What is a Fractional CFO? Build a Legacy Business with Fractional CFO Services
Are you losing sleep trying to manage your business finances? Are you searching for straightforward and sustainable ways to maximize profits? Are you looking for someone to take the CFO hat off your head for good and bring a strategic vision of finances to your company? Well–whether you know it yet or not–you’re looking for a Fractional CFO. Fractional CFO services are designed to lighten your load while helping your brand grow. Keep reading to learn everything you need to know about what a Fractional CFO does and why, when, and how to hire one.
What is a Fractional CFO?
When you’re ready to take your business to the next level, you need a financial leader with integrity and relentless ambition. That's where a Fractional CFO comes in. They can help you identify opportunities and trends, manage and improve your day-to-day accounting operations, and make critical financial decisions for future prosperity, whether you’re looking for immediate solutions to cash flow problems or expert guidance for long-term growth initiatives. They do all this in a contract capacity rather than as a full-time employee, saving you money while making you money (more on that later).
What Does a Fractional CFO Do?
Fractional CFOs come in many forms, and you can hire one depending on your needs and their expertise. For example, some Fractional CFOs operate in localized markets and can come on-site to work directly with an in-house team. Others provide Fractional CFO services outside the client office by accessing client accounting software via remote and/or cloud-based tools.
At Brady CFO, I work remotely with growth-minded businesses with $1-$30 million in annual revenue in mainly backbone industries, such as food production, food service, warehousing and distribution, manufacturing, construction, professional service firms, and more. My Fractional CFO services include:
Acquisition Analysis
Financing Plan Development
Financial Reporting Improvement
Accounting Team Strategy Development
Cash Management
Margin Analysis & Improvement
Credit Financing
The great news is you can have your pick in sourcing a Fractional CFO that will work best for your business. And having a good working relationship is key. They need to become an integral part of your team. So, you have to ask the question: “Does this person have the technical skill set and also fit our company culture and values?” I’d love to help you answer that question on a free consultation call, where you can share your vision for your company, and I share the Fractional CFO services I offer to conceptualize it.
How Much Does a Fractional CFO Cost?
Alright, let’s talk money. How much does a fractional CFO cost? The short answer: a lot less than a full-time CFO. The long answer: let’s break it down.
Fractional CFO services typically cost anywhere from $3,000-$12,000 per month for a recurring engagement. This can look different based on the specific agreement with the client. At the midpoint, you’re looking at a $90,000 annual investment.
Let’s compare this to the cost of a full-time CFO. The midpoint salary for a full-time CFO in Dallas, TX is $243,600. This doesn’t include incentive bonuses, which could bring that annual total to $304,600. Throw in a health benefits package (medical, dental, vision) plus employer payroll tax (typically 20% of the total cash compensation), and you’re looking at a $365,520 annual investment for a full-time CFO. This is more than $30,000 per month.
This isn’t to say you’ll never need an in-house CFO. But I highly recommend businesses wait to hire a full-time CFO until they reach revenues of at least $30 million. It is an expense that the business normally can't bear without revenues greater than that amount. However, investing in Fractional CFO services is a cost-effective solution for many small businesses.
When to Hire a Fractional CFO?
There are two milestones that indicate the need for additional financial leadership in a company. Coincidentally, they both have to do with money.
When Does a Company Need a CFO on a Contract Basis?
While you may have been getting by for the first few years managing your finances alone, once you hit the $1-3 million annual revenue range, a Fractional CFO becomes invaluable. Here are other instances in which investing in Fractional CFO services just makes good sense:
The business is on a high-growth curve and adding employees, etc.
The owners and current business executives are not financial experts.
The business wants to sell and maximize its sales price.
The business is struggling with cash flow.
The business is struggling with its accounting team performance and isn’t sure what to do.
The business has been denied credit by a bank.
The business is looking to acquire a company.
The business owners don’t understand their financial reports and how to improve their financial performance.
When Does a Company Need a CFO In-House?
While a Fractional CFO can support your business for many years, there does come a time when hiring an in-house CFO makes sense. For most companies, it’s when you hit $30 million in annual revenue. From my experience, the full-time leadership an in-house CFO provides to the finance and accounting function of your business becomes essential once you hit this financial level.
If you feel like you're drowning by trying to play the part of CFO in your business and generate less than $30 million in revenue, let’s talk, and we can assess an engagement together.
How to Hire a Fractional CFO?
When it comes to how to hire a Fractional CFO, I strongly advise allowing a potential CFO to conduct an assessment of your current situation. Without an assessment, even a good CFO won’t be able to recommend what you really need.
At Brady CFO, it’s standard procedure to perform a financial clarity assessment with a money-back guarantee for every potential client. This provides you with a complete assessment of your current financial performance and improvement opportunities in your accounting practices. You can learn more about this process and schedule your assessment today!
So, Is a Fractional CFO Worth It?
If your business currently generates <$30 million annually and you desire a stronger financial vision and need expertise on how to improve your accounting and finance functions, yes: Fractional CFO servicesfrom Brady CFO are worth it. I have worked with many clients that wish they had brought on a Fractional CFO sooner because they wouldn’t have encountered so many headaches and financial struggles.
As far as money goes, not only are Fractional CFO services more affordable than hiring in-house, but they end up paying for themselves and then some. At least, that’s my experience when working with clients. My goal is to add value by getting you the financing you need and providing insight into improving your financial performance. While hiring a CFO is not a quick fix (it takes about 4-6 months to implement changes and see results), over time, I can increase your earnings by helping you:
Negotiate a better price on the sales of your business
Negotiate better credit terms with lower interest, potentially saving tens of thousands per year
Reduce the headaches of trying to lead your accounting function and improve your accounting team performance to grow more efficiently without adding overhead expense
Identify improvement opportunities in margins and cash flows and ultimately create a more favorable ROI for your business
Impact Matters–Let’s Make One Together
As the founder of Brady CFO, my mission is to help small, family-owned companies grow. If you want to further your impact but need a strategic CFO to help you do it, we might just be a perfect fit. I’d love to hop on a call to hear about your business goals and share how my Fractional CFO services can help you achieve them. Get in touch today!