Hiring a full-time Chief Financial Officer (CFO) is a giant waste of time. Most startups, small, and medium businesses should hire a Fractional CFO. More so if you're a digital business, eCommerce, SaaS, or Agency. It’s not enough to find and hire a fractional CFO, they need to be great. Here’s how to find a great fractional CFO for your business.
If you do between $2.5M and $25M in revenue you’ll 100% want to hire a fractional CFO before you hire a full-time CFO. Learning what makes a great Fractional CFO will save you time, money, and a lot of headaches. To help we're going to cover;
- What is a fractional CFO?
- Is your business ready to hire one?
- The benefit of hiring one?
- The Red flags and common mistakes to avoid.
Unfortunately, most entrepreneurs screw up hiring their first CFO. They never consider what their business needs first.
Your business doesn’t need a full-time CFO!
- < $20M in revenue, you’re too small for a full-time CFO.
- Expertise in economics, macro policy, or public markets is useless to you.
- Red tape, process, and management will kill your business. You need an implementation expert, a person who does first.
- Manual work is slow, you don't have time for presentations. You need automation and AI-powered systems.
The good news is, fractional CFOs like Output are a great solution for businesses that don’t need a full-time CFO. But still want to grow profitably.
When do you need a Fractional CFO?
A good CFO makes the difference between healthy profit margins and not. It’s easy to tell when you need to hire a fractional CFO. The common problems you'll be experiencing every day look like this;
- It’s impossible to keep up with requests from your accountant or bookkeeper. Your taxes, filings, and more are all late.
- You lose sleep, have anxiety, and stress out about financial issues. Things like paying bills, making payroll, or purchasing more inventory are stressful.
- You spend 10+ hrs each week trying to make financial decisions. You’re always building or updating financial forecasts and budgets, or doing analyses.
- You know you’re losing money in places. You know you could get better deals on 100 things but don’t have the time to tackle any of them.
- You can’t answer Investors, Bankers, or Lawyers' questions on time. You have no idea how to get any of the information they need.
- You have a laundry list of things to put in place. You know it will all help but you have no time or people.
A great fractional CFO will solve these problems for you.
What makes a great fractional CFO?
Most people would tell you that a CFO is the business's financial leader. Someone who knows how to do financial planning and analysis. Or they are strategic thinkers, experts at modeling, or will help you raise capital. These are table stakes. Like having excel skills. Everyone has them.
A great fractional CFO is something different, they are;
- Chief Automation Officer. They're automation and AI experts. Their value comes from insights and decision-making. Not the building and assembling of data. They're experts at automating as much of your financial processes as possible.
- Information production. They focus on and produce your business's data. You get dashboards, financial statements, and analysis on time, every time.
- Speed of decisions. They provide recommendations and help make better decisions faster. They never say “Let me take that away” or “I need to do more analysis”
- Chief Deal Officer. They are experts at making deals happen. They can do all the basic procurement and legal functions of your business. Sourcing, negotiating, and saving money. They do it for banking, lending, software, suppliers, and more.
- Industry specialization. They have narrow expertise in your industry with your type of business model. They don’t talk about investment strategies, politics, or macroeconomics. They are operations-focused, and strategy driven.
Benefits of hiring a fractional CFO
You may think consultants are a waste of money. You likely had a bad experience with them. You may hate the idea of adding more overhead to your business. That’s alright because a fractional CFO like Output has none of those problems. They have these benefits;
- Bundled services. The best fractional CFO firms bundled together: CFO, accountant, bookkeeper, and tax specialist. This means you don’t have to manage communication between everyone.
- No people management. Managing people and building large teams is not all it’s cracked out to be. Especially if you are not on a mission to build a fortune 500 company. Fractional CFOs don't need benefits, insurance, or HR management. They operate with autonomy which gives you more time to focus on your business.
- Project Focused. Traditional CFOs and finance teams are operations focused. They are experts at checklists and processes. This isn’t the case with fractional CFOs. They're technology-enabled and project-focused. They are always able to take on the next project to keep moving the business forward.
- Better, Faster Decisions. Access the information you need at your fingertips. Building budgets, doing financial forecasts, or creating dashboards. A fractional CFO makes sure you have it all.
- Cheaper. A full-time CFO + Accountant + Bookkeeper can cost you up to $500,000 in salaries. With a fractional CFO like Output, you get it all and more for 10x cheaper at $5,000 monthly.
They may not be a part of your “team” or work full-time on your business. But if that doesn’t matter to you, hiring a fractional CFO is the way to go for you.
Common Mistakes / Red Flags
Everyone screws up hiring a consultant at some point. It’s normal. Increase your chances of success by avoiding these red flags and common mistakes.
- Wrong Industry. If they serve all industries and business models, they are not experts. Avoid generalist CFOs. For your size of business, you want a specialist.
- Manual Process. You want to ask about tools, systems, and software. If everything is Excel or Google sheets, it’s a big red flag. That means they’ll spend more time working on the data, than with it. Decision-making slows down.
- Problem Finders, Not Solution Finders. If they talk about finding problems, that’s a big red flag. If they talk about finding solutions and presenting them, that’s what you want.
- Dull & Boring. Personality makes it easier to work with someone. Being dull and boring isn’t easy to work with. Avoid CFOs that sound like what you see in a movie.
- Operate in isolation. If they have their own solutions, only send emails, or don’t talk in the software where you and your team are. It’s a major red flag. Great fractional CFOs are in your systems, communicating where you do. They have the direct lines you do.
- No project skills. They don’t talk about projects, they only talk about operations and processes. This means they are not going to improve or find new work to help you improve. They are going to operate. That's all. And it's a bad sign.
Using a fractional CFO is a smart move for any eCommerce, SaaS, or Digital Agency with < $25M in revenue. You get all the benefits of a full-time CFO at a fraction of the cost.
