Start ups are a different breed of companies wherein the requirements and demands on the skill sets are of different nature. The start up business environment is far more dynamic and volatile. In conventional and traditional companies, CFO keeps a track of financial health of the company, he is a facilitator of the growth and plays a role of compliance officer for the company. His portfolio is quite extensive, large and complex. His expertise dwells over the cross country transactions and regulatory affairs.
However in a start up environment he plays quite a different role than a CFO and he is a equal partner with entrepreneur. CFO contributes a major part in creating a successful start up. Following are the key areas where an CFO plays a role which is crossing boundaries of his conventional role.
He has to become a entrepreneur himself –
A start up business is made of people irrespective of the idea and concept. Its people who create, run, execute and achieve the goals. Many of the conventional functions of the CFO take a back seat in the start up environment since they are not required early on. Every penny in the business is 90% from equity and which is far more costlier than debt. He has to play a crucial role in deploying and spending the equity money which becomes productive from day one or sure a winner in the long run.
He has to play a role of devil’s advocate –
CFO has to play a role of devil’s advocate by most of the time challenging every idea, method, process, market, new entry , marketing strategy, hiring etc. It may sound irritating at times of the constant negative questioning but that helps to open up the mind of other partners / Founders and inculcate the habit of asking questions all the time. He has to challenge the theories and rational behind every decision since most of them are not proven theories or methods and they are newly created start up ideas. However he has to keep a balance in such a manner that he does not kill the positive idea and still push for the better evaluated model or idea.
He has to change his mind set from being a cash protector to value creator. –
In a start up CFO has a shoe string budget and he should be capable enough to imagine and visualize the far reaching effects of his positive and negative decisions and its impact on the business. He has to constantly visualize the impact on the business prospects. Mark my words as “ business prospects “ . Its not what has gone by but what is coming and will be coming. He needs to be experienced enough to channelize the cash to most productive idea. However there won’t be any precedence available to base the decision and it would be on his own gut feeling and rational he sees along with the entrepreneur.
Service industry start up is always a challenge for a CFO –
In a start up world most of the services are based heavily on technology. Start up product services are always based on the out of box ideas with no parallel around. For a CFO the complete revenue chain ls left to the visualization and perception of the entrepreneur and his team. In such a situation CFO has to take most pragmatic approach to understand the basics of the technology himself by spending good amount of time and understanding the consumer cycle behind it. Only such in depth understanding will help a CFO to grasp the product and service and take decisions.
Start up CFO has to be a friendly guy with suppliers / vendors and stake holders in the value chain. –
Start up CFO is always pitched against all odds from within as well as from outside. CFO can always become a hard nut but it hardly pays in a start up environment. He has to keep mending his conventional norms and rules of the financial rule book and become a accommodating CFO. It is a very tough balancing act since losing cash or losing customer becomes a million dollar question. Entrepreneur never likes to lose the customer even if it goes beyond the financial norms and CFO has to find a mid way to handle the situation.
All this necessitates the few basic qualities a CFO should have within to become a successful entrepreneur CFO.
- He has to be passionate about the business, needs a liking and appetite to understand the technology by getting his hands dirty.
- He has to be a avid traveler which will help him to interact with customers, market, vendors, ground team and help him to deepen his understanding. This helps immensely while taking decisions.
- He needs to wear a marketing manager’s hat and experience one full cycle of selling the product. This helps in clearing the vision and broaden the perspective of the CFO.
It always help to get an experienced and senior CFO on board whether as full time or as a advisor early on for the success of a start up.