Entrepreneurial companies do their best to avoid overhead, especially in the form of large salaries for non-revenue-producing employees. So, they hire a bookkeeper and then later a controller, all the while relying on their external CPA firm for both strategic and tactical financial advice. And while this keeps down labor costs, at some point the entrepreneur will realize that s/he is spending too much time on financial questions and not enough time growing the business. And that is the time to hire a CFO.
Each company has its own time frame when logic dictates that it is time to hire a CFO. Some common milestones which indicate that the tipping point has been reached include:
- The need to rapidly scale company infrastructure driven by expansion
- Evaluation of merger and/or acquisitions alternatives
- The need to secure debt and/or equity investments
- The need to evaluate strategic partnerships
- Preparation for a liquidity event