The True Cost of a Finance Hire
Okay, you’re looking to grow your business and that requires hiring. It should be exciting, right?
Well, it is, but what many business owners don’t realize is the true cost of building out a finance team. Therefore, before you start, we have some not so secret secrets to let you in on. When you are hiring internally, you absolutely have to consider the hidden (or indirect, as they’re often called) costs, such as training, recruiting, turnover, and benefits. These can really add up, in time as well as money spent. Even more recently, we’ve seen these costs escalate as the market for strong talent tightens.
So, you are trying to find the best fit for your business, you look internally despite the small pool of applicants, but you need to fill the open position and so you’re on a mission and, again, that is great. You finally find it, but then there are hidden costs and important elements of the process that may have been overlooked, and you’re left with costs you never intended on paying, let alone what you paid just to advertise and find candidates in the first place. That is why we are here to help you out before you go running around your office looking for someone to promote to CFO.
You are typically recruiting for a specific skill set and expectations with each finance hire that we’ve listed below. Even when a company is in its stages if infancy, having a CFO or VP of Finance manage the books is not only incredibly expensive, but the employee will become bored and frustrated with the work, considering that isn’t really what they were expecting to spend their time doing, right? On the other hand, hiring an Accountant and expecting them to provide strategic oversight or scale financial operations can also lead to organizations failures. You hire an accountant to make sure everything is straight once it’s been done, not for him or her to be the start of the process. That being said, of course you need to have diversity within your team so each job is allocated to someone, and that someone knows what they’re doing and, hopefully, is good at those duties. While we aren’t helping you there, at least not today, with how to find the best person for your business, below is the breakdown for you of what these new hires might entail in terms of fun (not) hidden costs:
- Accountant: The average accountant makes a base salary of $60,000 per year. Maybe you knew that, but did you know that an accountant’s fully loaded cost, when factors such as benefits – that is, vacation time, insurance, paid time off, etc. – taxes, and training are taken into account (no pun intended), balloons out to $95,000.
- Controller: A controller’s base salary averages out to approximately $100,000 a year. This does not include their extra payments, such as bonuses ($12,500), benefits ($5,000), or taxes ($8,565). When these factors are added, hiring a controller will cost your business about $158,000 a year. That’s actually almost 60% of what you are paying them for their base, added on just for having them there.
- VP of Finance: Boasting an average salary of $150,000 a VP of Finance will often end up being one of the highest paid employees at your company – yes, one of, meaning there are more high costs! After adding in additional compensation, such as bonus ($37,500), benefits ($5,000), and taxes ($12,848), expect to shell out just over $250,000 for the services of this talented individual.
- CFO: With an average salary of $200,000, you are making a very significant investment in hiring for the CFO position. Costs such as equity ($40,000), bonus ($70,000), or rent and equipment ($12,000) add up. Your CFO needs a beautiful office and computer right? The $200,000 initial offering swells to nearly $350,000 when you add in these additional perks.
As you can tell from this list, the actual cost as opposed to the intended cost can be quite different for each individual position that you hire for. Say you were hiring all four of these for your company and weren’t as educated on the extra payments. You think you’ll spend, in total, $510,000. That’s a lot in the first place, of course, but those hidden costs come up… and ultimately you’re spending $853,000. What?! How did we get there? Well, I showed you, but, in conclusion, you don’t want to be blindsided by spending around $343,000 more than you anticipated. Your innocuous, yet very expensive dreams of expanding your team and growing your business will come true. We are here to help you and make sure that you aren’t the guy that didn’t realize hiring costs $350K more than you thought.
Why, exactly, is this so important? The indirect costs, yes, but the fact that you don’t want to be caught off guard even further – the cost of those positions for a bad hire is even larger, because it isn’t only monetary. Of course that cash goes out the door, but there’s also such a thing as morale, and it greatly impacts productivity. If there’s a bad hire, say your accountant doesn’t know what he’s doing and that CFO or VP of Finance we were talking about earlier actually does end up doing the books – now talk about frustration! There’s bound to be burnout, a firing, a quitting, or a raise to make up for it, lest the poor performance ripple through the company lower the standards of those employees you worked so hard – and paid so much – to hire. If you’re not totally convinced about how bad this type of accident can be, check out this Forbes article – it has some quick tips for you too. This is really real people.
But, we have good news. If you want to leverage a full stack of financial professionals for your organization while minimizing costs, especially with the large numbers just thrown at you, Nomad is a place to outsource your work and have it done quickly, efficiently, and at a lower cost to you. We have a team of vetted experts with extensive work experience and successful capital raises, as well as growth stories that can handle anything you give us, from decision support to full-time hiring support – and making sure those hires are the best ones for your business. Sound good, but your business is growing fast? There’s no need to worry because we adapt with you as your needs change, even if you don’t want the commitment of full-time hires – avoid that long hiring cycle and ramp up period with us by your side. Oh, and all that talk up there about taxes that adds thousands to your new hires? We’ve got you covered with that convoluted material too. Really anything tax, accounting, and finance related, we can help with complete efficiency, transparency, and reliability.