More and more entrepreneurs are in an exciting, but sometimes uncomfortable, place in their business. It looks like this:
- Revenues are in the $5 million to $15 million range. That's exciting. J
- Customer demand is growing nicely.
- The feeling of flying blind financially is creating discomfort and apprehension.
- Your partners and investors are pushing you to put a more professional approach to financial management in place.
The Challenge of Growth
When revenues are below $5 million, it's hard to make room in the budget for a CFO. So the entrepreneur wears the CFO hat and does the best they can.
Then, as you approach the $15 million mark, you start to feel the pressure of the "no-CFO" approach. It looks like this:
- The financial statements aren't being used as a decision-making tool
- Financial information is slow, sloppy and difficult to understand (as opposed to fast, accurate and insightful)
- There's no forward-looking view of financial information
- You want to hire key people and expand operations but you're unsure the profitability and cash flow implications of those decisions
- Your partners, lenders and investors want you to provide a clear view of where the company is going financially.
But hiring a full-time CFO will cost $150,000 or more and has other risks as well. Making a bad hire will probably add $75,000 to the cost and turn a six month learning curve into eighteen months or more.
And oftentimes you discover that you paid a lot of money thinking you hired a CFO… but ended up with something different. You hired a controller or an accountant. You hired a person better suited for keeping the books and attending to the more compliance and control nature of your accounting function.
That's a good thing on the one hand (at least you will have accurate financials). But it doesn't address the value of having a seasoned, strategically driven financial executive that can help you make your company more and more valuable over time.
Let's Simplify the Goal
The better way to address the challenge is to put the "hire a CFO" or "do a project with an outsource CFO" question off to the side for just a minute. We'll come back to that in a future post.
For now, let's step back for a minute and look at what you really need to accomplish.
What are the short-term goals you need to achieve to get on top of the financial side of the business?
If you could only list three problems you are trying to solve, what would they be?
Here's the three I see most often together with the role the Monthly Financial Rhythm plays in helping you solve the problems.
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