Why Are CFO Consultants in High Demand?
A recent Wall Street Journal article highlights several reasons that part-time CFO’s are highly sought after. The article focuses primarily on early-stage companies. Here are a few additional thoughts about why CFO consultants are increasingly a good fit for companies of all stages:
Early-Stage Companies
At this stage, you are building a foundation and making critical decisions. As the WSJ article highlights, savvy startup companies hire a bookkeeper and supplement that hire with a relatively small investment in a fractional CFO. Here are a few things they can expect:
Years of experience and best practices - A fractional CFO has seen where you are going and knows how to get there. A CFO consultant will have years of experience that includes helping companies obtain financing, growing their business, and preparing to exit. As you travel down this path, it is essential to have an advisor who can anticipate challenges before they arise.
A solid network -. You’ll need legal, insurance, and other experts to help build your company, and a CFO consultant typically has a well-developed network of trusted advisors.
A forward-looking perspective - At this stage, almost everything you need to think about is in the future. CFO’s understand how to ask the right questions and help you develop a clear picture of where you are headed. Using forecast tools, they will show how the decisions you make now will impact your future.
A solid foundation - Much of your focus is on building your product, service, and sales team. A CFO consultant will ensure you are growing a valuable, scalable company with a solid foundation.
Growing Companies
Growing companies, in my experience, reach a limit of their accounting and reporting infrastructure; this, in turn, starts impacting their ability to continue growing on the same trajectory.
If you haven’t hired a CFO consultant in the early stages of your company, you likely have parts of your foundation that aren’t supporting what you need now. It could be you aren’t getting the information you need, your bank is pressuring you to provide better information, you are struggling to understand the future impact of current decisions, or you have a sense that the accounting and finance part of your business just isn’t keeping up.
Some ways a fractional CFO can provide help as you move through this stage include:
A slice of expertise - Most growing companies can’t afford to hire a full-time CFO, and most don’t need one. They do, however, need someone with years of experience to think strategically and tackle some of the challenges that growth creates. I like to say they just need a slice of expertise, not the whole pie. Fractional CFO’s provide the expertise you need. They are flexible in allocating their time to you, thus giving you what you need at an affordable price.
Understanding your cash flow and financing needs - CFO’s understand how to get a clear picture of your cash flow needs today and in the future. In addition, they understand financing options and have a network of lenders and investors to support your plans. Finally, having a CFO advisor makes the entire financing process easier to deal with for you and often puts the lender or investor you are dealing with at ease.
Solidifying the infrastructure and accounting team - A CFO has experience building accounting teams and the controls and infrastructure they need to function effectively. They will help you identify talent gaps, implement software solutions and optimize workflows that will allow you to continue growing your business.
Late Stage, Preparing for Exit, Post Exit
I’ve worked with numerous companies that don’t fit neatly into the first two categories. Many have a full-time Controller or CFO, so why would they hire a CFO Consultant? Here are example scenarios where they might benefit from hiring one:
Software implementations - A CFO consultant will work alongside your software configuration team and optimize your processes and reporting for your future demands.
Preparing to exit - If you want to sell your company in one to three years, you likely have a suitable Controller. Adding a CFO consultant will help you look around the company and identify ways to maximize your enterprise value.
Due diligence: You may already have a full-time CFO, but they need to keep their eye on the company. You don’t want performance to dip during the due diligence process. Having a remote CFO devoted to managing the due diligence process can be well worth the investment.
Critical but short-lived projects - Most accounting teams and CFO’s are working at, or near, maximum capacity. When an urgent task comes along, CFO’s will often reach out to colleagues they can rely on to manage the project.
Summary
The Wall Street Journal noted, “Chief financial officers who work part-time for several companies are in high demand.” The article highlights venture capital as a critical driver of this demand and focuses on Silicon Valley and San Francisco. CFO consultants across the country, including myself in Tampa, Florida, are experiencing greater demand. As I summarized in this post, this demand comes from companies across the spectrum of sizes and stages. For many challenges, CFO consultants are often the ideal solution.
About Us
Highpoint CFO is a CFO consulting firm based in Tampa, Florida, that serves clients throughout the US.
Scott Young is the President and Principal Consultant at Highpoint CFO. He is a CPA and Certified Merger & Acquisition Advisor (CM&AA) with over 20 years of experience in finance and accounting at industry-leading companies.
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