Startups are remarkable. One company can disrupt an entire market with just a single service released into the world.
Consider that social media channels, for the most part, started with a small group of people. Or also consider how the keto diet is taking off thanks to spirited entrepreneurs. Budding business people are working to find their niche.
Even when doing that, you need to keep your eye on the money. You want to be the next disruptor, or perhaps introduce that unique item that the market has needed for decades. To do that, you need an investment or a loan. The problem when securing a loan, however, is having to pay back with interest and stake your credit on what you have borrowed.
When you run a startup, your first priority is gaining as much capital as much as possible and getting ready to release your product or service to the world. While you the owner could do the work, getting an expert can greatly help you.
This priority becomes more important when you cross the million-dollar revenue threshold. Is that threshold the beacon for success? Not necessarily. Earning between 1 and 3 million dollars means that you can have more business problems but don’t have enough money to solve them.
Remaining stagnant at this stage causes more stress and costs more than you can afford, even with the extra cash flow. Having a team of accountants also may not help, since they add to the costs and can’t provide the insight you need to be set you free from the money pit. You may need a Chief Financial Officer to keep you in the black.
Businesses tend to hire a Chief Financial Officer for controller and accounting duties. We do not recommend doing this because CFOs command a higher salary than controllers do. Controllers help you manage your accounts so that you can reduce costs and turn a profit while optimizing cash flow. They look at your account, organize debits and credits, and ensure that your books are balanced. You could outsource this and hire a CFO for more detailed duties at a fraction of the cost.
Usually, when we see CFOs in media, they are the first investor in the business and usually a friend of the entrepreneurial protagonist. They secure the capital that the CEO needs to get the company off the ground and running. In addition, they keep solid records of finances for accountability.
The truth is more complicated than what we see on television. A CFO does not just talk to investors and ask them to provide capital in exchange for a percentage. They also take care of your finances and provide information you need to help you see around the corner.
Also, we recommend not hiring your friend to handle the money. You should go with an expert who has some emotional distance.
Outsourced CFO Services
Let’s say you hire a Chief Financial Officer. They will serve as an in-house employee while filling out the controller and accountant duties and earn a salary. That salary tends to cost a business between $500,000-600,000 in US currency per year if your business is successful. Such an amount can deplete your cash flow, and you start looking for alternatives that deliver more on value.
When you get an outsourced CFO, you save on the cost of hiring an employee. What’s more, you get more expert advice than you would from a friend because the CFO will ensure that you get a return on your investment in them. You would rather have someone who will argue for the money that will grow in your accounts and received a relatively small fee for them.
If you need a CFO only for the short-term, outsourcing can help with that. Some offer part-time services. You can get a few months of financial advice to bridge a gap when you have sudden changes in management. That flexibility can save your company from going belly-up.
When hiring for the long-term, an outside perspective can provide key insights to help your startup take off in the business world. You can circumvent the glamorous surface of tech with someone who can look at the numbers and make appropriate recommendations based on short-term and long-term cash flow.
Get Your Startup CFO Services From DeepSky
DeepSky wants to streamline your finances at an affordable cost. When you outsource with us, you get more services than you would get from a regular accountant. Our Financial WingmanTM services will help provide the CGO that you need for your entrepreneurial venture.
Schedule your first consultation with us today! Let’s inject expert financial advice into your startup to encourage investors to do the same with capital.