Some startups and growing businesses need experienced financial leadership. But they aren't ready to hire a chief financial officer (CFO). This is where fractional CFOs come in. They offer strategic expertise that's tailored to your needs. And you don't have to hire them as a full-time executive.
Get a FREE review of your books
NerdWallet Small Business helps you get your business in shape for taxes, loans, and growth. Stop worrying about accounting and speak with a real, human expert from our partner, Xendoo.
on Xendoo's website
What is a fractional CFO?
A fractional CFO provides services to businesses that don’t require — or can’t afford — a full-time CFO. These professionals offer strategic financial guidance on a part-time, contractual or project basis.
What does a fractional CFO do?
Fractional CFOs provide many of the same services as a full-time CFO. Those include financial management, strategic planning, fundraising and more. These experts may offer different skills based on their experience, as well as your business’s specific needs.
Here are some of the functions a fractional CFO might handle:
- Financial strategy and forecasting. They may develop a long-term financial plan to achieve your business goals. This could also involve creating financial forecasts to guide strategy.
- Budgeting and cash flow management. CFOs can help create and manage your business budget. They can also make sure your cash flow meets current needs and plan for future expenses.
- Financial reporting and compliance. This refers to setting up or optimizing financial reporting. A CFO can ensure you’re in compliance with accounting standards and regulatory requirements too.
- Financial systems improvement. CFOs may review existing financial processes and offer suggestions to improve efficiency. They might recommend new accounting software or ways to automate financial tasks.
- Performance analysis and risk management. This involves evaluating current performance through financial metrics. CFOs can identify potential risks or opportunities too. They may also sort through data and provide actionable recommendations for your business.
- Fundraising and investor relations. CFOs can build and carry out fundraising strategies to raise business capital. They can value your business, create investor pitches and manage investor discussions.
- Merger and acquisition navigation. CFOs may provide financial guidance as you go through the process of a merger or acquisition. Other tasks could include preparing financial statements and forecasts and assisting with company valuation. They may restructure potential deals and oversee due diligence as well.
- Audit preparation. This involves preparing for an internal or external audit. It may also include making sure your financial documents are organized and up to date. CFOs may serve as a point of contact for auditors during the process too.
Who should hire a fractional CFO?
Here are some instances where hiring a fractional CFO may be worth it for your company:
- You’re growing quickly, but don’t have any financial leadership.
- You need help with strategic financial planning, but can’t afford or aren’t ready for a full-time CFO.
- You’re facing financial challenges and need assistance working through them.
- You’re preparing for fundraising, a merger or acquisition or an initial public offering (IPO).
😎 Nerdy Tip
If you primarily need bookkeeping or accounting support, a fractional CFO might not be the best choice for your business. While fractional CFOs may be able to handle these tasks, they’re a better option for long-term, strategic financial planning. That's because they will likely charge more than dedicated accounting or bookkeeping services.
» Learn more about how to find the best virtual bookkeeping services
Benefits of hiring a fractional CFO
Hiring a fractional CFO has several advantages for startups and growing businesses. They include the following:
✅ They're more cost-effective
Hiring a full-time CFO likely requires a six-figure salary, benefits and equity compensation. Working with a fractional CFO can be a more cost-effective alternative. That's especially true for startups with a tight budget. A fractional CFO can provide the same financial skills that you’d get from a full-time hire. But they do so at a fraction of the cost.
✅ They offer flexible, scalable support
A fractional CFO can provide the specific type and level of support your business needs. That applies whether you need help raising capital, preparing for tax season or navigating financial challenges. These professionals can scale as your company develops or changes. This can help ensure that your financial strategy evolves with your business.
» Looking for tax-specific support? Learn how to find a small-business tax advisor
✅ They have high-level expertise, but there's no commitment
Hiring a fractional CFO means you don't have to commit to a full-time executive who might not be the right fit. And fractional CFOs usually still have extensive experience in finance. Lots have held senior positions across various industries and business stages.
✅ They offer objective perspective
As an external advisor, fractional CFOs can bring an objective perspective to your business’s finances. They may be able to pull from their outside experience and identify financial issues. They might also suggest system improvements. And they aren't under the influence of internal politics or biases.
How much does a fractional CFO cost?
The cost of a fractional CFO will vary. It's largely based on their experience, the hours they’ll work, the services you need and your company’s size. Here’s a breakdown of common rate structures and estimates for what they typically cost:
- Hourly: $150 to $500.
- Daily: $1,200 to $2,500.
- Monthly retainer: $3,000 to $10,000.
- Project based (e.g. fundraising, resource planning implementation): $10,000 to $35,000+.
How to hire a fractional CFO
Use these steps to find and hire the right fractional CFO for your business.
1. Evaluate your financial needs
Before you look for a fractional CFO, think about where you need the most help (e.g. budgeting, forecasting, risk management). Based on your needs and budget, consider what type of fractional CFO arrangement will serve you best. If you’re looking for long-term strategy and support, for example, you might prefer a monthly retainer agreement. This would likely work better than an hourly, as-needed arrangement.
2. Identify qualified candidates
There are several places you can find fractional CFO candidates, including:
- Fractional CFO firms. These companies connect businesses with fractional CFO professionals. Some examples include Preferred CFO, Hire CFO and Focus CFO.
- Online marketplaces. These platforms let you browse financial experts' profiles and connect with ones who align with your specific needs. Examples include Toptal, Paro and Upwork.
- Professional referrals. You can talk to professionals in your network to see if they know any trustworthy candidates. You might consult certified public accountants, bookkeepers, business attorneys or other advisors.
- Industry and professional associations. Many of these organizations maintain directories of financial professionals and offer networking opportunities. Examples include the CFO Leadership Council and Financial Executives International (FEI). You might also search for contacts through your local chamber of commerce, business associations or industry-specific organizations.
3. Choose the right fractional CFO for your needs
The right CFO candidate will be able to provide the financial services your business needs. As you compare candidates, you’ll want to look for someone who has:
- A finance or business educational background.
- Relevant professional certifications.
- Extensive financial experience and a track record of success.
- Worked in your industry and with businesses at a similar stage to yours.
- Experience using financial tools and business software. This could include software for financial management, enterprise resource planning (ERP) or data analytics.
- Effective leadership and communication skills.
Before you hire anyone, check their credentials and ask for references. For example, let's say your candidate is a certified public accountant. You can use a website like CPAverify to check that their CPA license is valid and up to date. You can also reach out to previous clients or employers to verify the person’s track record. Those contacts can give you a better sense of what they’re like to work with as well.
