Updated: Dec 16, 2021
There are few things as crucial to a company’s success as solid financial leadership. So when the time comes to hire a new Chief Financial Officer, you need to find someone who will make a positive impact on your company culture through leadership, communication, and a clear vision for the financial future of your company.
Yet, whether your business is a burgeoning startup or has been around for a while, finding the right CFO, or even knowing if you’re at a stage to bring on a CFO, can be a challenge.
Since navigating this landscape is difficult for most businesses, we sat down with former CFO, Kristin Jackson, Ex-CFO at United Collective, and Cameron Kinloch, Ex-CFO at Dynamic Signal and Bulletproof 360, to discuss the nuances of finding the right financial leader for your next stage of growth.
What Does a CFO Do?
While it’s clear that a CFO is more than a glorified bookkeeper, their scope of work can vary widely from organization to organization, and even from CEO to CEO. A CFO’s responsibilities can include anything from finance, accounting, legal, real estate, to HR & IS/IT.
Yet, their number one priority is, and will always be, to ensure the financial success of their organization. “CFOs should still be utilizing reports to identify trends, potential problem areas, potential opportunities, etc., and present them to their business partners in an easily digestible way.” Kristin Jackson says.
However, unlike the CFOs of the past, today’s growth-focused CFOs are also expected to wear a few more hats, “That said, CFOs should not just be spending their days inside the accounting system,” Kristin continues. “They should be highly involved in strategic planning, they should ensure the financial health of the company. They should be outward-facing, developing and maintaining relationships with investors, and be a strategic partner to the CEO every step of the way.”
This means making sure your CFO is not just an enabled member of your financial team, but an active contributor and partner in the overall strategy for the business. This can look like, building and maintaining relationships, both internally and externally, as well as partnering with leaders within the organization in order to truly have their finger on the pulse of the business.
3 Biggest Misconceptions About the Role of the CFO
Like many other traditional roles, the role of a CFO has evolved greatly over the last several years, and this has resulted in prevalent misinformation circling around the position. The biggest misconceptions we’ve seen are:
1. CFOs are only focused on profit.
While it is your CFOs job to keep your business out of the red, this misconception can keep you from building the right kind of growth-centric partnership with your CFO.“The reality is that CFOs actually enjoy working with leadership to solve complex business problems,” says Kristin. “They enjoy maximizing opportunities with smart investments. They like working with the team and participating in strategic discussions. They take a holistic view when it comes to identifying business health & wealth - profit is only one piece of a much broader view.”
2. CFOs just say no and rule with an iron fist.
As with any business, there will always be some trade-offs that will happen when it comes time to make financial decisions, which can make the CFO come off as ‘the bad guy.’ However, “finance teams are not just the place you go to hear ‘no’ they’re a place of partnership” Cameron Kinloch points out, “They might set a really high bar for you to defend what you want to spend on and why, but we are here to help grow the business in a thoughtful and smart way.”
If you find that a CFO takes more time than other members of the team to issue approvals, it’s only because they will model out the different potential outcomes to better understand the risks. So, instead of seeing your finance team as an end point, see them as the place where decisions get made collectively. Their goal should be to keep everyone aligned with the company's overall vision.
3. CFOs don’t understand business operations.
While this may be true of an ineffective CFO, Kristin points out, any effective CFO will “make it their mission to truly understand a company’s product or service as well as how the business operates to create, market, and sell that product or service.”
A passionate CFO will work hard to understand your product, your operations, and even your community. They will work to create value and find opportunities to build and grow your business in everything that they do. “CFOs have to understand the inner workings of the company in order to effectively interpret the financial reports,” says Kristin.
When it is Time to Hire Your First CFO
Gaining clarity on the current responsibilities for a CFO is only one part of the puzzle, identifying the best time to hire a CFO is the next hurdle.
For most companies, there is a short span of time between not being able to afford a qualified CFO and missing out on leveraging their expertise as soon as possible to propel the business forward. While smaller startups can operate effectively with fractional CFOs through their first couple rounds of funding, figuring out when the time is right depends upon what value you want your CFO to bring to your organization.
“A good rule of thumb would be to get a CFO into the business at least 12-months prior to any major milestone that you want them to add value to so that they have time to really get to know the business,” Kristin says. “Of course, this is a general guideline and not a hard rule. If you have a complex product or service, for example, you may want to hire 18-months ahead of a major milestone.”
What You Should Look For in a CFO
Once you’ve decided to take the leap and hire, what do you actually look for in a CFO for your organization?
“First and foremost, you need to know what level of visibility or involvement the CEO wants to have,” Cameron urges. “For example, some CEOs want to be very involved in fundraising and others don't. So being clear on the areas that the CFO will take point on versus playing a supporting role will ultimately allow the CEO to work with them more effectively."
Secondly, it’s imperative that the CFO you’re looking for aligns with the overall growth and vision of the company. It’s great to have someone who is experienced in implementing accounting systems, but when you are looking to grow exponentially in the next year, you’d be better served by a candidate who has had a successful track record with growth.
Finally, getting crystal clear on which areas of the business could use the support of a CFO, where they’re empowered to make decisions on their own, and what should get escalated to the CEO is all vital to allowing your new CFO to hit the ground running.
“For example, if your management team does not include a COO, you might benefit from a financial leader who has experience managing HR, IS/IT, and Legal,” Kristin urges. “ If your current leadership is deeply technical but struggles with business management, bringing in a CFO who leads with structured business strategy could be a real win.”
Choosing Between Top Candidates
With a vision of your expanded leadership team and a solid understanding of the areas your CFO will need to cover, it’s time to think about how you’ll distinguish between top candidates.
Our experts say, “go with your gut.” A candidate can match every bullet point of your job description on paper, but if they’re unable to partner effectively with the management team, they will never be right for your organization.
“When your business is growing at an incredible pace, you don’t have the luxury of time to slowly build trust, so it’s important to figure that out as much as possible during the interview process,” Kristin points out. “If you don’t feel that you can trust someone throughout the interview process, they probably are not the right fit for your organization.”
Remember, the function of the CFO can be very different depending on your organization, and there can be plenty of different areas to potentially optimize for when you're looking for a CFO. So, take your time and find a CFO whose strengths align with what you’re looking for.
Advice for Founders Hiring a CFO for the First Time
For founders looking for help with their first CFO hire, it’s important to remember that this person will have the closest partnership with the CEO in the company - they need to get along and enjoy working together. This means that personality matters.“Talk to a number of CFOs on the market and figure out what their strengths are that align best with your specific CEO and the goals of the company,” Cameron says. “Find the one that best partners with your business and business leaders.”
But don’t forget, that where you’re going is just as important as where you’re at right now. “I’d encourage founders to hire for where they want to go, not where they have been,” Kristin says. “Make sure that the candidate’s experience lines up with where the company is headed.”
Regardless of which stage of the business you’re in, finding and hiring your first CFO can be difficult, but getting clear on which areas of the business could support will make it much smoother.