What Is A Fractional CFO?
A fractional CFO is a part-time CFO for small companies. Rather than working full-time for one business, a fractional CFO works part-time for several businesses. Fractional CFOs are a cost-effective way for small businesses to access finance professionals without the commitment of a full-time employee.
Does My Business Need A Fractional CFO?
There are many reasons a small business would benefit from a professional financial strategy. These include:
- Saving Time: You are too busy to perform bookkeeping and accounting.
- Reducing Complexity: Forecasting has become too complex or too stressful.
- Reducing Risk: You are entering a new market or pursuing vertical integration.
- Forecasting Uncertainty: You are pivoting your business plan and results are yet uncertain.
- New Capital: You are bringing on new equity partners or raising outside equity capital.
- Managing Cash Flow: Growth is limited by cash tied up in inventory or receivables
- Recapitalizing: You want to get new debt or refinance old debt.
- You are thinking about merging or acquiring another business.
There are many more reasons to enlist fractional CFO services, so it’s best to discuss with an advisor, your board of directors, or a finance professional.
What Fractional CFO Services Does A Small Business need?
Part-time CFO services perform all the same functions as a full-time CFO. These include:
- Routine bookkeeping and month-end accounting
- Forecasting cash, revenue, expenses and profit
- Annual budgeting
- Monthly budget vs. actual analysis
- Strategizing with management and providing financial expertise
- Negotiating debt arrangements
- Maintaining relationships with banks, lenders, and investors
- Analyzing customer acquisition costs and lifetime values
- Working with CPAs on annual tax filings
- Performing due diligence and valuation on business acquisitions
How Do I Choose A Fractional CFO?
Here’s some tips for hiring a part time CFO:
- Choose an agency over an individual. There are thousands of 1099 Fractional CFOs of unverifiable quality. Using a reputable agency ensures you’re engaging a vetted and experienced CFO.
- Hire a Fractional CFO team. Good Fractional CFOs bring with them a team of accountants and analysts to support their work, broaden their skillset, and lower your average bill rate.
- Professionalism is better than price. You get what you pay for. Fractional CFOs who charge lower hourly rates often spin their wheels performing inefficient or ineffective work, wasting your time with bad data.
How Much Do Fractional CFO Services Cost?
Cost will vary for each business, as there is no “one-size-fits-all” solution. In general, fractional CFO engagements range from $2k – $30k per month. Major factors that affect your overall cost are:
Major factors that affect your overall cost are:
- Your business size. Larger businesses require more work and have a higher cost.
- The complexity of your balance sheet. Inventory, deferred revenue, or multiple bank accounts add bookkeeping work and increase cost.
- The potential impact of financial strategy. Brokering a big debt deal, helping raise equity funding, studying your gross margins, or analyzing your cost of growth could make or break your business. Therefore, a part-time CFO will put in more work and careful attention.
- The services you select. Many small businesses already have a bookkeeper or accountant. In that case, a fractional CFO will focus on strategy and forecasting, lowering your costs.
- The team behind your CFO. A CFO with a team to delegate work to will be less expensive than an individual.
Good fractional CFO consulting will not overburden your company with services you do not need. As you shop for fractional CFO consulting services, check if you are being quoted the right amount of work or if instead you are being quoted excessive and unnecessary tasks.
Want To Speak To A Fractional CFO?
Schedule a consultation with a Fractional CFO to see if your business would benefit from part-time CFO services.
