If you are serious about your financial success then you need a CFO.
Statistically, 82% of businesses with less than $10M in revenue fail due poor cash management.
And have you noticed?
That some startups who raised millions of dollars in capital, still run out of cash and fail shortly after their launch? An experience Part Time CFO could possibly save from disaster and guide you to success.
Today, we’re going to teach you everything you need to know about how to hire for part time CFO services for your business.
Let’s start with the basics.
What is a CFO?
Businesses fail when they run out of money (can no longer support operating at a loss).
But if it is so obvious then why do so many small businesses fail?
Here are two likely scenarios:
#1 – Their competitors somehow spent more money, acquired more customers, and they were not able to gain market share.
#2 – They made poor financial investments that yielded negative returns.
Both scenarios require you to make sound money decisions. The solution that most people come up with is “I need to raise more money”.
However, this isn’t always the case. Sometimes there are opportunities that are hidden beneath the surface.
That’s where a CFO comes in.
CFO stands for Chief Financial Officer. Their role is to handle the business’s primary financial actions such as managing cash flow and financial planning.
A good CFO should be able to break down your company’s financial opportunities and easily present those options to you.
In short, a CFO Services help you make more money.
Knowing how to create a great product and service is great.
Knowing how to make the investments that will yield more profits is great.
But when you can do BOTH?
That’s when you can watch your competitors fall beneath you…
…Because you will develop a stronger customer base AND outsmart them financially.
Part-time vs Full-Time CFO
So you can see that hiring a CFO is worth consideration.
And you’re probably wondering… “Well how much is this going to cost me?”
The average full-time CFO earns $313,541 per year (according to Investopedia).
That can be alot of money for a young business.
Here’s the good news.
You don’t have to hire a Full-Time CFO.
In general, you will not need to hire a full-time CFO until you’re making at least $50M in revenue.
Great accounting firms like ours offer Part Time CFO Services for Small Businesses. You can contract an exceptional part-time CFO at a fraction of the cost you would pay a full-time CFO.
Depending on your needs and size, you can expect to pay anywhere between $2,500 – $20,000 per month on part-time CFO services. However, instead at LYFE Accounting, we only charge 1% of total revenue for our Part Time CFO Services. This is because we are dedicated to helping our clients grow and view our relationship as a true partnership.
Startups who hire CFOs early are likely jumbling the duties of a CFO, Controller, Payroll Clerk and Staff Accountant, all in one.
But wait, what exactly is the difference between a CFO and Accountant?
The Difference Between a CFO and Staff Accountant
For many business owners accounting is usually the last item on their never-ending to do list.
Because accounting doesn’t help you make money.
Which is primarily true.
Accountants mainly focus on recording and reporting on past events. The role is essentially looking backwards.
However, Part-Time CFOs help you look forward.
The CFO helps businesses make more money. They spend most of their time looking forward and trying to find opportunities.
Here’s an example:
A new vegan restaurant begins its operations in January. In the first month, the restaurant generates over 3,000 customers and $75,000 revenue.
An accountant will be able to tell you that the Black Bean Taco Salad was ordered 534 times and there were $2406.99 in sales allowance.
Whereas a CFO can recommend you to spend $5,000 for more square feet which will allow for more tables and increase revenue by $15,000/mo.
See the difference?
Accountants tell you what happened.
CFOs tell you what will happen.
How to Hire for Part Time CFO Services
At first, it feels good…
…To be able to say to your partners, vendors, employees…”I hired a CFO to help with our financials.”
But just like any other partner or position, it is important to bring the right person in for the job.
It’s even more important when the financial success of your company is heavily impacted by one person.
So you have to do your research.
Please, please, please, don’t ask your best friend or someone you know to be your CFO.
Instead, we have put together a list of questions to ask yourself and potential CFO before making a decision.
1) Does the potential CFO have a CPA license or Strong Accounting Background?
CPA stands for Certified Public Accountant which helps demonstrate their extensive knowledge in all areas in accounting. CPAs must pass 4 exams in financial accounting, auditing, regulation, and business concepts. Without a CPA license then your potentially CFO must have demonstrated through years of work experience that they understand all areas of accounting.
Does your CFO need to have an accounting background?
The truth is no.
But the odds favor CFOs with an accounting background and experience. This is because accountants have proven they know how to deal with numbers. Also, becoming a CFO is usually the ultimate career goal of ambitious accountants.
