Attracting Big Market Talent to Small Market Teams

Straight Answers to Real Questions

Question: I’m the owner-manager of a small but rapidly growing food services business. We have a controller who’s been handling my accounting since we started the company six years ago. However, I realized a few months ago that because of our growth curve and ambitions for the future that we need to recruit a qualified, experienced CFO to run our finance function and help us up our game.

I posted the job on LinkedIn and interviewed someone who I think would be a good fit for my CFO position.

Most recently, this person has been VP Finance of a well-established, national food services company. However, her former employer was sold to a U.S. firm and she’s been unemployed for the past six months.

I have no doubt that this candidate would be an excellent CFO for us. My issue is that she was making a lot more at her former employer than I can afford to pay her.  I want to make her an offer but I don’t see how I can bridge the gap between what she was making and what I can reasonably afford to pay. Any thoughts?

Answer: This is a very common conundrum for small, rapid-growth owner-managed companies. On one hand, you know that hiring a CFO who’s already played in the big leagues of your industry will help get you on the path to the big leagues yourself.

On the other hand, not only can you not afford to pay top dollar for that kind of talent, paying big leagues rates to your new CFO will put inflationary pressure on what you pay the rest of your executive team.

The key to your problem lies in the fact that you are enjoying rapid growth. If you think that you have a good chance of doubling or trebling in size and / or if your plan is to be taken out by a strategic buyer sometime down the road, think about putting some sort of long term incentive plan (LTIP) in place. This could take the form of a grant of restricted stock or a cash-based long-term incentive plan that mirrors the payout under an equity-based plan. Typically, private company LTIPs vest over a five to ten year period and are tied to both company growth and pre-determined performance metrics.

Having an LTIP in place that could potentially pay off big in the long term will often be incentive enough to make up for any the shortfall in the CFO’s compensation in the short term.