The rise of fractional CFOs: Who hires them and why

what does fractional cfo mean

However, it also brings its own unique challenges in areas such as financial management, cash flow optimization, and strategic planning…. After a more than 20-year career as a full-time CFO and in other financial leadership positions, he had an “aha moment” when taking a CFO role with a small, early-stage software company. “I was the controller, the accounting manager, and the payroll manager.” But he wanted to just focus on the strategic part of being a CFO, he says. “I thought it might be really interesting to be the CFO of multiple companies simultaneously,” DeGolier says.

In fact, many CFOs have left full-time positions to regain control of their careers and their time. That’s what you’ll find out in this blog post as we uncover how to become a fractional CFO. Copyright © 2023 BerganKDV
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Costly For Small Companies

These costs may mean you end up overpaying for a full-time CFO instead of hiring a fractional CFO. A fractional CFO could be hired using full-time equivalent (FTE) hours, or as a contractor. FTE is a what does fractional cfo mean unit that measures an employer’s number of full-time employees based on the number of hours worked. As an FTE the CFO would be an employee of the organization, while a contractor remains independent.

Instead of getting lost in the numbers, you can focus on making data-backed decisions based on what your fractional CFO provides. Startup fundraising can be tricky, and one of the biggest challenges startups face. But, a fractional CFO can bring the necessary expertise to make it easier. They can help you build your investor presentation, set financial goals and budgets, and identify potential investors. CFOs can provide a wide range of services, from financial planning and analysis to tax preparation and compliance. Because of the wide range of services a fractional CFO can provide, the cost to employ them varies.

Pros/cons of a controller

At many companies, a CFO is a full-time, salaried employee, working solely on advising one business. The right time to hire a fractional CFO depends on your startup’s unique needs and circumstances. And while a fractional CFO can be an invaluable asset for startups and growing businesses, many businesses jump the gun and hire CFOs too early.

During times of economic downturn, businesses face numerous financial challenges that can significantly impact their long-term viability. A recession brings about uncertainties, shrinking profit margins, and the need for strategic financial decision-making. A fractional CFO brings in a wealth of experience across different domains without burdening a startup with exorbitant costs. In fact, hiring a fractional CFO is perhaps the only way a young startup can get access to best-in-the-business expertise without having to pay through the nose for it. Including an experienced finance pro in the room with investors makes them feel more comfortable funding your start-up.

What to Look for in the Profile of a Fractional CFO

With the benefits of fractional work becoming more and more apparent, it’s no wonder that so many CFOs are leaping into this exciting realm. But with the right combination of education, experience, and networking, it’s an attainable goal. Whether it’s spending more time with family or pursuing other interests, being a fractional CFO means your schedule is yours. • Developing business plans, investor and board presentations and packages. • Equity and debt fundraising logistics, advice and coordination, including preparing financial and due diligence materials.

what does fractional cfo mean

Another benefit is that they can bring a fresh perspective to your business. They can offer new ideas and solutions that you may not have thought of before. There are several benefits that come with using an outsourced CFO when compared with a traditional CFO’s role. In this guide, we’ll cover all the questions you may have and discuss whether or not your business should consider hiring one. Close the books 4x faster, collect over 95% of receipts on time, and get 100% visibility over company spending. Like all great business models, it’s an arrangement that suits both sides.

How to hire the right CFO for startups

Successful fractional CFOs help companies raise hundreds of millions of dollars in debt and equity funding. Though the overarching responsibilities are relatively straightforward for CFOs, the specifics of what they do for these companies depends on the company’s individual needs. For example, a company might need to raise capital or implement a new accounting system altogether.