Building a Startup Finance Team? Here Are Four Things You Need to Know
One of the key areas to consider when operating your startup is your finance group. Building a team from scratch can be challenging, so here are four tips to get you started and to help you avoid costly mistakes down the road.
1. When should I add finance staff?
Survivalists will tell you if you wait to drink until you are thirsty you are already dehydrated. It’s better to hire too soon, than too late. Conserving cash in a startup sometimes means restraining your hiring and asking employees to wear many hats, but falling behind in your accounting function can create serious problems. The last thing you want is for your payables to get behind and have your suppliers wondering if you are a viable business. Nor should you wait to balance your bank accounts until you have some free time, only to realize suddenly they haven’t been done in a year. Don’t let thriftiness get in the way of what you should really be doing. Having an effective finance team from the start can pay off in the short and long run.
2. What critical positions should I fill?
Early on, everything in your startup is critical. But, remember, try to act like the company you want to be, not the company you are. If forward-thinking and strategy are goals, look for a financial analyst. If you or someone on your team will be handling those tasks, hire someone to manage the payables and receivables.
The natural flow of a startup is often to hire a CFO first. The CFO will handle the day-to-day accounting until the business volume picks up. Either a bookkeeper or an A/P or A/R candidate is next. Then you begin to fill out the middle with an accounting manager or controller and then a staff accountant. Our advice: over hire. You don’t need a controller to do accounts payable, but a good idea is to hire a staff accountant who can do the payables and more as you grow.
3. Is previous startup experience necessary?
This can be interpreted as code for, “Can this person work long hours, juggle dozens of tasks and head in many different directions at once?” Those kinds of demands exist in companies of all sizes, not just startups. Candidates from smaller companies, however, tend to multi-task more, so that background might be more desirable for a growing organization. Previous experience with a startup can help, but having the right skills and a can-do attitude is most important.
4. Should you bring on contract or permanent staff?
The answer is “yes.” As you grow you should take advantage of both permanent and contract resources. Many times the market you’re in will provide the answer. If it’s a candidates’ market and you’re competing with well-funded, established companies, you may not win the best talent as often as you would like on a permanent basis. If that is the case, you should turn to the contract market to get the best combination of skills and experience available. You can then evaluate them to see if they will be a fit for the firm, or use their services while you continue your search.
Startups can learn from Fortune 500 companies and take advantage of staffing on-demand with contract labor to scale your finance team. Every startup will have a five-year plan but will struggle to predict beyond five months. Today’s requirements will likely be different in six months to a year. Hire for your immediate needs while you decide what you should have for permanent staffing. Using contract labor is a good way to test candidates to determine if they might be a long-term fit.
Knowing when and how to staff your finance team can be a critical factor in the success of your startup.
[Looking for Millenialls for your startup? Check out this blog from MSCPA to find out how to atract them.]