5 benefits of a Virtual CFO for Startups

Opportunities abound in this ever-changing world for start ups to scale to sustainable success. As rapidly as COVID-19 has swept the globe, so grows the demand on technology tools to enhance our experiences like never before. But not every idea will become a financially sustainable success so some expertise early on can stack your odds. “Begin with the end in mind.” ~ Stephen Covey If you have big ambitions, you should want to launch your business on the right foot. It’s fair to say many tech startup entrepreneurs put lawyers and accountants on the bottom of the spend list in those early days, but there are a few reasons why a small engagement early on can really move the needle faster than you might think.

Here are 5 ways you’ll benefit from the services of a Virtual CFO early on: 1. Sequencing of priorities.

It’s been famously said that early stage tech founders often include a hipster, a hacker and a hustler, but disappointingly ‘numbercruncher’ isn’t as frequently referenced. A coincidence that most startups fail? I think not. Including an experienced financial perspective as part of strategic and operational discussions early on can help founders avoid many financial pitfalls and beat the odds. There is not a decision that a company makes that does not have short, medium and long-term financial implications.

2. Understanding cash flow needs.

Surprisingly many startup entrepreneurs begin fundraising efforts without actually knowing how much money they need. Startup CEOs need a financial co-pilot to numerate the strategic plan and assumptions and then run a variety of scenarios to understand what it is really going to cost to get to cashflow positive or at least a next funding milestone.

3. Creating financial packages that are easily consumed by banks.

If your idea business really is the next big thing then you want to take it to the bank. BDC has a great Startup Loan that many of our clients take advantage of. Establishing a line of credit at a bank will require financial forecasts (Pro Forma Income Statement and Balance Sheet). An experienced CFO is fluent in both entreprenese and bankology and can make the process faster and easier on everyone.

4. Recommendation of the right Accounting Firm.

This may come as a surprise but it is really important to form relationships with the right firms if you have ambitious goals. The best-matched firm will have a portfolio of clients in your industry, a rolodex of like-minded entrepreneurs, and show a keen interest in what you are up to. If you are selecting an accounting firm because it gave you the cheapest quote for Audit and Tax, or has the most recognized brand, you are going to get what you pay for in both instances. An experienced CFO can act as matchmaker to help you choose wisely.

5. Establishment of formal corporate budget.

Cash is king! When done right, a corporate budget formalizes goals and sets milestones. It is based on assumptions, and establishes early success indicators. It is the best tool for keeping everyone accountable early on. Amend quarterly to keep the business on track. Every startup experience is different and varied in complexity. It’s really impossible to create a one-size fits all package that will adequately fit every startup, but it in the interest of time and budget constraints it’s a decent MVP to what hopefully grows and expands with your company. Before you engage any one Virtual CFO, interview many. Despite the fact a virtual CFO is a contractor role, it is still a very strategic hire and the right fit is important. Interview 3-5 to start and make sure it feels right.

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