How Do I Choose A Part-Time CFO For My Startup?
Are you wondering, “How do I choose a part-time CFO for my startup?”. This post will answer all your questions and give insight on choosing the best fractional CFO to work with your business.
In Order To Grow – You Need To Hire A CFO!
No matter the industry, from tech to marketing to manufacturing, there comes a point in every small to mid-size company’s journey where they’re faced with a crucial decision: To CFO or not to CFO?
The benefits of a dedicated CFO are clear: expert financial strategy is invaluable for any company looking to grow – doubly so if you have this level of expertise on retainer. However, for many growing companies, CFOs are expensive, and the good ones can be hard to find. Depending on your budget, your workload, and your business goals, a fractional CFO might be exactly what you need to elevate your company’s operations to the next level.
PRO TIP: Companies such as Startup Tandem can provide an outsourced or fractional CFO to help your business get to that next level! Please take a look their services and contact them for a consultation. You can also read this great article and learn how to hire a CFO before you start!
What Is A Fractional CFO?
Think of a fractional CFO like a short-term rental home. Put plainly, these are qualified financial experts who offer their expertise to multiple companies on a part-time basis.
For some companies at an earlier stage of their growth, it is simply not cost-effective to employ a CFO full-time. Instead, fractional CFOs devote their time and skillset in short bursts to multiple companies when the companies reach a crucial stage in their fiscal decision-making. It may not be the perfect solution for every business, but a skilled financial expert can make a huge difference in your company’s trajectory when you need it most.
What Are The Benefits Of Hiring A Part-Time, CFO?
There are many benefits of hiring a part-time (or fractional) CFO. For one, if your business is growing but you don’t want to invest in a full time chief financial officer, this might be the option to get your business to that next level.
A fractional CFO can provide a level of expertise that most companies need to scale but many don’t have the budget for on a full time basis. However, finding a really good fractional CFO may be just what you need to take your business to that next level.
Some of the benefits of investing in a fractional CFO include:
- eliminate cash burn
- increase cash flow
- identify potential issues
- hone in on areas of potential growth
- streamline operational processes
- financial analysis and evaluation of important metrics
When Should A Startup Hire A CFO?
Full-time or fractional, hiring a CFO is a big decision with a big risk. To ensure a suitably big reward, it’s important to first consider your company’s current needs as well as its future goals. There are a couple mile markers to keep in mind to be certain that your company is ready to take full advantage of a CFO’s services before you start scouring the classifieds. Read some of the insights below to learn more about the right time to hire a CFO.
- Annual Revenue
- The big question, as you might expect, is cost. While fractional CFOs cost less, they are still expensive. Hiring one at the wrong stage could end up doing more harm than good to your company’s bottom line.
- First, let’s consider the average salary of a full-time CFO in the US. In 2022, This number tends to range between $150,000 to $300,000.
- A Fractional CFO might charge an hourly rate of $50-$60. Annually, the salary for a part-time CFO might be anywhere from $85,000 to $150,000 depending on the projects they invest in, and the workloads they take on.
- With all of this in mind, the cost benefit of an expert fractional CFO becomes clear. But if your company’s revenue is less than $1,000,000, it may not be in your best interest to hire a part-time CFO just yet. On the other hand, if your annual revenue surpasses $30,000,000, chances are good that you have more than enough financials to manage on a daily basis, and you could likely utilize a CFO in a full-time role.
- Company Size
- Every company will of course vary in their specific needs, but a good rule of thumb for a company size that will really utilize a fractional CFO’s value is somewhere between 10 and 100 employees. Much larger than this, and you start approaching a workload that’s better suited for a full-time employee. But if your company is any smaller than this, it may not be worth the CFO’s time. And likewise, it might simply be more efficient (and certainly more cost-effective) to handle any bookkeeping duties in-house.
- Day-To-Day Bookkeeping
- To get the most use out of a high-value financial expert, it’s important not to slow them down with the more functional, operational tasks that come up every day. Instead, consider delegating the day-to-day bookkeeping to someone in-house. As we’ve established, CFOs aren’t cheap, so it’s best to let them focus on the macro-level, strategic decisions – after all, that’s their area of expertise, and it’s why they command such a high price point in the first place.
- Project Goals
- After you’ve considered all of the guidance above, it’s time to start thinking about what problems this fractional CFO is actually going to solve. Perhaps you’re a startup entering a round of funding, or a mid-size company looking to upscale quickly. Like a short-term rental home, the beauty of a fractional CFO is that you aren’t paying to utilize them when there’s nothing to be done. You can hire an expert to tackle specific projects at crucial points in your company’s growth.
Once you’ve decided on the right time to hire, the challenge then becomes finding the right individual to suit your company’s needs.
Choosing The Best Part-Time CFO Is Important
If you’ve made the decision to hire a fractional CFO, you want someone who will integrate seamlessly into your company’s work environment, servicing your company’s needs expertly and efficiently. But depending on your industry, and your goals, a fractional CFO can provide a range of services. So, if you want the most mileage out of the role, it’s important to find an individual with the perfect mix of attitude and experience.
CFOs can track all of your financials and develop an effective system for accounting. Some are equipped with fundraising experience, and others have experience with company scaling. You may need a part-time CFO to tackle debt negotiations, offer investment advice, or assist with high-concept strategic thinking when it’s time to go public.
It is rare that any one CFO is adept in all of these areas. When you’re making your decision, it’s vital that you refine your search by keeping in mind the precise problem areas that this fractional CFO will solve.
PRO TIP: Read this great post to learn if the time is right to quit your job and start a business! We know it will lead you in the right direction.
3 Steps For Choosing A Part Time CFO
Here are 3 easy steps for choosing a fractional CFO. Read on to learn everything and get started!
Step 1: Establish your company’s current position, and consider its future needs.
While it may not be as big of a commitment as hiring a full-time CFO, it’s not a decision to be taken lightly. Make sure your business is poised to take full advantage of the services that a fractional CFO can provide.
Step 2: Identify specific project goals.
A part-time CFO doesn’t need to be a Jack-of-all-trades role, and that’s exactly what makes them so valuable. Determine the most important holes in your business that a master CFO can fill, and leave the smaller tasks to someone else.
Step 3: Shop around.
The best CFO for one company may not be the right fit for yours. It’s a big investment with the potential to transform your business in a big way. There are plenty of experts in the field, so there’s no reason to settle. Explore all of your options until you find the perfect individual to complement and elevate your business.
CONCLUSION: How Do I Choose A Part-Time CFO?
Building a business is never easy, and it doesn’t happen overnight. It’s a long, winding highway with plenty of challenging roadblocks and difficult decisions along the way. Having a skilled CFO can not only ease the burden, but also propel your business to new heights. Beware, though, as it is a serious commitment – one that requires careful consideration and strategy to be truly effective. If you’re properly prepared, and if you can afford it, it has all of the potential to be the best investment you could ever make.
Companies such as Startup Tandem offer fractional CFO consulting services. They work with startups in many different industries and help hundreds of companies manage and analyze financials. Take a look at their locations below and reach out to them when you have a chance.
You should now have a much better understanding on how do I choose a part-time CFO and we wish you all the best.