6 Things to Know Before Hiring a CFO

by Marty Koenig and Keith McAslan

Partners at CxO To Go^TM

Before hiring a financial executive to guide your company, ask these 6 questions to ensure that you don’t end up paying a whole lot of money for services that are not what you need, expect or want. Hiring an on demand CFO does not have to be a confusing experience. Instead, it can be the most empowered decision you ever make for your company.

1. How do I know if I need a CFO?
   

   Many small companies have a bookkeeper, accountant or CPA. Their roles are important, but very limited in scope compared to the experience of a CFO. Bookkeepers and accountants function mostly in the day-to-day work of keeping up with your records and taxes. Even a controller is often seen as a “number cruncher” that spends a lot of time with their nose in spreadsheets and doing reports. A CFO is very different and provides far greater value to small businesses.

   Here are some examples of why a small company might need a CFO:

• Rapid company growth has stretched the capabilities of your current accounting staff to the limit, but you still cannot afford a full time senior financial executive.
• You are planning a major expansion and can benefit from adding an outsourced CFO and trusted advisor to your management team.
• You need assistance in dealing with bankers, lenders or outside investors.
• Your company is in a crisis, experiencing financial or other difficulties and requires strong financial leadership that cannot be provided by your current accounting staff.
• You need specialized financial expertise not available internally, and could use the help of an experienced CFO to mentor and coach them to do better at what they do.
• You are planning an exit from your company with a merger, acquisition, or sale and want to gain maximum value and sale price in the future.
• Your CFO leaves unexpectedly and your company has no one internally with the skills and experience to take over. Until you complete the search for a replacement, CxO To Go can provide the financial expertise to keep your business running smoothly.
• You need a periodic financial advisor to keep your company on track, someone that is dedicated to your company as it grows.
• You are a new start up company and want professional advice to begin your financial management correctly.

1. What questions should I ask a CFO to be sure he/she has the experience and personality traits to help me?
   

   Throughout your conversation, determine if the CFO is a people person, not just a number-cruncher. His/her people need to like him and trust him, and he/she needs to inspire everyone around him. Some accountants and professionals do not enjoy working with a lot of people and collaborating for success. These types will never be successful CFOs.

   Ask them about breadth and depth of knowledge and experience. While knowledge of your particular industry fine, a big part of his/her ability to add value to your firm will be his experiences in and around a multiple of industries. He will possess the unique ability to understand and lead several, if not all, of the disciplines of the company with great focus and precision. He needs to have significant experience helping companies obtain clarity, maximize cash, improve profits, and optimize their resources from a multi-disciplinary perspective.

   Ask them to give you examples where they have had to be diplomatic and persuasive. The CFO holds all of the confidential and valuable information to the business model and plans for growth. He needs to carefully and professionally work with others around him without being abrasive but using persuasive communication to engender buy-in and loyalty. These are sometimes rare traits, but a great CFO needs them desperately.

   Ask them if they are open to new opportunities and flexible. If he/she always says no before hearing you out, then he will never succeed as the CFO. In the broad and deep context of all of his experience and strategy for the company, he/she should be able to filter through opportunities and help the company implement the ones that best position the company to achieve its objectives and improve its competitive advantages in the market.

   Ask them if they are a Strategist and Visionary. He/she must always think ahead. Reporting on the past is an important function he/she oversees, but his/her value will come from his foresight and ability to strategically guide the company as a whole, not as individual parts.

   Ask them about their professional designations and education. A professional accounting designation is good, but not required for a superstar, senior executive CFO. Having a graduate degree with 25+ years experience is key. An MBA with less than 25 years experience does not begin to cover the accounting, process, and operating knowledge needed to steer a company’s finances.

   Ask them how hands on they are. The job of a small business CFO is very different from one at a big company. The latter is much more of a hands-off role focused on investor relations, deal making (financing, M & A), governance, reporting and other back office matters. In stark contrast, the small business CFO is much more hands-on and integrated into the day-to-day of the business.

   You want a CFO that is not shy. The CFO is the CEO’s most trusted advisor. If a CFO doesn’t tell you he/she is planning to ask you tough questions that nobody else will, then you won’t get the best experience and value. A good CFO is good at asking questions that force those around him to think through and understand things they are about to undertake. A good CFO keeps asking questions until he/she gets his/her mind around the issue and fully understands it – and is confident that those around him/her fully understand it as well. The discipline to keep after it until initiatives and actions are understood and are sound is the hallmark of a good CFO. It takes much humility and tact to accomplish this, but organizations soon learn to completely think through things before they bring them to you.

