What makes a good startup CFO
Do you know a founder who prefers to deal with numbers than to think about the product 24/7? Or tirelessly struggling to open up new sales channels and attract cooperation partners. Product development and the search for paying customers always come first - and it would be bad if that weren't the case.
Nevertheless, questions like: "What price can I ask for my product?" or "How many customers do I have to gain to break even?" but not long in coming. The word calculation brings a cold shiver over the energetic founders back in many places and the financial plan does not fit the startup Bullshit Bingo at all. When it comes to finance, it's about money and costs. Costs spread a bad mood and create the urgency to raise money. Both distract from the product and the team has not yet won a customer by working on the financial plan. The mere fact of “planning” raises questions: “Does it really make sense to think about a 3-5 year plan if I don't even know what will happen next month”.
In other words: Many visionary founders have made it second and foremost to describe how their own product will change an entire industry, but the concrete implementation, including planning the monetary framework, is difficult.
The quick shot is often: Let's get a business graduate on board who, as CFO, takes care of the numbers. Actually logical. If you take the step, please do it correctly:
The four most important core tasks of an early stage startup CFO
- The master of the financial plan
The financial plan should be the numbers brain of every company. This is where all the data come together - external as well as internal, the financial plan knows where the company should go and records whether it is moving too slowly or maybe even took a wrong turn. The CFO prepares or takes over the financial planning with all the relevant core elements: Revenue planning, cash flow planning, personnel planning, sales planning, possibly media or marketing planning. He discusses deviations and changes with the management, continuously adapts the planning accordingly and makes them available to investors and financiers.
- The mirror for management
The planning only makes sense if this is the basis objective agreement for the operational teams become. At this point, the CFO takes on the role of COO and monitors the operational business. "How many deals does the sales team have to do, when does the new channel have to show initial results and when does the new product have to be out?" All of these parameters are relevant management components. The CFO coordinates these with the management, as COO he also communicates them and continuously checks the implementation status. The financial plan expands step by step with the inclusion of the figures achieved Controlling and monitoring instrument.
- The synapse to bookkeeping, sometimes it is also bookkeeping
What distinguishes the CFO of a startup from a CFO in a more mature company is its broad scope. Basically, the CFO is on duty to take responsibility for “everything with numbers”. This often also includes accounting, document management and the payment run. A tax office can save a lot in the process, but be careful: not all tax advisors are familiar with startup business models! Choosing the right advisor is really essential in order not to spend too much time on clarification and ongoing changes in the accounting and, in the case of financing, also to have the right advisor for tax issues on hand. Nevertheless, the CFO should check the bookings in the first few months and with the tax consultant a sensible one early on Coordinate cost center and booking structurewhich reflects the company's core processes, the most important costs and sales to be differentiated and thus simplifies the controlling of the CFO.
- The mouthpiece to investors
If a financing round is pending, the financial plan must be clear, with the necessary resilience, but also with clarity about where and how the company should develop in the future. The planning and thus the business model must be easy to understand, KPIs must offer comparative values and the assumptions must be flexible so that an investor can test scenarios for himself. For example: “What happens if a sales employee only manages one contract per month instead of two. With the financing round, the investor and startup agree on mostly monthly reporting. For this, not only the condition must be compared with the plan-ACTUAL BWA (business management evaluation), but also company key figures (KPIs) must be evaluated and commented on in writing. In addition, there is the important question of the time frame in which the company runs out of money, for which a liquidity plan-actual comparison and a monthly forecast provide information.
After the overview of the 4 duties of every Early Stage Startup CFO, you have to ask yourself whether the tasks in the first 12 to 24 months of a startup are often sufficient to utilize a full-time position and whether you see your money well invested here. If you entrust a CFO with the entire financing process during a financing round, including investor contacts, due diligence and preparation of the negotiations, he is 100% involved in the time. In other phases of the start-up, there is always the decision about further areas of responsibility or the question: “Does the woolly milk sow have to be able to lay eggs?” In other words, to what extent will the CFO take on other operational tasks: Does he take on contract negotiations for the purchase of services, for example, does he handle the entire accounting internally, or does he have the task of managing recruiting and personnel in addition to payroll accounting? In addition to these typical additional roles of a CFO, he can also hand over a wonderful project manager who relieves the visionary head of the company and controls the employees in a goal-based manner. After all, he's the one who should have the best overview of corporate and operational goals.
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