An affordable and effective way to accelerate the growth of your business for a fraction of the costs, could be hiring a Fractional Executive. Instead of a full time working executive, a fractional CFO may incentivize growth and include a lot of benefits for your business. Explained below, you may understand how they can challenge the status quo of your company.
As we know, a chief financial officer (CFO) is a top level executive, who handles everything relating to cash flow, financial planning and taxation issues, in other words he is responsible for a company’s financial affairs.
On the other hand, a fractional CFO is an executive that has the skills and experience of a C Level professional, but instead of being hired as a full time employee, they manage the responsibilities of being a CFO on a part time schedule or under fractional basis. This alternative allows them to take care of the financial affairs of your business only when needed and therefore, at a fraction of the cost.
In this modern world, a fractional CFO is not only a solution for startups, small and mid size companies can also benefit from the expertise and insights of this executive, since they can deliver the same benefits as a regular CFO, but under a new scope of management.
What are the benefits that a fractional CFO can offer to your business?
Fractional executives have experience in more than one company or industry, this brings to the table a broad and diverse professional background, due that they tend to develop a wider and more comprehensive judgment in the management of the financial actions of a company. Also, they are able to deliver value into your business from the learnings that they have had in other experiences and industries.
Since a CFO must provide actionable recommendations, not only to diagnose a financial problem within a business, but to design a map on how to solve them. Having an executive involved in your team with a track record of failures and successes, and a broad portfolio of companies, could be an affordable and outstanding addition.
Fractional executives are not consultants, the difference between these professionals is that a fractional executive is required to offer operational assistance and can be held accountable for daily business and the outcome of the projects they oversee.
So, what are the tasks that a fractional CFO should address in your company?
Here’s a list with some of them:
- Developing a short and long term financial planning
- Ensure that a proper financial foundation is in place
- Oversee Accounting and Reporting
- Provide support and assistance throughout an audit
- Deliver strategic financial advice
- Implement systems to ensure that the company’s requirements are met
- Designing and developing raising capital strategies
- Resolve cash flow challenges
- Forecasting & Budgeting
- Address specific issues, like having high expenses or low gross margins
- Drive performance in conjunction with COO and Sales
Nevertheless, all this task should be goal oriented, they are called upon to suggest and take action to shift the route of a company in order to meet the objectives. In addition, an experienced CFO can influence and manage unexpected events like shifts in the economy or the appearances of unforeseen financial problems.
Startups pivoting to fractional executives are companies that:
- Have outgrown their operating model and need to level up.
- Companies with an operations manager without the strategic skills of a CFO.
- Companies looking to delegate financial duties that have been solved to date but don’t require a full time position.
In general terms, startups or mid-size companies looking to scale up, in need of expertise and guidance but with a limited budget for talent.
Hiring a fractional executive is the most cost-effective way to bring the needed talent into your company without going broke.
It is common to see that companies who are still struggling to see revenue, become very cautious with the financial compromises that they acquire, oftentimes, hiring a full time CFO might be out of their initial spending priorities, despite the need that they might have of this expertise. This is where fractional executives come into the picture as a cost effective way to bring talent, more experience, require almost zero training and help businesses to scale up rapidly for a fraction of the cost.
As startups and mid-size companies require high level professionals, a lot of times these don’t have the budget to hire them, this is why a fractional executive is a valuable alternative for companies that can work with experienced and trusted minds that would be unreachable for their current budget. This translates into having one person in the task not only to solve the problem at hand, but to also get a diagnosis or analysis of the financial operations of a company and provide with a map to follow to achieve them. It is the most cost effective way to bring high value talent to a company.
To fix only what is broken, mid-size companies that may not have needed a CFO in the past can set new objectives and come up on the horizon or the economy shifts. This new challenge can be addressed by the experience of a fractional CFO, with the same amount of experience and with a goal oriented scope.
- Considering that it is more than likely that in the first year of a business, talent management could fail to recognize the right employees. This would mean extra costs, pressure and a deviation from a growth route.
- These high level executives work for a percentage of what a full time employee does.
- They work for an hourly-bill rate instead of a monthly price tag, they won’t sit idle in an office, and sometimes, they don’t even need to be in the same physical space.
- They are also considered investments, so a company founder can rely on equity or a percentage of revenue to make an attractive offer and lower the cost of employment.
- The flexibility for the fees to be paid is also a factor to consider. Instead of a monthly fixed payment, these professionals can work on a fee per project, recurrent monthly fee or even results based fees.
Mixing flexibility of payments, a modern work model and high level expertise, allows starting companies to scale up its operations are all factors that make a fractional CFO an effective and profitable solution for a business.