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As a Software as a Service (SaaS) organization, your goal is always on the future. Whether you are working to build a new application or component to your program or seeking other growth opportunities, a large part of the process focuses on financial decision-making. Consider the value of a SaaS CFO or SaaS Certified Financial Officer. Could the investment in these services help propel your company forward? Before you decide, consider a few core aspects of the SaaS CFO options.
As a SaaS business, the decisions you make on how to invest, spend, and raise money directly impact your business's longevity and financial health. The job of a SaaS CFO is to empower companies by managing all financial aspects with careful attention, including handling all financial strategy management, reporting requirements, and optimization of all levels of performance.
Consider the benefits of a CFO SaaS companies bring on board:
SaaS businesses are some of the most motivated and highly optimized organizations out there. They have ideas, goals, and huge plans. Yet, without a clear, well-paved financial plan to move forward based on actual market trends, there are risks and gaps to manage. More so, SaaS CFOs also provide business model evolution as these fast-changing organizations grow, morph, and scale. This means they always provide a forward-facing financial strategy.
These financial pros are required to oversee daily financial operations. In doing so, they ensure two things remain consistent: efficiency within operations to best utilize finances and compliance to minimize any costly penalties that could otherwise develop. With these factors consistent, they help keep the company on track for overall revenue growth.
Another core service provided is the monitoring of the business's key performance indicators (KPIs). That includes monthly recurring revenue (MRR), annual recurring revenue (ARR), and churn rate. It also includes other KPIs the CFO establishes. The SaaS CFO is tasked with managing every aspect of this process, including developing, implementing, and monitoring KPIs over the lifecycle of the business.
The subscription-based model that many SaaS businesses follow is challenging for cash flow management since payments tend to come in once or so a quarter or even annually. That challenges many organizations to meet financial needs throughout the year, but the help of a CFO can ensure fewer risks in this process.
CFOs drive profitability. They provide diversified strategies designed to propel companies forward, often working alongside leadership to achieve those goals. At the same time, they also work to balance shareholder expectations. With facts and figures and authenticity in what they offer and do, the CFO is one of the most trusted professionals in the company in the eyes of shareholders.
Pricing strategies are complex in the SaaS model, but one of the skills of a specialized SaaS CFO is to provide very specific support for creating, setting, monitoring, and adjusting pricing as needed. That includes making adjustments to meet market dynamics, customer feedback,
SaaS CFOs aid in identifying and mitigating financial risk. That includes providing insight into what's coming – changes in the economy, competitor product launches, changing dynamics in the marketplace, and customer feedback and retention insights. Once these areas of concern are identified, it is then possible for the CFO to create mitigation strategies for their elimination.
Startups within the SaaS space, as well as established organizations, always have an eye on fundraising since these are often fast-growing companies that can rapidly scale with the right resources. They provide investor relations to help build and support the company's short-term needs and long-term capital-raising goals.
Another core component of the work SaaS certified financial officers bring to the table is financial management strategies and goals. That includes full budget planning designed specifically to support the organization's growth objectives. They work to strategize to create a budget and then allocate resources to help the company remain green and growing. At the same time, they ensure that growth can be sustainable over the long term because of their careful planning and execution, taking into account new customer acquisition cost and the already existing customer base.
For SaaS CFOs, mergers and acquisitions are a core component of the landscape. Yet, not every opportunity is a good one that aligns with the organization's long-term expected growth or financial needs. The CFO's job is to crunch the numbers, evaluate the opportunities, and make key decisions that help support the organization and the owners of it. With evaluation and strategizing for M&As, these professionals are capable of helping SaaS make solid decisions.
What are the most important tasks for a SaaS CFO to manage? Here’s a brief look at what’s most important in nearly any SaaS operation:
These are just several of the many goals the CFO at a SaaS must master.
One of the core aspects that leads to success for CFOs is their ability to grow, monitor, and adjust to meet the changing climate in today’s market. Networking to keep an ear to the ground is always a valuable component of this, but it is also critical for organizations to have a way to learn from peers –
CFOs need to be in a constant learning mode. This is a fast-changing industry, and their ability to compete is dependent on the new skills and strategies they develop over time.
For this reason, most CFOs should be constantly embracing information and content from multiple layers. For example, they should seek out industry-specific CFOs who can offer insight. Listen to podcasts from speakers they enjoy. Discuss their struggles in peer groups or through networks they develop.
There are many metrics that can prove to be very valuable to SaaS CFOs, but there are three key critical factors to keep in mind. They include:
These three metrics provide clear insight into what the company’s financial metrics will ultimately reflect over time. Expect your CFO to be continuously focused in these areas.
As noted, one of the most important services CFOs provide to SaaS organizations is a way to upsell. The key is always to “get more” or continue to offer a better opportunity for existing paying customers to get them not just to renew but to spend more as they do. The job of the CFO is to create pathways for this. Always customized to the company itself, some ideas may include:
CFOs are wildly valuable to today’s SaaS organization, but there are numerous routes to take to obtain the services they offer. In short, you need to choose a CFO based on what they can offer to you in the current landscape. Consider these areas of focus:
While plenty of information is out there documenting the work and methods of achieving success as a CFO, there is, without a doubt, no better way to truly achieve success than to hire a professional to help you.
You can choose to hire an in-house professional to meet your organization’s needs on an ongoing basis. If you have the financial means to do so, that can be an exciting opportunity to build your company. Yet, fractional CFO services are also available. These allow you to tap into just the services you need, allowing you to pay just what your company can afford right now.
Once you begin looking at your options regarding who to hire, it becomes necessary to tailor your focus to what a particular person or company can offer. Some key areas to focus on may be:
The growth-critical mission every SaaS CFO must focus on is financial reporting that is specifically tailored to a company. That is, you need a professional who understands your company, your product, and your mission, not just numbers. This is ultimately going to drive success.
Organizations must tailor their CFO services to focus on these key areas, as noted previously. As you begin to consider companies or CFOs to work with, focus on how they can impact these specific areas within your organization. It can make a huge difference in your long-term outcome and success with a CFO.
Always hire a CFO or a fractional CFO based on their insights. What can they offer as insights into what your company has to offer or which growth projection you should be focusing on? Have a frank, open conversation about the optimal strategies and execution plans they can bring to the table.
We aim to always provide our clients with the most recent developments, trends, and insights in SaaS financial management. We see this as an industry that is as quickly growing as our clients’ SaaS models. Here are 3 things you need to keep in mind:
Let our team help you. Contact Propeller Industries today to learn more about how a SaaS part-time CFO can change the way your company excels in the field.
Data security and confidentiality are always potential concerns when filling a role with someone out of house. Before working with an external financial professional, ensure that they function in compliance with industry regulations. Be sure that your intellectual property (IP) is protected and employ the use of NDAs if necessary. While there should be some level of trust between you and your fractional CFO, it’s always good practice to follow standard procedure with regards to security and confidentiality.
Hiring a fractional CFO can help you grow your ecommerce business and set yourself up for long-term financial success. By opting for a fractional CFO over a traditional full-time CFO, you can gain expert financial and strategic insights without breaking the bank. The professionals at Propeller Industries are here to provide your ecommerce business with the financial modeling and guidance it needs for substantial growth and serious financial gains. Help us help you propel your ecommerce business towards success. Contact us today to learn more about our ecommerce CFO services.
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