Signs Your Business Needs a Fractional CFO

Headshot image of author James Wheeler
By James Wheeler
August 11, 2022

Businesses grow at different rates. For most businesses, a growth rate in excess of 20% or more annually is a sign of fast growth–or for businesses with a market cap below $1B–30% annually. Tech startups tend to see triple-digit percentages in the first few years, and many others make smaller gains of 5-8% annually and call it a win.

The point is–growth isn’t standardized, and there isn’t a uniform threshold to cross that signals when it’s time to hire a Chief Financial Officer (CFO).

What is a Fractional CFO?

High-quality financial talent can propel growth and open the door to new opportunities by helping you navigate a capital raise or have challenging conversations with your board. Almost every company can benefit from a CFO, but not every company is ready for a full-time executive salaried commitment. That’s where a fractional CFO can meet the need.

Fractional CFO services provide the same level of financial expertise and high-level strategic support but come with a scalable commitment. Growing companies with limited budgets can commit to as few as 5 hours per month or even a limited duration–like a single project with fractional services.

When Should You Hire a Fractional CFO?

Great talent is the lifeblood of successful businesses. It’s not a matter of if your company needs a CFO–just a matter of when to hire and how to access that talent. Here are five signs that your company is ready to consider a CFO.

1. Your Revenue is Growing

Rapid growth can create cash flow problems as spending needs fluctuate to accommodate changes in personnel, inventory, and operations. In the rush to keep up with the demand, it’s easy to miss important financial steps that support sustainable growth.

When your revenue growth outpaces industry standards or is significantly higher than historical trends, it’s time to enlist the help of qualified financial talent to help with cash flow management, budgeting, and forecasting to ensure that growth is sustainable.

2. Your Bookkeeping is Becoming More Complex

Growth also brings complexity, especially in financial management. More sales mean more customers, and that means more of everything else that happens behind the scenes, like:

  • Higher Volume of Transactions
  • More Financial Data
  • Increased Regulatory Compliance Needs
  • More Stakeholders

This added complexity creates new needs. Bookkeeping that once took a few hours per week now requires a significant time investment and added expertise to stay on top of the sheer volume of transactions generated by providing goods or services.

This leads to more complex reporting needs that require the expertise of a skilled CFO to accurately analyze and forecast company financials. Having the right hands guiding the financial health of your company is one of the many benefits of hiring a fractional CFO.

Set up a free consultation with one of our experts today.

3. You’re Planning to Expand

Growth can look like new hires, new funding needs, new facilities, new products or services, or new customers. It might even look like new markets or new business models. Regardless of what it looks like, the common thread between all of the different faces of growth is capital requirements.

A fractional CFO can help you make better funding decisions or strategically plan for sustainable growth in new markets with diligent financial planning and analysis. Expansion plans, like opening a new location or entering a partnership, require careful planning. Most founder CEOs and even the best-trained accountants may not have all of the expertise that a company needs to navigate growth.

4. You Have Funding Needs

It’s no secret that funding can be challenging for many smaller companies, especially startups and growth-stage ventures. While there are plenty of options to explore using both debt and equity to reach funding goals, there aren’t always investors lining up to fill funding needs.

When a bank makes a loan, it wants to know that the guarantor can repay the debt. And when an investor comes on board, they want to know that their investment will grow. With an experienced CFO involved in growth planning and financial management, both banks and investors feel more confident in the transaction.

5. Your Team Has Gaps in Financial Expertise

A chief financial officer does more than watch the money. They are more than an experienced accountant; they’re an executive-level financial professional. A CFO generally has several years of experience and advanced degrees in both finance and business management.

Reporting, budgeting, and forecasting are just the tip of the iceberg for the CFO role. This individual is also instrumental in strategic planning, risk management, and investor relations. Growing companies have many different needs–all driven by money. A fractional CFO can help facilitate difficult financial conversations with a board or provide important financial input during a business deal. For most companies, a CFO can help stabilize the financial strength of the company and support growth.

Enlisting the Help of a Fractional CFO is a Smart Money Move

The truth is that any business of any size at any point in its growth can benefit from the financial expertise of a CFO. However, small startups and middle-market companies may not have the resources to support a full executive team.

Fractional CFOs work with businesses on a part-time, per-project, or limited-hourly basis. This scalability makes access to executive-level financial talent feasible for businesses with a smaller budget for talent.

Headshot image of author James Wheeler

James Wheeler

James Wheeler has 15 years executive financial leadership experience in service and technology companies. He was a San Diego Business Journal CFO of the Year finalist in 2019. James was the recipient of multiple graduate fellowships at the University of California, San Diego, where he earned a BA in economics and an MBA, before complementing that with executive education at MIT Sloan. He has held several nonprofit and for-profit directorships and committee positions over the past 10 years.


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