Insights

While the opportunity for growth and expansion in your start-up may be exciting, it also comes with new challenges in finance. One key decision is how you manage your finances as it can significantly influence your startup’s potential success. Adding a full-time Chief Financial Officer (CFO) to your payroll sounds attractive, but many start-ups struggle to afford that in the early days. This is what makes hiring a fractional CFO a powerful tool.

What is a Fractional CFO?

A fractional CFO is a senior financial executive who provides chief financial officer (CFO) services on a fractional, interim or contract basis to help startups gain access to high-level financial expertise. Fractional CFOs really excel when they work with multiple companies simultaneously, as they are able to gain additional insight and experience. Startups end up paying for and receiving the expert advice they need without the cost of a full-time CFO. Fractional CFOs can handle clients of different shapes, sizes, budgets, and needs, and therefore can offer flexibility and scalability that are perfectly suited to the needs of your startup.

The Benefits of Hiring a Fractional CFO

1. Expertise and Experience

A fractional CFO brings critical experience and expertise to your startup, including knowledge of:

• How other firms succeeded or failed
• Running a business with limited funds
• Raising funds from investors
• Gowing marketing and sales
• Managing stagnant or negative cash flow
• How to reach break-even
• How to scale from small to medium enterprises
• Understanding your current financial health
• Setting realistic financial goals
• Solidify strategies to achieve them and more.

2. Cost-Effective Solution

Hiring a seasoned CFO full-time comes at a high price, which can be challenging for a startup to easily afford. Through a fractional CFO, you’re able to acquire top-tier financial expertise at a fraction of the cost. You pay only for the services as needed, whether for a few hours of work each week or during your most crucial points of growth.

3. Scalability

With a growing startup, your financial requirements will change too. The advantage of working with a fractional CFO is that you can scale the services to suit your business needs as you go. You can bring in more or less of your finance partner depending on where your business currently is and where you’re heading.

4. Strategic Financial Planning

A fractional CFO can work with you to develop a complete strategic financial blueprint that can enable you to achieve your business goals. They can help you with budgeting, forecasting and modelling, which can help you make better decisions and plan for the future with confidence.

5. Improved Cash Flow Management

Cash flow management is fundamental to the success of any startup, making sure you don’t run out of cash is crucial to survival and growth. A fractional CFO can help you improve your cash flow, by

• Identifying areas where you can improve cash management
• Lower expenses, and create ways to increase revenue.

That way, you’ll have more cash to put back into the business for investments that drive growth, or when things get a little challenging.

6. Enhanced Financial Reporting and Compliance

Accurate financial statements and regulatory compliance are essential to maintain the trust of investors and stakeholders and attract additional funding. A fractional CFO can ensure your business has good reporting and regular adherence to regulatory requirements so you have the numbers to clearly understand your business's financial health.

7. Access to a Broader Network

Fractional CFOs usually have strong professional networks. They can provide access to valuable personal contacts who can serve as investors, open doors with banks and other financiers, and help you find the best new suppliers and advisors for the company.

How to Find the Right Fractional CFO for Your Startup

As a first-time founder, how do you go about finding that elusive fractional CFO that will unlock and maximise the value of this new key role in your startup? Here are some helpful steps to take.

• Define Your Needs
  First things first, you must decide what you want from your fractional CFO. This means thinking about the kind of skills and experiences you seek, the role you wish to assign, and how much input and involvement are needed.

• Look for Relevant Experience

Make sure that they have experience in your industry or businesses with a similar environment. A fractional CFO who has previously faced and overcome your specific problems will give you the best advice and be better equipped to find and suggest solutions.

• Check References and Track Record
  Make sure to verify references and, even more, to review the track record of the fractional CFO. Have they built successful companies in the past? Were they able to create value for previous clients, and do they receive good references? For a new startup, good performance in your C suite will help to create a sense of well-being, assuring you’ll have the well-rounded staff you need as you grow.

• Assess Communication and Cultural Fit
  The two factors that matter most after the financial skills of your fractional CFO are communication and cultural fit. It’s important to ensure that he or she can communicate complex financial information in a simple yet digestible way, and that the CFO respects your startup’s culture and values.

• Consider Flexibility and Availability

See if the fractional CFO can accommodate your needs in terms of flexibility and availability. Ask what their workload looks like and whether they have enough time to dedicate to your startup.

If you are a startup working on a tight budget, hiring a fractional CFO can truly change the course of your business. A fractional CFO can help your company make sense of financial information, increase cash flow, and build systems for long-term growth and scalability. The right fractional CFO can take your startup to the next level while reducing the common risks many startups face.

Just remember, when you’re finding a fractional CFO for your company, you need to think long-term, things such as: if they ‘get’ your business, if they’re a good match for your business goals, and if they can provide your startup with the financial insights and strategies it needs to scale. It’s an investment worth making.

Want to speak to a professional? Get in touch with us today and we help you discuss what might be best for you and your business.