So having a CFO who understands how the numbers work makes the most sense.
2) Does the potential CFO have any experience with helping businesses grow financially? (Make more money).
Let’s be honest.
There are a lot of smart people who theoretically know how to do things.
Theoretically, the people in our office know how to get shredded and achieve our dream body…. yet no one does.
Sometimes only having the technical knowledge and skills won’t prepare you for all the challenges ahead.
That’s why we strongly recommend you work with a CFO who has previous experience building profitable businesses. The ideal Part Time CFO has either proven growth for his clients or successfully built a 7+ figure dollar business.
If your goal is to grow to 7 figures and beyond then you’d better make sure your CFO has walked that road before.
3) Will the CFO save you more time?
Thank about this.
Yes, you want to hire someone who can manage your financials and make you more money…
But an added benefit that Part Time CFO Services should have isthe ability to save you time. Time you can spend on developing your product and employees.
A great CFO should be able to determine more efficient processes that will speed up all your accounting and other business functions. Some examples could be speeding up accounts receivables, automating journal entries, or even closing deals faster.
As we enter into 2020, technology can save businesses a great deal of time and effort. What was manual before, can easily be automated thus saving companies thousands of hours.
So it’s important to ask about your potential CFO their process and what technology is involved.
But don’t just “listen” to what your potential candidate or firms tells you. Instead observe the way they are running their business.
4) Did you find the CFO online or event?
Finding a firm online shows their ability to leverage digital marketing. This shows you if the CFO firm has a forward-thinking approach which is what you want for your business as well.
Although, it’s still possible to meet a great CFO at an event. The point here is that you should check out their online presence before marking a decision. Visiting their website, reading reviews and learning more about how you could help
Does the CFO require meetings in office or run meetings over online video conference?
Some people will require that you visit them in their office, however, it’s so much more efficient for both parties to meet in their respective locations to prevent time wasted on commutes.
5) Does the CFO receive data electronically or request you to mail/fax stuff in?
You can tell a lot about a company by the way they conduct their business.
Technology is what makes everything run more efficient, clean and organized. If you are not able to run things electronically yet, then you should definitely make strides towards doing this.
But, it takes two to pass and receive data over the cloud.
So it’s a no brainer to find a CFO who can help get things online vs someone who prefers mail/fax.
Unfortunately, a lot of CPAs and CFOs are still running their practice like it’s 1999. So pay close attention to their operations because it could help or hurt yours.
4) Does the CFO ask you about your problems and goals?
Your Part-time CFO is almost like your business partner. They should be just as eagar as you are to hit your goals, grow the business and solve tough problems along the way.
An average CFO will want to review your financial statements and ask surface-level questions about your business such as “How many employees do you have?” or “What are your review goals for the next year?”
While a great CFO will ask questions to uncover what challenges you may be facing or goals you have for the business such as “How long is your current sales cycle?” or “What is the ideal salary you would like to pay your employees?”
You can judge a lot by simply accessing how deeply engaged they are about learning more about you.
While it’s important to judge the type of questions your potential Part-Time CFO may ask, don’t expect for answers to come immediately. Most likely, it will take some time before anyone can fully digest your problems and goals.
However, like my wife likes to say. “It’s the thought that counts.” and that’s what you are looking for here.
5) Do they offer reasonable Part-Time CFO Rates?
This one is tricky.
As mentioned earlier, CFO Rates can vary anywhere between $2,500 – $20,000 per month. (Also recall that LYFE Accounting only charges 1% of revenue).
That’s a huge gap.
The key reason for the gap is usually experience and reputation.
However, instead of simply looking at the cost.. look at the potential value.
For example: Most businesses would gladly pay a CFO $10,000/mo if that CFO could profitability make them an extra $30,000/mo. Whereas someone who charges $2,500/mo can only help you save an extra $1,000/mo.
That’s an easy decision… in the aftermath.
That’s why we recommend that you ask all the qualifying questions above first. Then make your decision based on value and costs.
Also, remember to have realistic expectations. It takes time to grow a business, so cost still plays a big factor. Yet, it can be disastrous to only choose the lowest bidder.
Small businesses need to consider using Part Time CFO Services.
But, please, please, please. Don’t rush your decision. Make sure you follow the steps above, do your diligence and go with someone who can help you grow.
If you are in the market currently for a Part-Time CFO then please contact us and speak with one of our in-house CFOs today.