When Should a Startup Hire A CFO
Sep 16, 2020
The story for many startups is a plot heavy on vision and light on execution. There’s passion, enthusiasm, and excitement that drives initial activity. The founder’s network and tenacity can even create business inertia and revenue. But when resources are lean and light, founders or partners might have one or two key people around them and often none of them are experts in running a business.
One key teammate they may be missing is the modern CFO.
Startups Need More Than Good Ideas
Startups need money, and getting it takes more than getting the word out. A pitch deck is often where it starts with investors, and the pitch deck needs to be more than ideas about taking over the universe. As soon as someone is interested in what the startup is doing, they’ll want to see the numbers. That doesn’t just mean how much money they have in bank. Investors will want to know what your plans are, how you’re going to get from where you are right now to realization of your great idea. They’ll ask how you’re going to get that to market and how you’re going to make it successful. Investors want to know how you’re going to get other people interested in what you’re doing – whether that’s a customer or other investors or banking relationships. What are your plans for the future? Many entrepreneurs simply don’t realize the the hurdles they’ll have to jump through to get to a point where they can have people risk their money and invest in their company.
If you walk into those meeting prepared, understanding the landscape you’re entering, and having anticipated the questions and arrived with answers in hand, you’re on the way to earning trust. Complementing ideas with financial acumen instantly makes you more credible with potential investors. This is where an experienced CFO is crucial to success. A CFO will have helped create a plan with the ideas. They’ll put a rationale behind the business – why it’s important, how it’s going to make money, how investors will succeed.
The CFO Is An Agent For Guiding Growth
This kind of insight isn’t just valuable to investors – it delivers value to the ideas themselves, to the DNA of the company. When a pragmatic lens is applied to the ideas, challenging questions have to be answered about growth. About inventory. About people and resources, and competition. This is more guidance the CFO can deliver, helping startups discover and refine their competitive edge. Very often entrepreneurs fall in love with their ideas. That passion is a key ingredient to success, but if left unguided it can lead to poor decisions. Investors want to see that passion – and the marketplace will respond to it positively. The right financial guidance can leverage the passion in the right ways for the appropriate stakes, with a vision for growth, and with fewer mistakes along the way.
