When Is It Time To Hire A CFO?

If you’re a business owner, then you’ve likely experienced a sleepless night or two (or let’s be honest, many more). It comes with the territory, even if you’re wildly successful.

But when you’re losing sleep over unrelenting cash crunches (despite showing a profit on your P&L!), or whether to purchase a struggling competitor’s assets, or why your best selling product seems to be a drain on the bottom line, it might be time to hire a CFO. 

It’s a CFO’s job to be at the heart of your company’s financial systems, to help you understand the stories behind the numbers and provide you with key insights that are necessary to make the best, most strategic decisions. And that can go a long way towards giving you a good night’s sleep. 

There are any number of different circumstances that justify hiring a CFO depending on what’s keeping you awake at night, but let’s look at three common ways a CFO can be an invaluable resource to your company.

#1 Understanding The True Cost Of Doing Business With Customers

Not all customers are good customers, but many business owners make the mistake of accepting any and all new business that comes through the door. They think that more business always correlates to bigger profits. And that just isn’t true. 

Generally there are costs associated with onboarding new customers, and some customers can actually be a drain on profits. A CFO can help you evaluate existing models for profitability. 

If, for example, you’ve got a customer who purchases goods or services regularly, but they dispute most invoices or are frequently dissatisfied with your products and insist on returning them for a full refund, they could put a serious dent in profits.

A CFO can help you analyze your company’s profitability by customer and by product or service lines so you can identify which ones are actually helping— or hurting — your bottom line. Then you can work together to form a solid strategy for resolving these types of issues.

Similarly, a CFO can help you best structure deals with new customers at the outset so you know you’re charging a competitive price that’s also good for profit margins. 

#2 Raising Capital

Just because you’re generating a lot of revenue doesn’t mean you’re immune from cash crunches, especially if you’re investing in assets to grow the business or have a lot of long-term receivables on the Balance Sheet.

That’s when many businesses look to lines of credit or bank loans or even in some cases, taking on equity investors.

A CFO can help you understand which might be the best solution based upon how much and how quickly you need a cash infusion. And they can put together solid reporting packages so you’re more likely to get the financing you need. 

And a CFO should be well versed in standard interest rates and bank loan terms and how to structure a deal with an equity partner that protects your stake in the company and your role going forward. 

#3 Acquisitions And Strategic Alliances

If you’re considering an acquisition or strategic alliance, it’s safe to say you’re probably experiencing a dramatic shift in how you do business, and that’s precisely when a CFO can be an invaluable resource. 

Whether you’re buying an entire company or just its assets, you’ll need to understand the valuation process. And some might say valuation is more an art form than a tactical skill set, so again, a CFO can be a huge asset when you’re deciding whether to acquire or form a strategic alliance with an organization. And they can help ensure you don’t overpay.

Fractional CFO Solutions

The good news is that, particularly if you’re concerned about adding to headcount, you don’t necessarily have to hire a full-time CFO. Many consulting firms now offer CFO services on a part-time basis. 

Fractional CFOs act as part of your finance and strategy team to help you manage cash flow and growth, and can unpack things like how pricing structures and customer behaviors affect profit margins. They can provide oversight as well as strategic recommendations based on a deep knowledge of your company’s structure and finances. 

If you’re losing sleep over business-related finances, it’s a good time to consider hiring a CFO. For more information on fractional CFO solutions, click here to connect with the experienced professionals at Steiner Business Solutions.