There used to be a time when it was easy for startups to determine when to hire a CFO. Once the startup began to achieve meaningful revenue, the conventional wisdom said, or when the startup was a year away from an expected IPO roadshow.
These rules no longer apply--and Christian Gheorghe over at TechCrunch took the time to explain why. He also offered some tips on when modern startups should hire CFOs. Here are our top three takeaways:
The CFO’s job description is changing. Gheorghe uses Twitter CFO Anthony Noto as an example of someone functioning in a changing role. Noto, formerly an investment banker and analyst, helps out with communications in addition to managing finances.
“Today’s finance executives are expected to recognize that planning involves data, decisions and people--not just spreadsheets and budget mandates,” Gheorghe writes. “They’re now expected to work across the organization to model the business for growth, develop potential responses to likely scenarios (good and bad), align new initiatives with monetization, and deploy resources and investments where they’d drive new revenue.”
Non-CFOs can lay the groundwork very effectively. CFO salaries are pricey, but many startups continue to think that they need to pay it. It’s simply not true anymore. “Even a mid-level finance pro can move an organization’s planning, budgeting and forecasting processes beyond Excel spreadsheets so managers have the data and analytics needed to understand those ‘what-if’ scenarios and utilize predictive analytics and forecasting,” Gheorghe explains. “And when it finally comes time to bring on that CFO, you can bet he or she will have plenty of thanks for the team who enabled them to inherit a finely tuned machine.”
Still, if you think you need it, don’t hesitate to hire. Like in so many cases, Gheorghe notes, there's a fine line between getting timing right and getting it wrong. “If you’ve held off on hiring that finance guru until the moment you have an IPO or other milestone in your sights, you’ve waited too long,” he emphasizes. “You’ve missed crucial months that could have been spent identifying where you should place your biggest bets, your most valuable resources, and your most significant investments ... Wait too long, and you’ll make your new CFO’s job even harder once he or she comes on board.”