   Ask them about their technical and systems expertise. No, you don’t want your CFO troubleshooting Windows on your desktop, but you do want someone who’s sufficiently comfortable in information technology to take the lead in driving your information systems.

   Ask them about their decision making. Your CFO will be a trusted advisor. Running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

   As you probably noticed, only one of these points (the 2nd one) actually deals with accounting. Despite their accounting experience, the best CFOs go far beyond this foundation. They are capable of adding value to every aspect of the business. Judge yours accordingly and make sure you have a high impact CFO.

2. How do you bill for your services?
   

   There is no need to be afraid to talk with your CFO about how he/she bills for the work they will do with you. No one wants surprises!

   Since the CFO is a trusted advisor, they will work with you to understand your exact needs and put together a no-surprises cost. This is accomplished by assessing your needs, understanding the current state of your business, performing a gap analysis, and agreeing on specific work that will benefit your company the most. Since these are advisory services, most often they are billed on a bi-weekly or monthly fee basis.

   Sometimes a small business just needs an experienced CFO to help them with a strategic plan, business plan, financial projections, bank lending package or similar project that’s typically charged a flat fee.

4. How will you proactively communicate with me on an ongoing basis?

Unfortunately, many CFOs do a horrible job of proactively communicating with their clients on an ongoing basis. The general thinking in the financial industry is that financial work is back office number crunching.

You want to look for a CFO who will proactively communicate with you regularly so you know what’s going on in your business and you can go be the entrepreneur who focuses their time on company growth. If you are considering hiring a CFO who does not proactively communicate with his or her clients, think again. This CFO might be stuck in an old, outdated mindset that won’t serve your needs in the best possible way.

5. Can I call about any financial problem I have or just about matters you have experience with?

In today’s complex world, CFOs must keep up with a lot of changes. Solopreneur CFOs can only provide value from their own, limited experience. On the other hand, a CFO that has many other CFOs in their practice and their networks leverages the collective knowledge of hundreds or thousands of years experience. Having a massive amount of collective experience means these CFOs have seen just about everything there is to see and have been down the road many times. We like to say that the novice white water rafter cannot see the big rock just under the water six turns ahead. The CFO that collaborates with his/her partners in a larger practice can see the rock because he/she has been down that river dozens of time. And he/she can help steer you away from the rock and keep you from wrecking the boat or getting injured.

Look for a CFO who has an ongoing service program or membership program in place so that you can pay a low monthly fee and be able to call with all of your legal and financial questions without being charged hourly for the consultation. And be sure that when you call, you’ll get to schedule time to talk with your own personal CFO who you know and trust and not get passed off to one of any number of CFOs who happen to work in the office and may not know who you are or what’s important to you.

6. What happens when I am ready to retire or transition the business?

This is a critically important question to ask yourself when beginning a relationship and a question that is far too often overlooked. Many business owners have not considered their ultimate exit strategy, whether it be to sell the business to retire, transition the business to a family member or merge with another company. The CFO who has worked with you as a trusted advisor is in the best position to provide sound financial advice to prepare the company in advance to ensure the highest enterprise value upon exit.

When you ask these 6 questions before hiring an on-demand CFO you will know you are engaging a trusted advisor who will help you to make the very best decisions for your business, your employees and your family.

About Us

Part time, interim, project and virtual CFO’s are one of the cornerstones of our company. CxO To Go’s senior financial executives bring vast experience that is immediately brought to bear on the key opportunities/issues faced your company in today’s market thereby delivering high ROI. Since CxO To Go works on an interim/virtual/ part time/project basis, clients are more readily able to afford resource quality that is usually only associated with a permanent hire and/or priced beyond their ability to afford long term. Our experience is that our CFO’s quickly become trusted advisors to the client company CEO’s and/or Owners.

We have equally powerful resources in Sales, Marketing, Operations, and IT, etc. We are a one-stop shopping partner for all of your corporate needs. Ask us about our services offers in these and other areas. It is our goal to become your trusted advisor partner in all aspects of your business.

