CFOs are in high demand in the tech sector today. And there are a number of reasons why Chief Financial Officers are in even higher demand than various IT experts and CEOs. Let’s address the factors driving demand for Chief Financial Officers at all levels of the tech sector, whether it is a startup or established firm.
Save Our Startup
There have now been a number of studies on what is most likely to stunt a startup’s growth. And cash crunches sit at the top of most of those lists. Many startups fail to manage cash-flow, burning cash early on unnecessary expenses, adding headcount they don’t really need or failing to negotiate contracts to get the best deal.
Others fail to consider how they’ll monetize an idea. They may choose a business model that cannot raise cash fast enough to keep the startup in business or they may not know how to raise capital through various methods. This had led to many startups hiring chief financial officers early in their life to improve the odds they’ll stay in business.
Take Us to the Big Time
A major reason why CFOs are the hottest hire in Silicon Valley is the recognition that a financial expert at the helm like this is necessary to prepare a company for an IPO and guide it through the process of going public. A CFO is perfect for forcing a company to get its books in order and start planning for the future long before a liquidity event.
Tax Planning and Accounting
One reason to bring in a Chief Financial Officer is to raise accounting and functions like tax planning to the same level of importance as product development. When the company executives are discussing ways to spend or invest a financial windfall, the CFO is able to discuss the ideal uses for the cash, from bolstering the pension plan to paying out bonuses. This is likely why Google’s hiring of Ruth Porat as CFO caused its earnings to skyrocket and a related 14% jump in Alphabet’s stock price.
Save Our Floundering Big Business
There are times when a CFO is needed to stabilize and revitalize a floundering big business. According to an article on Trinity News, Twitter brought in former Goldman Sachs banker Ned Segal as CFO. It is claimed they brought him in to get it out of its current financial slump because the CFO was able to revive the company’s financial health a few years ago, bringing it back to profitability.
Studies by Accenture and Ernst & Young show that CEOs and corporate boards intentionally seek out Chief Financial Officers to manage business transformations, whether it is a hardware company shifting to computing services or brick and mortar business turning into an e-commerce site. In fact, digital transformation was ranked the top concern of CFOs surveyed, coming in at 74%.
Conclusion
Businesses from startups to household names see the literal financial payoff of having a CFO at the helm. They’re also seeking CFOs to transform businesses and prepare them for going public, causing companies from small startups to Fortune 500 firms to compete for top talent.