Startups: When Should You Hire A CFO?

Many early- and growth-stage founders are hesitant to hire a CFO. It makes sense: You’ve got spreadsheets; you’re tracking your pipeline; your projections are still tenuous—and, honestly, hiring a CFO (probably your first non-founder exec) feels like a huge, non-revenue-generating expense.

But sometimes a CFO can make all the difference. A great one will not only keep your books clean but they’ll also provide valuable strategic advice, help align your expenditures with your goals, stretch your runway and know the key performance indicators (KPIs) your next investors need to see. And that can be the key to a successful raise.

So, how do you know when it’s time? What makes a good CFO, and how do you even find one? When is fractional enough, and when do you need someone in the seat full time? Let’s break it down.

Who needs a CFO early, and who doesn’t?

Here’s what to ask yourself: Does someone on your founding team (or close circle) have solid finance experience? If the answer is yes—and if your financial model is relatively simple—you’re probably fine for now. Say you’re a software-as-a-service (SaaS) company with a straightforward business model and not much revenue, for instance. If you’re hitting your budget targets, let it slide for a while.

Whether you’re building hardware or you’ve got a long cycle from research and development (R&D) to revenue, it’s a whole different situation. You’ll likely need help balancing capital expenditure (CapEx) and operating expense (OpEx), structuring contracts and negotiating with suppliers. And if you're in a regulated space—think pharma or med devices—it’s even more important.

Hiring a CFO early also might make sense if you have complex contracts, financial models or sales commissions—or if you simply keep missing your numbers. If you feel like investors or partners are raising eyebrows around your financials, that’s your signal: time to bring someone in.

When is the right time to hire a CFO?

Regardless of industry or business model, there are a couple more benchmarks to pay attention to. A big one? You’re gearing up for a Series B. At that stage, your investors will expect more polish and rigor. They’ll want to know that your metrics are accurate. That your capital is being allocated wisely. And if you've already raised a B round—especially if it's over $15 million—you're late. Put this on the front burner.

Another sign you’re ready for a CFO: profitability. If you're paying taxes, it’s probably time for a CFO.

When is a fractional CFO enough?

Let’s say you’re somewhere in between these two scenarios—your business is straightforward. You’re not in a crisis. But you don’t have financial expertise at your company. You need help keeping the numbers clean and building a model. In this case, a fractional CFO might be perfect.

That said, know what you’re getting. Most fractional CFOs won’t be there for board meetings. They won’t negotiate your lease. They probably won’t lead your fundraising or merger and acquisition (M&A). Some will help behind the scenes with the deck, but don’t expect them to sit next to you in the room. Set expectations clearly, from both sides. And revisit often.

What should you look for in a CFO (and how can you find a good one)?

When you need more than a fractional CFO, how do you find the right one? This part might feel daunting. A simple place to start is to identify someone whose experience aligns with your goals. Let’s say your next milestone is going from $3 million to $10 million in annual recurring revenue (ARR). Has your CFO done that? Have they built the systems to support that scale? Every development stage requires a different skill set. You want someone who knows how to get where you’re going, not just someone who’s been where you already are.

It’s also important that their mindset and risk tolerance be compatible with your growth stage. The best startup CFOs are collaborative by nature. They can deliver a hard message when necessary, but they are not roadblocks.

So where do you find that CFO? Start with your investors and close advisors. They know your business and your style. They might know someone fit for the job—and also a fit for you personally.

What can a CFO do for an early- or growth-stage startup?

Let’s start with the obvious—they can save you money. I’ve seen a CFO save a startup more than their annual salary by simply renegotiating a lease. Scoring wins like this early on helps earn the CFO’s trust with management and the board. And that pays dividends when it’s time to make harder calls.

As another example, CFOs can realign sales compensation plans. If your sales team is not driving the results you want, an experienced CFO can rework your incentive structure. I’ve seen CFOs make a dramatic impact on sales efficiency metrics this way, helping achieve financial targets.

Finally, in tough times, the steady hand of a good CFO is priceless. Imagine you’re on the rocks—high cash burn, missing projections and with less than a year of runway remaining. With the right cost-cutting plan, a CFO can buy more time to weather a tough environment or to close more customer contracts. They can help decide which costs to cut while preserving growth opportunities or new product launches. I’ve seen CFOs help companies make significant pivots—allowing them enough time to fix the product, grow revenue, reignite investor confidence and ultimately land a strong financing round.

You can’t live by spreadsheets forever. But that doesn’t necessarily mean you need a full-time CFO today. Talk to your inner circle and decide when you should really take the plunge and how much autonomy you are willing to offer a CFO, not just now but six to 12 months from now. When will it feel like the right moment to let someone help you make some of the most strategic decisions for your company? When that moment comes, you’ll be glad you thought it through.

A version of this article originally appeared on Forbes