Overhead is one of the fastest ways to increase your burn rate and shrink your runway. As a result, hiring the help you need usually feels like a major undertaking. You want to be sure you’re getting someone with the expertise you need so you can see ROI on their salary. At the same time, you want to make sure they’re a culture fit who’s bought into your startup’s mission.
Ultimately, hiring is something all early-stage founders need to weigh carefully. We tapped Rakesh Shah to talk about precisely this. As a fractional CFO, he’s had extensive experience helping startups scale their finance team in the right way at the right time. If you’ve been wondering who to hire for your finance function and when to make that call, Shah provides guidance that can help.
Who to hire — and when
Generally, Shah recommends staying as lean as possible during your pre-seed and seed stages. That means waiting to hire any dedicated finance personnel. At most, he says that early-stage startups need an accounting team to help with their bookkeeping and tax filings.
He suggests starting to think about expanding your finance function late in Series A fundraising or Series B. At that point, he says startups typically benefit from choosing one of these two paths.
Hiring a VP of Finance
If you want to make your first finance staffer a full-time internal person, Shah suggests hiring a VP of Finance. The VP role straddles the line between high-level strategy and decision-making (like a CFO) and someone who’s very in the mix with your books (like a controller).
Support them with an outsourced accounting firm to ensure your VP can maintain the elevation they need rather than getting too caught up in the basics. That accountancy can handle your bookkeeping and tax needs. This, in turn, frees your VP of Finance up to analyze trends, evaluate the marketplace, and take other steps that can drive strong decision-making. It also gives your VP more bandwidth to interface with investors and field any finance-focused requests from them.
If you go the VP of Finance route, Shah recommends making your second finance hire a financial planning and analysis (FP&A) manager. As you hire more finance staff from there, they can all report to your VP.
Starting with a fractional CFO
Alternatively, Shah says startups can wait to make a full-time finance hire and instead choose a fractional CFO. This person works on an as-needed basis, bringing your company the expertise of a CFO without the costs of a full-time salary and benefits.
That fractional CFO works to guide your startup on the path to financial success. Shah says a good one will help with all of the following:
- Financial modeling
- Cash flow forecasting
- Setting up strong processes and procedures that can scale up as your finance department grows
- Hiring the right people to add to your finance function at the right time
With a good fractional CFO, Shah advises making your first full-time finance hire a controller. That person can handle your accounting, payroll, and A/P and A/R while your fractional CFO focuses on financial modeling and forecasting. This way, you get someone dedicated to handling your daily financial to-dos paired with high-level strategic guidance.
For more guidance on building your finance team, we have a guide to organizing this department as you scale.
Finding the right people
By the time you feel pressure to make a finance hire at your startup, the need for that person is probably pressing. The need for a dedicated finance hire usually indicates that you’re either experiencing growth you need help managing or feeling pressure due to a tight runway.
Either way, there’s a sense of urgency to make this hire. You shouldn’t rush the process, though.
Take your time and get to know candidates. If you’re not sure you’ve got a good option, expand your options. LinkedIn, job boards like ZipRecruiter, Monster, and Indeed, and recruiters all help here. It’s well worth investing some money into creating a solid pool of candidates. Ideally, the person you hire will be with your company for decades to come. You want to make sure you’re digging up good options to choose from.
Once you start the interview process, Shah says you should look for some specific characteristics. He’s seen startups succeed when they ensure that their first finance hire has all of the following:
- Enthusiasm: Is this person excited about the job? Do they really buy into your mission as a startup? Someone who genuinely cares about the work you’re doing is much more likely to put in good work themselves.
- Contentment working alone: In a startup’s early days, Shah says working as the sole finance staff can be isolating. Look for a hire who thrives when working independently, and who’s a self-starter who doesn’t need motivation from others to get things done.
- Resiliency: Very few startups have a straight shot to success. Look for a candidate who can weather the ups and downs that come with working for a young company.
- Cultural Fit: Shah says this is important, but the other three characteristics are just as much so. Don’t hire someone who has the experience you want on paper but isn’t a culture fit for your team or passionate about helping your company thrive.
One more thing: don’t hire someone too junior
Shah says he’s seen one common mistake in startups hiring their first finance staffer: bringing in someone too junior.
While this might seem like a good way to save some money, don’t assume that person can scale up their skillset with your business. Building the processes and procedures a finance department needs is specialized work. Most people don’t know how to do this.
And if you miss the opportunity to lay a good foundation for your finance function, you’ll eventually have to hire someone more senior to come in and fix things. That too-junior hire often ends up costing more in the long run.
As you scale up your company, doing the right things at the right time matters, particularly in your finance department. And if your startup grows quickly, this could all need to happen fast. You want to have a team you can rely on that knows what needs to get done and how to do it.
Here, a fractional CFO goes a long way. To get that high-level finance expertise without the price tag of a full-time compensation package, schedule a tailored one-hour CFO Consultation session focusing on your financial strategy and planning questions.
Rakesh brings you a wealth of expertise. He’s worked with ultra-lean tech startups all the way up to publicly traded companies, partnering with their founders to develop a successful financial strategy while making the company look as attractive as possible to investors.
With Rakesh and our fractional CFO services, you get all of the benefits of a tech-focused CFO — without the overhead.