The Value of a CFO to a Start Up Company
Is there really a need for a CFO from ‘creation, development & after funding’ for a start-up? 3 questions for you to consider…. I have definite opinion. Your thoughts & opinions are welcome!
1) What value does a CFO bring to such a company, (in terms of Salary & Equity) if this person helps create business plan, full financials, distribution & sales channels & funding sources as well as psychologist & business coach?
2) What should an entrepreneur/ owner & investors in a new start-up company with a valuation between $2.5m -$10m with only 4-5 employees expect to pay a CFO? (salary &/or equity?)
3) Does a company this small even need a CFO from development or after funding is secured?
A clue… the answer is YES to all 3, (tell you why in just a moment)…
Hint… too many entrepreneurs say ‘NO’ because they think they can do it all… Yikes!
There are 2 languages that must be spoken in business. Entrepreneurs usually speak ‘Sales’ or ‘Technical’ with great fluency. The language they lack is ‘Finance’. Most of these brave souls don’t understand the financial language. Getting around their ego is the real challenge.
A full-time CFO might not be needed, but it doesn’t have to be all or nothing. A friend helped me with this analogy. CFO’s are like ‘Painkillers, or a Vaccine’. Your CPA, staff accountant, office manager or controller are like ‘Vitamins’. Folks need to think out of the box. Consultant can be a dirty word to smaller companies… the expectations of a consultant working for a big company vs a smaller company is night & day. Small companies & such entrepreneurs expect problems defined & solutions delivered, shorting the rest of the process. Okay, it is possible, smaller means more agile, less hoops, quicker decisions, but still big Egos.
The educational process involved in selling the value of a CFO to a start-up should NOT be compared to a ‘consultant’. Consultants conjure up ‘interim’ assignments. solving 1 problem at a time. The better way to view & sell this value is the same approach to choosing a lawyer. Again, too many folks think 1 lawyer can do it all, but there are experts in IP, securities, transactions, litigation etc… 1 size does not fit all. I digress…
A PART TIME CFO with some skin in the game (maybe some equity), who is ‘Retained’ can greatly help meet the needs of such businesses. The virtual ‘Painkiller / Vaccine’! You don’t want to get addicted, but you need the pain to go away. Unlike a consultant, a Part Time CFO, is there on a ‘as needed basis’, 3-4 days a month or more before & after funding. The owner can hire a bookkeeper, office manager, or even a Controller if big enough to handle the black & white accounting items. These folks are like the ‘Vitamins’ that are needed to help retain your health, but they have specific roles & are not a cure all. The CFO stays out in front, shoulder to shoulder with the CEO. There is a big difference between a consulting engagement & a Part Time CFO role. Entrepreneurs need to think outside the box. Save some money & still get the value they so desperately need.
President – ProCFO4U
“Your Trusted Alternative to a full-time CFO”