A business owner is stressed by complicated financial problems.

The Fractional CFO: How To Choose The Right One

Hiring a Chief Financial Officer (CFO) is difficult. Most CEOs have no idea how to vet a finance professional and often choose fractional CFOs for the wrong reasons, such as their likability or interviewing skills. Only after months or years of struggle will they realize their mistake, resulting in a disruptive transition and ruminating regrets. 

At CFOshare, we cannot afford to make such mistakes, so we have developed a reliable vetting and hiring business process which you can learn from. In this article, I’ll explain what we look for when hiring a Fractional Chief Financial Officer so you can avoid making basic mistakes. 

Do I need a factional CFO or a full-time CFO?

I have only ever seen a few small businesses actually need a full-time CFO, usually because they’ve received tens of millions in private equity funding for growth. If you are bootstrapping or venture-capital backed, you will probably be well-served by fractional CFO services.

As a rule of thumb, small businesses under $50M in revenue do best with a fractional CFO, while businesses over $50M may benefit from a full-time CFO. 

Businesses under $2M in revenue are often too small for even a fractional CFO. If your business is this small, you likely just need a bookkeeper instead.

How much experience does a fractional CFO need to help a small business?

I look for hires with a combination of 10+ years of industry experience AND at least 3 years of fractional experience. This combination ensures they have real financial expertise and can consult remotely while balancing multiple clients.

Your fractional CFO should be experienced in your industry, but an exclusive focus can be detrimental. One of the advantages of a fractional CFO is diverse experience, which brings perspective and connections outside your specialized industry.

What should I look for in a fractional CFO?

An ideal Fractional Chief Financial officer will first seek to understand your business and vision, then respectfully challenge your ideas. When interviewing, I look for people who listen actively, ask provocative follow-up questions, and refuse to let me settle for the intuitive decision without analyzing data. Watch out for fractional CFOs who immediately offer small business advice before they know you – this is a red flag!

If this is your first hire or if you’ve been burned by bad fractional CFO services in the past, you should spend some time creating a list of criteria for your next hire. 

Make a list of all your financial goals. These may include things like:I want to get myself out of the bookkeeping

  • I want to feel confident we have enough cash for regular operations
  • I want to grow profit to $1M EBITDA.
  • I want to feel confident we have money to support our next hire.

Make a list of the failures of your past finance team. This might include:

  • Unreliable month close timing
  • Poor cash flow visibility
  • Slow responsiveness to questions
  • Frequently exceeding estimated project budgets

When interviewing prospective hires, see if they ask you about your goals and past failures. This is a good sign. Here’s other things you should look for:

Fractional CFOs are good listeners.

I cannot say this enough: good CFOs seek first to understand you and your business before building models or giving advice. They should listen actively, as thoughtful questions, and earn your trust throughout every meeting. They should care about your goals and approach your challenges with curiosity. 

Fractional CFOs are team players.

The lone-wolf CFO is rarely successful. Instead, the best work with teams of accountants and analysts to delegate work, ensure proper QA checks, and deploy a broader skillset than any one person alone can possess.

Fractional CFOs are polished professionals.

Your fractional Chief Financial Officer should be polite, respectful, and an excellent communicator. You can effectively evaluate this during your prospecting interviews: 

  • Are they focused or scattered? 
  • Do they have a clear process or do they wing-it? 
  • Is their service contract thorough and thoughtful, or simple and lacking?
  • Do they communicate clearly?

The Fractional CFO Shortcut: an agency

If you want to save yourself time, you should only consider fractional CFO services from a reputable agency like CFOshare. These agencies have overhead structures and business processes designed to select and deploy only the best hires for their clients in exchange for fair management fees.

If you would like to learn more about how CFOshare chooses our fractional CFOs, schedule a call with our business development team.

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