Does a small business need a CFO?
Many small businesses are having difficulty making ends meet these days. In a market where well-funded rivals are a constant threat, it can be challenging to stand out and succeed. Some owners of small businesses make the mistake of attempting to be solely responsible for the financial management of their companies.
As a business owner, if you don’t understand how to manage your company’s money correctly, it might result in costly mistakes. For this reason, many owners of small businesses have concluded that it is best to outsource their financial management to an expert. Small businesses can benefit from hiring a professional or part-time CFO to manage their profits, expenditures, and investment risks.
Moreover, a CFO is in charge of ensuring stable financial conditions for the organization. However, even though having a Chief Financial Officer (CFO) on staff for your small business, the question remains whether you have the financial means to hire one. Hence, let’s look at why your small firm can benefit from hiring a CFO.
Create new goods, markets, or services available
Businesses shall expect greater unpredictability in the future. The ability to change and adapt is essential in today’s business environment because of the proliferation of disruptive technologies, evolving market dynamics, and new leadership styles.
Consequently, the CFO sought to be a professional in change. It assists in identifying new opportunities and transforming the company’s goods and markets, as well as in capitalizing on and planning for future growth, as well as in creating and effectively communicating the company’s growth.
Serves as a source of financial information
Instead of managing your firm’s time and energy, focus on analyzing your pricing, sales, and profitability data. Your firm could benefit significantly from their financial understanding, which could help you achieve unprecedented development and success.
Offers specialized guidance and forecasting
It would be ideal if there were no financial difficulties for your small business. Although it’s highly doubtful, a CFO is a good investment.
Other than helping you deal with issues like low cash flow and profitability, expensive overhead, debt overload, and high customer churn, they can give you access to their industry knowledge and experience.
To top it all off, they may help you with resource allocation by forecasting. The term “forecasting” relates to predicting your company’s future financial results. A lack of forecasting means you will struggle to learn from your previous performance and set attainable targets.
Increase the company’s profits
Most small firms routinely generate profit and loss statements and are frequently used to compare one month’s results to the previous. However, how sure are you that your report is correct? Have you set aside some time to rectify the situation? Can you forecast why your profits don’t show up next month?
So, a CFO may assist you in setting profit and financial goals by comparing your results to industry norms and averages. For example, After a CFO identifies areas for improvement, firms can see a return rapidly by reducing unnecessary expenses.
Minimizing risks
No matter what sector it operates in, every firm is exposed to dangers such as the possibility of going bankrupt, a decline in market value, a decrease in profits, and unpredictable events such as the appearance of COVID-19. In the long run, these factors might significantly impact your company’s financial stability.
It will allow your CFO to learn about your organization and help implement risk management measures that are proactive rather than reactive. You may protect your company against unforeseen events by taking purchasing insurance and business succession planning measures.
Boost the market value of your company
If it comes the time that you leave your company, you will most likely either sell it or pass it on to a member of your family or a trusted coworker. Has your business ever made you question how much it’s worth?
It may be difficult for small business owners to place a dollar figure on their businesses, but knowing its worth is critical. Planning your retirement becomes much more difficult when you lack access to this information.
Thus, when you’re ready to sell your firm, a CFO can help you increase the company’s profitability by working with you to make proactive improvements.
