Becoming the CFO of a small- to mid-sized enterprise (SME) is, in my opinion, one of the most exciting roles available to a finance professional. Transitioning to small business, moreover, is a rite of passage for many accounting and finance executives.
I became CFO of a privately-owned small business after starting my career with PwC in Philadelphia followed by many years at Campbell Soup Company. Maybe you started your career at a large public accounting firm too. Or maybe you started at a major consulting firm, financial institution, or Fortune 500 company. Or maybe you have been working in small business your entire career.
Regardless of where we start our careers, finding our way into small business is often part of the natural progression. Consider that, according to the U.S. Small Business Administration Office of Advocacy’s 2023 Small Business Profiles for the States, Territories, and Nation, 99.9% of U.S. businesses are classified as small (where “small” is defined as having fewer than 500 employees) and 45.9% of the U.S. workforce is employed by small business. By default, most CFO opportunities are small business ones.
Making the Switch
After “growing up” at a large company, being named CFO for a small business and transitioning into the new role will be quite an adventure. You are unlikely to find layers of management and excess talent. On the contrary, you will probably inherit a small team with an overabundance of responsibility. The team may be feeling a bit overwhelmed, especially if the CFO seat has been open for a long time. The team may or may not have the experience and qualifications you previously took for granted.
You must be willing to roll up your sleeves on day one. Suddenly, you are personally calling customers about past due receivables, signing vendor checks, approving journal entries during the close, and performing other tasks that you previously delegated. At the same time, your CEO and other cross-functional partners will have high expectations, engaging you in strategic planning and major initiatives from the start. The silver lining is your ability to quickly put your finger on the pulse of the business.
Improving the Odds of Success
1. Pre-Hire Due Diligence. Before accepting such a role, learn everything you can about the company, including its leadership, culture, products, customers, competition, and financial performance. Ask about the CEO’s and the board’s vision, strategic goals, and key concerns. Ensure you understand their expectations of you, and that your skills, experiences, and temperament are aligned with those expectations. Public information is likely sparse, so you will need to rely heavily on the CEO and their team to provide insights. If needed, offer to sign a confidentiality agreement. Be inquisitive, observant, and connect the dots. In short, accept the offer with eyes wide open.
2. Onboarding Plan. Collaborate with the CEO and board to develop an onboarding plan that clarifies expectations of you for the first 30, 60, and 90 days, as well as the first year overall. Prioritize getting to know your cross-functional partners and their areas of responsibility, including their objectives and pain points, and how your team can support them. Gain clarity regarding the company’s strategies, organizational structure, product offering, key initiatives, and the industry overall. Request introductions to the company’s CPA partner, legal counsel, banking partners, top customers, and key service providers. In general, your goal is to become a resident expert of the business.
3. Relationships. Building effective working relationships is critical to your success. Proactively get to know the CEO, including their background, leadership style, priorities, and, generally, what makes them tick. Also invest in building relationships with board members, cross-functional partners, and, importantly, your direct reports and their teams. Understand each team member’s goals and desires, strengths and weaknesses, key responsibilities, and areas of concern. That said, relationships must be two-way, so share insights regarding your background, values, leadership style, and expectations of the team. Relationship-building is especially critical if a member of your team was vying for your role and is disappointed because they were passed over.
4. Current State of Affairs. During the interview process, you hopefully obtained a meaningful glimpse of how the company is doing. Once you are in the door, though, you need to quickly assess the reality, the good, the bad, and the ugly. Deeply review the financial reporting to understand the organization’s recent financial performance, cash position, and trends. Assess talent, culture, customer relations, supply chain, and other key aspects of the business. Trust, but verify!
5. Business Stabilization. As you assess the current state of affairs, you may realize that, like many small business CFOs, you have been hired into an organization facing strong headwinds, even crisis. Stay calm, not over- or under-reacting, but quickly formulate action plans to stabilize the business. Cash is the lifeblood of your company, so diligently monitor and tightly manage it. Understand your financial position, running various what-if scenarios. Strengthen the supply chain. Negotiate reasonable payment terms with customers and vendors alike. Make cuts if necessary. Then, once you have addressed the immediate crisis, partner with your CEO to revisit long-term strategies, identifying new growth opportunities.
6. Post-Onboarding Plan. Ninety days, even a year, can go by in a flash. Assuming you prioritized building relationships, assessing the current situation, getting to know the business, and stabilizing it as needed during the onboarding phase, you will have established your credibility. Now its time to collaborate with your CEO, board, and other cross-functional partners to align on longer-term strategies and objectives that are focused on creating sustainable economic value.