As a growing financial firm, we’re very in tune with the process of hiring CFOs. We know it can be hard to find new employees, especially great ones! Finance and accounting professionals are some of the most in-demand people and, when they’re familiar with tax law, forget about it. But aside from the challenge of the search, hiring a new financial expert comes at a BIG cost.
The 4 Hiring Costs to Consider
In order to calculate the real cost of hiring a full-time CFO, there are four costs to consider:
- Benefits and taxes
- Overhead costs
- Time and effort
This means that when you’re hiring a CFO at a salary of $175,000, the real cost to your business will be closer to $278,250. Let’s break the costs down.
The Cost of Recruitment
Let’s assume your new CFO will earn $175,000 annually. On average, recruiting firms receive 20% of a new hire’s salary, so the cost of recruitment is $35,000. You’ll also spend time developing a job description, briefing a recruiter, and reviewing 10-20 resumes. Then you will conduct at least four first interviews and likely two second interviews. The recruiting process has now taken a total of five days. To build an accurate view of recruitment costs, we must include the cost of your time AND the opportunity cost of five days spent recruiting. Using a manager’s rate of $500 per day, accruing an additional $2,500, plus the
opportunity cost, we’re closer to an additional $8,000. The cost of recruitment is now $43,000.
Don’t Forget the Benefits
Employee wages are the most straightforward cost of hiring, but they will vary, depending on where your business is located and the experience level you’re looking for in your CFO role. Benefits – including health insurance, vacation, payroll taxes, and retirement – are commonly used to compare your company
against another when a job seeker is deciding to take a job. Many companies use a straight percentage of an employee’s wages from 20-30% to determine their compensation package. So now the $175,000 CFO salary with the addition of benefits is at the very least $210,000.
Getting Your New Hire Up to Speed
In terms of training, the heaviest load will be in the first three months. There is usually a month of heavy training with a staff member to set up the new role. Let’s put the cost of getting up to speed at $5,000.
They Have to Sit Somewhere!
The cost of office space, rental rates, service charges, utilities, reception, and technology comes in at $50 per square foot in Boulder (where we’re based). If an average desk is about 75 square feet, then annually, we will add $3,750 per new hire.
Managing and developing a new employee takes a lot of time. This includes the cost of evaluation and feedback, objective setting, and informal 1-on-1 meetings. This is likely to absorb at least three days of management time – $1,500 wage cost or a $3,000 opportunity cost – during the year and much more if there are issues.
Actual Productive Time
Another cost employers often fail to take into account when hiring is the actual productive time of an employee. There are 250 working days in the year. However, after vacation (20 days), sickness, company meetings, and training days, it’s unlikely there are more than 220 working days.
So, What’s the Real Cost of Hiring In-House?
Base salary: $175,000
Benefits & payroll taxes: $48,500
Overhead costs: $3,750
Training & onboarding: $5,000
Employee management: $3,000
The Big Balloon in Costs
A $175,000 salary just ballooned to $278,250! And when you hire in-house, you will only benefit from the ONE skill level of that employee. If they’re a CFO, they’re not going to be spending time on bookkeeping tasks. Or if they’re an entry-level accountant, they’re unlikely to have the necessary CFO expertise.
But there is a way to get it all – outsourcing! By outsourcing your accounting, you gain access to a range of skills from the strategic insight of a CFO, the logic-based mind of an accountant, and the organization of a bookkeeper AND all the one fixed monthly price. With the real cost of hiring in-house and the sheer access afforded to you by an outsourced accounting firm, the decision to outsource is a no-brainer.
Why A Fractional CFO Can Cost You Less in the Long Run
When you take the fractional approach to staffing the CFO function, you can reduce the associated costs over the long term, until your business has reached a point when you truly need a full-time CFO. Download our guide, “Calculating the Value and Cost-Benefit of a Fractional CFO“, to learn more about how a fractional CFO can both save you money and enhance your growing business.