Is it Time to Call in a Fractional CFO?

Consider this situation: Your car is making a funny noise and not driving right. You can open the hood, watch hours of YouTube videos, and try to fix it yourself…but it’s likely not going to be pleasant, and it’s very unlikely you’ll succeed. On the other hand, you could take your car to an expert mechanic and know that the job is going to get done right.

Most rational people would pick the latter. So when it comes to finances, why would any startup go the DIY route instead of leaning on a financial expert when needs arise?

In a nutshell, this is the value of a fractional CFO. 

Many startups are in an awkward in-between stage where they can’t just wing it with Quickbooks anymore, but they’re not quite ready to bring on a salaried CFO. This could be the result of a lack of budget or simply not having the need for full-time support yet. 

A fractional CFO is the ideal solution for teams in this situation. They offer the same high-value services, but they have the flexibility and affordability to meet startups where they are.

 

Pros and Cons of a Fractional CFO

Although fractional CFOs offer a slew of benefits that help startups reach their key milestones, you might also be skeptical about the details of this type of partnership. Weighing out the pros and cons will help you decide if this role will result in a net positive for your startup at this stage.
 

Pros

Cost Savings

The most obvious advantage of working with a fractional CFO is the cost savings. Hiring a full-time CFO is out of reach for many startups, but hiring a fractional CFO is much more realistic. 

Typically, a fractional CFO costs startups about $5,000-$8,000 per month. This is compared to the average full-time CFO salary of a whopping $425,691 per year, or about $35,000 per month.

Industry Expertise

Fractional CFOs have usually had long careers working with a variety of startups. They’ll draw on their experience and knowledge to help you make strategic and thoughtful operating decisions while your startup is still in the early and growth stages.

Objective Insight

A fractional CFO also offers an objective perspective that you can’t get from your full-time team members. While your team is typically entrenched in the business in their day-to-day roles, a fractional CFO is somewhat removed from the inner workings, helping them to see things in a new way. 

Strategic Guidance

Working with a fractional CFO also gives you the ability to analyze the financial health of your business and make critical operating decisions. Their depth of experience gives them the ability to identify common warning signs and areas for improvement, helping your startup be more proactive. 

Cons

Working Remotely

The biggest downside of working with a fractional CFO is that they usually work remotely, so they’re not going to be with you in the office from 9-5. As a result, they won’t be as embedded in your company culture. 

Limited Availability

You also won’t have unlimited access to their time, so you need to be realistic about your expectations and their availability. But when expectations are set correctly up front, most fractional relationships end up being extremely positive. 

Hyper-Specific Expertise

It’s also important to note that not all CFOs will have expertise in your specific industry. It’s worth shopping around and looking for someone who specializes in work that’s relevant to your organization.

Trust and Adaptability

This last con is more about your partnership with your fractional CFO. Trust has to be ever-present in the relationship, as does your willingness to adapt when they’re helping call the shots.  

One time, we were acting as the fractional CFO for a startup. After running an in-depth runway analysis, we realized the organization had half the time they thought until they ran out of cash. This realization pushed the founders to cut costs and focus on cash flow.

This organization trusted our strategic guidance and adapted quickly. This openness in the partnership course-corrected their startup at a critical time.

Why a Fractional CFO is the Right Choice for a High-Growth Startup

Fractional CFOs perform all the same functions as a full-time CFO, including financial analysis, planning, and reporting—just on a part-time or as-needed basis.

This expert team member helps guide your startup’s financial strategy and offers big-picture insights that go beyond what a standard accountant can do. When financial challenges arise, they act as a partner to help you solve them in a way that sets you up for long-term success. 

When startups don’t have the budget to bring a full-time CFO onto their team, the quality of their financial planning is often at stake. For startups that are currently at a high-growth stage, whether bootstrapping them or seeking investments, this is the time when airtight financial planning is crucial. 

When is the Right Time to Hire a Fractional CFO?

Hiring a fractional CFO is a big decision, so you don’t want to rush into it. Before you start your search, you want to make sure you’ve asked yourself all the right questions to set you up for success. 

Are You Starting to Have Conversations That Require Expert Financial Insight?

Ideally, you want to take a more proactive approach to your finances. 

Instead of bringing a fractional CFO in only after problems start to pop up, you want to get them in the conversation to prevent these problems from happening in the first place. Backtracking on financial decisions that were made without expert guidance can end up costing you more in the long run. 

A good rule of thumb is that if you’re starting to have strategic conversations about your finances both internally and externally (with investors, a board, etc.), it’s likely time to bring a fractional CFO on board to guide you.

Do You Understand the Unit Economics of Your Business? 

If your answer to this question is anything other than a confident “yes,” then you likely need some expert guidance. 

Bringing a fractional CFO on board helps you understand the economics of your organization on a deeper level. This understanding helps you make smarter business decisions that are rooted in the unique needs and opportunities of your startup. 

Be sure to check out Graphite’s financial dashboard demo, which illustrates how a fractional CFO can help you better understand your unit economics.

 

Have You Found Product-Market Fit? 

If you have, that’s great! Now it’s time to kick your financial strategies up a notch. 

Once you’ve reached this important milestone, you’re likely going to need additional financial support to scale. At this point, it’s an execution game, and you need a well-rounded grasp of your financial health to move forward successfully.

Are Your Investors and Board Members Requesting Financial Data? 

To maintain trust with your investors and board members, financial data needs to be communicated clearly and accurately. 

Without a dedicated team member, you may not be confident in the accuracy of your financial data and the best strategies to present it, or you may simply not have the time to invest in high-quality reporting.  

A fractional CFO helps you reliably prep financials to report to the board and investors. These individuals likely have a ton of experience doing this, so you can lean on them to make you look confident and prepared. 

Are You Nervous About Your Cash Flow? 

Running out of money can seal the fate of a promising startup, so you want to have a solid plan in place to dodge this possibility. A fractional CFO will build a cash flow roadmap to help you plan ahead and avoid running out of funds. 

If you want to take a long, hard look at your cash flow ahead of this decision, check out Graphite’s cash flow template. 

Are You Planning an Acquisition or Merger in the Near Future? 

Both acquisitions and mergers come with new financial territory. A solid financial foundation and airtight financial planning can make the difference between a smooth and successful transition and a rocky start.

A fractional CFO has the expertise to advocate for your best financial interests and prepare you for any thorny financial groundwork.

Give Your Startup the Expertise You Need

Your team is busy doing what you’re best at, so let a financial expert come in and help them enhance their skill sets. 

Having a fractional CFO on board gives your startup the expertise you need to grow, scale, and hit your targets. Whether you’re trying to build a financial foundation, anticipating some major changes soon, or just have a specific need for expert financial guidance right now, a fractional CFO will help set you on the right path. 

If you’re ready to make the leap, Graphite is here for you. We’re a financial accounting firm built with high-growth startups in mind. Our fractional CFOs handle everything from fundraising to financial modeling. 

Start your journey to startup success by learning more about how we can help.