Why CFOs are ideal as Startup Mentors!Shuchita Gupta
Startups are about Innovation &; Scalability: Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth &; employment (as defined by Start-up India)
Businesses starting up with great ideas, businesses starting up with a motive to make a difference, businesses starting up to make it big in the industry within few years. Each day we witness many such start-ups being created. But along with the creation, we witness so many other start-ups shutting down. The reason could vary from “not having a strong idea” to “poor execution” to “not living up to the name”. But a strong factor that leads to close downs is – running out of funds or exhausting the funds received/not able to raise next round of funding. More than acquiring fund, managing funds well has the potential to make or break a startup – equally important. And most of the time startups fail due to lack of vision and the ability to strategise and handle internal pressures, zillion compliances and registrations along with their finances. Creating a practical expansion plan with realistic goals, utilising the funds optimally and multiplying it to grow, and all this within a short time frame can be an extremely demanding and dynamic process. But if executed in the right way, it can help a startup found the right foundation leading to success.
This is where a startup mentor can show the direction. A startup mentor’s job is to lead the company to a strategic growth plan, chalk out sources to acquire fund and utilise the fund to create a successful business. Having a startup mentor can help you turn your good ideas into a viable business proposition, and good fund into business products and services – making all the difference in getting your dreams off the ground. However, it cannot be done by any one person. While one person of focusing on the core business, another needs to take care of compliances and costs/ fund availability and utilisation.
Now the question is who is an ideal choice to be a startup mentor
No guessing here. When the success of the startup has so much to do with managing funds and strategising moves based on company finance, choosing a CFO as a mentor becomes a priority. Having said that, the role of a startup CFO goes way beyond managing the company’s finances. Like a true “guide”, a CFO is meant to show a path for growth, form new relationships, drive measurable value, and establish core financial processes and reporting requirements.
The importance of having a mentor with a financial background
CFOs can fill a lot of blanks. If CEOs are the key founders, CFOs set the key financial fundamentals like unit economics, leverage and cash position. The fuel to the engine!
CFOs encourage collaboration. They work on the foundation of trust and respect. They dedicate themselves to at first establish a collaborative relationship. The CFO influences the rest of the C-suite by driving the metrics and presentation of results. A complete collaborator!
CFOs build the company’s capabilities. When CFOs come on board, they start delivering value from Day-1. And every contribution of a CFO is to address a long-term objective of a company. From financial processes and controls, from company goals to establishing actionable milestones, from dealing with cash flow to risk assessments – A CFO looks across multiple horizons.
CFOs mentorship for StartUps – Helping startups navigate well
Your mentor will set attainable goals – Setting of a long term and quantified goal is the first step to effective growth and expansion for a startup. And most startups fail to set a realistic goal. Most mistake vision as goal and at the end of a stipulated time frame, they fail to quantify the same leading to a shutdown of an idea. With a mentor and a CFO on board, there would be a detailed analysis of the growth trends right at the inception and the potential, before setting a realistic and quantified goal for growth. A mentor will ensure that the goals are achieved and vision of the company is realised.
Your mentor will bring along the “flexibility” – The whole idea of startup is based out of agility factor – facing challenges, overcoming roadblocks, starting over after a setback. All this is part of a startup journey. So when it comes to an operational strategy, it needs to be agile. One that is flexible to adjust to any change. A CFO chalks out such a strategy that ensures entrepreneurs and startups can navigate through these challenges effectively without deviating too much from the original growth plan. With an ever evolving social-economic environment along with dynamic market trends, digital innovations across industries and sectors, changing shape of the global consumer, all you need for your business is an adaptive strategy that can keep up with the pace. A CFO understands this need and can identify the flow of money and possibilities, thus offering expert guidance to leverage the challenge.
Your mentor will take charge of “money money” – Routine expenses when not monitored well can become financial burden for a startup organisation. A mentor with a strong financial expertise can take charge of the situation with effective mentoring. From internal HR management to expenses on third party vendors and complementary services, from profit takeaways to salary of the employees – a CFO will monitor, optimise and budget all these expenses, helping streamline the cashflow.
Your mentor will keep your company’s financial health on check – Startups are meant to grow fast and as peer pressure, they end up taking risks that often turn into financial disasters, pushing them on the banks of debts. And that’s unhealthy and sometimes cannot be recovered at all. As a financial expert and advisor, a mentor can help navigate these tricky challenges, and help draw out a plan which involves calculative risks with healthy balance of liabilities and debts.
Your mentor will review “the good” and “the bad” – Regular business reviews are important to keep a check on the growth. And that’s another aspect a mentor takes care of! A quarterly business and financial review by a mentor ensure not only that the business is growing at the pace and in the direction as desired, but it also allows for yearly identification of challenges and timely resolution with corrective measures – a practice that ensures success of an enterprise.
It’s the time of start-up businesses and this trend is undergoing massive transformation on a daily basis. It’s not only about the idea or finding the ground, it’s about keeping pace with the market trends, industry policies, and technology innovations. Under such scenarios, the need for a specialised mentor and guide for business and finance, customised to meet the needs of startup is increasingly becoming necessary.
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