38% of startups fail simply because they run out of cash. Perhaps a valuable decision-maker missing from your board of directors is a fractional CFO. They could help meet company needs regarding anything from raising capital and equity funding, handling basic accounting, or lowering customer acquisition costs.
Let's see how you can profit from hiring a strategic partner for the CEO who will handle the finances – and how to find the right person to make the most of your existing finance team.
A fractional CFO or chief financial officer is an experienced professional who provides part-time or temporary financial services to businesses. Those include specialized financial management and strategic planning for navigating a business's frequently overwhelming economic aspects.
As opposed to full-time CFO hires, a fractional CFO offers their expertise and knowledge on an hourly or project basis.
Hiring a full-time CFO may be a budget-straining cost. That's why many startups and small companies opt for fractional CFOs. These specialists offer services to multiple companies, helping them overcome financial challenges without a long-term commitment.
In an interview with Fuel's founder Alyona Mysko, Carl Seidman, an FP&A leader and a Fortune 500 fractional CFO, talks about when it's time for companies to start looking for fractional CFOs. Small companies typically only need someone to do their accounting and bookkeeping. Very large businesses require a full-time CFO.
When you're in the middle, within the $5–$50M range, you probably don't need a full-time CFO – or you may not be able to afford them. That's why we're seeing growth in the fractional CFO business. Startups and flourishing companies can profit from working with someone with 20 years of experience who can administer the FP&A responsibilities on a part-time basis.
The key services and responsibilities of outsourced financial professionals include:
See also: 5 key types of outsourced financial services
The primary motive for opting for interim CFO services to take care of your company's financial operations is that it's so much cheaper than hiring an in-house CFO. However, the reasons don't stop there.
It also saves you time. While the fractional CFO handles your financial needs, you can focus on the core aspects of your business. This lets you achieve growth in a faster and more stable way.
Fractional CFOs can create realistic and well-supported financial projections that demonstrate your company's potential. These should include financial statements, key performance indicators (KPIs) and a comprehensive market analysis. They also help to translate complex data into an understandable, compelling narrative for investors.
Professional financial planning also involves thorough risk assessment that includes assessing market risks, operational risks, financial risks and regulatory compliance. Based on the gathered information, they create risk management plans, revise financial policies or implement insurance coverage.
Risk management is necessary for the business to be prepared to respond effectively in the case of any unforeseen events.
Bad decisions that result in huge losses or even business failures are often because leaders base their actions on their instincts or experience instead of facts and figures.
A good finance leader assists their clients in defining and tracking relevant KPIs about the company's health and operational efficiency. They create detailed budgets, forecasts and financial strategy models for simulating the impacts of various economic scenarios.
This shift to data-driven decision-making usually requires an investment in new technology – which a part-time CFO can help you implement and learn to use.
The average base salary for a full-time chief financial officer in 2023 is roughly $147,000 yearly, based on 9,431 salary profiles and without counting bonuses and equity. However, other sources talk about the average base salary of $250,000-$400,000 for an experienced specialist.
If you're going to draft a fractional CFO services agreement, define the scope or time you expect the professional to work with you. The standard hourly rates for fractional CFO services are $250-$400. The monthly costs of hiring a fractional CFO may cost you about $8,000 to $16,000, depending on the number of hours or days you're willing to pay for.
Compare this to the $250,000-$400,000 yearly salary plus bonuses and equity you would have to pay for a full-time CFO, and you'll understand why companies increasingly opt for a fractional CFO.
Carl Seidman advises looking for fractional CFOs who can handle:
Here are some other things to look for in a fractional CFO to handle your administrative tasks:
Experts agree that modern technological solutions are going to augment the FP&A function. Financial analysis tools like Fuel allow people to do their CFO duties more efficiently and effectively, reduce the risk of high-level manual involvement and detect anomalies or errors that might usually take hours (if not days) to identify.
Fuel handles all your accounting, P&L, CF, financial projections, plan/actual analysis and unit economics. It's a financial management solution that combines software with a team of financial professionals to free up your time.
The benefits of using Fuel to handle your financial processes include:
Not to mention, it's just a fraction of the cost of hiring a CFO, from $1,199 per month.
Here are some notable Fuel case studies to illustrate how it can help you grow.
The design agency O0 Design lacked reports and metrics that would let them understand their financial health and performance. They also needed a better project payment planning and pricing policy to track the income and expenses.
Fuel helped them implement a system for collecting and categorizing all data from different sources. We also set up:
The results included:
Hampton, the invite-only membership community for professional networking and coaching for CEOs, had trouble with customizing reports and extracting meaningful data from their financial reporting system. In an attempt to solve this, they tried multiple SaaS tools – which only brought more confusion, errors and wasted time due to different report formats.
They also needed a way to cross-check their revenue stream with the data from their reporting system. Without it, there was no way to plan and budget for well-informed business decisions.
Fuel's FP&A solution helped them create a comprehensive package of finance reports in Google Sheets that combined all the data from the tools they were currently using. These included:
All Hampton reports were supervised by an experienced financial manager, available for consultations through ad-hoc meetings.
The results included:
Petcube allows pet owners to interact with their pets through smartphones with their innovative devices for cats and dogs. They had trouble summing up their monthly financial activities. Their planning and budgeting weren't great either; in fact, it sometimes led to crises based on miscalculations. There wasn't a solid, trustworthy financial system in place.
Fuel brought together all the scattered data from its financial tech stack toolset into one coherent and secure cloud. They automated this to facilitate high-quality, real-time financial reports.
The new Fuel financial reporting system included reports like Profit and Loss, Cash Flow and Balance Sheet. Forecasts deviate only 2-5% from planned results. Unit economics calculate the individual profitability of each Petcube product.
A dedicated financial manager made sure that all reports were on time and readable. They also received an action plan and all-around support on their way to financial growth.
The results included:
Hiring a fractional CFO is a strategic move that will take your whole business to another level – not just your finances. Their years of financial expertise combined with knowledge of your industry will help you minimize losses, plan for the unexpected and find new opportunities to grow.
When looking for someone to fill the CFO role within your company, look for a proven track record of success and industry-specific experience. At Fuel, we're waiting for you with a team of financial professionals to guide you through everything from accounting to P&L, projections and detailed reports.
Sign up for a free, 30-minute demo to turn boring finance into exciting, sustainable growth.
Small companies may not need an experienced fractional CFO. However, if you're in the $5M–$50M range, it's high time to invest in such services to help you grow smartly and efficiently.
A full-time CFO is an experienced finance professional who is fully committed to helping your company grow. Fractional CFOs have the same level of expertise, but they only work with companies on a part-time or contract basis.
Hiring a fractional CFO lets you get the benefits of working with an experienced CFO without the cost of hiring a full-time expert.
A fractional CFO for e-commerce is a chief financial officer with financial expertise specifically in the niche of e-commerce. They help small to medium companies overcome the challenges of online retail, such as seasonality, inventory management, pricing strategies and digital marketing costs.
