Hiring Trends for SMBs: the Fractional CFO

What is a Fractional CFO?

All growing businesses need a sound strategic financial leader – the Chief Financial Officer, often called the CEO’s righthand executive. However many small and mid-sized businesses do not have the budget yet to pay for an experienced, educated CFO. Enter the fractional CFO.

A fractional CFO is precisely what the term implies – a CFO who works for you a fraction of the time. This could be “hours per week” or “days per week” depending on the model for your company.

The Dilemma of a Full Time CFO

When your company is new and/or growing, there are many financial decisions to be made, mostly of a strategic nature. A CFO’s role is to identify these financial decisions and provide experience, guidance and strategy. Some of these issues and challenges may include:

  • Preparing the strategy and company financials for potential investors and various equity funding stages
  • Preparing financial packages for other types of lending
  • Developing the overall financial infrastructure
  • Reviewing and adjusting current accounting systems, processes and reporting
  • Long and short term growth strategy
  • Headcount planning, employee comp plans and facility costs

Typically, it would cost anywhere from $200,000 – $350,000 total compensation for an experienced, educated full time CFO, but many companies simply don’t have that kind of budget. By hiring a fractional CFO, you still get the education and experience for a “fraction” of that annual cost.

Additionally, as a smaller organization, you wouldn’t want to require your CFO to tackle the day to day duties such as accounting, taxes and other finances. When you hire a fractional CFO, you can spread your budget out to get bookkeepers and accountants for these tactical tasks.

A CFO with experience may enjoy this type of engagement as it provides flexibility, challenge and an entrepreneurial step in one’s career. As time goes on, you may mutually decide to make the position a full time employment opportunity to which he or she may want to consider. Or, at that point, they may opt to help you find the right CFO for your company based on having worked with you up to this point.

What to look for in a Fractional CFO

start up company image on laptop screenWhen you’re considering a fractional CFO, start by asking yourself the following questions:

  • Where do we want the company to be two years from now?
  • What is our starting point now?
  • What financial decisions and actions need to take place to get us there?
  • Where are the holes in our financial strategy and growth plan?

Defining your objective is key for finding the right person for the role. Once defined, you may wish to look for the following criteria:

  • Educational level – most CFOs will have an advanced degree and often other credentials, such as a CPA.
  • 8-10 years of experience at the senior management level, plus additional “boots-on-the-ground” tactical experience
  • Experience in your industry or one closely related
  • Experience growing one or more companies from your starting point to your objective
  • Most of all, they should be trustworthy and transparent

The fractional hiring trend is becoming a great solution for all C-level disciplines, including Marketing, Legal and Human Resources. If you would like to discuss your needs for a fractional CFO, please contact us at: [email protected]. We often work with talented folks who may meet your criteria or we would be happy to help you with your search.