One of life’s only certainties is change. Over time, every situation, in any area of life, will inevitably transform.
This principle is especially evident in the business and financial world. For example, every company will change over time—whether through growth or downsizing, adding or discontinuing products, altering development or management methods, or fluctuating employee numbers.
As the company evolves, so does the role of the CFO. Tasks, budget priorities, and financial strategies must adapt to each phase of the company’s life cycle.
At Danoy, as one of Israel’s most experienced providers of outsourced CFO services, we have accompanied many clients for years. With each phase the company goes through, the tasks and priorities of our outsourced CFOs evolve to match the company’s needs.
Startup Phase: Organize, Establish, Build a System
In most cases, our outsourced CFO joins the company during its startup phase. This is an exciting time, as the startup is already operating but often lacks a solid financial infrastructure. Founders are usually focused on development, operations, or marketing, leaving financial matters less structured.
At this stage, the CFO’s primary task is to bring order—determine how much money is available, calculate the burn rate, and project incoming cash flow in the near future. This provides a clear financial picture that can be shared with the CEO and board, forming the basis for a financial strategy aligned with the company’s business plan.
The CFO is also responsible for creating a functioning finance department, laying the groundwork for proper financial operations. This includes implementing financial systems, identifying qualified professionals, and establishing protocols and workflows.
Additionally, the CFO becomes a key member of the management team, leveraging their business and financial expertise to guide broader initiatives like fundraising and managing the funding process effectively.
Growth Phase: Efficiency, Expansion, Adaptation
If all goes well, the company transitions to a growth phase as development is completed, marketing gains focus, and revenue streams start to flow.
In this phase, the CFO’s role shifts from building financial systems to processes that support growth and expansion. This might include creating a new financial strategy to help management identify the most profitable and efficient business activities. The CFO also conducts in-depth audits to pinpoint areas of waste or unproductive operations and works to streamline them. Monthly management reports may also be introduced for the board and leadership team.
Fundraising continues during this phase, but it becomes more complex. The CFO must manage and support multiple funding rounds, involving investors entering at different valuations. This requires meticulous management of the cap table, ensuring clarity and precision in equity distribution.
Stability and Expansion Phase: Operations, New Markets, New Opportunities
After years of hard work, the company often reaches a stage of business and financial stability. At this point, the CFO’s role in ensuring smooth and efficient operations is as crucial as ever. With larger revenue streams and higher expenses (e.g., payroll, rent, contracts, suppliers), maintaining efficiency becomes a significant challenge.
Simultaneously, stability often serves as a springboard for expansion. The management team may explore new products or markets and invest in their development. The company might also consider acquiring or merging with other companies—or entertain acquisition offers from other businesses.
In all these scenarios, the outsourced CFO plays a vital role. Expanding into new products or markets requires financial and operational planning, including budgeting for workforce, marketing, and resources. Opportunities for acquisition or mergers demand extensive financial preparations, including due diligence and valuation assessments.