When Do You Need To Bring In A CFO?

A better opening question might be “Do you need a CFO?” We frequently get different forms of this question, and the answer is nuanced. A Chief Financial Officer (CFO) is often the last addition to round out a firm’s C-Suite, and for good reason. Traditionally, CFOs weren’t brought on until a company was already pretty large: $50mm in revenue and up. These days, companies much smaller have CFOs on staff. The decision to bring on a CFO, either full-time or in a fractional capacity, should be dependent on a few things: your firm’s financials, your firm’s growth expectations, and your existing team’s financial acumen.

Your Firm’s Financials

The more complicated your financials, the more value a CFO can bring to your business. Most professional services firms, including marketing, creative, and digital firms, have relatively simple businesses. There’s no inventory or complicated Enterprise Resource Planning (ERP) systems to implement and maintain. If your firm gets along just fine using QuickBooks, FreshBooks, or similar without any bolt-on systems, your financials alone probably aren’t complicated enough to necessitate a CFO.

Your Firm’s Growth Expectations

That said, growth can complicate even simple business models. Growth often requires capital (either via debt or equity), more sophisticated forecasting and resource planning, and a close eye on cash flow management. Traditionally, any growth above 30% per year will trigger the need for more executive resources. In these instances, a CFO might be necessary to simply relieve some of the operational pressure on a COO or CEO.

Your Existing Team’s Financial Acumen

If your financials are relatively simple and your growth expectations are modest (less than 30% per year classifies as “modest” in this case), you might have everything you need in-house, without bringing in a high-priced CFO, but it depends on the types of minds you already have in-house.

Finance and accounting can be intimidating areas for principals in our field, particularly since so many of you come from creative backgrounds. Obviously, intimidation alone is not a good reason to hire someone. Fortunately, having someone with the title of a CFO on your team is less important than having the functions of a CFO covered by your team, even if the job is spread across multiple people. In many cases, a controller, or even a competent bookkeeper coupled with a leadership team, can fill the role just fine. There are six key CFO functions that must be covered by someone on your team:

  1. Risk identification and mitigation
  2. Financial forecasting and strategy
  3. Management of finance/accounting personnel
  4. Financial reporting
  5. Pursuit and management of debt and equity
  6. Bookkeeping

Risk identification and mitigation

This is the most important skill a CFO can bring to the table, but it doesn’t have to come from the CFO position. Risk identification and mitigation requires looking forward, proactive decision making, and accurate analysis and reasoning. Firm founders take on this role by default at the beginning. Many continue in this role through phases of growth (and sometimes contraction). The faster a firm is growing, especially if it's on the back of one client, the more risk there is to mitigate.

Financial forecasting and strategy

If operational expenses are low and organic growth is modest, you probably don’t need much financial forecasting and strategy. The larger and more complex the operation, the more important forecasting becomes. Seasonality of your firm’s business can also come into play here, if you’re working in a vertical with definite swings in revenue. Until you get to a certain size, though, your operations arm and bookkeeper should be able to handle this.

Management of finance/accounting personnel

Small finance/accounting teams don’t necessarily need a dedicated manager. If you’re operating with 1-3 folks on your money teams, personnel should be able to report up to operations. The larger your finance and accounting team, the more important a manager (such as a CFO or controller) becomes.

Financial reporting

Regular monthly financial reporting, in addition to ad hoc reporting depending on needs, is also a key CFO function. But again, this doesn’t have to be performed by a CFO as long as someone on your team is competent and responsible. Particularly once you’ve developed a rhythm, including the following, you might not have much of an ongoing need here:

  • Monthly financial review process
  • Annual budgeting process
  • Semiannual or annual performance review process, including compensation adjustments

Pursuit and management of debt and equity

Raising money can easily be a full-time job. Capital-intensive businesses and startups set on rapid growth need ready access to funding. Marketing, digital, and creative services firms rarely fall into the category of needing constant capital injections. In fact, if you do, you are probably doing something wrong. While this business function needs an owner, in our industry, this rarely requires the level of expertise a CFO can provide.


A CFO should not (and will not) do day-to-day bookkeeping, but they are ultimately accountable for keeping clean, accurate, and up-to-date books. Many firms can still manage this even with just a part-time bookkeeper.

So when is the right time to bring in a full-time CFO? For the majority of firms, the right time is never. CFOs can be incredibly valuable, but the marketing services industry is neither complex nor capital-intensive. Fractional CFOs can help fill the gap for many firms, but some firms don’t even need this, as long as one of the principals has a level of financial literacy.

A principal should never be too far removed from the finances of the firm. If you know where you stand, know what you’re working towards, and have a game plan to get there, odds are you are already performing the duties that a traditional CFO would perform.

Queue emails from angry CFOs everywhere…

Article by Jonathan Baker

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