Author: Larry Chester, President

Is Your Business Ready for a Part-Time CFO?

As a business owner, there are a handful of questions you repeatedly receive from your clients and prospects. At CFO Simplified, President Larry Chester is frequently asked one question by his clients and prospects: “How do you know when it’s time to hire a CFO?”

Larry believes there are two reasons why a business owner should look at hiring a CFO. Here’s what they are.

Reasons You Should Look at Hiring a CFO

There are two reasons why a business owner should look at hiring a CFO: business size and complexity of your business.

Let’s dive into each a bit more.

Business Size

As a general rule of thumb, if your company is doing more than $2 million worth of revenue, you probably have a good basis to hire a CFO on a part-time basis.

A part-time CFO can give advice on things such as:

• The structure of your business financially
• Business analytics
• Strategic planning

Below we’ve outlined two cases in which business owners learned they were, in fact, NOT ready to hire a part-time CFO.

The Microgreens Case Study

A business owner growing microgreens for local restaurants was proud of how he had grown his business and was planning on making an investment in additional equipment to grow more microgreens.

His revenue for the previous year, however, sat at $50,000. This is a nice startup for a business but according to Larry, he’d be hard-pressed to recommend making any substantial investments in a business that was doing $50,000 a year in revenue.

The Blacksmith Case Study

The second case study follows a blacksmith who offers both classes and manufactures products on a custom basis.

He came to Larry, concerned about his cash flow. His sales sat at $135,000 a year. 

Larry’s advice?

“You need to analyze what your business is doing from a cash-in and a cash-out point of view… [Identify] whether you have enough money to grow your business and do anything with it.”

At this point in the blacksmith’s career, he certainly didn’t have enough money to hire a fractional CFO on a part-time basis.

Complexity of Business

Complexity of business can be a driving factor in hiring a CFO. One might hire a fractional CFO to give advice in a specific area.

For example, an individual might have multiple companies. There are many small organizations where an entrepreneur has decided to divide his business into a number of different areas, so that each one is protected legally from losses in the other areas. That may be a reason to hire a fractional CFO to give you advice.

Additional reasons to consider hiring a CFO include:

• If you’re looking at capital investment to buy more equipment
• If your company has varying costs
• If you are looking at a variety of funding sources on an ongoing basis to be able to understand how those funding sources could impact you
• If you’re having difficulties because of revenue recognition or cash flow

The Bottom Line

The fact of the matter is that your business will grow and change. A well seasoned CFO, who can offer high-level financial support and strategic advice, is a valuable asset to your team during this time.

Take a close look at your business to determine whether or not you’re ready for a part-time CFO, and if you still have questions, get in touch with us today.

Read on to learn the difference between a part-time, fractional, and interim CFO.