Software as a Service (SaaS)
The software as a service industry is preparing for a major overhaul. The impact of remote working and growing regulatory requirements have been dominating the inbox of CEOs at SaaS companies.
Challenges for SaaS companies range from navigating the subscription economy to embracing automation and tackling high customer churn rates. Recruiting a part-time or full-time CFO or FD could be the key to unlocking your company’s potential. The evolution of the role of CFO has seen it move beyond a bean counter position to being a business leader.
At FD Capital, we’re the leading recruitment agency for SaaS companies searching for an FD or CFO to oversee fundraising and corporate finance while navigating industry challenges. Our portfolio of financial executives has experience delivering on seed and Series A funding for SaaS companies and overseeing mergers and acquisitions.
Recruiting a part-time CFO is an affordable way for scaling SaaS companies and access specialist industry-leading talent. A CFO or FD can fill the skills gap of a CEO without prior fundraising experience or lead on business exit preparation.
SaaS is one of our specialisms at FD Capital with an extensive talent pool of candidates available for an immediate start.
When Should a SaaS Company Hire a CFO?
There’s no ‘right’ time to expand your C-suite team. SaaS companies will choose to hire a CFO or FD at various stages of their growth and development. The evolution of the CFO role means they’re often to oversee specific projects, from investing in digital transformation to spearheading fundraising efforts.
CFOs have also become more accessible as the role evolves with part-time CFOs enabling scaling businesses to access top-level financial professionals without the pressure of a full-time C-suite salary.
There are several stages in a SaaS company’s life cycle when it may choose to recruit a CFO. If you’re planning a merger or acquisition, exploring fundraising, or expanding to new markets, you’ll want a CFO on board.
SaaS companies may also call in a CFO to help change their fortunes. A CFO can offer an unbiased and fresh perspective on the company’s finances, implementing changes and investing in AI and automation for more accurate forecasting and reporting.
The Priorities of a SaaS CFO
SaaS companies pose a unique set of challenges for CFOs as the industry faces growing regulations and calls for financial transparency. Our specialist SaaS CFOs have the skills and experience to take your company to its next stage with their fingers on the industry pulse.
Every SaaS CFO will have their own priorities and responsibilities, but there are a few that every financial executive will want to stay on top of.
1. Metric and reporting
Core metrics that SaaS CFOs need for their reporting include ARR, churn, net retention rate, MRR, and CLV. While these metrics are vital to get a full picture, they’re difficult to calculate and can lead to CFOs relying on inaccurate data.
CFOs leverage data to drive their decision-making process and identify new opportunities. Data insights are crucial for SaaS CFOs who need to examine consumer behaviour and market shifts to adapt accordingly. CFOs need to establish a dependable tech system that can automatically calculate the required metrics as accurately as possible.
SaaS investors and board members expect to get real-time insights from CFOs. AI and automation investment is the key to unlocking greater data insights and forecasting.
2. Investing in automation
CFOs want a billing system that can perform complex calculations and account for the range of pricing offered by SaaS companies. A smart payment system is crucial to ensure that it can retry credit cards and payment options in the right situations. A payment collection system should be in place to automatically send payment notifications. Automation can also help with revenue recognition.
3. New accounting standards
A CFO with their finger on the industry pulse can put the right systems and planning in place to transition seamlessly to new accounting standards. Revenue reporting is one of the most critical metrics for a SaaS, particularly when a CFO is reporting on its financial performance. Different markets and jurisdictions have their own reporting revenue requirements and expectations.
SaaS companies should account for revenue when services are transferred to the customer in proportion to what has been delivered up to that point. Subscription-based SaaS companies face challenges with producing accurate revenue reports. CFOs will utilise automated management tools to align the company’s financial system to navigate these complexities and produce accurate forecasts and reports.
Challenges Facing SaaS Companies
There are industry-specific problems that a CFO or FD will need to stay on top of at a SaaS company. Our specialist financial executives have extensive experience working alongside SaaS companies at various stages of their life cycles.
The challenges facing SaaS companies feed into the strategy and financial decisions made by CFOs and FDs. While not strictly financial, these challenges could benefit from the out-of-box thinking of a senior financial executive.
1. High customer churn rates
The average churn rate for a SaaS business sits between 5% to 10% according to Cobloom. CFOs will identify strategies to avoid higher churn rates with customer retention being a key priority. Today’s FDs and CFOs are interacting with every aspect of the business to feed into its overall financial strategy, including determining acceptable discount points and the ROI from potential product development.
2. Increasing development costs
Automation has the potential to reduce labour-intensive tasks and streamline reporting, enabling employees to redirect their time to development and other tasks. Risk management is another responsibility of CFOs that can help to tackle increasing development costs. It enables CFOs to identify and prioritise risks that could negatively impact the company in the short and long term to prevent revenue loss.
3. Hybrid working and team management
A CFO may need to plan for a SaaS company going remote or hybrid, while also exploring ways of capitalising on hybrid working for product development.
4. Data Compliance
Failure to ensure proper data management can result in SaaS companies incurring significant fines and damaging their public reputation. CFOs who lead on data compliance can support their company in expanding to new markets and future-proofing its systems with the correct risk management.
SaaS companies have a harder time dealing with data compliance due to the nature of their products and as many offer multiple services with individual discounts, bundles, and pricing.
5. Market Consolidation
6. Team Management
Headhunting for a SaaS CFO or FD
The tech hiring space is a mixed picture for recruiting. Although American tech companies made headlines earlier in the year with major layoffs, half of all companies are planning to increase their recruitment budget for 2023.
Recruitment remains competitive at the top seats of the executive table, including CFO and FD. The expanding role of CFO has led to increasing flexibility with start-ups and scaling companies being able to recruit CFOs on a part-time and remote basis on more affordable terms.
Headhunting a CFO or FD instead of using traditional recruitment methods can be the most suitable option for SaaS companies in particular situations. FD Capital offers both traditional recruitment and headhunting as part of our 360-degree approach to recruiting.
Benefits to headhunting a specialist SaaS CFO or FD include:
1. Quicker Recruitment Times
At FD Capital, we have a talent pool of candidates that we can shortlist for positions at short notice. Utilising a CFO headhunting service can also provide confidentiality to the process if your company has a public profile or if you’re recruiting after a tricky exit.
2. High-Quality Candidates
Our candidates have the skills and experience to support SaaS companies at every stage of development and growth Headhunters are also more likely to have access to candidates with a proven track record within the industry.
3. Risk Management
The processes that our headhunters use are designed to lower the risk of selecting an unsuitable candidate. We work towards the specific requirements of your company, from identifying your skills gap to finding a candidate to build a winning CEO-CFO partnership.
Recruiting a Specialist CFO or FD for Your SaaS Company
Recruiting for a CFO or FD in the SaaS industry requires you to consider your company’s long-term goals and what your leadership team is missing. At FD Capital, we offer a 360-degree approach to recruitment and specialise in recruiting senior financial executives in the SaaS industry.
Our team will work to streamline the recruitment process and narrow the candidate pool to find the most FD or CFO for your company. We take a curated approach to recruitment, specialising in connecting SaaS companies with part-time and full-time CFOs.
Working with an agency like ours is the best way to recruit a CFO or FD who will fit into your company culture and understand your SaaS company’s mission. Start recruiting for your specialist SaaS CFO or FD today by contacting our team at recruitment@fdcapital.co.uk.
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