When to appoint an FD
Jun 18
I had an interesting conversation today with a person who was looking at starting a business and asked me about the board positions.
He had excluded a Finance Director from his starting management team and it brought back some very painful memories!
Most start ups bring in a FD at a later stage and start off with a book-keeper and then feel they can bring someone else on once the business has got to a certain stage to be able to afford an FD.
My advice is to get an FD as soon as possible. Even if it is on a part-time basis - they will prove their weight in gold. It is the one appointment that I always look for - (after having made many mistakes in the past!) An FD will give you a really good grip of the business and let you know what is going on.
You will be amazed at the amount of companies that do not know until the end of the year that they have not been making a profit! I invested in a company last year which looked very profitable and I assumed all was going well as I kept getting good sales reports.
Then I realised that we were constantly having cash flow problems and it was only when an experienced FD went in that we realised to our horror that the business had real problems and was not making any money! The FD sorted the situation out and the business is slowly being restored back to health.
We (the shareholders) were very lucky in this case. We realised that the business had a problem soon enough. Had it gone on for a further two or three months - it would have been beyond hope.
When I look back at most of the investments that have failed for me, I notice that one of the issues is that the companies did not have good FD’s in place (or any!). A good FD may not have saved the company - but they would have prevented further shareholder loss by warning against further fund raising rounds!
No FD no commitment!
Hi and welcome to my blog. 
Jun 21 at 08:58
Great blog. Mehul sent your link to us. We’re about to close our Angel round and I don’t know what we would have done without our FD. We engaged an interim CFO from the moment we came up with the idea. He helped us write our business plan, prepare our initial financials and then he joined us at least 2-4 days per month. He helps us report all critical numbers monthly to our friends & family investors, we go through cashflow and address ways we can increase revenue and decrease costs. It’s priceless!
Jun 21 at 10:02
Thank you so mch for your comments - it is so pleasing when my views are validated by the real experts. I wish you the best of luck with your business.
Sep 09 at 13:42
Really great blog. I apologise for this rambling question. I am a director of a firm of accountants and we regularly provide the kind of services and FD would to our clients.
However, we have one client that we were helping but he decided to “make do” with a local bookkeeper against all advice. Two years later he’s back, his accounts have not been filed, neither have his VAT/CT, etc. The bookkeeper has been sacked and many others made redundant. The company needs finance to finish its half completed hotels and properties but of course, the bank wants to see projections, plans, accounts and the client doesn’t even know what his expenditure was 18 months ago. We can help, we have the experience, the team and we know what the issues are, however, they can’t afford to pay us. Do you think we could ask for shares in exchange for an FD role in the company? It could be a great business, it hasn’t done too badly considering everything, and we would invest the money if we had it. I would need to check the ICAEW guidelines before approaching the client but would really appreciate your views.
Many thanks
Sep 09 at 16:11
Great question. I would say (and I have done this in the past), is to always take a proportion of fees in cash. You can blend it so that you take 20% in cash and 80% in equity.
I find that if businesses are not properly funded enough to even pay for essential proffesional advice, they are likely to fail - in which case your equity is worth zero. I have learnt at great cost that it does not matter what your ‘paper’ wealth is - it is the cash in the bank that matters!
I hope that helps and than kyou for reading my blog!
Sep 09 at 16:21
Thank you, I hadn’t thought of that.
Added your blog to my favourites.
Lisa