Starting and scaling a business is filled with innovation, ambition, and growth.
And as a founder, you wear multiple hats, from visionary leader to operations manager and even a customer service representative!
However, there is one critical aspect that often gets overlooked and that is financial leadership.
Generally, finance operations is set up quite quickly within a business, whether that be with external bookkeepers or an in-house team – however a professional finance function is much more than just day-to-day operations.
This is where a Fractional CFO or Finance Director steps in, offering expertise, strategy, and guidance to help you navigate the complexities of finance while helping you maximise growth and minimise risk.
So, what does a Fractional CFO do and how can they help your business?
Financial Strategy and Planning:
- A Fractional CFO can work closely with you to craft a clear financial strategy, helping you set achievable goals and make informed decisions.
Be it extending runway, creating a path to breakeven / profitability, scenario testing or build a growth model for fundraising – having an expert create these models with the business is essential.
Cash Flow Management:
Effective cash flow management is crucial for startups and scale-ups and never more so than now. A Fractional CFO monitors your cash flow, identifies potential issues, and implements strategies to optimise cash usage.
Whether it’s improving your working capital, cost inefficiencies or cost savings or looking at fundraising strategies (be it debt or equity) – having a longer term cashflow strategy ensures that your business knows when to act.
Detailed financial analysis is essential for tracking the performance of your business. A Fractional CFO provides in-depth financial insights, enabling you to adjust your strategies as needed.
Whether it’s looking at the profitability or margin of different products or revenue streams or identifying areas of the business that are working well or need improvement – having someone who looks at the business as a whole, rather than a separate department is useful. Fractional CFO’s can also help the leadership team make informed decisions about the company’s strategic growth and direction, based on data analysis & experience.
When you’re ready to secure funding, be it equity, grant funding or debt, a Fractional CFO can be a valuable asset. They help you prepare financial documents, projections, the dataroom, run all debt lender meetings and help with investor presentations.
With fundraising becoming more difficult, it’s ideal to put your best foot forward and you can do this with using financial experts as part of the team.
Navigating financial risks is part of the entrepreneurial process. A Fractional CFO assesses risks and develops risk mitigation strategies to safeguard your business.
Being very positive about the future and having a growth mindset is in a founder’s and sale’s team DNA. Sometimes is worthwhile having a balanced view so the business can prepare itself for all outcomes.
They can also help ensure that the business complies with relevant financial regulations, tax laws and reporting requirements.
Professionalise Finance Function:
A Fractional CFO will take the existing finance team (whether it’s external or not) and build financial processes, policies and teams. This establishes your financial framework for future growth. (and ensures you pass future due diligences / audits by investors and shareholders!)
When is a good time to hire a Fractional CFO?
As early as possible! However, there are 5 scenarios where a Fractional CFO would be really useful:
- Once your business has started selling to market and you’re seeing rapid growth.
- When you want to raise funds via debt or equity.
- When your business is experiencing some financial challenges, whether that’s cashflow management or other complex issues.
- Your existing team lacks in financial expertise, and you need an experienced person to fill that gap.
- When you’re working in a regulated business where there are additional reporting, compliance, and/or disclosure obligations. Or your board members need additional support.
What is the benefit of hiring a Fractional CFO?
Similar to LegalEdge, filling that General Counsel role, your business may not be at the size to accommodate a full-time in-house CFO.
So, the main benefit is cost. A full-time CFO will cost upwards of £150K per annum + equity and therefore a Fractional CFO is very cost effective.
Other benefits include:
- Flexibility – they can scale up when you need additional support such as a fundraise or an annual budget for the board and scale down when applicable.
- Broad knowledge – most Fractional CFOs have a team working with them, so you can access a broader team rather than just one.
- Experience – Fractional CFOs have and do work with multiple clients and industries and so you can take advantage of their broad experience and knowledge.
What to look for when hiring a Fractional CFO?
Ideally you want to work with an experienced CFO who has worked in the Fractional market for some time. Working as a Fractional CFO is quite different to working in-house, so if you want someone to hit the ground running, than experience counts.
You would also want a Fractional CFO who has worked in similar industries or business models. Be it retail, ecommerce , fintech, SaaS, etc – most Fractional CFOs will have a few sectors that they work with, so ensure that you find one that suits your business.
If you want a Fractional CFO who can implement long term changes and help build your finance function, you ideally also want someone who has soft skills for mentoring and levelling up teams.
As a founder, it’s essential to recognise the critical role that financial leadership plays in the success of your scaling business. A Fractional CFO can be a strategic partner, guiding you through financial challenges and opportunities, ultimately helping you achieve your business goals. Fast Growth Consulting has been supporting growing companies with their finance function since 2019; including training for finance professionals to upskill into that leadership role.
They’re offering exclusive access to their valuable insights in their “Outsourced Bookkeeping Handbook,” to help to drive your company toward long-term success. This comprehensive guide covers essential topics related to outsourcing your bookkeeping to 3rd parties: detailing how to manage this outsourced support, red flags and when to bring financial operations in-house.
To access this handbook for free, simply use the code: FGCGUIDE.
If you have any questions or would like to explore how Fractional CFO services can benefit your business, please contact them on firstname.lastname@example.org