Ryan Carroll is a serial entrepreneur and the CEO of Wealth Assistants.
Building a killer finance team is crucial for startups and can help contribute to the company’s long-term success. In my own business, having a solid finance team has been a major key to driving revenue growth, reaching KPIs and achieving overall success.
In this article, I’d like to cover the basics so you can understand why your startup should consider investing in a strong finance team–and what it takes to achieve this.
Why Startups Need A Killer Finance Team
Financial Planning and Strategy
A strong finance team can help a startup develop and execute a sound financial plan and strategy. This includes creating realistic budgets, forecasting cash flow and identifying funding needs. They play a crucial role in setting financial goals and determining the path to achieve them.
Fundraising and Investor Relations
Startups often require external funding to grow and scale their operations. A competent finance team, led by a chief financial officer (CFO), can assist in raising capital by preparing financial statements, conducting due diligence and communicating effectively with potential investors. They should be able to provide valuable financial insights to attract investors and maintain strong relationships with them.
Financial Risk Management
Startups face various financial risks, such as market volatility, cash flow fluctuations and regulatory compliance. A skilled finance team can assess and manage these risks by implementing robust financial controls, monitoring key metrics and ensuring regulatory compliance. They can help the startup navigate uncertainties and make informed decisions.
Financial Reporting and Compliance
Having a finance team is extremely convenient for startups because it relieves the CEO of the burden of handling complex financial matters. Timely and accurate financial reporting is essential for startups to assess their performance, attract investors and comply with legal requirements.
A finance team also ensures that financial statements are prepared in accordance with accounting standards and regulatory guidelines. They handle tax obligations, manage audits and maintain transparent financial records. With their expertise, CEOs can get the support and insights they need to make informed financial decisions and steer the startup toward success.
Business Insights and Decision-Making
A competent finance team provides valuable insights through financial analysis and reporting. They generate financial metrics and key performance indicators (KPIs) to measure the startup’s performance, identify areas for improvement and support decision-making. Their financial expertise should help the management team make informed strategic choices.
To improve business decision-making in my own company, we choose metrics that align with our overall goals, identify key drivers, work with departments to identify relevant metrics and consider industry benchmarks. In addition, we focus on leading indicators instead of lagging indicators. This means we look for metrics that can predict future performance, rather than just looking at past performance.
We utilize a weekly scorecard of metrics across all departments in line with Geno Wickman’s Entrepreneurial Operating System (EOS). It is important that these key metrics drive the business. They should be tied to the company’s core values, purpose and long-term goals.
Within our company scorecard, we have metrics that track the inflow of sales, cash flow and fulfillment metrics. For our company, the success of our clients is our number one priority. As an e-commerce management company, one of the most important metrics that we track is revenue per store. We know that when our clients succeed, we succeed with them. We also regularly review more general financial metrics such as revenue growth, operating expenses and net margin to keep a pulse on the health of our organization.
Using these metrics has led to overall improvement and success across all departments. With our EOS process, we review our scorecard on a weekly basis. Anything that is out of line is raised for discussion to identify the root cause dragging down the metric. We have been able to isolate and solve many issues through this process.
Scalability and Growth
As startups grow, their financial operations must become more complex. A robust finance team establishes scalable financial processes and systems that can accommodate the company’s growth. They should help in managing financial resources efficiently, optimizing capital allocation and supporting expansion plans.
It all comes back to using those metrics in a smart way as you grow. The main advantage of having a good set of metrics is that it allows focused activity. There are endless problems in business. The key is to identify the biggest issues and solve the root cause so you can grow more sustainably. With our metrics, both as a company and departmentally, we’re able to focus on the biggest problems and drill down to solve the root issue forever.
Strong Finance Team = Strong Financial Foundation For Your Startup
A strong finance team is crucial for startups as they provide financial planning, fundraising support, risk management, compliance, business insights and scalability. By having a killer finance team, startups can enhance their financial stability, attract investors and make informed decisions to drive sustainable growth.
Not sure where to start? My best piece of advice is to hire a CFO to run and grow that team with you. Having a CFO present in your startup company ensures a strong financial foundation, enables informed decision-making, and enhances the startup’s credibility with investors and stakeholders. Overall, they bring specialized financial expertise to the table that you won’t be able to find elsewhere, and will be able to assist you with knowing exactly who to hire to grow your dream finance team.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
