Back to Opinion

Beyond Finance. The value of a Finance Director

Charlie Ruck, CFO Practice, Dartmouth Partners

The role of finance is ever-changing. Understanding the value that a high-quality Finance Director can have on your business can be critical to realising it’s potential.

Alongside this, identifying the skills ‘gaps’ in your leadership team that your FD can fill is key to ensuring that the hire is both a successful, and lasting one. These ‘gaps’ are not always those that you might expect, such as fundraising, M&A and investor relations, but instead those not traditionally associated with finance, such as sales, negotiation, operations and human resources.

In considering the right type of Finance Director to hire, I recommend first considering these three questions:

  • How is my leadership team currently structured?
  • Which cognitive traits are there across the leadership team?
  • What other areas of the business could a finance professional add value?

How is my leadership team currently structured?

As is ubiquitous across young, fast-paced businesses, the leadership team is stretched and wearing a multitude of ‘hats’. As these teams grow, individuals can wear fewer ‘hats’ and can dedicate more of their time and effort to particular areas of importance. Every business approaches this differently and requires a different allocation of resources.

In the context of finance leadership, areas in which finance professionals can excel beyond the more obvious finance responsibilities include operations, investor relations, HR, strategy, legal and compliance. Therefore, when selecting an FD it is important to consider the areas of your business that would benefit from an experienced hand, particularly when cash is tight and the budget does not yet permit specialists across all areas.

To put this into context, I recently led an FD search for a Series A stage e-commerce business, where the two co-founders had backgrounds in sales and marketing. With recent investment of £3m, they needed a finance leader to enable them to optimise their spending and build their processes for scale. When we discussed the specification, it was clear that one of the founders was over-stretched in dealing with suppliers and distribution. As a result, we focused the search on finance professionals with strong operational experience in supplier management, enabling the founder hand over and focus on business growth.

Thinking through the current roles played across your team when scoping the FD role can result in significant value-add that you might not have originally expected.

Which cognitive traits are there across the leadership team?

Cognitive diversity is extremely important across leadership teams, arguably even more so in start-ups as it can have a profound impact on the foundations on which a business is built. It is important that leaders contribute different opinions and are able to challenge one another in decision making.

Coming back to the e-commerce business, we spent time understanding them as leaders and decision makers. The founders categorised themselves as creative, with lots of ideas, energy and enthusiasm, while the CTO was highly analytical with a keen eye for detail and a mentor-like leadership style. Based on this discussion it was agreed that the FD should apply a commercial approach, be able to challenge decision making, and help the team to focus on ideas with a high probability of success.

What other areas of the business could a finance professional add value?

Areas in which a senior finance executive can add additional value are arguably limitless, as these depend on the individual; however, there are some notable trends in the start-up market.

Customer and supplier contracts are one such area, where an FD can bring significant experience of negotiation, coupled with commercial awareness. This is particularly apparent in SaaS businesses looking to offer products across a global client base, where country-specific legal and tax implications must be taken into account. A finance professional with strong negotiation skills and legal experience can add huge value in this circumstance.

Other common areas are compliance and human resources. When early-stage businesses are looking to disrupt large, established and often regulated markets, a good handle on compliance matters is essential. Ensuring that the business has everything in place to manage its people and provide a thriving work environment is also important, and hence HR responsibilities are a common area of focus, particularly before a business is sizeable enough to hire a dedicated HR professional.

These areas vary across all businesses, so we recommend considering those that are most applicable to your own and overlaying some of the professionals skills that an FD could bring.

With finance often being one of the first leadership hires that a business makes outside of the founding team, it is essential that someone stepping into the role brings a breadth of experience and skills, and a willingness to embrace anything and everything that might come their way, as is the nature of dynamic scaling businesses.

About the author

Charlie Ruck leads the Start-up and Venture Capital Finance practice at Dartmouth Partners, a leading recruitment consultancy with specialisms in finance and private equity. Charlie works with CEOs, Founders, Investors and CFOs of start-ups, scale-ups and VC funds on their hiring strategies.

Copyright Capitalex Limited 2024, a limited company registered in England and Wales No. 08990469. All rights reserved.
Capitalex does not provide legal, financial or tax advice of any kind. If you have any questions with respect to legal, financial or tax matters relevant to your interactions with Capitalex, you should consult a professional adviser. Capitalex does not make investment recommendations to you. No communications from Capitalex, through this website or any other medium, should be construed as an investment recommendation. Further, nothing on this website shall be considered an offer to sell, or a solicitation of an offer to buy, any security to any person.