Why You Should Consider Hiring a Part-Time CFO

Two things have become increasingly apparent to me.  If you’re a big company, you have good access to capital and can find the funding needed to finance your business.  Small companies don’t have that access to capital and finding funding is difficult.  Here’s why:

  • Banks are consolidating and there are less banks focused on the small business market.
  • Many banks have gone up market to make larger loans to larger companies which are more profitable.
  • Regulators have caused lenders to increase lending standards making it more difficult to obtain credit.

Also, the median salary for a full time CFO is $150,000 plus bonus. Your company can’t afford a full time CFO, but you have significant financial management issues to address: cash flow, finding financing, scaling the business, and exiting the business.  You need resources, just not full time.

You’re too small to be big, but too big to be small.

So, you need access to capital to fund your business and you need financial management resources to help you with the overall financial strategy for your business.  But where do most business owners find these resources?  Here are a couple of things to consider:

  1. Your banker: Most business owners have a bank, but not a banker.  Banks consolidate and many bankers move to another bank hoping the business owner will follow, but that doesn’t always occur.  When bankers move, the trust relationship can change and takes time to develop again.  Plus most bankers have never run a business from the inside. They have never had to sweat out a payroll, so it’s hard for a banker to relate to what you’re doing inside of the business.
  2. Your CPA or attorney: Most business owners will trust their CPA or attorney more than their banker.  These two professionals know things that most business owners wouldn’t tell their banker for fear it would jeopardize their credit arrangement.  CPA’s and attorneys do have financial management expertise because they manage their practices, but a CPA or attorney are trained in their professions.  They don’t think, talk or act like bankers, so helping you find access to capital can be difficult for them, especially because the capital markets and players change.  It’s hard to stay current.
  3. The part time CFO might be the right person to help you with access to capital, but also help with the financial management of the business.  The CFO needs to have a good grasp of accounting and finance and preferably banking experience in their background to navigate the banking markets for you.

Generally, it’s a good idea to staff your core competencies and outsource your weaknesses.  If financial management is a weakness and outside your core, then consider adding a part time CFO on your team.  You get the benefit of their expertise without paying for it on a full time basis.

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