When and why hiring a financial director makes sense

When do business owners need to hire a financial director? Contrary to a popular misconception, financial directors are not simply glorified accountants. They offer much more than just holding the company purse strings. If you want to grow your business faster, they can mean the difference between success and failure. Here is why.

As any business owner can tell you, the early days of nurturing a business into viability requires two core ingredients: relentless hard work and unwavering determination. At Growth Street all the businesses we are involved with, regardless of size and success, encompass these ingredients. What happens when it’s time for that next step? It is a serious question: the skills needed to get an early stage company off the ground are not necessarily the ones you will need to grow your business faster. Many enterprises that have survived the fledgling stage fail to get to the point where they are beginning to grow healthily.

This is where life can get impossibly complicated for the entrepreneur who has, so far, run the whole show. That adrenalin-propelled, tireless skillset that got you to this point has limits. Knowing your limitations is part of entrepreneurial intelligence, not a failure or a weakness. Recognising when you have reached the point where your company is too big for you to handle everything on your own is crucial to its ongoing survival and success. Scaling up and managing a bigger company requires additional tools beyond knowledge of particular products and services, and a financial director can provide them. For a growing business, financial strategy is key.

Let us tackle one obstacle right away. Many small business owners who are planning growth find themselves recoiling from the expense of appointing a full-time Financial Director; many directors can, after all, command full-time salaries of between £80,000 and £120,000, and that is before additional benefits are thrown in. However, it is not necessary to appoint a full-time financial director. A new pay-as-you-go/consultancy model is becoming increasingly popular among small enterprises who wish to navigate a growth transition, which allows you to get the expertise to manage it, without the expense of a full-time appointment. Financial management professionals can be found via platforms like the FD Centre, FD Recruit and Your Right Hand. (We also, of course, recommend our very own part-time CFO Ciaran 'The Virtual FD' O'Donnell).

Once the business has grown successfully, such an appointment may become not only necessary but, more importantly, affordable. While making the transition, part-time access to a seasoned financial director will cost a fraction of that full-time salary. More financial directors than ever before are working part-time for several companies these days, and if you can find one who has experience in helping SMEs as well as larger firms, so much the better. The reason we are championing this kind of key hire among growing and recently established businesses, apart from the obvious value creation, is because we think financial management lies at the heart of any good growing business, and also simply because we have part time FD ourselves at Growth Street.

A financial director will ensure that your projected growth strategy is compatible with your company finances and your debt needs (for example through business overdraft). On occasions, the advice may be difficult to hear, but potential flaws are best addressed before implementing a strategy with holes in it, and a financial director will help you restructure to make a watertight growth strategy.

Financial directors are masters of strategy, whether you are planning to invest in acquiring new assets, expanding into a new market, expanding your presence in an existing market, planning a shift in supplies or inventory strategy. To grow your business better, accessing the talents of a seasoned financial director should be on your “must have” list, not the one marked “wouldn’t it be nice.”

Written on in Business Insights