Hiring a Fractional CFO: Save Time and Solve Financial Problems With One Hire

One of the challenges of being a small business owner is the reality that you are not a jack of all trades. For instance, you may have a revolutionary idea and excel in marketing, but may not have much of a financial background. You may be able to handle all aspects of your business when you...

One of the challenges of being a small business owner is the reality that you are not a jack of all trades. For instance, you may have a revolutionary idea and excel in marketing, but may not have much of a financial background.

You may be able to handle all aspects of your business when you first start your company but find yourself overwhelmed or stretched too thin as your company grows.

Regardless of the reason, it may be beneficial to outsource certain aspects of your business operations. If you’re looking to improve your finances, you can contract a chief financial officer, otherwise known as a fractional CFO. This article will serve as a complete guide to fractional CFO services so that you can determine whether hiring one is worthwhile for your growing business.

What Is a Fractional CFO?

A fractional CFO, or an outsourced CFO, is an experienced chief financial officer who is hired to work for a company, typically on a part-time basis. This CFO is not an employee of the company. Instead, the CFO is brought in:

  • On retainer
  • On a contract agreement
  • On a part-time basis
  • As a freelancer or gig worker

Fractional CFOs are beneficial because they have the experience necessary to take a growing company to the next level.

How Does a Fractional CFO Work?

A fractional CFO is an outside entity brought on board to help solve specific challenges or help companies reach their goals. For instance, perhaps a company has poor bookkeeping practices and is struggling to monitor its cash flow. Or, maybe a company needs help raising capital to grow.

Hiring fractional CFOs allows small businesses to add an experienced CFO to their team without breaking the budget. Because the company is only hiring a part-time CFO, it does not need to invest in the high salary often associated with full-time CFOs.

Fractional CFOs are different from interim CFOs. An interim CFO is someone who a company brings in while searching for a new permanent CFO. These individuals may work for a few months in a full-time role before being replaced.

A fractional CFO, on the other hand, can work for a single company for years. While this person can provide everything from strategic planning to financial expertise, some companies only bring in a fractional CFO to handle a particular project or aspect of the company. It’s certainly possible for fractional CFOs to be brought in on a project-by-project basis.

4 Benefits of Hiring a Fractional CFO

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There are many benefits associated with hiring a fractional CFO. Let’s take a closer look.

1. Years of Experience

Fractional CFOs have enough experience to help you with financial planning and strategic decisions.

Often, small business accounting staff members act more like bookkeepers, focusing on historical and current data. They don’t have the time to shape strategy and make forward-thinking business decisions. But outsourced CFOs can do their due diligence and use their expertise to strategically guide your business in the right direction.

2. Useful During Times of Change

Fractional CFOs could be particularly useful during times of significant change. This can include not only periods of high growth, but downturns as well. Either one of these scenarios may be new to you as a small business owner. Having someone with considerable experience will come in handy when navigating these uncharted waters.

3. Staff Development

Another reason why fractional CFOs are beneficial is staff development. Qualified fractional CFOs have worked on high-level executive staffs before, giving them plenty of experience managing employees. Bringing on someone with such expertise could come in handy when it comes to developing your internal staff.

This development aspect could be helpful if you have employees under you who are loyal to the company. For instance, let’s say that you have a bookkeeper who was with you from very early on. This person has seen your startup grow and has been a big part of that growth.

However, this person doesn’t yet have the technical knowledge to bring your company to the next level. Bringing in a fractional CFO as a mentor not only ensures that your business finances are in good shape, but it will also help develop someone who’s been loyal to you.

4. Special Projects

Fractional CFOs could help if you have a particularly unique project that you need help with. For example, you could be looking to take your project to fundraising but know your potential investors will want to see in-depth financial statements and a break-even analysis.

To date, you have only used a basic bookkeeping software and can’t provide the forecasting models necessary to secure funding. Your new CFO could help you pull this information together. There’s no obligation to keep the CFO on after completing your task.

Frequently Asked Questions

Still curious about whether you would hire this type of CFO for your small business? Consider some of these frequently asked questions.

1. When and where do fractional CFOs work?

The answer to this depends on the contact the CFO has with the company they are working for. If possible, many choose to work as virtual CFOs who work remotely. This is beneficial because it allows small businesses to find the perfect match for their needs, no matter where the company is located. It also allows the CFO to take on work for multiple companies, all while working from home.

The same concept also applies for when the CFO works. As a contractor, the CFO typically has leeway in when they can be logged on, so long as the person meets deadlines and gets the work done. There may be some meetings that the CFO will need to be logged in for but generally speaking, there is flexibility when it comes to working hours.

2. Does a fractional CFO work exclusively for one company?

It’s possible, but not necessarily. The fractional CFO determines his or her workload and may be willing to work for a couple of different companies at once. Because the outsourced CFO will only be working on one project or aspect of your company, this shouldn’t be that big of a deal.

If you want a fractional CFO to work exclusively for your company, you’ll probably have to pay that individual full-time, since they will be missing out on other work opportunities.

3. What qualifications does a fractional CFO have?

A fractional CFO is usually someone with experience working for a high-level executive team. The person will have typically served as a CFO in a full-time role previously.

Technically, a CFO only needs a bachelor’s degree to work in this position. But many are more highly qualified than that and have years of experience and secondary degrees, including a Masters in Business Administration (MBA) and a Certified Public Accountant (CPA) certification.

According to Ernst & Young, 79% of finance leaders agree that the financial management experience of CFOs has increased the demand for them to take on board-level roles. Some of the prior positions that a CFO may have held include:

  • Finance manager
  • Business manager
  • Director of operations
  • Direct of administration
  • Finance director

If you’re planning to hire an outsourced CFO, you can look for an expert in your area of need. For instance, some CEOs specialize in financial strategy, while others may be best at working with startups for early-stage fundraising.

4. How much do fractional CFOs cost?

The cost of this role depends on the person’s responsibilities. Generally speaking, a part-time CFO costs between $3,000-$10,000 per month. This breaks down to around $36,000 and $120,000 annually. But considering full-time CFOs earn an average of $383,000 per year, it’s most cost-effective to hire one on a part-time basis.

5. Where can I find a fractional CFO?

Check out Toptal or Paro. These easy-to-use sites have you fill out surveys indicating what you’re looking for, then they match you with a fractional CFO in as little as 24 hours. Done!

Improve Your Business by Hiring a Fractional CFO

Man looking at paper

If you’re a gig worker trying to grow your business, then hiring the right fractional CFO could help. Adding an experienced fractional CFO to your management team would be beneficial for everything from developing a business plan to keeping financial statements.

Fractional CFOs work part-time or as contractors. They’re considerably cheaper than hiring a full-time CFO. Plus, because they work remotely, small business owners have a lot more hiring flexibility when hiring a fractional CFO. If your small business is ready to take the next step, hiring a fractional CFO as a trusted advisor could help get you there.

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