the fractional CFO
Fractional CFO Services - Accelerate Your Company's Growth With Strategic Financial Leadership
Founders and experienced CEOs face many challenges in managing their financials and leveraging their data for long-term planning. For leaders to effectively position themselves for profitability, they need a strategic financial expert to make sense of the numbers and partner with them in developing a blueprint to achieve growth.
The Fractional CFO is a relatively new position in the C-Suite, yet it’s proving to be an invaluable part of the management team in companies across the board. First, let’s step back and define the role of a CFO at large.
A company’s Chief Financial Officer (CFO) serves as the CEO’s trusted advisor, leading the company’s corporate finance division and overseeing a range of important matters, including:
- Tracking cash flow
- Analyzing the business' financial strengths and weaknesses
- Ensuring accurate and timely financial reports
- Spearheading the company’s overarching financial strategy
CFOs are responsible for the financial health of the business. In many ways, CFOs are the heartbeat of the companies they serve with financial expertise.
Full-time CFOs do not come cheap – a jarring realization many CEOs run into when they realize their need for comprehensive financial support. An experienced CFO typically costs between $300,000 and $500,000 annually once you’ve factored in benefits, bonuses, and other essential components of employee compensation. Due to the staggering costs of hiring a full-time CFO, many small business owners think they can’t afford the support they desperately need.
What Do Fractional CFOs Do?
Fractional CFOs keep businesses afloat and help them to overcome financial challenges through strategic analysis. Fractional CFO Services provide the framework for optimal growth and help companies to take action towards achieving it – similar to their full-time CFO counterparts, just working in a dynamic, entrepreneurial model.
Unlike traditional CFOs, fractional CFOs work on a part-time, contractual basis. They typically work with several companies at any given time while still being an involved and integral strategic partner as your business pursues its strategic growth goals.
Let’s dive deeper into what fractional CFOs do and how fractional CFOs add value to your business.
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Managing Financial Challenges
While many businesses can get by using a payroll company or CPA to manage their finances, bringing a fractional CFO on board can help your company take the next step and navigate the financial complexities of your business today and as you look to the future.
Of the many financial challenges fractional CFOs can address, fractional CFO services are focused on providing the following strategic financial guidance for the company:
- Raising Capital
- Navigating Audits and Transactions
- Managing and Optimizing Budgets
- Overseeing Customer Acquisition Cost Issues
- Establishing Key Performance Indicators
- Addressing Cash Flow Problems
Partner With CEOs In Pursuit of Profitability
Growth is the linchpin for any company’s continued success, and growth looks different for every business! That’s why partnering with an A-level financial strategist is critical to hitting your company’s unique growth goals. While every business has a different road ahead – whether moving into vertical integration, pivoting to a new business model, entering a new market, or raising capital through new equity partners – one thing holds true: your success depends on a comprehensive financial strategy.
Partnering with a company’s executive team, the fractional CFO works with leadership to identify organizational growth goals and weave the business’s complex financial characteristics with the CEO’s vision to create an actionable strategic plan.
While unique in their fractional capacity, fractional CFOs are highly invested in the ins and outs of the companies that engage their services. Beyond overarching financial direction, fractional CFOs can also step in and train staff on new systems and methodologies, bring a profitability perspective to the hiring process, and much more.
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Improve Dynamics Between Companies and Investors
When a company is looking to raise capital or bring investors on board, it must present well-organized and complete financial statements. A fractional CFO can develop these documents for a company and work with the executive team on a larger scale to ensure that the company is in the excellent standing necessary to acquire funding.
Daily Tasks of a Fractional CFO
- Bookkeeping and Accounting
- Financial Forecasts - Cash, Income, Revenue, Expenses, and Profit
- Annual Budgeting and CPA/ Tax Attorney Relations
- Monthly Budget Forecasting and Analysis
- Debt and Loan Negotiation
- Investor/Lender Relations
- Business Consulting
- Financial Planning
- General Financial Strategy
- Assisting to Implement Systems for Optimal Financial Reporting
Your Fractional CFO is a Game Changer for Growth
Needing a CFO is a good problem, as it indicates your brand’s strong growth trajectory. Once you need a fractional CFO to move your company’s financial growth strategy forward, you’ll soon realize the importance of this investment and that as you scale, you can’t afford to continue without someone in this crucial position.
When you bring a fractional CFO on board, they will work with you to assess your needs and identify how much time must be allocated to managing the company’s finances, accounting tasks, and engaging in strategic planning. From there, a fractional CFO will tailor a plan to meet your specific goals.
Many fractional CFOs’ contracts are structured at an hourly rate for a predetermined period. These contracts typically run for one or two years, sometimes with the company’s end goal of hiring a permanent CFO (after that contract period ends). The average contract for a fractional CFO is between $5,000 and $7,000 per month—a far cry from the quarter of a million-plus you’d pay for a full-time hire.
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Here are some of the primary factors contributing to fractional CFO billing rates:
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Business size: a larger business has more layers and drives more hours of work, which may increase the upfront cost of working with a fractional CFO
02.
Complexity of business structure: If you are running a financially complex business, managing that information to the highest benefit of the company increases the hours a fractional CFO spends with your company. Some examples of business complexities include inventory management, deferred revenue on the books, multiple bank accounts, etc.
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Scope of work: Perhaps the single biggest factor in determining the cost of a fractional CFO is the scope, which also drives how the work is segmented. If you start from scratch with getting your finances in order and begin to scale up, plan on more hours for several weeks or months. A fractional CFO’s job is a lot like painting a house—the prep work is interminable, but once the real work begins, it goes quickly. Once the work is done, the painter only needs to come back for touch-ups. This is a bit simplistic, but over time, a fractional CFO may only need to spend a few hours every month with your company if everything is running smoothly.
Key Differences Between Interim CFOs and Fractional CFOs
Some CEOs wonder if an interim CFO is better than a fractional CFO. There are crucial differences between the two, and only you can determine which role aligns with your unique needs.
Interim CFOs - Short-Term Financial Expertise
An interim CFO is just that—a CFO who fills in a staffing gap while you are in the hiring process for a new, full-time CFO. An interim is typically hired for a three-month contract, although they may stay on for six months in some instances. Interim CFOs seldom implement any new strategies or systems. Instead, they simply provide financial oversight and assist with managing financial reporting requirements until a permanent replacement comes on board. Unlike a fractional CFO, an interim does not work with any other clients while they are under contract with your company.
Typically, interim CFOs only work with established companies with a pre-existing CFO position. Some CEOs hire a fractional CFO for a particular project. Some companies that fit this model will also bring a secondary CFO in temporarily during a merger or acquisition or for a new systems integration.
Fractional CFOs - What Does A Fractional CFO Do?
On the other hand, a fractional CFO performs CFO duties for your company on a part-time basis. They put in the agreed-upon hours weekly on your behalf and are free to provide CFO services to multiple companies. Although a fractional CFO has many responsibilities, once they grasp of your business and financials, they can accomplish their tasks in a few hours per week. Thus, the fractional business model is often a better solution for startups or smaller companies seeking a finance professional to deliver sustainable growth.
Startups and mid-market privately held companies ($50m) can benefit immensely from leveraging a fractional CFO’s expertise and fresh perspective. Intelligent financial management is a critical component for future growth. With a strategic perspective and an eye for transforming numbers into opportunities, a fractional CFO offers l the advantages of a traditional CFO in a cost-effective way.
