Let’s face it, running a marketing, creative, or advertising agency can be hard.
Clients expect results, and living up to those expectations isn’t easy. You have a lot of competition, and it can be hard to differentiate your agency and find new ways to add value.
There’s a tricky balance between delivering on creativity and ensuring you stay on top of your business finances.
Early on, you may not have people who speak the nuanced language of finance. That won’t necessarily be a problem when you don’t have many people to manage. Your finances may be simple to deal with.
But as your agency grows, your finances will get more complex as you add more clients and services.
With more clients to track, you will find it harder to keep a clear and accurate picture of your agency’s financial health.
That’s why you may want to hire a chief financial officer (CFO) sooner rather than later.
Here’s what we cover in this article:
- Why your marketing agency may need a CFO
- CFO vs bookkeeper vs accountant
- When you might want to hire a CFO
- 5 reasons to hire a CFO for your marketing agency
- How to hire a CFO for your marketing agency
- Final thoughts on hiring a CFO for your marketing agency
Why your marketing agency may need a CFO
It can be problematic if monetary responsibility falls to creative people because they won’t necessarily have the understanding to make good business decisions while keeping on a financially sound footing.
Kevin Barrington, commercial director at global media agency Wavemaker, says: “Even from the start, financial discipline across any business is important.
“If it’s all falling on the shoulders of a founder, that’s a lot of responsibility.
“If you’re looking to grow, you need to have that breadth of financial information and accompanying understanding to carry the business through.”
Chris Woodward is the UK group chief operating officer for Oliver, which builds in-house agencies for brands. He says: “Most creative businesses neglect the operations of running their business. They are rightly very focused on the creative end-product.
“But if you want to be a globally successful business that can support clients at an enterprise level, and you’re not investing in your infrastructure in running a highly professional business, you’re not going to be credible.
“You won’t be a safe pair of hands for clients to trust their marketing efforts.”
If you’re looking for an agency figurehead who will be the captain overseeing your financial stability through uncertain waters, you’ll want to bring in a CFO.
CFO vs bookkeeper vs accountant
You probably won’t need a CFO at the beginning. Since all you want to do is keep simple financial records in order, you may opt for using a bookkeeper or even do the accounting yourself.
As your agency grows and generates more revenue through a bigger roster of clients and services, it’ll be time to bring in an accountant who could be more involved in tax preparation and compliance.
They’ll also be able to help you understand what’s going on in your business so you can make good decisions.
A CFO is a different kettle of fish.
It’s important to understand that hiring one isn’t simply a case of upgrading your accountant or bookkeeper.
With a CFO, you have in place a key member of your agency’s senior management team who handles the overall financial strategy with a broader set of responsibilities, including:
- Risk management
- Financial analysis
Accountants are unlikely to have the leadership and communication skills of a CFO because their focus may be more on numbers rather than people management.
Deepa Shah, CFO at LAB Group, says: “What a CFO does is not what your accountant or bookkeeper is going to do. They’re going to be helping you deliver your strategic growth ambitions.”
When you might want to hire a CFO
Lewis Maleh, founder and CEO of executive search firm Bentley Lewis, says agencies may start thinking about CFOs when they reach a stage of significant growth and financial complexity.
He says: “This is when revenues and financial responsibilities become too complex for your current financial team to handle efficiently, or they are outsourced, and you want to bring them in-house.
“The need for a CFO may also arise when you require access to more capital, or you need to improve financial reporting, budgeting, and forecasting processes.
“Ultimately, the decision to hire a CFO should be based on your specific needs and growth trajectory, and carefully thought through because they will form a pivotal part of the senior team.”
5 reasons to hire a CFO for your marketing agency
Let’s examine why you might want to bring in a CFO to offer financial leadership within your agency.
1. Strategic planning
With a good CFO, you get strategic financial planning and guidance to help your agency achieve its growth targets.
Because they are part of the senior management team, your CFO will understand the big picture, ensuring the agency makes good operational decisions.
Ideally, you want a CFO with a unique insight into financial trends that will affect your future success.
Suppose you’re considering expanding into new markets and diversifying into new services. In that case, your CFO can supply valuable insights into how that will affect your bottom line and how much revenue you should expect.
Look for a CFO that can help your agency create plans to meet your wider business goals. They should help you understand your most important metrics and focus on what truly matters.
Todd Davison, managing director of Purbeck Personal Guarantee Insurance, says: “A CFO can also provide data insight into non-performing services.
“Or they can look at investment opportunities with tax concessions, such as research and development investment. This can have a positive impact on margins and profitability.
“Non-performing services can be scaled down, with resources reallocated to those offerings that provide better margin and return.”
A CFO’s responsibility is to be the bridge between the sales side of the agency and the delivery side, according to Peter Hoole, founding partner at Cact.us, as they understand what kind of resource levels you need moving forward.
Peter remembers: “I would sit in the sales meetings, understand what projects were coming up next, how much they’d been priced at, what the credit risk on those clients was, what the payment terms were, and whether there was any legal stuff we needed to go through.
