What type of CFO do you need?
When you go to the doctor for your annual check up, you usually see a family practitioner or generalist. On the other hand, if you suffer from a broken hand, you most likely see an orthopedic surgeon. Similarly, not all CFOs are created equal. Sometimes you need a general practitioner type of CFO and sometimes you need a specific surgeon.
These are some of the situations that your company may be facing and the type of CFO that best fits the situation. Just like filling any other key position in your organization, you want to tailor your search for a CFO based on your specific situation and pain points.New business/Small Business: Part time CFO
You have successfully launched a new business and you can call yourself an entrepreneur. You have a passion for a specific product or service, but you may not recognize yet that you need a person to keep you grounded in the business and the upcoming challenges.
A typical CPA may only do your taxes and books on an annual basis. But what you really need is someone that can guide you and make sure that your business plan is being followed. In this case your business may not have the size or the funds to hire a full time CFO. There are a number of firms and independent consultants that offer part-time CFO solutions. These solutions basically cover accounting, business planning, budgeting and taxes. As the name indicates, these firms work on a reduced schedule in order to minimize cost. This is a viable solution for a business that only needs guidance once a month or once a quarter from an experienced individual at a fraction of the cost.Heavy Manufacturing or Tech start-up: CFO with VC or capital raising experience
Heavy manufacturing or Tech start-ups companies usually need large sums of capital to get to their critical mass. In addition to having a CFO that has a deep knowledge on accounting and finance, this individual has to have a network of contacts in commercial lending and more importantly in the Venture Capital area. To be successful at raising capital the company needs to have a good story about its product/service and a CFO that is a good "story" teller.Midsize to large private company: CFO with entrepreneurial and growth experience
This is typically a mature company that has been in business for a few years and that has achieved certain level of maturity. To ensure that the company does not become complacent, it needs a CFO that has an entrepreneurial spirit. Someone that can see far enough in the horizon and help pave the next growth curve. A typical CFO for these companies has background not only in public companies but also in private companies.Midsize company with the desire of going public within 3 years: CFO with IPO and Sarbanes Oxley experience
In addition to the experiences mentioned above, in this specific case the board of directors usually brings a firm or a CFO that has done and IPO before. A CFO not only with the extensive knowledge of the company but more importantly experience with positioning the company ready for IPO which could take several years. This is also an individual that has the charisma to convince Wall Street that the company is a good investment.Large size public company: Corporate CFO
Once the company has gone public and as it becomes a Fortune 1000 company, it will need a seasoned CFO. An individual that has experience in managing not only the Financial and Accounting obligations but also all of the regulatory and SEC requirements. Very often this type of CFO has enough experience to help manage operations and many other support functions such as HR and IT. This is also a CFO that has mergers and acquisition experience, corporate treasury and international experience.
In summary, depending on where your company is heading you need to plan ahead and decide which type of CFO you need. However, not having one is not a good decision even for a small business. “Renting” a CFO can be a very healthy option for those small business that do require the financial discipline, but may not have the budget for a full time person yet.
Ricardo Lowe, CPA RLowe Consulting
RLowe Consulting focuses on helping clients start new businesses and on developing growth strategies. Specifically, we assist companies with business plans, business strategies, process improvements and cash management.