Can’t afford a full-time Chief Financial Officer? A part-time CFO may be the answer.

By Greg Williams and Craig Feronti

It’s a dilemma nearly every restaurant company faces as it develops from an idea into an expanding chain: When should we hire a full-time Chief Financial Officer (CFO)? The simple answer: when the benefits outweigh the costs. What isn’t so simple is determining when that is. While it’s easy enough to ascertain the compensation costs of hiring a seasoned CFO, the benefits of adding one to your management team may not be so readily apparent.

What are the benefits of having a CFO?

For starters, these benefits include executive leadership and the ability to provide financial strategy and insight into all major decisions—including those on the company’s rate of growth, the financial viability of prospective locations, and the appropriate form of financing. Your CFO’s expertise can also guide decisions on corporate infrastructure, types of benefit and incentive plans, terms of purchase agreements, and selection of an integrated point-of-sale equipment and software system.

Perhaps just as importantly, the CFO is the architect who financially maps your company’s future through use of various financial planning tools. This starts with short-to intermediate-term cash-flow projections and is followed by detailed operating and capital budgets for both the corporate office and
individual store locations. It ultimately leads to longer-range strategic planning and the development of a business risk model for the entire enterprise.

Finally, a good CFO also provides oversight or, in smaller companies, execution of all controllership functions. This includes the timely and accurate production of all financial and operational reporting, oversight of all human resource compliance issues, and compliance with and filings for all federal
and state taxes. In addition, your CFO is responsible for timely payroll payment, setting risk management limits, defining and monitoring internal controls, cash flow management, and rigorous monitoring of all cost areas.

What are alternatives to having a full-time CFO?

While it seems clear that every company would benefit from these advantages, the compensation cost for a CFO remains a major consideration—especially for new or small restaurant companies. With average CFO salaries running into the six figure range, plus bonus and equity, companies that need such leadership for many of their important early decisions are the ones least likely to be able to afford them.

In response to this need for services that go beyond those of the local CPA or contract consultants, a number of firms have begun offering part-time CFO services. This enables companies that can’t afford or don’t yet need a full-time CFO to reap the advantages of hands-on financial leadership without incurring the cost of hiring a full-time CFO.

How does a part-time CFO work?

Unlike interim solutions provided by many accounting contract service providers, a part- time CFO works as an employee of your company a designated number of days per week or month. For example, in early-stage restaurant companies, a half-day to one day a week is often sufficient to
establish a solid foundation from which the company can grow. As new units are added and the demands grow, the number of days can increase.

As an employee of your company, a part-time CFO has much the same authority as a full-time employee, with the main difference being the amount of time physically spent in your office.

What are the benefits?

The primary benefits are flexibility and cost. By using a scaled approach, many companies can economically gain access to a financial skill set that was previously out of reach. They can adjust the amount of time needed for a part- time CFO to fit their current needs, thus enabling them to pay only
for productive time spent at their company.

Furthermore, they can avoid hiring costs or other hidden costs such as equity or other long-term incentives. According to a 2000 HCE Hospitality Compensation Exchange survey by HVS Executive Search, the median CFO salary and bonus for restaurant companies with revenues under $50 million is $137,240 per year. On top of that may be recruiting costs of 20% to 30% of the first year salary, relocation costs, and incentive stock options.

In view of those costs, a part-time CFO—even at four days per week—is often more affordable than a full-time hire.

Who should consider a part-time CFO?

According to David Mansbach, Vice President of HVS Executive Search, “The true leaders in the industry understand that the first issue is to have a strong finance function, which should be added upfront. Restaurateurs often underestimate the importance of bringing in someone with solid financial experience in the early stages, and this can lead to much larger problems later.”

There are a number of scenarios where hiring a part-time CFO makes good sense. Probably the best candidates are concepts that expect to grow relatively quickly, have sophisticated equity partners, or anticipate using debt financing in the future.

If your company doesn’t fit into the above examples, you can still benefit from some type of CFO oversight, even if it is limited to a monthly or quarterly review of financial statements and operating reports. A seasoned CFO can quickly spot balance sheet problems and cost areas that are out of line and provide immediate solutions.

In short, regular financial checkups through the services of a part-time CFO protect your business the way regular medical checkups protect your health. By practicing good preventive maintenance, you can spot and correct problems early, when they’re easiest to correct, or avoid them entirely.