The moment where the growth of a small business necessitates hiring a CFO should be an exciting one. It means that the company has finally rose from its meager roots to a level of respectability and experienced exponential growth. In an article on Forbes.com titled “Signs a Small Business Needs a CFO”, Jeff Thomson interviewed Marc Parker, Director of CFO Consulting Partners, about this exact moment. 

During the interview, Mr. Parker mentioned a few of the inherent qualities that a CFO should have. A small business CFO should be quick on their feet and must be meticulous. “The CFO must also be critical of the banking relationship – there can be no slip-ups,” Parker stated. Any small financial mishap could have drastic consequences for a business and it’s the CFO’s job to avoid that. They need to be ready to get their hands dirty. Parker continues, “A CFO in a growth-oriented small business must be hands-on. Being in the weeds is critical to controlling growth and communicating results to those with money at stake.” 

There are a few factors that may determine if your company is ready for a CFO: 

1. Rapid Growth and Financial Oversight Help  

If your company is experiencing tremendous growth, it may be time to bring someone in with a higher level of financial expertise to help guide you through this growth. It will eventually become too much for the CEO to navigate this growth by themselves, especially the finances which deem to be the most important part of a company.  It could be detrimental to the company if the finances are not prioritized and done correctly.  If you hire a good CFO, it should add at least 1-2 percent of net income. This amount should more than cover the cost of the CFO services. 

Growth requires an expansion of systems to handle the growth, and additional capital and/or financing to finance the growth. A CFO is best prepared to handle rapidly increasing growth due to the complexity involved.  

2. You Need to Raise Capital 

A CFO is a must-have when it comes to the company raising capital. Whether you need a loan, are looking to purchase new office equipment, or are taking it to the next level with an investor or venture capitalist,  it will only benefit you and the company to have a CFO to be able to interpret the investment and technology, and the terms of acquiring capital. 

3. Merger or Acquisition 

If your company is preparing to go through a Merger or Acquisition, it is time to hire a CFO. It is important that financials are trustworthy so that the value of your company increases. CFOs can analyze contracts, complete due diligence, work with stakeholders on your behalf, and much more. They are critical to the success and flow of this process. 

4. Company is Going Public 

An IPO for a small business is extremely exciting. This will take your business to the next level and the value of your company will skyrocket. An IPO will also make your company subject to audits, which will also require the skillset of CFO. It is crucial for public companies to have accurate financials as you must provide this information to shareholders. 

5. You Are Being Audited 

Audits can be a stressful time for businesses.  If the bank is requiring more audited financial statements, this can become overwhelming for you if you are not sure exactly what they are looking for. A CFO can also implement internal controls and implement new systems that can make auditing processes go much smoother going forward and take the stress off your shoulders. 

As a small business, if you do not feel ready or cannot afford to hire a full-time CFO quite yet, outsourcing services can help you. Rather than hiring a full-time CFO, you can consider an outsourced CFO or interim CFO service as a cost-effective alternative. These types of services are growing in popularity, especially for small businesses. 

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