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 considerhiring 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. Enter a senior financial professional. A part-time CFO or experienced accounting CPA firm is a much better fit for most seed andSeries 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 acontracting 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.
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