6 Reasons to Hire a Fractional CFO
There is no magic formula or precise milestone marker for when a company should take on a fractional CFO - also called an outsourced, part-time or interim CFO. However, typically businesses with revenues under $10M or fewer than 100 employees would benefit the most. Fractional CFOs bring extensive knowledge, experience, and finance expertise to a company’s financial health and with the added benefit of cost control since the services are provided on an “as needed” basis. In terms of life cycle, most companies utilize a CFO during the growth stage when they need guidance on the best way to invest for optimal scaling.
Here are 6 Reasons to Hire a Fractional CFO:
1. Professional Experience for a Fraction of the Cost
Very few small businesses require 2,000 hours of a CFO’s time each year. Including salary, bonuses and benefits, the cost of a permanent CFO can easily approach $200k per year. Part-time CFOs typically cost $4k to $6k per month. This would allow you to spend the savings on people, marketing, sales or the next product. In short, fractional CFOs give you more control over your overhead costs and allow you more flexibility than a full-time hire.
2. A Part-Time CFO drives strategic planning and growth.
CFOs play an important role in problem solving, goal setting and strategy development. They can help the management team create a strategic roadmap and develop an action plan on how to meet long-term goals. Using a collaborative approach and working cross-functionally, the finance leader can oversee the planning process by defining metrics, setting challenging targets and holding departments accountable for results.
3. A Fractional CFO can increase your company’s productivity.
Outsourcing the financial and administrative functions of the business frees up time for business owners to focus on other aspects of the business. In addition to finance areas, CFOs can also provide oversight of operations, HR, legal, facilities and compliance as well as investor relations. Experienced CFOs have seen a lot - across many industry and company types - and can provide fresh perspectives. By outsourcing the finance function, business owners can go back to running the business, meeting customers, and seeking growth opportunities.
4. An outsourced CFO can bring stability when there has been a disruption to the finance team.
Businesses can sometimes lose their finance leader with very little notice. A fractional CFO can step in on an interim basis and keep the business running smoothly. Experienced CFOs are very skilled at identifying a company’s needs and getting up to speed quickly. This gives the business continuity and stability as the company searches for a permanent CFO. Sometimes, the company may even determine that a full-time CFO is not essential and decide that a fractional CFO is a better long-term solution.
5. A CFO can improve the decision-making process using data.
By basing key decisions on accurate financial information, business owners can avoid costly mistakes and reduce the risk of loss. Key decisions include financing the business, expansion or downsizing, whether to enter a new market or produce a new product, make or buy decisions and capital investments, to name a few. Effective CFOs utilize relevant financial information to guide decisions rather than relying on “gut feel.”
6. A company may be looking for assistance on a special project.
Companies can bring in outsourced CFOs on varied projects covering the financial and strategy spectrum. There are certain one-time events that are well-suited for fractional CFOs. These include projects like capital raising, investor presentations, loan applications, cost reduction initiative, or entering a new market. Businesses seek outside help in these special cases when they lack the internal bandwidth or expertise to execute the project.