April 10, 2019 | 5-minute read (820 words)
When you hear “team,” you likely think of your co-founders and employees. In reality, your team is everyone working on the business including advisors and professional service providers. Strategically building your team can make all the difference when getting your startup off the ground. Understanding when to hire an employee, outsource, or just do it yourself can be one of the most challenging aspects of growing your team.
Often, we find that startup CEOs seek out Early Growth Financial Services when they’re preparing to fundraise. As they work on their financial projections for their pitch deck, they realize they need help from someone who lives and breathes financials all day – a Chief Financial Officer. Bringing someone in full-time (especially if you are offering equity as part of executive compensation packages) is probably overkill. Hiring an outsourced CFO has become the most common solution.
What does an outsourced CFO do?
Services an outsourced CFO provides can include:
If you’re not at a stage where you need the above services, you may wish to start by hiring an accountant to free up your time for strategic work and to avoid making tax-related mistakes. If you are ready, consider interviewing at least three different firms before making a decision. A quality CFO will ask a lot of questions about the state of your business and your goals. By the end of the meeting, you’ll want to ensure you’ve gotten the following questions answered as well.
Four Questions to Ask When Hiring a CFO
At this point, you know what your short and long-term goals are, so you probably already have many questions ready to ask a potential CFO. Add these to the list.
1. What kind of experience do you have in my industry?
It’s common for CFOs to specialize in a one or a few industries. This is good news for you. Because they have seen the pitfalls related to your industry, they can help you see red flags. And as revenue models tend to vary by industry, you want to find a CFO who understands how your company generates revenue and can help you evolve as you scale.
2. What separates you from other financial service providers?
Like any service provider, choosing the right CFO will come down to a few factors that are unique to your situation. If they don’t bring it up first, be sure to find out what is special about their firm. Why would they be better suited to help you than another equally qualified one?
3. How much do you charge/what are your terms?
This is important for interviewing any service provider. Make sure that you’re comfortable with the price and other terms. Do they make sense for what your needs are?
4. How often will I see you/what is it like to work with you?
Founders and their teams want a CFO (or any outsourced professional) to be available for high-priority consults on an as-needed basis, and to know that regularly-scheduled meetings will be kept. CFOs are busy and manage their schedules and communication differently. Get a clear picture of how often you’ll see your outsourced CFO, in-person or via a face-to-face web call, and how responsive they will be to ad hoc needs, and what the experience at and in between those meetings is like.
Eric Leaf, one of EGFS’s team of over 40 startup-experienced CFO’s, points out that these relationships ultimately "really comes down to fit.” Leaf suggests engaging the resources of a firm versus a solopreneur. For example, when you work with EGFS, your CFO can lean on the largest national team of CFOs exclusively serving startups for any challenges that may arise or to help them find opportunities they may not see on their own.
Finding the right fit is so crucial that Leaf strongly recommends sitting down in person to interview potential CFOs. Leaf says he personally likes to work with his clients in person when possible, as well. It makes it easier to build a relationship faster —a critical relationship will only become more import ant as your company grows.
“Outsourced” does not mean "outside.” You and your CFO should both see their role as a trusted business partner who is committed to growing your startup. Don’t wait until your financials are a mess or you’re overwhelmed to bring a CFO onboard. Let them help you be proactive and strategic.
Questions or Comments?
Reach out to EGFS
Is it time to hire a startup CFO?
Choosing an outsourced CFO: How to find the right fit
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