The fractional CFO

Many companies are encouraged to outsource their non-core functions.  This concept has ushered in a new era of consuming products and services and is especially relevant in the technology services sector such as software-as-a-service, or cloud computing. 

Outsourced services provide a rapid, flexible way of doing business in a hyper-connected world, at a fraction of the cost in-house.  Companies that use these services benefit because they pay only for what they need. Vendors offering these services reduce waste, which simplifies processes and saves money.

Another example of an outsourcing function is the role of the “fractional CFO”, as opposed to a traditional CFO. 

A CFO is a key business partner and financial strategist for the CEO.  They can develop financial strategies, sales pricing and operations, negotiate contracts and otherwise maintain the company compliance functions.  The fractional CFO does all of this, too – but only as much as a client wants or needs. 

For example, if you are an institutional investor-backed startup with fewer than 50 employees, odds are you don’t need a full-time CFO.  The fractional CFO fills this roll for the company on an “as needed” basis. 

So what are the key benefits of using a fractional CFO?  Here are the top three:

1. You only pay for what you use – The company consumes the services of a highly experienced CFO on the company’s terms.  Typically, fractional CFOs are needed to help provide financial guidance as little as a few hours a week.  Workloads typically increase during quarter or year ends, including board meetings and audits.
2. More is less – The company benefits from implementing cutting-edge, best-of-breed financial ideas.  A fractional CFO is most likely working with similar companies.  They can take the best ideas and implement them across multiple clients, so everyone benefits.
3. Try before you buy – Using a fractional CFO takes risk out of a bad financial executive hire that can be a poison pill for company culture.  The flexibility in this model allows companies to test their way into the relationship with little to no risk.  This also allows the company to “hire slow and fire fast”.

If you are a CFO, what does this mean for you?  Fractional CFO work allows for a better quality of life, expands your exposure to multiple companies and allows you to better set your schedule.  Another great perk: fractional CFOs choose which companies they want to join. 

If you are considering going out on your own, the fractional CFO route may be a solid option for you.  It can be liberating to work for yourself.  You can define, control and impact your own destiny.  But it’s not easy, and many times you must learn by doing.  A few pieces of advice:

• Find your niche – Initially focus on one type of business model, and do it well.  “Boiling the ocean” will only spread you too thin.
• Commit – You must be fully committed to fractional CFO work.  If not, your clients will find someone who will and they won’t tell you the true reason they didn’t choose you.
• Fail fast – You work for yourself.  You are responsible for developing your own deal flow.  Be prepared to be turned down – often.  Learn to fail fast and persevere.
• Perfect your pitch – If you can’t explain what you do in 30 seconds or less, don’t bother explaining at all.  People don’t care how great you are. They want to know if you can deliver results, for them. 
• Be top of mind – Establish your network, and take the time to sincerely nurture it.  Even if you reach out and don’t get a response, don’t assume the person on the other end didn’t get it.  They probably appreciate you connecting with them and are busy themselves.

If you decide to join the challenging world of the fractional CFO, I would love to hear from you about your experience.