Why Startups Hire Finance Too Late

There are few functions in a startup that are more misunderstood than finance.

In the early days this is understandable.

The founder is doing everything. They're selling, delivering, hiring and worrying about cash. The business is small enough that bank balances and invoices can be managed on an app or in a spreadsheet. Volume may not be high and successful founders tend to have the ability to make things work across any business function.  

At this stage finance feels like an administrative necessity more focused on compliance and tax returns which can be outsourced. Founders can keep an eye on finances and everyone can focus on building the business, until suddenly that isn't enough. 

Finance is often seen as a cost centre

Most founders don't start businesses because they love finance. They start businesses because they have an idea, a product, a skill or simply a desire to build something. Naturally then, the early hires tend to be in sales, marketing, product or delivery.

Finance is an afterthought. 

In the early days this makes sense - finance will be a backward looking process that can now be heavily automated. It’s then easy to see why proving value from this function is difficult and it ultimately becomes seen as an expendable overhead or cost centre. 

But by the time many founders realise they need finance support, they are already experiencing the symptoms of not having it.

Cash becomes unpredictable.

Margins are unclear.

Hiring decisions become harder.

Growth feels chaotic.

And strategic decisions start being made on instinct rather than evidence

Accountant vs. finance function

This is perhaps the biggest misconception we see. Having an accountant is important.

But accountants and finance leaders solve very different problems. An accountant will help you stay compliant. A good finance function should be helping you answer business critical questions. 

Which customers are actually profitable?

How much runway do we have?

When should we hire?

Can we afford to invest in growth?

What happens if sales slow by 20%?

What are the key drivers of value in our business?

These aren't accounting questions. They're strategic questions that importantly are forward not backward looking and often involve some form of scenario analysis. 

And they're difficult to answer without the right financial information.

So why founders delay hiring finance

In our experience there are three common reasons.

1. "We're Too Small"

Many founders assume finance becomes important at a certain revenue threshold. 

But finance and the analysis that comes with it isn't about size. It's about complexity.

A business doing £300k with subscriptions, contractors, software costs and multiple revenue streams can be far more complex than a £2m business with a single customer type.

The earlier you understand your economics and the key drivers you can pull, the easier growth becomes.

2. "We Can't Afford It"

Ironically, businesses often can't afford not to invest in finance. Poor pricing, weak cash management and  over-hiring to name a few are expensive mistakes. 

As mentioned a good finance function doesn't just record performance.It improves it.

And increasingly this doesn't mean hiring a full-time Finance Director or CFO.

Fractional and part-time support allows startups to access strategic finance much earlier in their growth journey.

3. "We'll Figure It Out As We Go"

Many founders are incredibly resourceful. They learn sales, marketing, product development, hiring and so naturally they assume they can learn finance too.

And to some extent they can, but eventually the business reaches a point where gut instinct becomes insufficient.

Growth creates complexity.

Complexity requires information.

And information requires systems and processes that most founders simply haven't had the time to build.

The best startups don't hire finance late

Some of the most successful founders we've worked with have something in common. They invest in finance earlier than they strictly need to as they recognise growth creates complexity, and making good choices requires clarity.

Ultimately finance underpins and controls most aspects of a business. When working well it provides the information that allows founders to allocate resources, understand trade-offs and invest confidently.

Finance isn't about control

There is a valid fear that finance creates bureaucracy. That introducing budgets, forecasts and reporting somehow slows the business down.

Done badly, this is perhaps true. But if done well there will be asymmetrical upside and value creation for a business. Done well, finance can give founders confidence. 

Confidence to hire.

Confidence to invest.

Confidence to say no.

And most importantly, confidence that they understand the business they are building.

Because ultimately, startups rarely fail because they hired finance too early.

But many make life considerably harder for themselves by hiring it too late.

And by the time they realise it, the problems finance could have prevented have already arrived.