okay, so you’re in that space where you think you need to hire a team. Your workload is expanding, your waitlist is booked, your time is in short supply. All the tell-tale signs of needing a team. Working with a CFO will ensure that your business can financially support that decision. And, if you aren’t ready for that investment, a CFO will help you create a plan to get there.
You want to scale.
Business growth is a large focus of this blog post because that’s a large part of what a CFO can help you do. With expert guidance and analysis, your CFO can be a trusted member of your advisory board (even if your advisory board just includes your little one and your dog). Like I mentioned when thinking about hiring a team, your CFO can help you maximize what you’re doing and help you reach that next level in your business with plans, projections, and profit analysis.
When you hire a CFO to come in and look at your numbers on a high level, you’ll increase your understanding of your numbers in a meaningful way so you can make bigger business decisions that support yourself and your business at that next level. You’ll have the advice and tactical, practical knowledge that you need to make wise decisions that support your growth.
If it isn’t time to hire a CFO, now you know what to think about as you grow and prepare yourself for what you’ll need at that next level (you are working with a bookkeeper already, right?), though a CFO can certainly help you get there!