Why this CFO quit his corporate job to provide shared CFO services for 350+ mid-sized enterprises and startups

While on his daily morning walk, V Srinivasan frequently encountered founders of SMEs and startups who lived in the same apartment complex. Over time, they became walking buddies.

At the time, Mumbai-based Srinivasan worked as CFO at Bharti Axa Life Insurance. During his walk, his new friends would tell him the challenges their companies were facing, especially when it came to attracting and hiring top talent in financial management.

“They told me that only large corporations and firms like the Big Four would visit campuses and hire the top talent. Also, they said not all SMEs and startups could match the salaries offered by the bigger players. Looking at this gap, I decided to quit my job and start a shared financial governance service for mid-sized enterprises and startups,” Srinivasan tells SMBStory.

In 2012, he launched CFO Bridge in Mumbai to provide shared CFO services in the form of bookkeeping, MIS, analytics, business planning, fundraising, taxation, and more.

Srinivasan claims, over the years, the organisation has worked with over 350 mid-sized enterprises and startups across manufacturing, services, trading, and other sectors.

“Our past and current clients include the likes of Suryoday Small Finance Bank, Hicare Pest Control, Dr Batras Homeocare, Apurva Natwar Parikh group, Aviglobal Plast, ARS Steels, Baccarose perfumes, GOQii, Nazara (Next Wave), Simnovus, and more,” he says.

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The need for shared CFO services

Hiring a full-time CFO and a team of accountants can be expensive for SMEs, especially amidst the ongoing pandemic when businesses find that they are yet to recover from their financial crises.

But the need for financial governance is not new or created by the pandemic – in fact, when SMEs or startups faced fire or looked to raise funds and onboard an investor over the past decade, they realised their need for a CFO or a finance team, according to Srinivasan.

They also found that outsourcing financial services would be more cost-effective than investing in a full-time finance team. And although businesses of all sizes require these shared CFO services, Srinivasan’s firm only targets a select group of potential clients.

He explains, “Mid-sized enterprises in the Rs 50 crore to Rs 300 crore turnover category and startups in the Series A to Series C funding category are our target audience. Newer companies which are smaller in size are more focused on developing their products or services, and may not be able to engage with us economically.”

When potential clients approach him, Srinivasan finds they are either in the midst of a financial problem or are looking at investing in financial governance for future growth.

He adds, “SMEs avail our shared CFO services until they grow enough and become capable of hiring an in-house finance team and CFO. For startups, an investor coming in during a Series C round may also demand this.”

Second- and third-generation entrepreneurs of family-owned SMEs also approach Srinivasan for the shared CFO services as their finance and MBA degrees highlight the need for financial governance in their traditionally-run family businesses.

Partnership-oriented business model

Srinivasan explains that his firm runs on the principles of partnership, where there are two types of CFO partners – regular and equity. Regular CFOs can share in the company’s equity after spending a few years with the business.

Each CFO partner out of a group of 20 experienced finance professionals manages their portfolios of mid-sized enterprise and startup clients. Client relationships are nurtured by the CFO partners themselves and the client base can be expanded through referrals.

“The costs for partners would be royalty for the usage of CFO Bridge IP (including the brand) and staff cost at actuals basis utilisation. Further, profits from the portfolio will fully accrue to the respective partner,” Srinivasan says.

The overheads, expenses, and future reserves are set aside out of the royalty received, and the balance profit is shared among the equity partners in their equity holding ratios.

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Challenges and the way forward

As the market for shared CFO services becomes more established, finance and accounting leaders are increasingly working with SMEs and startups to help them navigate the current climate and be prepared for future scenarios.

Against this backdrop, CFOBridge plans to enter more cities, including Ahmedabad. Besides Srinivasan’s firm, there are several other shared CFO service providers such as BankaCFO, MyCFO, SuperCFO, and more which are also looking to tap into the trend.

However, the quality of financial data available at the client’s end remains a challenge for the industry.

Srinivasan explains, “It isn't easy for SMEs to prioritise and provide high-quality data that is necessary for our shared CFO services to work well. Although this takes time, it is ultimately beneficial for them. Further, we also tell them that CFO Bridge is not a permanent solution.”

He adds, “If we stick with a client for more than three years and continue to provide them with full-fledged CFO services, something is wrong. Either we haven’t done our job properly or they have been unable to grow despite high-quality financial governance.”