A few years ago, I worked for a start-up that raised a few million dollars in venture capital. After the cheque landed in the corporate bank account, it felt like we had all the money in the world, which made spending it pretty easy.
It took a while for that feeling to go away before reality hit home with a resounding thud - the money that had once seemed so plentiful and never-ending had shrunk in a major way. We suddenly appreciated that it might have been a good thing if someone with financial training, such as a chief financial officer, had been involved to provide us with supervision and guidance.
Unfortunately this scenario is all too common for new businesses, which spend (and spend) to get things going until the money's gone or until a pile of debt has accumulated. It begs the question: When is the right time to hire a CFO to provide financial discipline?
Mark MacLeod, CFO of two start-ups, Akoha and Tungle, and an adviser to several online and software companies, says the need for a CFO depends on how fast a company is growing. For businesses experiencing "normal" growth, he says they can become quite large before needing a CFO. But for fast-growing start-ups, it's a different kettle of fish, particularly if they are trying to raise their first round of financing.
So why do start-ups need a CFO, while "normal" companies can hire one later?
"Startup life comes down to a few key moments: fundraising, partnerships, exits. Each involve complex transactions," Mr. MacLeod says. "The ideal startup CFO can not only manage those important transactions but source them as well. You want a CFO who can bring deals to the table and close them. Between deals you want someone who really gets the business and someone you can count on as a trusted adviser."
Wednesday: An inside look at things to consider when hiring a CFO, and how to get them integrated into the business.
Mark Evans is a principal with ME Consulting , a content and social media strategic and tactical consultancy that creates and delivers 'stories' for companies looking to capture the attention of customers, bloggers, the media, business partners, employees and investors. Mark has worked with three start-ups - Blanketware, b5Media and PlanetEye - so he understands how they operate and what they need to do to be successful. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshUniversity and meshmarketing conferences .