Small Business & Startups

When To Hire A CFO and How to Afford One in Today’s Startup Ecosystem

By January 7, 2020 No Comments

when to hire a cfo

Today’s startup ecosystem is thriving.

According to a new report by the Global Entrepreneurship Monitor, over 27 million working-age Americans are entrepreneurs. Yep, you read that right —  nearly 14% of Americans are getting a piece of the startup pie. In fact, Acuity’s home city of Atlanta has been named one of the top 10 rising cities for startups in the country, with 3-year VC investments totaling $2.9 billion

In short, there’s a lot of startup funding out there and plenty to go around. We hear you! You’re ready to take a bite out of the funding pie, but have you considered who’s going to guide you in the right financial direction or be in charge of all of that funding you’re going after? The idea of hiring a chief financial officer might be a pipe dream; something you never could really fathom doing anytime soon. 

However, as your business grows, we’re here to tell you that the investment in a CFO might be exactly what your company needs. From building the right budget to knowing when to hire a CFO full-time, let us give you some tips on how to afford a CFO.

Hiring a CFO – full time or outsource?

First things first: the role of a CFO should only be forward-thinking and strategic, so that means it might be a while until a startup company like yourself needs a CFO full time. Typically, CFOs receive a base salary of $200,000, usually with a bonus, stock package, and benefits (and in Georgia it’s even higher)…dramatic pause while you recover from sticker shock…okay, let’s keep going. 

CFO compensation is obviously different for different markets, but to hire a chief financial officer full-time, you’d need to budget something in that neighborhood. Keep in mind, however, you’re actually getting a lot more than a warm body. Beyond being someone who is knowledgeable, you’re also gaining a sounding board, another soldier in the startup trenches, and in many cases, a business partner. Your CFO can help you with everything from choosing a bank for any kind of loan agreement to helping you determine product pricing. Essentially, a CFO is your financially-minded guru. 

Learn more about whether you need to hire a CFO >>>

So, what do you do if you can’t quite afford the price tag?

We usually recommend outsourcing that position until it’s a recurring 2.5-day (or 20 hours per week) need. Additionally, once you reach a recurring 2.5 day need on a financial side, you might also want to consider a full-time hire. How do you know if you’re ready? Look at your revenue. If you’re making 5-10 million in revenue, or you’ve raised 5-10 million in funding, you’re ready and should consider hiring someone.

Otherwise, keep on outsourcing. Think of your needs on a fractional basis. Someone like Acuity has CFOs ready to help you at all times. Chief financial officers like this can bite off chunks of projects just where you need that financial or strategic guidance. Because it’s essential to have someone available to help you make those judgments, or even just someone to use as a resource for bouncing ideas off of, outsourcing your CFO is a great idea.

Learn more about the benefits of a virtual CFO >>> 

The startup CFO budget breakdown: When to hire a CFO.  

We usually recommend businesses budget 1-3% of their revenue towards finance functions. The tactical side of things only takes so much, so the balance can be used for some of the forward-thinking things like a CFO. Plus compare the cost of part-time CFO work to the $200K salary we mentioned earlier. 

Ready to learn how one of our CFOs can help you grow your business? Get started today, or test the waters with our free CFO office hours

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