What Size of Company Needs a CFO?

By Gene Godick | August, 14, 2023 |

A Chief Financial Officer (CFO) is a seasoned leader overseeing your business's financial operations and strategies.

These financial experts lead everyday financial management, contribute to strategic enterprise-wide decision-making, offer essential advice for financial planning, and tackle risk management — among other finance-related activities.

They’re a vital part of your business’s leadership team. But not every business has the resources to hire a full-time, in-house CFO. Instead, for many businesses, hiring an outsourced CFO represents a much better solution. In this guide, we explore the different factors that determine when your company needs to seek out qualified financial leadership, whether on a full-time basis or in a fractional role.

G-Squared Partners serves as a strategic financial advisor to businesses across a diverse range of industries and growth stages, providing a sophisticated suite of outsourced CFO, accounting, and bookkeeping services. To learn more about how we can support your business, schedule a consultation now.

A CFOs Role In a Company

What role does a CFO play in everyday business operations?

Essentially, a CFO is the leader of your organization’s financial architecture. CFOs not only manage financial activities but also act as critical partners to the Chief Executive Officer (CEO) — guiding the overall direction and growth of a business.

While generally speaking, a CFO deals with financial tasks, their responsibilities are often multifaceted. Regardless of what they do on the day-to-day, CFOs often act as a company’s navigators, strategically steering your business toward your financial goals and objectives.

Overview of CFO Responsibilities

When it comes to CFO responsibilities, there are several crucial financial tasks that you can expect these professionals to handle.

One primary responsibility is to ensure your business's financial reports are accurate and completed on time. CFOs are also responsible for overseeing the accounting and finance team.

They keep the financial train on the tracks and ensure every team member has what they need to ensure a smooth and compliant ride.

If it’s financially related, CFOs will play a pivotal role. This could be everything from managing capital structure decisions and investment options to handling cash flow management. Whenever a financial task requires constant monitoring, a CFO is never too far away, keeping track of the financial landscape both within and outside of an organization.

Factors Influencing the Need for a CFO

Does every company need a CFO? This is a question posed by many growing businesses.

To get to the heart of the answer, you’ll find a few influential factors to consider.

Company Size

Small businesses with a few million dollars or less in revenue typically do not require a full-time CFO. In many cases, an outsourced accountant, supplemented by other advisory services, provides these businesses with the financial foundations they need to grow.

However, once a smaller business starts to experience rapid expansion and growth, they need to start laying the foundations for a scalable financial infrastructure. In these scenarios, the expertise of an outsourced CFO will prove invaluable while still enabling the business to continue investing in growth.

Next, there are mid-sized companies – businesses with revenue ranging anywhere from $5 million to $25 million. These organizations will have a bit more complexity baked into their financial operations, although it’s important to overcomplicate things at this stage.

Many smaller to mid-sized companies lack the resources to hire a full-time CFO, but that doesn’t need to be an impediment to financial growth. An outsourced CFO service provides these businesses with the financial leadership they need, often at a fraction of the cost of hiring a full-time CFO.

Lastly, there are larger companies – those with $25 million or more in annual revenues. Once a company reaches this level of financial maturity, it’s often time to hire a full-time, in-house CFO to oversee financial operations.

Funding Status

While company size should be top of mind when making decisions on hiring a full-time, part-time, or outsourced CFO, that’s only one factor to consider. Another important driver of this decision is your company’s funding status.

If a business is bootstrapped, the onus is on the founder to determine whether they need a CFO. However, if the business has accepted institutional capital, it’s often expected that they secure the services of a CFO. When a business accepts outside capital, it has a fiduciary duty to its shareholders to effectively manage the business.

A major element of that is investing in bringing the business’s financial infrastructure up to scratch. Many investors will require that a business becomes GAAP compliant and embraces regular financial reporting – tasks that can be difficult to achieve without the support of experienced financial leadership.

If a business has raised capital, it’s likely that their focus is squarely on growth in order to deliver returns for their new investors. By working with an outsourced CFO solution, businesses can continue to prioritize investment in growth while ensuring that their finance function operates in a cost-effective yet sophisticated manner.

Additional Factors to Consider When Determining Whether to Hire a CFO

Here are a few others to keep in mind when deciding on whether to hire a CFO for your business:

Industry: businesses in heavily regulated industries, like finance or healthcare, may benefit from a CFO’s expertise.
Growth stage: startups and businesses focused on rapid growth can leverage a CFO’s financial leadership to tackle growth challenges and find new opportunities.
The complexity of financial operations: companies with complex financial operations, including international transactions or multiple revenue streams, can benefit from a CFO.
External factors: external factors such as regulatory requirements, investor expectations, market dynamics, or other economic factors can also influence the need for a CFO.

While assessing your business needs is critical, you should also understand what questions to ask a potential CFO to determine whether they fit your business well.

G-Squared Partners: A Trusted Outsourced CFO Solution

While the expertise of a CFO is mission-critical for many organizations, making a full-time hire isn’t the right option for many businesses.

Instead, businesses should consider working with an outsourced CFO service that provides strategic financial leadership without the significant financial commitment of hiring an in-house CFO. It’s the perfect solution for small to midsize businesses, plus ambitious startups that have raised institutional capital. Plus, you’re getting more than just one individual: you’re getting the support of a team of experienced financial professionals with a variety of specialties.

Here at G-Squared Partners, we provide businesses like yours access to effective financial management with our outsourced CFO services. With the ability to provide strategic financial guidance and services tailored to your business, G-Squared Partners fills the financial leadership role effectively, helping your business scale responsibly and efficiently.

Are you ready to grow your business with our outsourced CFO services? Be sure to connect with the team today to schedule a consultation.