The CFO in an entrepreneurial middle market company is clearly one of the key members of the executive management team.
- They shield the CEO from financial risks so they can focus on the strategic plan and general management of the company;
- They partner with other members of the management team to make the well-informed decisions that build revenue, profits and company value;
- They lead the budgeting and forecasting efforts and provide the dashboard reporting that allows the other members of the management team to understand their goals and chart their progress;
- They make the cash flow projections and execute the financial plans that allow the business to grow on a solid financial foundation;
- They often manage all administrative operations including not only accounting but also IT and HR.
When a middle market company has no CFO or has a CFO who is under qualified, they simply go without some or all the critical contributions outlined above. Why? CEOs and owners are often reluctant to hire a highly-skilled and experienced CFO because:
- They do not believe, sometimes incorrectly, that their company is large enough to justify the high fixed cost of a full-time CFO;
- They do not believe a CFO would be fully utilized in their company (indeed, full time CFOs for many middle market companies spend less than 50% of their actual work time on typical CFO-related work);
- They are not aware of the option of having a part-time or interim CFO;
- They are unsure about the type of skills and experience a CFO would need be the right fit for their organization or how to find a CFO with that specific skillset.
Hiring a part-time or interim CFO on a contract basis is a solution that addresses the needs of the company and resolves these uncertainties without making the long-term commitment and upfront expenditures that are often associated with hiring a permanent CFO.