Decoding the Fractional CFO: Pros and Cons for Your Business

Growing businesses often find themselves in personnel limbo when hiring new financial leadership. They need help but can’t afford a full-time Chief Financial Officer. 

Enter the fractional CFO, which is just a fancy name for a part-time CFO. 

Fancy names aside, a fractional CFO can provide your growing business with interesting options to smooth the growing pains associated with scaling up. 

Today’s post will cover the fractional CFO concept, when you might consider hiring one, and the pros and cons of hiring one. 

Let’s go! 

How does the fractional CFO concept work? 

Fractional CFOs provide the same forward-looking leadership as their full-time counterpart. But they fulfill their role by handling additional duties within your business or by contracting part-time to provide CFO help for multiple businesses. 

Hiring one usually involves asking your business network for help or working with a CFO consulting firm to find a candidate who matches your business’s goals and needs. 

But before you do, make sure your business is a good candidate for a fractional CFO. 

How to decide if your business needs a fractional CFO

This really comes down to understanding what a CFO does. They work on your business, not in it. You probably want a financial controller if you want someone to analyze how your business did last month or quarter. They handle your business’s day-to-day financial affairs. 

A CFO is in order if you need someone to help your CEO develop a financial vision and strategy. They are more forward-looking and goal-oriented. Whereas a controller would work with your accountants, your fractional CFO would work with investors, business partners, and the board of directors. 

While there’s no hard and fast rule about who should hire a fractional CFO, trends show what kind of businesses gain the most benefit. Let’s look at those now. 

What Kind of Business Needs a Fractional CFO?

Small to medium businesses experiencing rapid growth often need help with strategic financial planning. And they need it from someone who isn’t bogged down in day-to-day affairs. 

So, they are often natural candidates for a fractional CFO. This applies to businesses growing due to a merger, acquisition, or other significant restructuring. 

Startups seeking investors can also be good candidates. That’s because CFOs specialize in investor relationships and provide the financial structure investors are looking for in a new business. 

Finally, project-based companies may benefit from a fractional CFO. A fractional CFO’s part-time nature isn’t locked down like that of a part-time employee. They may work full days, but only for a short period while a company completes a project. 

This may sound like your business but don’t rush out and hire a fractional CFO just yet. There are still some pros and cons to consider. 

Pros of Hiring a Fractional CFO

There’s no doubt hiring a CFO is cost-effective. Often, you don’t have to worry about providing full-time benefits. If you do, it’s only for a short period. 

While you save money, your business is still getting the high-level financial expertise it needs, including assistance with budgeting, forecasting, and financial strategy. 

Scalability is another pro. Your business gets the support it needs during the tough times of growth and transition. It also opens the door to a built-in candidate if you decide to hire a full-time CFO later. 

Those pros are tempting, but every Ying has its Yang, and fractional CFOs are no different. Let’s look at some potential downsides. 

Cons of Hiring a Fractional CFO

Yes, it’s great to save money by hiring part-time, but that means you may only get part-time access. Remember, your fractional CFO is working with other clients and won’t be at your beck and call. This can cause delays in decision making and slow progress. 

The other concern is integration. There’s something to be said about company culture; sometimes, part-time employees don’t fully integrate into it. That sets the stage for a lack of deep understanding of a business’s unique challenges, resulting in missed opportunities. 

The Bottom Line 

Fractional CFOs can provide a bridge for growing companies that don’t quite need full-time help. But be careful to do it smartly.  Use your network to find a fractional CFO that truly understands your company, including its culture. Don’t forget to ensure they understand your business goals and their role in achieving them. 

Covering those bases will go a long way in making your fractional CFO hiring efforts successful and making sound strategic financial moves for your business.