Most agency owners I’ve met (myself included) started as “makers” first: designers, developers, marketers, writers. No finance background. But until we can hire that expertise, we’re not just the CEOs – we’re the CFOs too.
Don’t worry though. Playing interim CFO doesn’t mean we need an intergalactic spreadsheet with a thousand tabs. Or MBA-level financial models.
Instead, what helped me was following a few super simple guidelines: straightforward, easy-to-follow rules that kept the lights on, reduced my stress, and gave me enough clarity to make better decisions.
These aren’t advanced CFO strategies, and this isn’t financial advice. They’re just strategies I learned from others, and employed myself, that worked for me.
To wit:
Keep 3 months of cash in the bank
“Cash” meaning: if you need $100k a month to keep everyone paid and the lights on, you should have $300k cash in the bank. “Cash” is liquid, quickly redeemable. I kept it as actual cash in a business savings account (earning some marginal interest) instead of in something like CASH.TO or other short-term instruments, but you do you.
If I had more than three months of cash in the bank, it was usually for a clear reason (e.g. a big one-time outlay planned, sales metrics weren’t great, or because forecasting felt shaky).
Invest additional cash via a HoldCo
When I had excess above the 3-month buffer, I would sometimes pay it up to a HoldCo (I was the shareholder of the HoldCo; HoldCo was the shareholder of the OpCo, aka my firm). This gives an extra layer of protection from lawsuits and let me invest more tax-efficiently.
Worth noting: Canadian rules on HoldCos and passive investment income are a bit nuanced (e.g. passive income can claw back the small business deduction), and presumably American ones are too, so I found it useful to work in conjunction with my accountant. Hi Kevin!
Have 6 months of cash in funnel
Same deal as “cash in the bank”: if I needed $100k a month to stay afloat, I aimed for $600k of potential deals in the funnel at a minimum. That usually meant using a CRM and being wary of elephants in the pipeline (e.g. one $500k deal making up 80%+ of the total).
Check out this sales calculator for a few additional agency sales KPIs.
Pay yourself fair market value
Real talk: I did a bad job of this until late in the game. In retrospect, I should have done a much better job of paying myself what I’d need to pay someone else to do my job (factoring in both base and variable comp).
A few reasons for this:
- Being paid appropriately makes it a hell of a lot easier to deal with the stresses of running a business.
- It forces you to build a sustainable agency that isn’t subsidized by the savings from your lesser salary.
- A lower-than-FMV salary for owners will be accounted for in valuation on acquisition (if you’re looking to sell), meaning your valuation will decrease to offset your lower salary. This can matter more than you think, when you factor in multiples of 3-year firm financial performance.
Review and act on overdue invoices bi-weekly
Another handy finance rule for agency owners: I checked accounts receivable every couple of weeks and, importantly, had rules for what happened next. For example, at what threshold (financially or date-wise, or both) would I: follow-up? Let the client know we’ll have to stop work until payment? Actually stop work? Threaten to break some kneecaps?
(I learned this the hard way when a client stiffed us $130k after a year of being perfectly on time with payments 😬)
(Don’t worry, he eventually paid it back via a monthly payment schedule)
(Ok, no more parantheticals)
Forecast revenue out 3–6 months
And update that forecast at least monthly. Being able to look ahead to future revenues, without being too subjective and mostly objective / data-informed, meant I slept much better at night.
If you do this, the how depends on how your firm operates. I had a very simple system at first; it worked because I simplified our billing practices:
- Recurring invoices totalled and averaged over the coming months, plus
- Each month’s pre-made, scheduled draft invoices in our system, plus
- A weighted percentage of won deals in our funnel, then
- Copy-paste into a spreadsheet, total it up, weep / dance.
It took me less than an hour every couple of weeks. Now, this could be done very easily with AI agents, simple prompts with screenshots, or via AI pulling directly from your CRM and accounting software (sidebar: what a great use for AI!).
None of these finance rules for agency owners required fancy spreadsheets, a finance degree, or deep financial know-how.
They’re no substitute for a CFO either – or the kind of financial chops an owner needs when their numbers really start to grow. But they made handling the firm from a financial standpoint something I could actually do without losing my mind, or unknowingly steering us into the ditch.
And honestly? That was enough.