4 Things You Need To Know Before Hiring a CFO

Outsource a CFO 434333

Hiring anyone is difficult, but when hiring a member of your senior management, the stakes are even higher. Now, any decision this person makes will affect the success of an entire business, meaning choosing the right person could make a difference between success and failure. 

So, how do you navigate the landscape of hiring a CFO?

While this question is too complex to be untangled so easily, here are the top four things you need to know before hiring a CFO.

1. What are the responsibilities of a CFO?

It’s preposterous even to start talking about hiring a CFO before you define their role or figure out what they’re supposed to do in your enterprise.

Simply put, a CFO is there to handle the complex financial operations of your organization. When you need to handle multiple streams of revenue, international operations, or intricate financial instruments, it’s time that you get a CFO.

CFOs are also in charge of fundraising or IPO plans, so even if you don’t bring them in right away (when starting out), you’ll have to bring them in during the first larger project. As soon as you start dealing with increased regulatory compliances (as you get entangled in more complex partnerships and larger projects), you’ll need a CFO (or someone with their skillset) to help you out.

The same goes for an increased complexity in tax and legal matters. As a sole proprietor or a small business owner, you probably won’t need too much help with your taxes. As your enterprise starts growing, these things will rapidly change. 

Most importantly, a CFO is in charge of your strategic decision-making. They are there to handle massive projects like mergers, acquisitions, and partnerships. Handling this without a CFO could put you in a position where you feel like you’re way out of your depth. 

2. What is your budget?

One of the biggest questions you will face is your available budget. Since they’re a senior management member, their pay is proportional to the size and status of your company. In other words, being a CFO in a small enterprise and a CFO in a multi-billion dollar company are incomparable.

What you need to figure out is how much you can spend. 

Now, there’s one more thing you need to keep in mind. This is a high executive, someone with an incredible level of skill and motivation. This means that they’ll require proper pay, a pay that you may not be able to afford. Hiring a CFO while you’re a 10-person startup makes little sense.

This is why you must understand when to hire a CFO

Generally speaking, every business is different. While some would say you need a CFO when transitioning from a small to a medium enterprise, others would find this definition quite crude. 

The truth is that you don’t have to wait until you need them. When your business is rapidly expanding, and you figure you’ll need one shortly, it’s probably time to start looking. 

The simplest explanation is that it might be time to look for a CFO when your business starts facing complex financial operations.

3. What are your requirements?

When it comes to requirements, you must split this into two categories – objective requirements and subjective requirements.

For instance, a CFO is a chief financial officer, meaning their accounting knowledge is non-negotiable. They need the right degree, certificates, and in-depth knowledge of all the financial processes your firm is involved with. More likely than not, you’re looking for someone who came up through the CMA route. 

Regarding industry experience, you can look up some industry standards, but this is completely subjective. The same goes for your interpretation of the rest of their CV; however, truth be told, every one slightly “embellishes” their CV, which is why you need to figure out how to cut through all of this and get straight to the point. In other words, you must learn to read between the lines

You can also look up their social media to get a general feel of whether they’ll fit your company culture. This is even more important than hiring regular employees since they will represent your enterprise while serving as one of your highest executives.

Ideally, you would also want to have a recommendation from someone you know, someone you’ve heard about, or someone who just seems like a credible source. The thing is that this is sometimes hard to get, which is why you shouldn’t be too exclusive.

4. Their future plans

The problem with hiring a CFO is that you need them to stay, at least for a while. So, what you’ll do is try to inquire about their plans. For many financial specialists, your small or medium business will just enhance their CV. This means they’ll leave for a better offer as soon as it presents itself. After a few years as a CFO, they can choose much better gigs.

This is why you need to negotiate it with them. 

Ask them for their long-term plans and try to negotiate a progression system with them. Sure, there’s not much they can advance past a CFO, so you can either promise them their salary will grow as the firm grows, reward them with company shares, or negotiate their salary progression.

This way, you’ll increase the duration of their stay in your company and incentivize them to give it their best and try extra hard. Appeasing your employees is always important, especially if they’re a part of your firm’s senior management. In this scenario, they’re even more indispensable, and keeping them is an even greater priority.

Also, ensuring that they’re a great cultural fit may also determine how long they stay in your company.

Wrap up

The most important thing you need to understand is that this is a decision that you shouldn’t take lightly. Take all the time in the world to try and figure out if this applicant is the right person for you and your business. In other words, research CFOs in other companies, set your budget, make a list of your requirements, and always plan for the long run.

Interesting Related Article: “CFO (Chief Financial Officer) – definition and example