Why an outsourced CFO is the best option for you.

Outsourced CFO

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Your startup business is up and running; you’ve got a product, a wonderful team, and you’re breaking into some markets. Sales are coming in, bank accounts are growing, and investors are starting to kick the tires. With all of this success, you’ve now created a new problem; how do you manage the finances to support this activity and position yourself for growth? Your management team has come to you with a solution – it’s time for a real finance department and to find someone to lead it. Establishing a finance team is more than just finding a good in-house bookkeeper. If you intend to grow, you’re going to need a real strategy for your business.

Enter the CFO

A successful startup business venture can only get so far on the sheer force of will of the founders. Eventually, a proper strategic outlook is important. That’s where the CFO usually comes in. Their job is to do more than just the accounting – they’re your right hand. Your CFO is the person you turn to with any and every question, and they need to be prepared for that. Often, founders will turn to a trusted family member or good friend to fill this role, and that’s fine… sometimes. Your in-house CFO might be an absolute rock star at running a tech startup business. They may be the best accountant you know. Is that enough? Does that person have the depth and breadth of experience you need to keep your business heading in the right direction? To answer that question lets look at what a CFO needs to be able to do.

You can’t manage what you can’t measure…

The first, and likely most important thing you’ll need your CFO for is to know, at moment’s notice, what state the company is in. Your CFO should know what the various parts of the company are doing, how things are going, and what issues may arise in the short term. They can tell you how much runway you have left, if you need to start looking for financing, and where you should put some of that cash once you have it. Your CFO is the one who implements controls, creates new policies, and keeps a vigilant eye on your finances. They are both the referee on the field, and the eye in the sky.

If it weren’t for physics and law enforcement…

You’re the founder, your job is to come up with the plan. Your CFO’s job is to make sure that plan isn’t completely off-the-wall and can be achieved with the resources available. They are your sanity check, your conscience. Your CFO should be the one who tells you when to grow the team, and when to bring in a new piece of equipment or technology, and they’ll know how best to deploy that. If you’re the architect of this thing, your CFO is both engineer and general contractor. They build and execute your plans, deploy the right resources, and keep projects on track.

Finding the right fit…

If the CFO is so important then why is this post entitled “Why you should outsource a CFO”? The answer to that question is complicated, because the truth is that while you need a CFO, you don’t necessarily need them to be full-time in-house. In fact, outsourcing your CFO might be the perfect direction for your company to move in.

How can some stranger possibly be the right move for my executive team?”

  • Sober second opinion: Bringing in an outsider means hiring someone that isn’t going to hold back from fear of hurting your feelings. They aren’t connected to you in any way other than the business, and as such they’re not going to sugar-coat their answers. They’re going to look at your company as a business, and make the best decision for the growth of the business. An outsourced CFO is far enough away from your business to see the forest, not just the trees.
  • Breadth of experience: An outsourced CFO didn’t grow up in your business; they’re a consultant. As such they’re likely bringing a huge wealth of knowledge and experience to your business that you wouldn’t otherwise have access to nor could you probably afford. A CFO who has successfully brought their advisory services to market is likely coming from a very different industry to yours, and so is less likely to get hung up on the details that drag you down. They’re able to quickly move between the issues and perform at their best.
  • Experience outside of finance: You’re going to be asking your CFO to perform several tasks for your business, so it behoves you to find someone who can do that. More than an accountant, your CFO is also the person who will most actively push for new technological development and to bring in new systems. They’re the one who will manage your team. They will make decisions on when and how to spend your money.
  • Cost savings: Hiring a CFO is an expensive proposition. Like any executive, an in-house CFO carries a payroll tag that is nothing to laugh at, often rivalling that of the CEO and other members of the top level executive team. Outsourcing a CFO can present significant savings on that front. Since your consulting CFO will be managing multiple clients, your cost drops dramatically. Your CFO’s effectiveness won’t be affected by them being out-of-office, but their ability to make the right decision will be significantly increased by having many situations arise at the same time with comparable results.

The decision to hire a CFO isn’t one taken lightly. It is the first step toward high growth rates, and can set your business on the path to success. It can also allow you to off-load some of the day-to-day decision-making processes, giving you the freedom to develop that next step. Your CFO will steer you in the right direction, away from blowing your cash in the wrong place. Outsourcing that hire saves you a ton of salary cost, and offers a very different perspective on your business than you’d be able to get from internal hires. Your outsourced CFO will point you in the correct direction for your general accounting practises, and keep you in line with your local and federal regulations.

The takeaway…

  • You need a CFO to reach your full growth potential.
  • Hiring a CFO in-house may be too narrowly focused for your needs.
  • Outsourced CFO services offer a broader spectrum of knowledge and experience
  • Outsourced CFO services come at a fraction of the salary costs
  • Bringing in outside services can be much more widely leveraged (click the link at the top)
  • Profit.

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