CFO Compensation Packages – What’s a CFO Worth?

The market for senior level finance talent is hot. This is especially true for small to middle market companies ($20mm to $100mm in annual revenue) across a range of industries to include technology, products, software, etc. I’m often asked by CFOs what their market value is, and how compensation packages vary with regards to base salary, bonus, equity, incentives, etc. Unfortunately, there is no short answer, and it depends on many variables. For non-financial service companies in this revenue range, we see salaries from $250k – $500k, bonuses from 25-50%+, and equity from 0-2% or more.

If you are exploring the market, negotiating an offer, or lobbying for a raise at your current job, here are some factors to consider:

  1. Size of Company — the size of the company can have a big impact on the compensation level for a CFO. $20-$50mm companies generally price CFOs in the NYC/Boston areas between $250k and $400k base salary. $50mm-$100mm companies will see that range increase by 10-20%. Bonuses can vary, but a 25%-50% bonus range is standard, with some compensation packages exceeding 50% bonus. As the revenue of the company increases, and finance team size grows, so does the cash compensation component for most CFOs.
  2. Stage of Company — where the company is in its life cycle plays a large role in the variability of equity compensation for CFOs. Earlier stage companies obviously have more ability to bring in CFOs with the lure of equity vs. a more established business. A CFO joining a hot startup company early on can sometimes get 1-2% of the total equity. An established company would typically fall into the .25%-.75% equity range. Turnaround and company sale situations are special circumstances, and the increased element of risk often demands a higher equity incentive.
  3. CFO Duties — what type of CFO you are can have a large impact on the structure of a compensation package. For simplification purposes, we’ll look at “outward facing CFOs”, those hired with a mandate to do things like fundraising, dealing with company Board of Directors, possible transactions, IPO, etc.; and “inward facing CFOs”, those hired for more general management of broad accounting and finance operations at the company. Outward facing CFOs are often able to negotiate more lucrative equity grants. Back end cash bonuses are also common for a successful fund raise, sale, etc. If a client retains us to find a CFO who will assist in outward facing activities, we are generally able to negotiate a change of control clause for a liquidity event, larger equity grants, or cash payouts based on predefined objectives related to their hire (i.e. payouts triggered by specific dollar value capital raise, sale of company, etc.). Inward facing CFOs aren’t likely to get a change of control clause, unless they were a founding member of the company. Compensation for internally facing CFOs is often determined by their years of experience and size of the company. Also noteworthy is that the modern CFO in a company below $100mm in revenue can often play a dual role of COO. If non-finance duties are included in a CFO job, base salary tends to increase slightly, say 5-15%.
  4. Contract vs. “At-Will” — if there is a contract, CFOs should carefully consider the terms, and the consideration given. Separation terms, severance agreements, and executive perks are all negotiable. An experienced attorney should review your employment contract. An attorney can also provide good bench marking advice on the contract’s relative fairness.

With the labor market tight, there is generally more inflationary pressure than not on compensation packages for CFOs. As a result, total compensation for CFOs doesn’t tend to vary too greatly among peer level CFOs.


Don’t Lose the Talent War – Fix Your Hiring Process

miss the mark22018 saw one of the most hectic labor markets in decades. The economy is at full employment, and labor demand is sky high. The war for talent is in full swing. Some companies are losing this war however; and here are the two main areas where they go wrong:

Broken Hiring Process  – the #1 reason we see clients lose candidates to other employers is a slow or convoluted interview process. Job seekers in this market have multiple options. The company who makes the best hire is very often the company who moves the candidate through the interview process the most quickly and efficiently. This doesn’t mean you have to rush hires, but go into each hiring process with a plan. I suggest that clients:

  1. Identify who will conduct interviews in advance. Don’t have candidates interview with people for no reason. Pick the key decision makers, or the primary people that this position will interact with, and limit the interview panel to those people. Also, have an idea of who should meet with them, in what order, in how many rounds. If you cause delays or add unnecessary steps, you’ll lose candidates.
  2. Give up on the idea of interviewing or comparing multiple candidates multiple candidates against each other. When interviewing candidates for a high demand position, be prepared to offer the job to the first qualified candidate you meet. In a perfect world, you could meet multiple candidates, compare them side by side, and pick the best one. That is NOT a reality in this job market. Know what you are looking for in advance. Decide on “must have” and “nice to have” qualities. When you meet someone you like, hire them! Waiting to see other candidates is not going to guarantee a better hire. It will however guarantee that you’ll lose good candidates.

