Cant afford a full-time Chief Financial Officer?
A part-time CFO may be the answer.
By Greg Williams and Craig Feronti
Its 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 isnt so simple is determining when that is. While
its 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 decisionsincluding
those on the companys rate of growth, the financial viability of
prospective locations, and the appropriate form of financing. Your CFOs
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 companys 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 considerationespecially
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 cant afford or dont
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
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 CFOeven at four days per weekis
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
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 doesnt 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 theyre easiest to correct, or avoid them entirely.