A common mistake that several startups make is not hiring a CFO
Shared CFOs have worked with dozens of different personalities — often simultaneously
A shared CFO brings tremendous value to a startup
In 2019, India reigned supreme as the third-largest startup ecosystem in the world, with the creation of around nine new unicorns, and investments close to $12 Bn. This has paved the way for 2020 to see the country rise in its global ranking and attract capital to create more unicorns.
Having said this, it is pertinent to note, that a very important figure in creating such successes out of startups is the chief financial officer (CFO). However, a common mistake that we have seen several startups make is not hiring a CFO.
One of the most widely heard reasons for the same is the cost factor involved in the same, which takes precedence over the advantages of having an in-house CFO. To remedy this, the concept of shared CFOs has emerged, which has gained popularity for a large number of reasons.
Financially Viable Option
A shared CFO’s services can be employed at the fraction of the salary of a full-time CFO, making it a financially viable option for a startup. A shared CFO will charge basis the amount of time/deliverables worked on for a particular organisation. Taking this into consideration, a shared CFO can cost around INR 12-20 Lakhs per annum, as opposed to an in-house employee, which would be at least 3-4 times more expensive.
Broad Spectrum Of Experience
Shared CFOs have the unique experience of working with multiple industries at any given time. While the CFO organisation you work with will pair you with a professional who has significant experience in your specific industry, the shared CFO in question will also have experience in other industries as well.
This provides an opportunity for multi-layered insights and networks that can greatly benefit a start-up, especially in the initial stages.
Insights From Multiple Professionals
By employing the services of a shared CFO, who is part of an organisation, start-ups can greatly benefit from insights from the spectrum of professionals that make up the team. While it is highly probable that you will have a single touchpoint at the CFO organisation, you can expect to enjoy the expertise of all the members of the same.
Standardised Reporting And Formatting
Every seasoned CFOs, controllers, and bookkeepers have their own preferences or style into how they format documents, files, or reports. In the case of a shared CFO, he is more likely to have adopted the most widely accepted best practices for generating and formulating client reports and deliverables.
Ease Of Working With The Team
Shared CFOs have worked with dozens of different personalities — often simultaneously. They know how to bring financial expertise to an existing team without ruffling feathers or egos. By employing the services of a shared CFO, you can expect one who knows how to bring about change, without causing contention in the organisation.
Vast Network Of Professional Connections
Most CFOs have been in the industry long enough to have a robust network of key individuals and organisations that a start-up can leverage from. These include financiers, lenders, and other experts. A CFO who is part of a shared CFO team has not only his or her contacts, but also has access to the network of the rest of the CFOs on their team.
That means if you are raising funds or expanding into new geographies or products/services, your CFO will have the right connections to help you get off to an even better start.
Credibility In The Industry
When a CFO has proven themselves time and again, they gain clout and credibility in the industry. When you consider a shared CFO, they’ll likely have solved more challenges and raised more funds for more organisations than an in-house CFO who has worked at the same firm for many years.
Smoother Handovers And Transitions
Hiring a shared CFO often ensures that the same professional will work with you for a longer period of time. However, if a change of hands has to take place, it is more likely to be a smoother transition process. At a shared CFO organisation, it is likely that the team will be apprised of the details of your organisation already, making the transition process easier, and quicker.
Faster Adaptability Into The Organisation
Generally speaking, new employees take between 6-12 months to come up to peak performance at an organisation. In the case of a shared CFO, they have a lot of experience entering an organisation mid-process and hit the floor running. They are able to quickly assess the current situation at an organisation and implement solutions to resolve challenges and achieve the company’s goals.
As seen, a shared CFO brings tremendous value to a startup. In a country like India, which is gearing up for the next growth phase, the need for financial strategy will play a larger role in any company’s plans. By employing the services of a shared CFO, startups can enjoy this, while focusing on their core competencies, to achieve profitability and scaled operations.