Top qualities to look for in your SaaS startup’s first CFO

Bringing on your first CFO can be extremely exciting, and a strong hire can give your business a significant strategic edge.

However, to make an effective hiring choice, you need to know what makes a great CFO. 

A Mckinsey report on the role of modern CFOs put it this way: “…it’s important that COs step up to play a broader role, one that includes modeling of desired mind-sets and behaviors in transforming the finance function itself…”

With this in mind, what makes a great CFO? What should you be looking for in your SaaS startup’s first CFO?

Here’s what we’ll cover in this article

Prioritize data-driven candidates

Look for someone with revenue growth success stories

A good CFO realizes that customer satisfaction is vital

They’ll be able to improve your CAC & CLTV

Great CFOs know how important financial automation is

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Prioritize data-driven candidates

So, you want to narrow your search to find out what makes a great CFO. 

Without a doubt, one of the most desirable qualities in a potential CFO is a deep understanding of SaaS analytics and the importance of leveraging data to achieve your company’s goals.

Key Performance Indicators (KPIs)

The SaaS environment is fiercely competitive. This means that corporate decisions must be made based on hard data to be effective.

Specifically, be on the lookout for a CFO who understands and prioritizes Key Performance Indicators (KPIs).

KPIs are valuable benchmarks that allow you to gauge whether your company performance and making effective decisions.

There are many KPIs that can make a difference to your company’s long-term success.


Here are the main KPIs your CFO should keep an eye on:

  • Cash flow SaaS companies at a breakeven point or cash positive are in a much better position to grow. While a -50 percent margin is acceptable at the startup stage, breakeven or better is a strong predictor of future success.
  • Committed Annual Recurring Revenue (CARR) this KPI accurately measures the health of a SaaS organization. It shows its monthly annual revenue cadence by recognizing signed deals and netting out known or projected churn. Growth in CARR of 100% or better is a solid indication of future performance.
  • Customer Lifetime Value (CLTV)customer lifetime value analyzes the future return of an organization. If the customer lifetime value is decreasing, the company will need to add more customers at a higher rate to achieve results. A healthy SaaS provider will achieve a 3x on CLTV while best in class achieve a 5x.
  • Cash conversion the cash conversion score is a calculation of committed-annual-recurring-revenue to capital-raised-to-date (debt and equity) minus the cash on the balance sheet. This measures the return on invested capital and shows how well these dollars convert into recurring revenue. Best-in-class SaaS organizations post a cash conversion score of 1X or better.
  • Net Promoter Score (NPS)this KPI measures customer loyalty from a range of -100 to +100. The score is based on asking customers how likely they are to recommend the organization’s software. A low NPS indicates the company is at a crossroads. They must make transformational changes or accept future losses and business decay.

Deliberately tracking your SaaS analytics can give you a much better chance of improving them over time.

Read more: Business Growth Tracking Strategies for SaaS Startups

Look for someone with revenue growth success stories

Traditionally, direct profit-and-loss accountability often falls to the CEO. However, CFOs are increasingly being expected to play a more active role in developing and integrating revenue strategies.

Applicants should be able to demonstrate how their financial leadership directly impacted revenue growth for their past employers. This is one of the key proof points of what makes a good CFO.

Were they able to improve employees’ productivity by updating them on best practices and tools to use? Perhaps they reviewed their company’s pricing tactics and and implemented improvements.

They could even have used their financial credentials to help secure corporate funding from banks. 

Remember: CFOs should be looked at as strategically accountable members of your board, not just objective financial reporters. The ideal candidate should have measurable and proven results to share with you.

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A good CFO realizes that customer satisfaction is vital

For any SaaS company, avoiding subscription cancellations should be a top priority. The percentage of total users who end up cancelling across a specified time span is known as a company’s “churn rate”.

As SaaS finance revolves around recurring and subscription billing, your CFO should aim to keep churn as low as possible.

During the interview process, be on the lookout for individuals who’ve created effective “anti-churn” strategies for other SaaS startups.

These could include anything that entices customers to stay engaged with your product. 

A few well-known approaches are:

  • Prioritizing top customers – identify and cater specifically to your best, most loyal subscribers
  • Using direct feedback – leverage customer reviews or other direct subscriber feedback to make specific improvements
  • Keeping in touch – by regularly reaching out to your customers on social media, email, and other platforms, you’re more likely to stay top-of-mind. Make sure all communication is relevant, and don’t overdo it.
  • Asking why customers leave – a certain amount of churn is unavoidable for any SaaS product. Thus, when it does occur, try to get insight on what’s causing it and view it as a chance to improve.

CFOs will have a natural aversion to customer churn and have a variety of different strategies to correct it.

They’ll be able to improve your CAC & CLTV

Your CAC is a measure of how much it costs your company to persuade a new user to sign up.

It’s a very important metric to watch. Spending too much on customer acquisition ties up resources you could use more effectively elsewhere. 

Lowering your CAC should be a critical objective of any CFO you hire. Specifically, CFOs analyze the cost and effectiveness of different acquisition methods:

  • Your marketing team – does it seem like there are processes in your marketing department that could be streamlined? Can resources be used more effectively?
  • Advertising expenses – whether you’re running social ads, email campaigns, or anything else, it’s critical for a CFO to do a cost-benefit analysis of your advertising strategies.
  • Your sales team – as with your marketing team, your CFO should look at the day-to-day effectiveness of your sales professionals. Are resources being maximized across the department?

In conjunction with lowering your CAC, your candidate should also devise plans to raise your customer lifetime value, or CLTV.

Your CLTV is a measurement of how much revenue an individual subscriber contributes to your company across the total length of their subscription history.

By analyzing these two metrics, your CFO can help your company make more revenue from your customers. You’ll also convert them at a lower cost.

Read more: What is Customer Acquisition Cost (CAC)?

Great CFOs know how important financial automation is

Now that you understand what makes a good CFO, make sure you hire a candidate who gets the impact that financial automation can make on a SaaS startup’s trajectory.

In the hyper-competitive startup environment, CFOs who leverage automation accomplish more in less time. This will free up precious resources for high-value strategies and tasks.

Editor’s note: This article was first published in May 2022 and has been updated for relevance.