What Do You Look for In a Fractional CFO?

There is a basic formula for any business: invest, develop, gain. When companies put money and resources into creating value-added goods or services, they get compensated. Every firm is essentially a cash-in, cash-out cycle at its core. If one end of the process is disrupted, the whole cycle will be thrown off balance.

The Blueprint CFO offers a fractional CFO who does part-time employment for your firm. CFO services are available to other firms as long as they put in the agreed-upon hours on your behalf. Despite their various duties, fractional CFOs may perform their jobs in a few hours per week, provided they understand the company and financials well. A startup or small firm may thus benefit from the fractional business model.

The objectivity provided by fractional CFOs is another advantage. A fractional CFO can offer an unbiased view since they are not bound to its financial results. Consequently, CEOs are given objective counsel based on expertise and experience rather than a specific plan.

Initiation Experience

Do they have any prior experience working with startups?

You want to recruit a fractional CFO who has “been there, done that” in the startup industry for your venture-backed business’s finance and operations requirements. A CFO could have an impressive background with enterprise or mid-market firms.

Still, if they’ve never steered a company through a successful Series A or acquisition, they’re definitely not the ideal match for your startup. You need someone on your team who can successfully look around corners and assist you with the issues of managing finances while you grow.

Look at each CFO candidate’s expertise and track record relevant to startup success.

Service Expertise of Fractional CFO

Where does your organization require the most significant help?

Furthermore, the requirements of startups are distinct from the needs of well-established corporations and vary widely across firms. Make sure that each candidate’s experience and abilities match your company’s unique strategic financial demands. Consider both the immediate and long-term requirements you’ve identified as you grow your business.

Industry/Sector Experience

Are they well-versed in the industry in which your startup operates?

When looking for a CFO, it’s essential to look at the fractional CFO candidate’s industry experience. SaaS firms, for example, have quite different demands than Fintech businesses, which in turn have different needs than Consumer startups, and so on.

It would be best if you had a CFO who has familiarity with SaaS KPIs, such as revenue recognition and customer turnover. Pricing and subscription models are also important.

However, a CFO knowledgeable in inventory financing, online marketplaces, and product testing is needed for consumer firms.

Fintech businesses must recruit a CFO with financial services expertise, knowledge of crypto payments and accounting, and knowledge of the regulatory environment.

Relationships of Fractional CFO

Will they help you build a giant network of investors and business partners?

It’s all about who you know and what you know when effectively expanding a business. Your CFO must bring appropriate skills to the table and solid interpersonal connections.

Inquire about the VC connections of your prospective fractional CFOs. Do they have a track record of working with successful investors, and can they put you in touch with them? Are they familiar with any venture capitalists? Does one of these companies meet your startup’s financial needs?

What about your competitors, your industry, and the startup community? There are several ways in which these people might assist your company in developing and enhancing its market share.

There is a strong correlation between the value of relationships and their trustworthiness. An experienced and effective CFO should have extensive connections to draw upon when the opportunity arises. A warning sign is raised if they do not.

Time-to-Value and the Process

Your new CFO hire’s estimated time-to-value should also be taken into consideration. A fractional CFO is substantially less costly than a full-time CFO, but it is still an investment in time and resources. You want your new CFO to be up and running and provide value for your company as fast as possible.

When interviewing potential employees, inquire about the value they provided to their previous roles. For how long did you struggle with the idea that this worth existed before you finally accepted it as reality? Is it possible to determine what value is the most important? That must have taken a long time to do. As a CFO, you should expect to be able to put numbers to what you’re saying.

Conclusion

A fractional CFO may provide a company with a wide range of expertise without imposing a prohibitive financial load. Perhaps the only option for an early-stage firm to get top-tier financial knowledge without shelling out a small fortune is to hire a fractional CFO.

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan