Written by Jamie Irwin, Partner, CFO Practice. (5 minute read)
Over the last 18 months, around 37% of the CFOs I’ve placed have been first‑timers stepping into the role. Of those step‑up hires, nearly three quarters have joined within the first six to 12 months of their sponsor’s investment hold.
It’s a clear pattern and shows where private equity investors are willing to back emerging CFO talent.
Where step‑up CFOs get hired
The step‑up trend is strongest in the early hold period.
In the first year after a deal, investors are focused on getting the basics right: better reporting, tighter cash control and a finance function that can support the value‑creation plan. At this point, the business needs real CFO capability, but the company’s still scaling and many processes are not yet fully built.
This creates a tension. A fully seasoned, multi‑exit PE CFO is expensive and, in many early‑stage assets, bigger than the role really needs. A step‑up CFO, often moving from a strong Finance Director or CFO-minus-one level position, offers more headroom and more growth appetite, and often fits better with founder‑led or high‑growth cultures. Early in the hold period, funds are prepared to trade some experience for potential, pace and appetite for being hands on.
Later in the cycle, that trade‑off changes. Around 18 to 24 months from exit, investors are protecting the equity story and preparing for diligence. The tolerance for risk in the CFO seat drops, and the market leans back towards ‘repeat players’ with several PE cycles behind them and ultimately a track record of delivering an exit. In practice, that’s why step‑up CFOs are far more likely to be hired at the start of the investment than mid‑cycle or close to exit.
What a successful step‑up CFO looks like
The step‑up CFOs who do well in PE‑backed environments tend to have a common profile. They’ve led FP&A, data and automation as a direct report to the CFO. They know how to build lean teams, improve reporting quickly and work closely with commercial leaders across the business. They’ll have had exposure to managing inbound requests from the PE sponsor whilst playing a lead role in preparing the monthly board packs for review.
From an investor’s point of view, the strongest step‑up CFOs tend to show:
- A track record of building and improving finance teams, not just overseeing BAU
- Clear evidence they’ve driven growth, margin or cash, not just reported the numbers
- The curiosity and pace to learn a PE playbook quickly
- Have supported on an exit as a number two, running DD and management of the dataroom
When those elements are evident, a first‑time CFO is not a second‑best option. In the right deal, they can be one of the most valuable hires you make.
The real risk: the first 12 months
The challenge is less about talent and more about transition. Moving from a ‘strong number two’ to the CFO role in a PE-backed business represents a significant step-change in accountability and expectation.
The first six to twelve months are typically the most fragile period, where mistakes, delays and credibility gaps are most likely to emerge.
Typical pressure points include:
- Reporting that is improving, but not yet at the quality or pace expected by the board
- Cash and working capital visibility still being established
- Investor communication that remains reactive rather than proactive
- A finance function split between BAU delivery and building the systems required for scale and, ultimately, diligence
If a step-up CFO is left to manage these demands in isolation, the impact extends well beyond the finance function.
At its core, the transition requires a move from executing finance processes to owning outcomes at board and investor level. While strong number two’s are often technically capable, they may have had limited exposure to full accountability for investor relationships, commercial decision-making and the equity story. The role also demands operating at pace, making high-stakes decisions with imperfect information, and influencing beyond finance by partnering effectively with the CEO and wider leadership team, areas where first-time CFOs can still be developing.
How leading funds are managing step‑up risk
The positive news is that this can be managed. The most thoughtful investors now see step‑up CFOs as people to develop, not just hire.
Common approaches include:
- Pairing first‑time CFOs with experienced, PE‑backed CFO mentors who can support them on board packs, cash, lenders and high‑stakes calls
- Setting a clear 90‑day and 12‑month plan tied to the investment thesis, covering people, processes, systems and key events like bolt‑ons and refinancing
- Scheduling regular check‑ins with the CEO and deal team so that expectations stay aligned and issues surface early
- Creating portfolio‑wide tools, such as peer sessions, workshops and playbooks, especially for CFOs in their first year in seat
When this happens, the benefits are apparent quickly. New CFOs get up to speed faster; execution risk against the value‑creation plan is reduced; board, lender and investor confidence improves; and the finance function is stronger by the time refinance or exit is on the horizon.
Why this trend will continue
Demands on PE‑backed CFOs are rising: value creation is more operational and finance leaders are expected to provide clear, actionable insight, not just clean numbers.
In that context, the rise of the step‑up CFO makes sense. Funds want builders, leaders who are strong on data, automation and change and who have the ambition to grow with the asset. The trade‑off is that these CFOs need smarter, more deliberate support in their first cycle if they’re going to deliver at speed.
From where we sit at Finatal, across funds, sectors and geographies, the pattern is consistent: the investors who win with step‑up CFOs pick their moment carefully, usually early in the hold period and then invest in the transition as much as the hire.
The question for the next cycle is not whether funds will keep backing first‑timers; the data suggests they will. The real question is how intentional they choose to be about de‑risking those first six to 12 months, when the learning curve is steepest and the impact on value creation is at its highest.