Who We Are:

At its core CxO To Go is a team of true “pros” each of whom have 25+ years providing enlightened thought leadership, creative solutions, a real ethos of trust, and ethical business practices. We are bound by a belief that the relationship with our customers is not only essential, but is our business mantra. We only do business where we have an existing trusted relationship. You don’t invite strangers into your home, so why would you invite them into your business? If you have the need and are ready, we’d like to form that kind of relationship with you.

CXO To Go LLC is a national company with thousands of combined years experience. We help small and mid-sized businesses achieve excellence in every aspect of their business. We have hundreds of executives around the country with outstanding experience creating on point solutions to all types of business challenges.

Tags: Add new tag, colorado cfo, hiring a cfo, part time colorado cfo, part-time cfo

CxO To Go conducted a survey concerning the potential impact H1N1 could have on companies. Of those surveyed, 72% have not undertaken any financial modeling to see what may happen if disaster strikes. We certainly hope it does not get bad, or small businesses especially may be in for trouble. Over 75% of the respondents were senior executives, business owners or presidents of companies with less than 60 employees, and with annual sales less than $10 million. We also received some great comments both on the survey and from various LinkedIn groups. Companies of this size are the backbone of our country and therefore more highly affected when too many employees, customers, clients, and suppliers fall ill for any reason.

Large organizations can absorb the temporary loss of some number of their people, but it may devastate a small business. Small business owners who have 4-5 people out with the flu (regardless of the type of flu) 15% to 50% of your work force is out.

We were surprised that the majority of our survey participants, 67%, felt that H1N1 will have no or very little impact on their company. Only 11% felt that this virus would have a significant impact on their business. We wonder if people would answer differently if we had asked, “What would happen to your company if a 2-foot snowfall arrived for several days next Tuesday night.

Business owners need to consider what happens when an unplanned catastrophic event occurs. In our survey, 28% felt that they should prepare for a H1N1 outbreak, and almost 40% of the respondents felt that their company was prepared.

Each person carrying H1N1 will typically infect 10% of their co-workers, because of their close working environment. Small companies are more at risk trying to protect their human capital. For example, we have heard about a small software development company where every one of their team came down with a nasty flu, which shut down the company for over a week. The end result was that the company shortly went out of business.

Each season we have the flu, and the H1N1 is an extremely aggressive type of influenza. People generally feel that it will not affect them, if they do not know anyone who has contracted the virus. Yet, if they know a co-worker, family member, or friend who has missed weeks of work, they then believe that this new flu will have a major affect on their lives.

As with any abrupt change in your company’s daily operation, executives should know in advance what to do. Our survey shows that 17% have done some modeling to understand the impact H1N1 would have on their business. More shocking to us, only 11% of the companies have done any financial impact modeling to understand what the virus could do to their business finances and cash flow.

We received many comments in our survey. One comment said they had to cancel their business appointments, because they had to stay at home with a sick child. What if most of your sales people or fulfillment people were out for a time? If you are just guessing at the answer, what if you are way off? Wouldn’t you want to really know?

One respondent said that 25-50% of their clients were off work or recovering. If 25-50% of your clients could not pay their bills for an extra 30-60 days, what impact would that have on your company’s cash flow? By how much? You don’t know? A seat of the pants response will not give an Owner/CEO the insight needed for decision-making.

Preparedness is the sign of a strong management team. Some companies are taking steps to become Dr. Mom and teach their employees how to maintain a clean and safe environment. Anyone traveling the country or around the world will be more at risk. The smaller your organization, the more influence H1N1 or any type of flu will have on your organization.

In a year from now, we may say that the H1N1 scare is just like the Y2K scare at the turn of the century. One person commented that H1N1 is just FUD (fear, uncertainty and doubt) and that they will not be doing anything to prepare for what they believe is a non-event. To ensure that Y2K wasn’t a problem, companies spent years preparing for the worst and it didn’t happen. If they had not prepared for the worst, and did nothing, what would have happened? For an attack from such a virulent flu, you can prepare now and continue to refine your company’s plans each year to ensure your success. Will you be the 10% that are prepared? We hope so.

Helpful reference links for small businesses:

http://www.flu.gov/professional/business/smallbiz.pdf

http://chamberpost.typepad.com/files/smallbusinessh1n1guidever2.pdf

For a complete copy of the CxO To Go “H1N1 Impact Survey for Business”, click here.