It can be hard to know when to hire an interim CFO. Not only are there cost considerations, but since interim CFOs are often hired during times of crisis or transition, you may also be under time pressure.
In this article, we’ll share insights from indinero’s experience working with hundreds of startups and small businesses about when and why to hire an interim CFO, fractional CFO, or full-time CFO.
CFOs are responsible for investor relations and presentations. Download our guide to crafting compelling business reports to get a glimpse of the reports they create to impress investors.
What Does a CFO Do in a Startup?
Broadly, a CFO is in charge of a company’s financial strategy. In contrast to bookkeepers and accountants, who manage day-to-day operations, the CFO focuses on longer time horizons.
That said, there is no one answer to this question. The role of a CFO and whether or not you need one on a fractional, interim, or ongoing basis depends on revenue and your business’s startup funding stage.
When to Hire interim CFO for startups
During initial discovery calls, founders often start the conversation by asking about CFO services. It’s an important role for many companies and carries prestige.
However, early-stage businesses probably don’t need a CFO. They need help deciding between accounting vs bookkeeping or a controller vs CFO. Only once these foundational pieces are in place is it time to consider hiring a CFO.
Transition and Crisis
Often, startups seek financial services after something goes wrong.
Perhaps their accounting systems can’t keep up with revenue growth, their CFO has retired, or they’re having trouble achieving profitability and need help with strategic direction.
Brian Johnson, an interim CFO at indinero, has experienced this firsthand with one of his clients:
We have a client who came to us when they were breaking even, and the founder was concerned about whether he was going to make it. We ran through a financial analysis of their margins and discovered that some of their products, after considering fixed costs and variable profits, weren’t making money. So over six months, we achieved profitability by cutting his cost structure and right-sizing his business.”
Brian Johnson, Interim CFO at indinero
This shows how an interim CFO can be a major asset to a company in a moment of uncertainty. Often, companies that hire CFOs on an interim basis find that as they grow and achieve profitability, they prefer to retain those services continuously.
Pre-Revenue Stage
These startups usually receive some seed funding but are not at the Series A funding round.
A CFO will help these early-stage startups develop a three-statement financial model, linking the income statement, balance sheet, and cash flow statements into a fully integrated and dynamic model. This provides a clear picture of the company’s future and saves accountants and bookkeepers time when organizing financials.
Sometimes, but not as often, CFOs will also help prepare startups for their next funding round. We liaise with investors who want to see GAAP-compliant financial reporting at board meetings and hone your pitch by telling your story in the best possible light.
Pre-revenue startups don’t usually need ongoing services, so these projects are short-term and a good fit for an interim CFO.
Revenue Stage
Indinero has worked with companies with between $3 million and $20 million annual recurring revenue (ARR) on a fractional or ongoing basis. We find startups at this stage are pursuing or have already secured a Series A funding round.
“This is where CFOs provide the most value,” says Johnson. “You’ve raised capital from institutional investors, and there’s a lot at stake. The business needs to perform, and you need a path to profitability. We step in and say, from a quantitative perspective, this is how you get there.”
Brian Johnson, Interim CFO at indinero
Startups at this stage have established accounting and bookkeeping; an interim CFO’s role is to review their work, represent you at board meetings, and provide strategic consulting guidance.
To identify a path to profitability, the CFO helps answer some of the following questions:
- What are the startup’s projected revenues and expenses?
- How much funding is required to reach key milestones?
- What are your projected cash flows and burn rate?
- How do different pricing strategies impact revenue?
- What are the startup’s break-even points and timelines for achieving profitability?
An ongoing CFO can also provide support during a merger or acquisition by evaluating the value of a company you may want to purchase.
There’s no hard and fast revenue figure for when to transition from a fractional to a full-time CFO. Still, typically companies entering a Series C, Series D, or pursuing an IPO need a full-time in-house CFO rather than a fractional or interim CFO.
Benefits of Having a CFO
Our clients who hire interim CFOs often tell us they have more confidence in their business strategy and can relax knowing that the financial side of things is handled. They don’t have to spend their time tracking down payments and running payroll and can instead focus on what they enjoy and excel at.
CFOs can also reduce tax burdens on founders by transitioning them from cash to accrual basis accounting. This process can save a significant amount of money during the crucial fundraising period.
Lastly, many people don’t think about the administrative burden of managing finances. When startups hire indinero for a full stack of tax, accounting, and CFO services, suddenly, all of their vendor communication is under the same umbrella. This saves time and minimizes potential mistakes.
How Much Does a Fractional or Interim CFO Cost?
In 2024, the median estimated salary for a full-time in-house CFO is ~$440,000 per year.
An interim CFO will cost only a fraction of this amount, depending on how long you need their services. That cost can be further reduced by hiring a fractional CFO who works only as much as your startup needs them to.
Indinero provides custom pricing to meet your particular needs. For reference, our essential bookkeeping services begin at $750, and our growth accounting services at $1250 monthly.
Conclusion
The CFO’s role evolves alongside your startup’s growth.
Startups hire interim help during transition periods, usually when in-house support has left or they’re pursuing a new funding round. Series A companies and beyond often need ongoing support. Conversely, early-stage companies certainly need help with accounting but only brief help from a CFO, if at all.
If you’d like to rest easy knowing your company’s finances are in good hands, indinero has decades of experience helping hundreds of startups and small businesses. Contact us today about our fractional CFO or interim CFO services.
