In the early days of your startup you might be just fine handling your own basic bookkeeping and expense management or even outsourcing those tasks to a small firm or an individual. But you will reach the point where you both need and want more sophisticated help. Maybe you’re close to getting outside investors or maybe your revenues are growing faster than you projected (congratulations!) and you need to make sure you’re reporting them correctly. Once you’re at this point, you’ll want to put yourself in experienced hands.
Hiring an outsourced CFO is one way to step up your game when it comes to your startup’s financial management, while keeping your cost structure flexible. But it matters a lot who you hire. Here are some suggestions to help you find the right fit:
How to find an outsourced CFO
- Ask for referrals — Tap your network of service providers, fellow founders, advisors, and incubators/accelerators/co-working spaces.
- Look for fit — Don’t necessarily jump at the first person/firm you meet. Take fit into account and check credentials, background experience, and skill sets against your business needs.
- Check out the client list — Ask candidates for the names of clients who are representative of the range of services offered. If a firm has experience working with clients similar to yours in terms of industry, stage, etc., that’s a good sign that they have the expertise that your company needs.
Interviewing outsourced CFOs: asking the right questions
Outsourced CFOs can offer so much more than just “handling the numbers.” Beyond financial forecasts, budgets, business modeling, financial plans, pricing, revenue recognition strategy, cash management, cash-burn analysis, monthly reports, and M&A support, CFOs can help with investor relations, strategic planning, and so much more.
It will be easier to find the right fit, if you’re clear about what you want and need from the outset — while still being open to listening to CFOs’ suggestions. The key is to find an outsourced CFO that can meet your current needs and grow with you — at least until you reach the point where you’re ready to bring on someone in-house.
Start with these questions:
- What specific experience do you have working with startup businesses? Startups demand a unique skillset of CFOs. Of course, they’ll need the obvious ones like accounting credentials, expertise with doing financial projections, and managing budgets. But startup CFOs also need to have good negotiation and strategic planning skills as well as extensive contacts with potential funding sources.
- What’s your domain expertise? Different people and professional services firms may specialize in or have strengths in a couple of specific areas. Make sure that the ones you consider can offer you full-service support.
- How do you typically work with clients? You’re trying to understand if this person has the capability and desire to partner with you in the development of your financial infrastructure — that encompasses the ability to wear multiple hats plus the flexibility to adapt to quickly changing circumstances.
Your relationship with your outsourced CFOs should be an ongoing open dialogue. Your CFO should be a trusted business partner that helps you with all aspects of your business.
And remember, you don’t outsource to make responsibilities go away, you do it to enable your team’s continued focus on your core skills and chief objective: growing the business.
Are you considering or have you used an outsourced CFO? Share your experience and ask questions in the comments section below or contact Early Growth Financial Services for a free 30-minute financial consultation.
David Ehrenberg is the founder and CEO of Early Growth Financial Services, an outsourced financial services firm that provides early-stage companies with accounting, finance, tax, valuation, and corporate governance services and support. He’s a financial expert and startup mentor, whose passion is helping businesses focus on what they do best. Follow David @EarlyGrowthFS.