Articles and White Papers
Excerpt from October 31, 2008 article on BusinessWeek.com.
If your business is growing fast and has 30 or more employees,
you probably need to find a chief financial officer.
By Tom Taulli
When San Francisco e-mail marketer VerticalResponse grew to $6 million in revenues and 30 employees last year, company founder and CEO Janine Popick was overwhelmed with budgeting and accounts receivables. Eventually, she hired a chief financial officer to help her resolve the short-term problems, with the long-term goal of setting her company on track for sustainable growth. "I wish I had hired him earlier," says Popick. "He was a life saver." She says the CFO not only helped improve cash management and reporting but also helped deal with investors and HR issues.
A CFO is often an overlooked hire at a new business because of the expense and misunderstanding of the role. Traditionally, a CFO prepares and interprets financial statements; develops financing strategies (with banks and investors); does tax planning; sets internal controls (to help minimize fraud); forecasts budgets, and handles compliance.
Hefty Salary
These tasks can be vital for a company. Yet it is common for founders to neglect them - instead building products and finding customers. If a company wants to grow, there needs to be a solid foundation, which is what a good CFO will provide. In fact, in today's rough economic environment, a CFO may be even more critical for a company's success.
Before starting the selection process, a small business owner should keep in mind that it can easily take six months to hire a CFO and could potentially require a large salary - say $150,000 to $250,000 - including stock options (which may represent 1% to 3% of the company's outstanding shares). Given the time and cost, you're already probably wondering, when do you need a CFO? There is no definitive answer. But here are some guidelines:
1. The company's revenues are growing quickly - 30% or more per year.
2. The company has received venture capital.
3. There are more than 30 employees.
In some cases, your company may surpass those levels. What do you do in the meantime?
One strategy is to retain a part-time CFO. He or she will have a solid background - and will have been a former CFO - but will devote a couple days of week to your company. A part-time CFO can help build financial systems and even help with some of the long-range strategies. More important, the part-time CFO can help provide a transition to a full-time CFO.
Regardless of how you eventually find a CFO, keep in mind that this person should act as the CEO's partner and confidant. It's one of those positions that take lots of homework before you can make a decision - and can be a key to the success or failure of your company.
© The McGraw-Hill Companies Inc. 2008.
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