Make Good Offers – I’ve had several clients lose candidates in 2018 by starting with low-ball offers. Recent changes in Massachusetts and New York have disallowed employers and recruiters from asking applicants their current compensation. This has made offer negotiations a bit of a guessing game at times. Some succumb to the urge to start by offering a low compensation package, with the idea that they can negotiate up if necessary. This is a mistake. For one thing, candidates are generally insulted or put off by low offers. Second, more astute companies who understand candidate supply and demand are making strong offers to start, in order to show candidates that they really want them. I advise that clients lead with a strong offer. It’s always smart to have some wiggle room if needed, but starting too low can leave a company in a hole that is too big to dig out from. A few ways to make sure your offer is competitive:

  1. If working with a headhunter, talk to them about the offer. The recruiter will hopefully know the candidate, and has already talked about their compensation expectations. Recruiters will also know what the market value is for candidates. Get the recruiter’s advice on what the candidate is worth and what they are looking for.
  2. Compare the prospect against the person they are replacing, or peer level rolls internally. If you are hiring someone to replace Employee Y, use their current salary to benchmark an offer. Is the candidate as good or better than the incumbent? Make the offer reflect how they stack up against known comparisons.

Hiring is a huge challenge for companies right now. Streamlining the process and making competitive offers can go a long way to ensure you staff up with the best possible talent in 2019!

By |December 17th, 2018|Job Offers, job search, recruiting strategy|0 Comments

How To Evaluate a Job Offer

The good news – the job market is great and the demand for talented people is on the rise. The bad news – more job options don’t necessarily mean that people make good decisions.

I see a lot of candidates juggling multiple offers right now. Having competing job offers does sound like a great problem to have, but more options don’t always lead to great decisions. In this market, I feel it’s very important to have a game plan on how you will evaluate opportunities. I recommend job seekers consider three things:

  1. Determine what you want and why are looking BEFORE you start — when I interview a potential job seeker, I have a detailed conversation about what they like, and don’t like about their current role. I want to uncover the “what’s missing” aspects of their current job, as well what they really enjoy. Second, I have an equally detailed conversation about what they want in their next job. I figure this out before I ever tell them about a potential job opportunity. If you are looking for a job on your own, write down on paper the pros and cons of your current job, as well as what you’d like to do in your next job. This is a great list to refer back to when you start meeting with potential employers.
  2. Evaluate potential growth — when considering a job offer, it’s important to look at the growth potential you will have over the next 3+ years. Obviously, it’s impossible to predict the future, but during the interview process you should try to uncover the potential career path and learning/development opportunities you will get. Ask yourself how much you believe in the potential of the company. Compare competing job offers to your current job and make your best guesses as to where you might be in a few years with each opportunity.
  3. Don’t get hung up on money –money is important, but it should rarely, if ever, be a primary motivating factor when looking for a job. If the job offer is going to provide you with a growth and development path that is solid, and it addresses the reasons you were looking for a new job in the first place, you should take the job. A few thousand dollars is not going to change your lifestyle drastically in the near term, but a better opportunity and career path can add up to big future potential earnings. For more about the financial realities of job offers, click here.
By |January 18th, 2016|Job Offers|0 Comments

Realities of an Offer

realities of an offerThe realities of an offer are important to consider when negotiating compensation. In an blog post from February this year, I discussed what a “good” job offer is in this competitive market. In short, a 5-10% bump in total compensation would be considered a strong offer. A link to that article is here.

