If you’re an early-stage startup who has already closed a seed round of funding, you have probably already recognized the need for financial support. When you’re in high-growth mode and have raised somewhere in the ballpark of $400K to $1.5M, you need more than just day-to-day support with financial transactions; you need the kind of strategic financial support that a CFO provides. Likewise, if you have a lot of expenses, are earning significant revenue, or have a lot of activity, you need this kind of strategic financial support.
As I’ve already written in a previous post (When Is It Time to Hire a CFO?), that doesn’t mean that you need to hire a full-time, on-staff CFO. But you do need someone who understands your business finances, who can help you to manage what you have, and who can help you to make the kind of strategic plans that will translate into more money for your startup.
Hopefully I’m preaching to the converted here and you’ve already outsourced your CFO function. Great! Now what?
You may think that your job is done. Your CFO is there, in the wings, if you need her—but you don’t feel like you need her…just yet. You’re busy focusing on building your application, refining your product, growing your company. You may feel like looking at your monthly bank report is all you need to do to actively manage the financial side of your business.
But you’re wrong.
If your CFO tries to schedule a call with you, you may think: what’s there to talk about? The answer is: more than you know! It’s important to engage with your CFO on a regular basis if you are truly committed to growing your company.
Here are 6 reasons, in particular, when you need to reach out for the kind of financial guidance that your CFO can provide:
1. Preparing to raise another funding round. If you are preparing to raise more capital, financial forecasting—that is, cash-flow forecasting—is an essential part of your preparation. Your CFO can also help by introducing you to potential investors and helping you to manage your investor relations.
Contact Early Growth Financial Services for help with financial forecasting.
2. Completed a funding round. If you’ve just completed a new funding round, congratulations! Now it’s time to create or rework your budget in response to this capital infusion. Your CFO can help you create an operating budget based on your milestones, and help to refine your 3-5 year financial plans
3. Receiving payments from customers. If your company is earning revenue, that means that you are accruing sales tax liability. You need someone to explain your tax liability so that you can maintain compliance before you get yourself into tax trouble.
4. Upcoming board meeting. If you have a board meeting on the calendar, let your CFO know so that he can prepare timely financials that you will need to have at the ready to share with your board.
5. Contract negotiations. So many of our clients realize only after the fact that they should have had one of our consultants at the table to review, negotiate, haggle, and approve contracts. We can help you to achieve the best possible terms.
6. Executive team meetings. If you had an in-house CFO, she would be part of the executive team. An interim or part-time outsourced CFO should still be considered a key member of your team, someone who can contribute an objective view to help you to see where your company could be making more money and how.
These are just a few situations when it makes sense to reach out to your CFO, but there are so many more. CFOs can help provide strategic guidance in myriad ways. Of course they can offer financial planning, business modeling, forecasting, and budgeting. But they can also help with cash-burn analysis, revenue recognition strategy, pricing, operating budgets, liquidations, M&A, and so much more.
Think of your CFO as one of your most valuable resources. Just let him know where you are and where you want to go—and your CFO can help you to get there.
Where do you think you most need—or already benefit from—CFO support? Tell us about it in comments below and/or contact Early Growth Financial Services for assistance with financial strategy.