Scaling for growth vs exit or expansion: The role of the fractional CFO

2. The different stages of business: what you should know, when

What you should be aware of at different stages of your journey, and the gaps in knowledge a fractional CFO could fill: 

Metrics: 

• Early stage: main focus: growth! You’ll probably be familiar with basic metrics like churn, burn, runway, monthly recurring revenue (MRR) and customer acquisition cost (CAC), but if you aren’t then don’t worry, we’ve covered them all here for you!
• Established: a deep understanding of SaaS metrics is crucial, go beyond the basics and look at lifetime value (LTV), the LTV to CAC ratio, and net dollar retention, as these metrics give deeper insights into the health and potential success of the business (critical for valuations during an exit)

 Awareness vs. understanding of risk mitigation: 

• Early stage: you will be aware of potential risks (including market fit and operational efficiencies), but the depth of understanding might be limited to theoretical knowledge or basic compliance
• Established: actively managing governance, regulatory compliance, and financial controls, you’ll need to establish robust due diligence processes and governance structures (often scrutinised during acquisition discussions)

Revenue signs: 

• Early stage – under $1mill revenue: still proving its model, or in the early stages of market penetration, strategic focus is often on achieving product-market fit and smoothing out initial operational kinks
• Established – over $1mill revenue: more established business with proven market demand, the focus shifts to optimising ops and scaling up marketing/sales efforts

Connections in VC or PE ecosystems: 

• Early stage: you may not be well-connected within venture capital (VC) or private equity (PE) ecosystems yet, which can limit access to growth capital and strategic advice
• Established: strong relationships within these ecosystems is vital, connections can facilitate not only funding but also strategic partnerships and eventually, a successful exit 

Process maturity: 

• Early stage: processes may be in development or initial implementation stages, focus is often on identifying bottlenecks and areas for improvement
• Established: processes now should be scalable and well-documented, and be capable of scaling operations quickly by injecting capital into marketing and sales with the confidence in the infrastructure’s ability to support growth

Talent acquisition and development: 

• Early stage: founders usually handling most of this while numbers are lower 
• Established: focus shifts towards hiring specialists, developing internal talent, and possibly introducing a tier of management to delegate operational tasks

Market expansion: 

• Early stage: focusing on a single market or demographic
• Established: preparing for an exit often involves expanding into new markets or verticals to demonstrate growth potential to buyers or investors

Technology and Infrastructure: 

• All stages: upgrading technology to handle scaling operations efficiently is crucial, including investing in automation, robust data analytics platforms, and possibly enterprise-level solutions