Looking for an Outsourced CFO?: Here's Three Characters You Should Know

By David Worrell, Partner & CFO, Fuse Financial Partners

David Worrell, Partner & CFO, Fuse Financial Partners

Running a company without a CFO is tough—but hiring one can be even tougher. No other role will be so crucial to your success, so getting the right chemistry, skill set, experience and personality is vital. It’s no wonder that more and more business owners are turning to outsourcing for the CFO role and even the entire finance department function.

"Before deciding among the variety of Outsourced CFOs out there, think broadly about your needs"

But not all Outsourced CFO providers are the same. Let’s take a look at the three most common CFOs and the ways they work with—and within—a business.

THE COWBOY

The Cowboy CFO is an independent consultant— typically with a deep background in accounting or banking. They work at your location and are looking to develop three to five clients who they can visit once a week.

The Cowboy is loyal and hard-working. He’s at his best when the company has already identified a specific problem that matches his expertise. Need better accounting procedures? Great! An ex-Accenture CPA can meet with you once a week and re-design the finance department from the ground up.

On the other hand, Cowboys rarely have many tools in their kit. They travel light, counting on the business owner to identify specific problems and point them in the right direction. Like an employee, they’ll take on any task you give them, but may spend a lot of time figuring it out. And since the Cowboy is relying on just a few customers to support himself, he may be among the more expensive CFO solutions.

•BEST FOR: Autocratic leaders looking for a quick fix to a specific problem.

•DOWN SIDE: Cowboys may have limited personal networks, few tools to give direction to the business owner, a high bill-rate and a limited amount of time each week.

THE RAIN MAKERS

As long as there have been consultants, there have been rain-makers. These are the folks that know everyone in town and are good at closing a sale. When they get into the Outsourced CFO business, a Rain Maker quickly sells more business than she can handle. The Rain Maker is forced to build a bench of finance consultants and pretty soon looks more like a staffing agency than anything else.

Hiring a CFO from a Rain Maker means you’ll be assigned someone who may or may not have the specific experience you need. In many cases, the Rain Maker does little to screen the staff she sends out—and even less to support them.

Of course, if the CFO who shows up at your office is not up to your standards, the Rain Maker will gladly replace them—as many times as you need.

Likewise, since the CFOs themselves are between full-time gigs, don’t count on any one person for the long term. Many are contract (1099) employees with little loyalty to the Rain Maker—or to you.

• BEST FOR: Rain Makers often have deep wells of resumes and can provide lower-cost, part-time employees as well as your choice of several CFOs. If you need a few people in a hurry—or for a short period—a Rain Maker may be the right choice.

• DOWN SIDE: Outsourcing finance functions to a Rain Maker can set up a dangerous lack of accountability: when staff turns over, you may lose momentum and continuity—two things that are vital to the finance function.

THE SWAT TEAM

Once in a while, a group of Outsourced CFOs come together and find enough critical mass to become a team. They may have been Cowboys or Rain Makers in the past, but have found that there is value in sharing work among committed teammates who have varied and complimentary skills.

The Swat Team has enough fire power to dive into a difficult situation— and the variety of skills needed to find the best solution. The Swat Team believes that the CFO’s role is most valuable and most effective when it can touch accounting, banking, human resources, contracts, information technology, and overall business strategy.

• BEST FOR: Long-term relationships are the bread and butter of a Swat Team because the team can apply a changing mix of skills as the needs of the client changes. Many Swat Teams also take on complex problems, like turnarounds, bankruptcies, and M&A assignments.

• DOWN SIDE: Swat Teams are not for everyone. If your day-to-day needs are small, or your commitment to financial discipline is waning, then a high-powered Swat Team may not be for you.

CHOOSING A PARTNER

Before deciding among the variety of Outsourced CFOs out there, think broadly about your needs. Define the broadest possible role for your next CFO and consider what value they could bring to various aspects of the company, including accounting, IT, HR, and Operations.

Take the selection process as seriously as you would any other. Interview several candidates and compare their skills to your needs. Evaluate their personal networks and ability to grow your business in new directions. Ask tough questions about accounting, finance, and strategy. Listen for the most thoughtful answers–because the CFO role is best served by a truly thoughtful person.

And don’t discount chemistry. If you can find real skills along with mutual respect and personal chemistry—whether it is with a Cowboy, a Rain Maker, or a Swat Team—that’s a good indicator of your future success.