From sales and marketing to product development and customer support, you wear many hats as a founder. When you’re starting out, you’re the Chief of Everything. Nonetheless, your responsibilities as a business owner will become more complex as your business grows. In the past, a simple spreadsheet of revenue and expenses became a maze of cash flow projection, capital allocation, and strategic forecasting.
It’s at this point that many entrepreneurs realize they need a Chief Financial Officer (CFO). CFOs aren’t just glorified accountants; they can guide you through financial complexity, make smarter business decisions, and ultimately increase the value of your company.
For most solopreneurs and small business owners, however, a full-time CFO is an expensive luxury. So, how do you know when it’s time to hire? And more importantly, what should you be doing to make your business profitable right now?
Before you can afford a CFO, let’s talk about the signs you need one.
The Telltale Signs It’s Time for a CFO
Hiring a CFO is a significant investment. As of August 1, 2025, the average annual salary for a Chief Financial Officer in the U.S. is approximately $436,142, or $210 per hour.
As such, you shouldn’t do it just because it sounds professional. Instead, you should do it because your business has become too complex for you to manage it yourself effectively.
With that said, here are some signs that you’re ready to hire a CFO.
You’re flying blind with your financials.
When you were starting, you probably tracked your numbers on a basic profit and loss statement. Now you’re looking at your P&L and don’t know whether your business is truly healthy.
- In addition to your cash runway, you can’t confidently answer questions about customer acquisition cost (CAC) or lifetime value (LTV).
- In making major investment decisions, such as hiring a new team or expanding to a new market, you rely on gut instinct, not data.
- You’re reporting financial information reactively (looking backwards) instead of proactively (forecasting what’s ahead).
Your growth has stalled due to financial bottlenecks.
You’ve hit a brick wall in your business. Although you’re bringing in more revenue, your profits aren’t increasing. Only an expert can identify a financial bottleneck like this.
- Even though your business is cash-flow positive, you have no idea where the money is going.
- Your time is spent chasing clients for money, which prevents you from focusing on higher-level strategy.
- By not optimizing your capital, you may be missing out on growth opportunities or spending money inefficiently.
You’re Actively Seeking Capital or Planning a Major Exit
Investors want to see a clean, professional financial picture. When you’re preparing for a funding round, an acquisition, or an IPO, a CFO is non-negotiable.
- You need someone to build a professional financial model that accurately projects revenue, expenses, and growth.
- You require a partner to lead due diligence, answer tough questions from investors, and negotiate deal terms.
- Your goal is a smooth exit, which requires a financial expert to prepare the company for sale and maximize its valuation.
What to Do Before You Can Afford a CFO
If you aren’t ready for a full-time CFO, you can — and should — implement the systems and habits of financially mature companies. By doing so, you not only prepare your business for an eventual hire but also increase its profitability and competitiveness.
Build a solid financial foundation.
The first thing you need to do before hiring a financial leader is to make sure your house is in order.
- Separate finances. You should immediately open a business bank account and a business credit card. Why? You should always keep your personal funds separate from your business funds.
- Automate bookkeeping. Integrate all of your business accounts with accounting software such as QuickBooks or Xero. By automating data entry, your records are clean from day one.
- Hire a bookkeeper/accountant. While a bookkeeper can manage your daily transactions and reconciliations, an accountant can prepare your taxes and give you basic financial guidance. Unlike hiring a CFO, this is far more affordable.
Create and monitor key performance indicators (KPIs).
An effective CFO can make strategic decisions based on data. However, you can now begin the process.
- Identify your KPIs. Identify the 3-5 numbers that drive your business. Among these are monthly recurring revenue (MRR), gross margin, customer churn rate, and website conversion rate.
- Track them weekly. To track these metrics on a weekly or monthly basis, create a simple dashboard or spreadsheet. By analyzing your business from a data-driven perspective, you can identify what is and isn’t working.
- Understand your cash flow. Don’t just look at your bank balance. Create a simple cash flow forecast to calculate how much money will come in and go out during the next 30, 60, and 90 days. This will help you avoid crises and make smarter spending decisions.
Move beyond “spreadsheet management.”
In addition to managing spreadsheets, a great CFO analyzes them to tell the story of the company. But if you want to develop this skill, you can do it yourself.
- Ask “why?” If your numbers change, ask yourself why. What caused the drop in sales? Why did expenses increase? As a result, this forces you to think strategically about your finances.
- Create a budget. There’s more to a budget than just limiting spending; it’s a strategic plan for how you will allocate your resources for your success. Regularly review your actuals against your budget for the next quarter.
- Read the right books. Take the time to educate yourself. Consider reading Financial Intelligence for Entrepreneurs by Karen Berman and Joe Knight, or Traction by Gino Wickman. Using these resources, you can get a crash course on financial leadership.
When You’re Ready: Choosing the Right Financial Leader
After you’ve implemented these practices and your business is thriving, you can hire a CFO. However, you do not necessarily need a full-time employee.
The fractional CFO.
A fractional CFO is the perfect solution for many small to medium-sized businesses. Fractional CFOs are part-time financial experts who work with you on a per-hour or per-month basis.
- Cost-effective. With a part-time CFO, you get the strategic expertise of a full-time employee for a fraction of the cost.
- Strategic focus. Rather than getting involved in day-to-day bookkeeping, they will concentrate on high-level strategy, forecasting, and capital allocation.
- Flexible. As your business needs change, such as during a funding round or expansion, their hours can be scaled up or down.
The full-time CFO.
When your business reaches a significant scale, a full-time CFO is typically needed. For example, when you’re managing a large team, generating millions of dollars in revenue, or planning a public offering. In this stage, your financial needs are so complex and constant that an in-house financial manager is needed.
The Bottom Line
For any growing company, hiring a CFO is a crucial milestone, but it’s not the first step. To start, respect your finances. By building a solid foundation, making data-driven decisions, and understanding your company’s key metrics, you will have the opportunity to act like a financial leader long before you can afford to hire one.
Besides preparing you for future growth, this discipline gives you a deeper understanding of your business and the confidence to make informed decisions. By the time you are ready to hire a CFO, you will be a more informed and capable partner.
Image Credit: Tima Miroshnichenko; Pexels
