We all know the value of a strong, strategic finance officer—no matter what the size of your business or how many assets you have under management, you want to know where your money is and where it’s going next. This can look like different things to different people. In some industries, the CFO will need a background in controlling, operations, accounting, or perhaps even capital markets, in order to thrive. In private equity, however, it’s a whole other ball game, and a rising private equity CFO will need a very specific skillset in order to succeed.
While you could hire an established CFO with decades of experience, those individuals are often set in their ways—and very expensive. Especially right now, a more agile individual who is ready to take that final step up the ladder may be your ticket to transforming performance. Which brings us to the question…What should you look for in a top-tier private equity finance professional, who might just be ready for the c-suite?
Here are six ways you’ll know without a doubt:
1. Established Financial Leader
A CFO in the making is first and foremost a leader. They’ve taken the initiative on accounting and finance organization, implemented new processes that have brought about positive changes, and created a framework in which your company can thrive. This individual is already a leader on the operational front—a must-have for private equity—and thrives in challenging environments. These are the hallmarks of an established financial leader who has proven that they’re ready for the big leagues.
2. Hired & Trained Staff
Any executive should have the hands-on management experience of hiring and training staff. We look for individuals who have contributed to developing current accounting and finance staff, as well as brought on new hires who bring high value to the company. As part of this process, this individual should have a keen eye for knowing who to trust with special projects that will drive company growth. It’s the extra steps like these that set c-suite material apart from the crowd.
3. Assisted With Retention
No one likes turnover, especially in a high-octane industry like PE. It’s expensive, it’s inefficient, and it’s stressful for everyone involved. A good leader will go the extra mile to reduce turnover and assist with retention, effectively stopping the turnover issue before it starts. We look for those who have a history of leading by example, reinventing processes, developing team members with potential, and listening well in order to assist with retention. That’s a major factor in whether someone is ready to take the next step up, and one that often gets overlooked.
4. Implements Strategic Cash Management
Whether going through the process of integrating an acquisition or managing a cash flow hedging program, a rising CFO will always have an eye for strategic cash management. The right answer is not always the first one, or the second, or even the fifth. This individual will put in the time, research, and work to discover the optimal strategic solution for the business and take steps to make it happen. We want to see direct responsibility for significant savings from this individual, with thousands, perhaps millions saved in the rearview mirror.
5. Manages Tax Planning Initiatives
Tax planning is part and parcel of the CFO’s role, and an up-and-coming talent should be a proven expert at implementing strategic initiatives around tax time.
For example: We worked recently with an individual who was able to reduce taxes for sponsors by $9 million. IRC Section 174 tax studies were performed. This analysis allowed research and development expenses to be expensed vs. capitalized. Upon asset monetization, these expenditures are not subject to ordinary income recapture, which results in significant cash tax savings.
This is the type of direct strategic action we expect to see in someone ready to move up the ranks and take their place in the c-suite.
6. Creates Value
Perhaps the most singularly crucial element of a new leader like this is their ability to create value wherever they go. This individual harnesses data, owns processes, creates opportunities, and understands even when to say know. You should be able to see a history of thousands of dollars saved over the years throughout multiple implementations and integrations, and framework set for even more saved down the line thanks to those processes. That’s the type of constant value creation we expect to see in a rising private equity CFO.
We put together this list based on decades of experience working with finance professionals at every stage of their careers. From PE to wealth management firms, we understand the unique needs of your company, and the unique individuals you will seek to provide strong financial leadership for yourself, your team, and ultimately your clients. If you are ready to work with a rising finance professional who is ready to step up to the c-suite as a private equity CFO, let us know. We may have someone in our network who will meet and exceed your needs.