What tech founders should ask their CFO

November 19, 2019

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Curiosity: it is the trait that fuels success for so many tech founders. Asking questions – the what, why, and how - pushes entrepreneurs to innovate and ultimately grow their business. Yet how can tech entrepreneurs channel that curiosity when communicating with their chief financial officer (CFO)? What questions should they ask the CFO of their company? And what answers should they expect?

Even before asking questions of their CFO, founders can take two steps to make the conversation a success. First, they should ensure they retain a high-calibre CFO, preferably one who commands the complexities of the tech industry. In fact, this consideration is one reason why tech founders outsource their CFO services. Second, founders need to understand the ways a CFO adds value to their business – from raising capital to day-to-day cash management.

Once they have retained a CFO and understood how they can help the business grow, tech founders are equipped to make the most of their conversation. Whether talking to an in-house employee or chatting with an external CFO, they should ask these five questions.

5 questions to ask your CFO

1. Which key performance indicators should I measure on a monthly basis?

Tracking your performance helps you take steps to improve, and founders can choose from a slew of KPIs when assessing their progress. Common ones include revenue; earnings before interest, tax, depreciation, and amortization (EBITDA); net income; and cash. But make sure to request other KPIs that are specific to your business – such as utilization and customer acquisition costs.

2. Where will I be financially in one year, three years and five years?   

If the business won’t improve its revenues and net income using its current strategies, you may need to adjust those strategies. Track key milestones and timelines to reassess your plan continuously. Take the opportunity to uncover the assumptions that guide your plans. Are they realistic?

3. Is it time to sell my business?

Almost every tech founder confronts the question of when to exit, and your CFO can help you hone the timeline. The CFO should tailor their advice by viewing the entire picture, not just the financial statements.

In general, here are some key signs that you should consider an exit: 

  • The business requires a level of investment that you are unwilling to pursue.
  • The business is stagnant or is declining and requires new products, new markets, or an acquisition to take the business to the next level.
  • You want to move on to new challenges.

4. Is my business taking on too much risk? 

All businesses take on risk to grow, but a CFO helps you understand your level of risk. From investing in new product development to moving into new markets to making acquisitions to a changing economy – you need to ask whether the company’s risk profile aligns with its expected outcomes. If the risk threatens the company, the leadership team needs to iterate on its strategy before that risk overtakes financial reality.

5. How can I obtain more money to run the business?

Increasing the cash available is not the same as increasing topline revenues. Your CFO may also recommend better balance sheet management to generate more cash for the business. And they also might help you choose the best way to finance the business going forward, such as loans from chartered banks, venture debt, equity, government grants, and other loans.

BDO’s CFO Services team can help your tech business in all matters financial – from raising capital to back-office financial support. Find out how BDO’s CFO Services team can help your tech business grow