When to hire a fractional CFO

Do want your business to have the kind of financial oversight that can weather any storm and grow year after year? Is your bottom line unable to sustain the expense of a full-time Chief Financial Officer, but you want the ability to forecast and budget? If so, consider using a fractional CFO which is an individual with extensive executive-level finance experience who pools their hours for multiple companies in a part-time, as-needed capacity.

 

When you use fractional CFO services, you’ll get the expertise of a full-time Chief Financial Officer for a small percentage of the expense of hiring a full-time executive. This can be an excellent alternative for lean businesses.

 

While financial professionals like accountants, bookkeepers, and controllers keep your data organized and thoroughly documented, a CFO focuses on the future –helping you figure out how to get from your current situation to achieving all your goals.

 

A full-time CFO oversees all financial operations in an enterprise. On the other hand, a fractional CFO helps a business overcome a specific challenge or provides strategic advice. This is perfect for companies who prefer to pay “as-needed” for high-level support on-demand.

 

Most fractional CFOs are experienced C-suite veterans who spent years helping businesses navigate difficult financial challenges. Because fractional CFOs typically work with all kinds of companies, they bring a diversity of experience to the table.

 

What Does a Fractional CFO Do?

A fractional CFO performs all the same functions as a full-time Chief Financial Officer, only on a part-time basis.

 

They can help you raise capital so you have sufficient financial reserves to roll out a new product, buy new equipment or hire additional team members. For example, they might perform a valuation, talk to prospective investors, and handle all the due diligence and post-deal paperwork.

 

A fractional CFO can provide the accurate financial forecasting your company may need to confidently make plans for the future. Perhaps helping you determine when and how to secure loans and investments.

 

If you only need a seasoned financial specialist to tackle specific one-off problems, consider hiring a fractional CFO. Their outside perspective could help you see a particular difficulty in a new way, giving you the insight and clarity to overcome the challenge.

 

Other Benefits of Hiring a Fractional CFO

As financial advisors, fractional CFOs, similarly to full-time CFOs, oversee the processes and formulate the strategies that keep an enterprise on sound fiscal footing. A CFO can translate complex financial metrics into actionable information the rest of the executive team can use to make crucial company decisions. For example, when to bring in new team members, ramp up sales, or increase marketing spend.

 

If you need to boost your company’s profitability, a fractional CFO can scrutinize operations to identify the areas where you need to slash spending or opportunities to raise revenue. Sometimes, organizations hire a fractional CFO, even with a full-time CFO on staff, to act as an outside consultant or to lead separate projects, such as raising capital or overseeing an audit.

 

A fractional CFO can help corporate executives scale their business to maintain a healthy bottom line through seasons of expansion or downsizing. They can streamline the tools a company uses to create value for a continually growing customer base –helping overcome the challenges of decreasing margins as a company grows revenue beyond a certain point.

 

When Does a Startup Need a Fractional CFO?

For start-ups, a fractional CFO represents significant cost savings because they only pay for the financial oversight and strategies they need. Most early-stage startups don’t have full-time CFOs on their payroll because they don’t generate enough revenue to justify the cost. However, when the company is rapidly scaling up, a fractional CFO needs to be brought on board—even on a temporary basis.

 

As a startup starts to expand, its fiscal responsibilities become too complex for non-seasoned financial experts to manage. At this stage, founders need a specialist capable of seeing the bigger financial picture, which is exactly where fractional CFOs shine the brightest. Engaging an experienced financial advisor during your startup’s most challenging times can mean the difference between failing to meet expectations or successfully outperforming them.

 

As a company grows in complexity, internal audits become necessary to ensure that it remains financially viable. The technical nature of these reviews usually means that founders need to bring in outside help with the required skills to handle them, and fractional CFOs can do that.

 

What Qualities Should a Fractional CFO Have?

Just like hiring a full-time C-suite member, the ability to fit in with your workplace culture is crucial. That’s because a fractional CFO will be one of the CEO’s most trusted advisors even while only working part-time. Investors, board members, and other stakeholders must be comfortable with whoever you choose.

 

It’s also essential to find a fractional CFO compatible with your managerial style –someone that brings complementary skills to the table. For example, if you’re a CEO who’s not detail-oriented, hire a chief financial officer who’s comfortable getting into the weeds.

 

A fractional CFO must have a demonstrated track record of producing the results your company needs. However, this doesn’t necessarily mean that the candidate only worked in similarly sized companies or in your specific industry. Having a different perspective can help you solve challenges you previously struggled with.

 

On the other hand, if your company operates in a niche industry, you might need a fractional CFO who’s a specialist in your field. As an example, sectors like biotechnology have unique capital and cash flow requirements, and hiring a fractional CFO who has worked in these areas can help create the right financial strategy for your operation.

 

Disclaimer: This article is not, nor should be, considered legal, tax, or business advice of any kind. Always consult with experts (like Smith Jeffries) regarding any and all matters having to do with the financial future of your business.