Question: I have a bookkeeper who pays the bills and sends out invoices, but now that our company is expanding, I'm thinking of adding a CFO to our team. What are the pros and cons of hiring a full-time CFO vs. an outsourced, virtual CFO?
Answer: For most companies, the deciding factor is cost. A seasoned financial executive with an MBA or CPA degree and a 20-year track record generally commands a six-figure salary and might want an equity stake in your company as well. That's why entrepreneurial companies are increasingly outsourcing their CFO responsibilities to virtual CFOs, who can bring them the same skills and experience on a part-time or temporary basis without the hefty price tag.
Due to the recent wave of layoffs on Wall Street and in the banking industry, plenty of senior-level financial executives are looking to work with emerging companies. "These managers are available at a reasonable cost, and most use a sliding compensation scale," says Bruce Crawford, managing director of AngenAdvisors, which provides managerial talent to startups and entrepreneurial companies. If things don't work out, you can generally terminate the agreement on short notice without having to offer the kind of costly severance package you would give a departing executive.
The downside is that your CFO might move on to another assignment after the stint with your company is done or land a full-time offer that your company can't match. That's why it's important to check the CFO's long-term availability first.
Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses, and author of Getting Rich Without Going Broke: How to Use Luck, Logic and Leverage to Build Your Own Successful Business. Reach her at firstname.lastname@example.org or through her website, abcbizhelp.com.