In this post, I wanted to look at some realities of an offer and why a 5-10% increase is the market norm. The offer stage can be a highly emotional part of the search process. It’s important to remember that on both sides of the negotiation, this is a business decision. Money is important, and negotiating is part of the process, but remember these realities of an offer when approaching the negotiating table:

  1. Friends sort of lie – do not listen to friends or colleagues about their salary. Friends provide some of some of the most unreliable data available. First, people have egos and they tend to fudge the numbers. Second, even if your friend is completely honest about a huge job offer they got, one example does not represent the market as a whole.
  2. You aren’t underpaid – most job seekers I talk to feel they are underpaid. In reality, very few people are underpaid. If you are a top performer with good skills, you are much more likely to be on the upper end of the pay scale for your experience and skills. The economic law of supply and demand sets a pretty standard pay scale for a given skill, years of experience, credentials, etc.
  3. Titles don’t matter – don’t get hung up on titles. I was quoted in a Fortune magazine article the other day about this (link to Fortune article here). In short, titles aren’t universally defined. One firm’s Director is another’s Manager. The responsibilities of the job, how you will develop professionally, and what you are being paid is all that really matters.
  4. Evaluate money last – I always talk about job search motivations at length with a candidate – well before we look at an actual opportunity. Money is important, but it should almost never be a primary motivating factor when changing jobs. A reasonable offer that accomplishes many of the career goals and objectives you were seeking is a great job offer. Even if you receive a lateral offer, why would you not take a job that offered more responsibility, more growth, learning opportunities, etc.?


By |January 18th, 2016|Job Offers, job search|0 Comments

A Good Job Offer

Money_Scales_Balance_crop380wI get a lot of questions from potential job seekers about what type of job offer to expect when they make a move. “What is a good job offer?”, “What is the current market rate for my skills and experience?”, “What will company X pay me?”

The short answer is, your offer will reflect what you  are worth. And right now, for professional positions that require college degrees or greater, relevant experience, etc., that is just about a 5-10% increase in base compensation.

Do some people get more? Sure! Is it rare? YES! The reason for this “standard” level of increase is twofold:

First, supply and demand sets the price. Think back to Economics 101 in college. If demand is high and supply is low, price goes up. If supply suddenly increases relative to demand, price decreases. A given skill set and experience level comes with a pretty narrowly definable price point. Employers don’t wildly overpay for a skill set because they don’t need to. Conversely, they don’t underpay, otherwise people would leave for better pay elsewhere. Thus, the market has essentially set the rate for your skills and experience.

Second, that the average annual increase when you stay at the same employer is close to 2-3% annually, outside employers don’t need to create more of a financial incentive to attract talent. A 5-10% increase is actually quite generous when compared to what you can expect if you stay with your current employer!

Many people are surprised to hear this information. There is a common belief that a good job offer wildly increases your pay. It’s important to keep money in perspective. It really should not be a primary motivating factor when changing jobs! Making a career move should be motivated by better long term prospects, exposure to new skills and experiences, expanding your responsibility, etc. Money will always come to those who work hard and smart! Don’t let short term dollars cloud long term thinking!

By |January 18th, 2016|Job Offers|0 Comments

Counter Offer

Counter OfferI spoke with a contact yesterday who accepted a counter offer. Luckily for me, it was not a deal I was involved in. Unlucky for the candidate, he had no idea about the potential consequences and hazards of accepting a counter offer. Put bluntly, accepting a counter offer is a bad idea.

A counter offer is the equivalent of a band-aid on a gaping wound. At best, it is a short-term fix for the employer which buys them some time before the inevitable happens… that the person accepting the counter offer will leave. That’s right, the VAST majority of employees who accept a counter offer leave within six months. Employers know this, but a counter offer is often cheaper and easier than quickly replacing a good employee.

