See our list of the top Fractional CFOs in the US, and learn what a solid outsourced CFO can do for a startup. We also offer tips on picking and managing a Fractional CFO for your startup.
If your startup is growing fast and you need someone to manage your finances, but you’re not ready to hire a full-time employee, you may need a fractional CFO. A fractional CFO is an experienced Chief Financial Officer who provides services for startups on a part-time, retainer, or contracting basis. The main responsibilities of a fractional CFO are to:
Fractional CFOs most commonly partner with companies to help overcome financial challenges, achieve growth, optimize strategy, implement systems, raise capital, or navigate an audit and/or transaction. The CFO should be helping translate your company’s metrics into insight that the rest of the management team can use to make strategic, important decisions such as when to make additional hires, when to ramp up sales or marketing spend, or how potential contracts will impact unit economics.
Unlike a full-time CFO who oversees and maintains all general financial strategy or an interim CFO who performs CFO duties before or between CFO hires, a consulting CFO’s duties are usually on a project basis and are specifically tuned to your company’s particular needs, challenges, or goals. This allows your company to benefit from the experience and expertise of a premium CFO without the operating costs of a full-time CFO ie. salary, benefits, and bonuses.
Fractional CFOs work well for Seed and Series A-C Startups. All startups should consider hiring a Fractional CFO at least a minimum of one quarter before a new fundraise to avoid overloading the startup CEOs during a fundraise. Having a CFO to work on the projections, prepare KPIs, answer financial reporting questions - and in the best case - come with existing venture capital relationships, will drive a significant amount of leverage for the CEO during this challenging time.
The story is different for seed stage companies. Rarely, if ever, do they need a full time CFO. Rather, business founders should opt to take a Chief Operating Officer title and preserve full time positions, especially during the early stages. Instead, it is probably worth it to bring on a fractional, senior financial professional. A part-time CFO or experienced accounting CPA firm is a much better fit for most seed and Series A startups because they allow you to lower costs without sacrificing quality output.
Telltale signs your startup is ready for a CFO, despite the series round, include:
Not every fast-growth company needs a fractional CFO, but when it’s time, it’s time! Past Series D, a startup will usually hire a full-time CFO to manage the now growing accounting department, expecting to pay $240K+. However, before you reach Series D, you’ll want to look seriously at hiring for this role, either part time or full time.
Here are a few key items when hiring a senior finance professional on a contracting basis:
You’ve found the right fit. What next?
Securing loans or investments and anticipating future owner compensation.
Fractional CFO’s are often brought into an organization to help you achieve a specific goal such as raising capital or preparing for a sale, merger, or acquisition or optimize your forward-facing financial visibility. An outsourced CFO’s services will include anything and everything the company needs to help translate the founders’ vision into reality from a financial lens.Quality startup CFOs understand the importance of translating each founder’s goal into a reality from a financial point of view and can be trusted to work with you to take your company successfully into the future.
Acquiring fractional CFO services for your business can revolutionize financial management and strategic planning. A fractional CFO, like those who often work with Kruze, work part-time with your team, offering high-level financial expertise without the cost of a full-time executive. This role can take on key financial tasks such as financial modeling, budget-to-actuals comparisons, and board meeting preparations. If provided the right system access, they can also track crucial metrics like customer acquisition costs and lifetime value, manage spending categories, and facilitate communication between the startup’s founder and the accounting team. In particular, Kruze loves working with experienced finance professionals who can help take on the day to day accounting administration, and free up the founder’s time to focus on growing the business.
Fractional CFOs are worth the cost (sometimes as high as $10,000 to $16,000 a month) only if a startup CEO need specific financial advice and work. A part-time finance leader may be worth it if the business needs streamlined financial reporting, oversight on budgeting, better projections, fundraising help, They also step into negotiation roles, handling contract negotiations for new leases or large vendor contracts, and actively manage your startup’s cash and burn rate, making recommendations on optimizing resources. Additionally, a fractional CFO develops short-term, mid-term, and long-term financial strategies to fortify your startup’s trajectory and cash position, assists in securing loans or investments, anticipates future owner compensation, and implements robust systems to support sustainable growth. Fractional CFOs are often brought on board to achieve a specific goal, such as raising capital or preparing for a sale, merger, or acquisition, thereby translating the founder’s vision into a financial reality. So, if your startup is aiming to leverage financial expertise without committing to a full-time hire, a fractional CFO can indeed be an invaluable asset.
Fractional CFOs - at least the most experienced finance leaders we recommend to startup founders - usually charge in one of two ways: hourly or by the day/month. Hourly costs can range from $250 to $500 an hour. Daily or monthly costs are anywhere from several thousand dollars a day to over $10,000 for multiple days in a month. Most part-time finance professionals are looking for a recurring relationship and don’t tend to do one off projects. Instead, they choose to work with companies that they can support over the longer term on a variety of projects from fundraising advice to financial modeling, board meeting preparation, and operational management.
To secure fractional CFO services for your business, consider reaching out to reputable accounting firms like Kruze. Another route is to ask your investors if they have specific individuals who have helped similar companies. Keep in mind, the ideal candidate should not only have financial expertise but also experience in your industry, understanding of your business model, and a cultural fit with your team. Hiring a fractional help can not only help you streamline your financial operations but also offer strategic insights to aid your business’s growth.
What does a fractional CFO cost?
Fractional CFOs typically have one of two main pricing structures. The first is an hourly rate - we are seeing rates from $250 to $500 an hour - or they charge by the day, with a commitment of one to two days per week. Please note the video below has somewhat dated pricing.
The pricing structure of fractional CFOs is significantly influenced by their capacity to manage multiple clients simultaneously. As they typically work with anywhere from three or four clients to up to eight clients, their pricing model needs to reflect not only the value they provide but also the time they can allocate to each client.
If they charge an hourly rate, generally between $250 to $500, the total cost for a client will depend on the number of hours dedicated to that client. However, the client should be mindful that the executive’s time is divided among several clients, which might limit their availability. This is a common issue we see with founders who are fundraising or doing a more complicated transaction.
Alternatively, if the CFO charges a fixed monthly fee, it implies a commitment to dedicate a specific amount of time, often one full day per week, to the client’s business. This model provides more predictability in cost and guaranteed time allocation. However, it’s crucial to ensure that the CFO isn’t overextended, as this could compromise the quality and value of their service. Another item to note is that many startups have their executive meeting on Monday mornings - which can make it impossible for an outsourced executive juggling multiple clients to appear on every client’s Monday morning call.
It’s worth noting that despite juggling multiple clients, a good Fractional CFO will maintain transparency about their availability and capacity, ensuring they can deliver the necessary value to each of their clients. We’ve found that the best ones are able to take a ton of work off of the founder’s plate, while simultaneously improving the company’s financial reporting and strategy.
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