“I could take that understanding into delivery meetings, speak to project managers, go through schedules with them, look at some key accounts, see where we were overservicing and underservicing, and help them to make the right decisions.”
2. Business development
Business development is particularly important if you’re running an agency, as your business model could rely on winning more clients to service.
Product-based companies may have more stable revenue streams and do not necessarily need to focus so much on business development initiatives to stand out in their market.
You need to build and keep strong client relationships to generate revenue.
A CFO can help you seek new business opportunities, expanding your client base for financial stability, expansion, and growth.
3. Financial modelling
If a CFO builds a financial model for your agency, they can give you a mathematical representation of your financial performance, which can be used to forecast future performance.
They can input data such as revenue, expenses, and financial activities to the model, which can make calculations, generating projected financial statements.
Financial modelling is a key skill for a CFO and critical for forecasting, budgeting, and making informed business decisions.
An accountant may not necessarily have that level of ability, or the broad strategic focus, to create models of the right quality.
With a financial model, you can:
- Benchmark the agency against competitors
- Find potential growth opportunities
- Assess the risk of future scenarios
- Control and watch spending
- Prepare for funding bids.
Todd Davison believes a qualified CFO should be able to accurately build financial models and forecast complex forward projections based on internal and external factors.
He says: “Financial modelling helps underpin the agency’s strategy, identifying growth opportunities or keeping things on an even keel in market uncertainty.
“Having the ability to forecast accurately provides direction for the agency and provides a greater level of certainty on the prospects for the business, which helps future planning.”
4. Cash management
You would charge a good CFO to lead your agency’s finances, developing and implementing cash-management strategies to ensure you have the necessary resources to grow.
Let’s say you want to hire more employees for a particular service.
A CFO can supply much-needed support in understanding how much money your agency would require for this type of expansion and whether it’s possible within your budget.
David Wenn, CEO at Fiora, says setting your pricing model versus the cost of skilled resources is a moving target.
He says: “Planning and looking at the average salaries, expected pay increases, and overhead increases are more important each year as outside conditions now affect our business.
“Budget planning to ensure efficiency by buying new equipment or software to speed up the delivery of your service, without the need to recruit, would always be my first objective.
“You need to know what’s profitable and what isn’t with the cost of resources to deliver for your client. Knowing your numbers has never been so important.”
Your CFO should have a deep understanding of your data and business drivers, and they can use this knowledge to use cash effectively and support your agency goals.
They can make informed decisions because they should have a strong understanding of financial markets, capital management and investment planning, market trends, and industry benchmarks.
A CFO can help you stay close to your agency’s cash flow and understand what kind of surplus you have for investment or opportunity.
They’re dedicated to liquidity within the agency, helping to strengthen the balance sheet and provide foundations for future growth.
Your CFO can help your agency raise finance, which can boost cash flow. For example, you can provide cash to invest in revenue-generating initiatives by releasing value within invoices or assets (invoice finance).
This can also support you to build operational and cash flow buffers to help during downturns in trade or broader market sentiment.
5. Performance tracking
CFOs can help track and measure financial performance, supplying valuable insights into areas you can improve to drive growth.
This can be a complicated task with an agency, as it involves tracking financial and non-financial metrics and comparing them with other agencies to see how yours stack up.
A CFO can carry out this task more effectively than an accountant as part of the senior management team because they can access all necessary data.
Accountants may not have enough visibility of what’s happening throughout an agency, while a CFO should have access to all relevant information from different departments.
Todd Davison says a CFO keeping close to the actuals versus budgets can ensure your agency has a close eye on financial performance to decide how it’s tracking and trending.
He says: “If there are potential trading difficulties, this process can help signpost issues and allows the CFO and senior management to adjust business, putting in place mitigations to keep the business performing.”
How to hire a CFO for your marketing agency
Lewis Maleh highlights three considerations when hiring a CFO for an agency:
1. Use a personalised approach
Since relationships are so important at the C-suite level, recruiting for a CFO requires a tailored, personalised approach.
Understand the culture of your agency, as well as the technical requirements for the role you’re advertising.
2. Be clear on what type of CFO you need
Consider what type of CFO you’re looking for, and take the time to ensure the fit is right.
If it’s a first CFO appointment, you’ll need someone with experience in formalising and setting up the finance function.
If you want to expand into new territories, someone with global expansion experience would be most useful.
3. Make sure CEO and CFO values are aligned
The relationship between the CFO and the CEO is critical, and often their tenures are intricately linked.
It’s essential that your CFO is not only experienced but has personal and professional values aligned with the CEO and agency.
These are the foundation for a strong relationship.
The wider team will look to the C-suite for guidance, so you need to be aligned and pushing in the same direction on a values level.
Final thoughts on hiring a CFO for your marketing agency
Hiring a CFO for your agency can be a momentous change.
They can bring a wealth of financial ability, strategic vision, and management skills, allowing you to make data-driven decisions and drive growth.
When choosing a CFO, look for someone who aligns with your agency’s values and mission, has a record of accomplishment, and can effectively communicate with your team.
With the right CFO in place, your agency will be well-positioned for long-term success and growth.