What Should Entrepreneurs Expect From Their CFO?

Your CFO is a critical part of your leadership team.Your CFO is a critical part of your leadership team.

How do you keep building a great business? If you could add only one new leader to your leadership team, who would it be and why?  Over the past 25 years, I’ve asked this question to hundreds of CEOs and founding entrepreneurs and the answer is almost always the same. They believe the best acquisition to their team is a strong financial executive.  If your business is over 10 million dollars in annual revenues, I believe having a strong CFO can help you get to the next level.

For me, the next level of revenue is over 50 million dollars. These seem to be the magic numbers when trying to evaluate a business’ potential. There are exceptions to this rule, but entrepreneurs who have strong CFOs tend to have significantly more options available to them as they continue to grow.

A strong CFO can have a major impact on you achieving this revenue goal. In the past, it was important to have a strong financial professional that could help you manage your business better. Today, with so many changes and innovations in business, this CFO could help propel your business to the next level. Since it’s your Money Monday, I thought I’d give you several things that CFOs’ should be responsible for in your growing business. . I hope this week will jump start your thinking.

Here are the key areas of responsibilities that your CFO can help you with. I understand that as stage 2 entrepreneurs, you still need your financial officers to complete many of their current capabilities, but we also need to begin looking at differences between short team and long term approaches to finance. In my career, I’ve interviewed hundreds of CFOs and senior financial officers in both public and private businesses.  I started my executive search career recruiting auditors, controllers, and CFOs for over 100 Fortune 1000 companies.  Many of those auditors and controllers have moved on to CFO positions around the world in small and mid-market companies. I assume that most of the companies at this smaller $10 million size are still privately held. When we begin to exceed this number I will share how the role of CFO may change between a privately held or publicly traded company.

The first capability of a strong CFO is they should help you optimize revenues. As a smaller business, cash and revenue is critical for the growing organization. How does you current financial officer support your growth goals? I’ve found there are two kinds of senior financial officers, those who get it and those who don’t.  You need one that gets it.  You’re going to want one that can help you share your story from the financial perspective. They don’t need to know how to sell, but they should be able to advocate the way they manage their capital. I’ve had several of my CFOs over the years successfully help close business.  When you are a smaller lesser known quantity, your CFO can help your potential clients understand why they should trust your business.  This is critical when you are selling larger organizations.

The second capability of a strong CFO is minimize your business expenses. This doesn’t mean no expenses, it just means they look to get a good ROI on the money they spend to support the organization’s sales efforts.  A strong CFO can make it easier for the senior sales officer to stay within guidelines that optimizes what is spent acquiring the business.  In my organizations, I’ve used the CFO to help negotiate pricing on trade shows we were participating in. Many good financial officers are very strong negotiators and, in several cases, we were able to save over 30% on a trade show because of the CFO’s involvement.  This also allows sales leaders not to burn bridges. Almost every Vice President of Sales I know can use a strong partner to help get the most for their investments.

The third capability of a strong CFO is to minimize taxes. Sounds simple, but with all the changes going on in the tax code and health care laws, you want an individual who can minimize your business exposure to unfair or unreasonable taxation. I find many controllers to be good at taxes, but tend to be extremely conservative in discovering what options might be available for their company.

The fourth capability of a strong CFO is an individual who can help minimize risk to the organization. We are living in an era of wild card accounting and financial practices with government at all levels trying to regulate and monitor the way we do business.  One of the strategies I employ is having a CFO who has a strong network of financial professionals that they can work with to better understand what works in the real world. Does this mean I invest money to have CFO continually improve their skills? I do and will continue advocating this with my clients.  An effective CFO can create significant edge in a growing market.

Next week, I’ll share several questions that can help you determine if your CFO is providing you the optimum value to your organization. See you next week on Money Monday.  I’ll share with you five questions that separate good financial professionals from the great ones.

On Wednesday this week, I’ll share survey results on how active CEOs are in social media and what it means to a market leading organization. I think you will be surprised by the results I’ve found. As we put together our business development plan for the coming year, you’ll want to know how social marketing can create value for your organization, or can it? See you Wednesday.

Your CFO is a critical part of your leadership team.

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