The Challenges Of Being a CFO In a Startup

How different is the CFO role in a start-up when compared to more established companies?


Much has been made of the evolution of the CFOs role in the past couple of decades. No longer a role for those solely concerned with balance sheets and cost analysis, it's now a multidisciplinary position that demands a diverse set of skills.

A report by McKinsey and Company identified that a CFO's role can be categorised into one of four categories. The profiles listed below are representative of the company's growth profile, structure and industry.

These include:

(1) The Finance Expert

(2) The Generalist

(3) The Performance Leader

(4) The Growth Champion

Defining the 'type' of CFO you are is not a luxury that finance leaders in start-up companies have. Start-up companies often demand more than their larger counterparts in terms of the variation of tasks and this means that the CFO has to wear a number of different hats, whether that be a risk mitigator, a strategic advisor or a business development leader.

With so much ambiguity surrounding the role, defining 'the pillars' of it may sound unnecessary, but there are issues that every CFO should look to address when they venture into the start-up arena.

Many more startups fail than succeed in today's business climate. It's a state of affairs that most entrepreneurs have come accustomed to and a symptom of a start-up arena that's congested with competitors.

It's because of this that risk mitigation has to take centre stage for the start-up CFO - continual assessment has to be carried out with a vigilant approach that sees every financial regulation upheld. Whilst in the early stages of development, a company's future can be tarnished by a simple mistake and it's imperative that the CFO guards against this.

Forecasting, planning and analysis is key at every stage of a company's progression, but it is arguably at its most important whilst in the start-up phase. This is where the CFO has to put their strategy hat on as KPIs have to be analysed on a regular basis to see if the company is performing at the desired level.

With this in mind, the start-up CFO has to address a wide range of issues that CFOs in more established companies don't have to touch. This makes the role challenging from a number of perspectives and although the role may not have as much in the way of responsibility in comparison to their peers in larger companies (CFOs in FTSE 100 companies will be dealing with sums well in excess of one at a start-up) the start-up CFO will have his/her fingers in more pies.

It's about prioritising and having the ability to decipher what's important at specific times. Capitalise the company whenever possible and know when to make the right move - adaptability is also key. The role of the start-up CFO is not the same as one in an established company and without question fails to adhere to the framework stipulated in the the McKinsey and Company report, instead, it's a combination of all of them.

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