The responsibility involved in leading and managing a startup, nonprofit or small business is a great one. Are you making the right choices? Will you run out of cash before your product will get to market? Is there a better, more efficient way to run the back office?
For these tough-to-answer questions on your own, you may be looking into financial consulting for startups or nonprofits—but you’re worried they are too pricey for your still-growing organization and their advice may not be applicable to your unique situation. This article explains how tapping startup CFO expertise and financial advisory services, on a fractional basis, could in fact be the most fitting solution at this phase of your company’s journey. Read on for what these services can entail (depending on your needs and budget) and what to look for in a startup CFO consulting firm.
The Role of a Startup CFO
A startup CFO introduces strategic insights to the financial operations of the company and the future of the company. CFOs have a unique skillset and mindset that combine granular finance and accounting knowledge with an ability to be future-focused and explain complex information to non-finance-minded leadership. Rarely part of the earliest stages of a company, a CFO becomes a necessity once the founding management team is ready to expand investor outreach, get the financial house in order, and seek out insights and a fresh, expert perspective on their plans.
When a growing company is not ready for a full-time CFO, and the compensation and benefits package that comes with the position, fractional CFO services offer a cost-efficient alternative. During the hours they work for the company, the startup CFO is completely dedicated to the needs of the company, and the overall cost is a fraction of what it would cost to compensate a full-time, more traditional CFO.
These CFOs have steep experience with startups and can offer best practices and ongoing expertise and mentorship as the company advances on its growth path. These fractional CFO services for startups may need to expand over time and evolve. With a flexible agreement, such as a fixed fee plan, that works for the budget and size of the startup, the services can be dialed up and down as needed. Click here to explore options.
Customizable CFO Services for Startups
Consulting firms that have steep experience with startups realize that there is no such thing as one size fits all when it comes to growing organizations. Ideally, the consulting firm will work closely with you to help you determine and prioritize the level and range of services a CFO/financial advisor can provide your company, and they will adapt their services to the unique needs of your organization.
As you research options for a financial consultant for startups, consider the following benefits of partnering with the right consulting firm:
Expertise as needed: The expertise of a CFO—their ability to focus on the finer details of the finances and the strategic plans of the entire business—is a unique one. Even though your organization is on the small side right now, and has limited funds, it still needs access to this level of expertise.
An adaptable financial advisory firm will work with you to find an agreement plan (such as a fixed fee arrangement) that works within your budget limitations, with flexibility to make changes as your needs evolve.
Best practices: What have other companies like yours (i.e., industry, size, stage of growth) done in similar situations? What can you learn from their successes (and even failures)? An expert CFO can relay past experiences that could apply to your company, and help you consider what can be learned and potentially applied to your company from those experiences.
Scenario planning and financial modeling for startups: Past experiences are helpful for considering their applicability to your startup and lessons learned—but you also need to have some sense of what’s going to happen if you make one choice over another.
Using timely, reliable information about your company’s past performance, plus a full understanding of what’s occurring in the market today, a fractional CFO can implement a forward-looking approach to your decision-making. What’s likely happen if you choose Scenario A over Scenario B, and how will each decision affect the state of your company and where it’s headed? When needed, the fractional CFO can help you think through the next moves your rising startup should make.
What to Look for in Startup Financial Advisory Services
What matters most to you when considering the level of expertise and access your company will need for a fractional startup CFO? Here are some questions to consider as you research options for a CFO/financial advisor that specializes in startup services.
Will they adapt their services to your unique company? When you first meet with the consulting firm offering fractional CFO/financial advisory services, do they seem to want to get to know the ins and outs of your company—or do they spend most of the meeting talking about their services? If you’re dealing with a limited budget, look into whether the firm can agree to an alternative fee structure to hourly billing.
How dedicated will the fractional startup CFO be? Partnering with a consulting firm means you can benefit from their wide range of experience and skills, as needed. For instance, you could outsource your entire accounting function to the firm or benefit from the services of an accounting expert for a one-time project, such as switching accounting systems. Will they be completely dedicated to your company’s needs during the hours they work with you? Will they become a part of the team, and aim to do what’s best for the company?
What should you know about the consulting firm? Comprehensive research for the right partner could include comparing services with different size firms, their range of capabilities, and considering the firm’s length of time in business and its experience with startups.
What to Look for in a Startup Financial Advisory Firm
While you may have an immediate need right now, you want to factor in how your organization will evolve. Will this new business partner be able to adjust its services as your company grows or changes strategy?
Let’s say your most immediate need right now is for someone to get your team up to speed on a new accounting system and a clear process for closing the books every month. Once you have access to better, timelier information about your business, you may want to know what you’re missing out on or you may want to pursue a new growth strategy. When needed, high-level finance leadership can help guide the CEO, the board, and other members of the leadership team, by affirming current plans or helping leadership see where another path may lead.
A company pursuing a major M&A transaction or an IPO will require more than occasional CFO-level input and guidance to become “investor ready” and complete the transaction, but for many early stage companies and nonprofits, their current state is where they want to be for now. They simply do not know whether they could be operating more efficiently and they lack the ability to properly plan for the future. CFO/financial advisor experts can expand on their day-to-day accounting operations to help the company get out of the status-quo mode and improve upon their situation.
Additional services could include:
- Mentoring or upskilling current members of the team.
- Preparing the company to be “audit ready” and liaising with the audit firm.
- HR-related services like payroll.
- Determining what is holding back the company or organization from moving forward.
How RoseRyan Can Adapt CFO Services to Your Startup
Working closely with startups since 1993, RoseRyan, a ZRG company, understands the pain points and challenges facing entrepreneurs and startup leaders—and also fully realizes that those challenges do not have a one-size-fits-all solution. We get to know the companies we advise and guide, and tailor our services to address the most immediate needs, always with an eye toward the future.
Looking for a fractional startup CFO solution? First, we want to learn more about your company. Fill out our contact form, and we’ll be in touch to learn more about the challenges facing your finance team and your overall business—so we can tailor our solutions to you.
