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 here will often pay for itself, especially on collections.
  • At $20m in VC money raised, 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.
  • At $20m in ARR, it’s not too early for a CFO.  That starts 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.  That’s a ways off.

A related deep dive here:

The Top 10 Important Finance Mistakes First Time Founders Make

 

Published on April 14, 2022

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