A counter offer generally consists of two things. First, a counter offer will include promises. The employee might be offered a promotion in six months, a bigger office, or told about “exciting changes” that are coming. Second, they might be offered money. Sometimes, it may seem like a lot more money. The candidate I referenced above was given a 20% base salary increase to stay! Big promises and more money sound good… right? If you get a counter offer, it’s important to remember that talk is cheap. The promises made are almost always empty ones. It’s easy to tell an employee things that they want to hear and never deliver. Especially since employers know that the employee is likely to leave anyway. As for money, while a 20% raise may sound great, it’s only done because it is far cheaper for the employer to offer short-term cash to avoid long-term headaches associated with replacing the employee. Moreover, since the employer knows that person will likely leave within six months, the employer never has to pay out in full. They may give you a 20% salary raise today, but only pay a small amount of that to you before you end up leaving, or get fired! The cost of replacing a good employee is high. A recruiter like myself charges anywhere from 25-33% of a new hire’s first year pay. The cost in time and effort training a new hire is also expensive. When you add up all these costs, what seems like a generous counter offer is actually chump change!

A counter offer can almost never remedy the reasons the employee was looking for a job in the first place. Most job seekers who leave an employer do so because of limited opportunity, a desire for more growth, to work in a new field or industry. A counter offer can do little or nothing to address any of these causes. Thus, most people who take them come to realize this within weeks or months of accepting a counter offer and end up leaving.

The potential fallout from a counter offer is similar to that of a personal relationship. When you accept a counter offer, your loyalty is obviously questioned. You’ll never be considered part of the “inner circle” again. Companies have long memories for this sort of thing, and when it is time for a raise, a promotion, etc., you will be looked at differently. If the company needs to reduce the workforce, it’s very likely your name will be on that list after accepting counter offer. The minute after you take a counter offer, it’s safe to assume the employer is already planning on how to replace you. They know from experience that you won’t stay, but if you accept the counter offer it affords them time to find a replacement in a more cost effective way.

You should rule out a counter offer before you ever look externally. If you get to the point at your current employer where you want to leave, try to address the reasons internally first. If you ask for a promotion, more responsibility, a change in duties, salary, etc., in a constructive way and are told “no”, then you can be pretty confident in your decision to leave. That way, when you give notice you’ll see the counter offer for what it is… a band-aid on a gaping wound.

By |January 18th, 2016|Uncategorized|0 Comments

How To Negotiate a Job Offer

handshake_1Ah… that magic moment when it’s time talk turkey and negotiate a job offer. Many job seekers are nervous, clueless, or both about how to negotiate a job offer. In order to negotiate the best possible deal, here are some tips:

  1. Don’t Discuss Salary Expectations Up Front – in initial interviews, if asked about what you are expecting to make say nothing specific! Don’t give a range, a big number, a little number, etc. Simply say, “I’m currently earning X, and for me this move is more about the opportunity. I’d assume that if you make me an offer it would be competitive.” At the end of the interview process, the onus is on the employer to make an offer. The general rule of how to negotiate is that he who speaks first loses. By telling them what you want, you are essentially negotiating against yourself.
  2. Assume The Initial Offer Is Negotiable – it’s very likely that there is room to negotiate the initial offer. Before doing this, you should carefully compare all aspects of the offer to your current compensation. You should also do research on the job market at your level and within your field. To negotiate properly, you need to consider factors like commuting costs, employee benefits, etc. Try to determine how the offer compares to your current compensation, and the overall market for your skills and experience before attempting to negotiate.
  3. Negotiate For More? – if you are very excited about going to work for the new employer, and the offer is strong as-is, just accept it! However, if the offer is weak compared to your current compensation, or weak compared to a well researched market analysis, don’t be afraid to negotiate and ask for more. At this point, you probably have some idea as to what it will take for you to accept the job. If the offer is significantly below your expectations, you may want to be more aggressive in how you negotiate. Conversely, if the offer is pretty solid, you may still ask for more, but be careful of how hard you push for more.
  4. EVERYTHING is negotiable! Keep in mind that you can negotiate more than just your salary . Bonus, vacation time, stock options, etc. are all potentially negotiable. Let’s say you ask for a higher salary and the employer says “no”. You might go back and negotiate an extra week of vacation. Alternatively, you may ask them to grant you an early performance review whereby you’ll have a chance to prove yourself at the job for 3-6 months and then get a compensation increase if they are satisfied with your performance.
By |January 18th, 2016|Uncategorized|0 Comments