Dear SaaStr: When Should I Hire a CFO?

Dear SaaStr: When Should I Hire a CFO?

Most startups just wait way too long to get finance right:

• They wait too long to get collections right, and have to write off a lot of bookings.
• They wait too long to get ARR measured right, and have to restate revenue.
• They wait too long to measure churn properly, and measure it wrong.
• Etc. etc.

So what are some rough rules?  This is probably close enough:

• At $2m ARR, you start to get too many things wrong for it to be 100% outsourced.  Most outsourced finance resources aren’t great at collections, and aren’t perfect at SaaS revenue recognition.  Hiring a real controller / seasoned “finance person” here at least a part-time one will often pay for itself, especially on collections.
• At $20m in VC money raised — irrespective of ARR — the excuses sort of end for the metrics being wrong.  You need someone experienced to own this all full-time.  Ideally earlier, but at least by then.  If the VCs have invested this much, the metrics and numbers need to be at least 98% correct.  Not just what some outsourced resource that doesn’t really know your business says they are.
• At $20m in ARR, it’s not too early for a CFO or more practically at least a real VP of Finance.  That when you start to put all the systems and processes in place you need to scale to $40m, $80m, and more ARR.   Yes, maybe a CFO you hire at this stage won’t be the CFO that takes you public. But that’s OK.  A VP of Finance might be better, someone with deep experience but perhaps that full CFO package.  That’s OK.  The IPO here is still a ways off.

A related deep dive here: