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:
- 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.
- 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.
- 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%.
- 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.