The chief financial officer at a company is usually responsible for the reporting of financial information, for understanding the business’ financial condition and for developing a strategy to help a company grow and succeed. A CFO is an executive-level position and usually comes with an executive-level salary and benefits package. While there’s little argument that a CFO provides value to a company, many businesses don’t have the budget to hire a full-time CFO or might not need the full-time services of a CFO.
What are companies that aren’t quite ready for a full-time CFO to do? One option is to work with a fractional CFO, also known as a part-time or outsourced CFO. When a business only needs the support of a CFO some of the time, working with a fractional CFO can be the best option.
What a Fractional CFO Does
The word “fractional” suggests that a fractional CFO only works with a business for a fraction of the time. How frequently a company works with a part-time CFO depends in large part on its needs. It might be the case that a company brings on a fractional CFO around tax-time or when it is reviewing its business plan. In some cases, companies might work with a fractional CFO when they are mapping out a plan for growth and want advice on the best ways to obtain financing or when they are considering selling all or part of the business and want feedback on the value of their company.
The Benefits of a Fractional CFO vs. Full-Time CFO
One of the most significant benefits of working with a fractional CFO rather than a full-time CFO is the cost. When a company partners with a fractional CFO, it is only working with the person as needed. Depending on the fee structure of the CFO, the company might pay a flat fee for a certain amount of service or might pay by the hour. In contrast, a full-time CFO usually expects to receive an annual salary, as well as other perks that go along with full-time employment, such as retirement, health insurance and paid time off.
Another benefit of working with a fractional CFO, particularly for newer or smaller businesses, is that they are able to work with a person who has many years of experience in the industry. When newer companies are looking to hire full-time positions, the CFOs who might align with their salary requirements might not align with the level of experience the company needs. Fractional CFOs typically work with more than one company at once, as they are contractors who maintain a roster of clients. They bring years of experience and a high level of expertise to the table without the high cost of a full-time employee.
When to Hire a Fractional CFO
The best time to hire a fractional CFO is when your company needs financial guidance or assistance in planning its next steps but doesn’t want to or is unable to hire someone full-time. For example, a fractional CFO can help your business develop or adjust its strategy and business plan for growth. If your company has reached a point where it needs to make an important decision about what to do next, it might be time to hire a part-time CFO. Another time when it is appropriate to hire a fractional CFO is when your company is looking for new sources of financing or when it needs help determining what mix of financing will best help it reach its goals.
What to Look for in a Fractional CFO
One of the most important things to look for in a fractional CFO is an interest in your company and a desire to establish a relationship with your business. When people only work together on a part-time basis, it can be easy to give those part-time commitments less of a focus. You want a CFO is going to be fully invested in your business and fully interested in establishing a rapport with you. A fractional CFO who’s interested in what makes your company tick and who’s interested in developing a sustained relationship with you is going to be more likely to deliver the care and attention you need to achieve your goals.
New Direction Capital provides fractional CFO services to companies. To learn more about what we do and how we can help your business, contact us today.