How much do you need to Pay your FD as a growing SME?

Do you need to pay your FD £100k or £200k? (and what on earth does the LTIP need to look and sound like?)

• You’re an SME in the £5m – £100m bracket.
• You know you need a qualified finance professional to head up the finance function.
• But what profile do you actually need and how much do you need to invest on day one?

That’s a common equation that we help clients solve.

You could look at a generic salary survey…. it’ll probably give you a banding. But it’s not a one size fits all answer.

Recently we worked with 2 SMEs in South Yorkshire that are maybe 5 minutes drive apart in distance. Both in the £10m – £20m turnover bracket currently. Right now both relatively similar complexity.

One privately owned, one PE backed.  One in manufacturing one in professional services.

Both worked with us to find an FD.  On the face of the original job specs the roles & duties looked very similar.

One paid £180k plus equity (which being blunt will be life changing at point of sale)

One paid £100k + annual 10% bonus

That’s a more-than-significant difference…

So what’s happening and what’s behind the disparity, and if you’re in that market how big does your cheque need to look?!

Let’s start with where is your business at currently – and probably more importantly… REALISTICALLY, WHERE DO YOU WANT TO BE 3-5 YEARS FROM NOW AND WHAT ROLE WILL THIS PERSON PLAY IN THAT JOURNEY??

The realistic element of this question is vital.  Most business owners want to quadruple turnover and profit in the next 3 years, right? But based on current trajectory, strategic plan, investment appetite – on a good day where do you want to get to?

Maybe you are £15m turnover, have just invited PE to the table and want to get to £40m+ then sell.

Maybe you are £12m turnover and would be happier than Larry’s happy mate to be at £14m and £3m EBITDA in 3 years.

Let’s also look at the RIGHT NOW landscape.

Maybe finances are a dog’s mouldy dinner, cash is tighter than you can bear and the FD is going to have a real unravel and rebuild to get stuck into.  Maybe it’s neater than my OCD record collection and it just needs a firm hand on the tiller because you’re cash rich and everything they will inherit is pretty slick.

These things make a difference.

Maybe the PE journey means this person is going to be working some long days and will need to stay away from home frequently.  Maybe it’s the opposite and the culture is pretty chill and you finish at 1pm on a Friday.  Again these things offer fuller and important context.

How hands on are they gonna be?  Do they have a great number 2 on day one who produces the draft numbers or are they rolling their sleeves up to the shoulder and getting down into the dirty?

If you are in the “grow like mad” phase then how is that growth going to be delivered— will it be acquisition driven and if so do you need that skillset (it probably ups the price tag)… or is it pure organic growth that will be executed?

How strong is the wider boardroom – is the FD your out and out number 2 or are they one of the legs on a well made stool of existing directors?  Are they perhaps even the next MD or someone you want to groom for an MBO exit?

Then there are some more specific nuances – do you need sector awareness, international trading experience, previous involvement in PE growth and exit, a track record of ERP or complex system install, ability to get a chunky refinance dusted…

Maybe you don’t need the finished article – an FC now who can transition into the FD role as you get bigger?

Or maybe you just need a steady, seasoned and reliable set of hands to make incremental improvements but keep the ship steady away?

All of this matters.  Small pieces of a larger puzzle that can be fleshed out.  And that can inform where you want to be fishing and how big the bait needs to be.

In all honesty sometimes it also comes down to “our directors are all on £80k – £100k + a car allowance so we need to see what we can get for what budget” – and that’s also fine.

The key is trying to work out what you need now and what you will need in 3 years from now from this person and this role. The time spent at the front end is always worth it if you want to find the best suited talent and if you want to enhance your likelihood of keeping hold of them once they join.

Thanks as always for reading