Does Your Small Business Need a Finance Chief?

November 14, 2011

When to hire a CFO?

It’s an important question for a start-up small business. I’m often asked what is the role of a CFO and at what point a small firm should think about hiring one. I don’t think there’s a revenue number that if you reach then you should say: “Now I need a CFO”.  It’s more to do with the demands of your business: if you’re a dynamic, fast-growing company with ambitious plans for the future then you’ll benefit from having a CFO.

As Hiscox’s CFO I combine several jobs. Certainly I’m in charge of all the numbers at Hiscox, making sure they’re right and are delivered on time. But my role goes much further than that. I’m also a consigliere to Bronek, our CEO: a confidante, an adviser but also someone who can challenge the boss, and other members of the executive team.

A common reason why many companies fail is because they have no one who can challenge the CEO successfully. If you have a very forceful boss who won’t listen, it’s unlikely the firm will pick up a problem and deal with it effectively when it occurs. A CFO has to be tough enough to tell their CEO when they’re wrong. There aren’t too many other people in the company who can do that.

But you must get the balance right. A good CFO should challenge ideas without stifling them. You mustn’t suppress innovation and enthusiasm within the company, because they’re its lifeblood.

It’s important to look for problems on the horizon that could hurt the company, but not all entrepreneurs are good at doing that, because they tend to be very focused on their own businesses. That’s understandable, but in that case it becomes important to have a CFO who can take on that job of risk manager. They need not only to have a good knowledge of their own business, but also the industry in which it operates, as well as of the state of the economy generally.

Risk management is as much an art as it is a science, because you can’t be certain what’s going to happen in the future. So you need to use the limited information you have and your gut instinct to try to act to change the company’s direction before a problem arises.

If you decide to bring in outside investors then it can be very useful to have a CFO. We’re listed on the London Stock Exchange, and I’m in charge of the group’s investor relations, working with analysts and shareholders to make sure they understand Hiscox and what we do.

As a finance chief I’m always interested in the bottom line. And in this case the bottom line is that if you’re an entrepreneur who’s crying out for a business partner, a counselor or someone to help you move your company to the next level then you should look at hiring a CFO.