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Want to kickstart your startup’s finances? Partner with a fractional CFO
Posted by Grace Townsley
August 30, 2023
As your startup grows from an early-stage venture to a fully mature business, your financial needs can evolve significantly. At first, your startup may benefit from basic cash flow management guidance and support raising funding through venture capital partners, angel investors or other sources. But as your company grows, you may find that your team needs more strategic guidance around managing capital, investing in new opportunities, and maintaining compliant reporting processes.
Typically, these processes, forecasts and business-shaping decisions are driven by an experienced Chief Financial Officer (CFO). But if your startup can’t yet afford to bring in a seasoned financial expert, fractional financial services or a fractional CFO for startups may be an easily accessible solution.
What is a fractional CFO?
A fractional CFO for startups is a part-time CFO professional who can provide the necessary financial expertise and guidance your company needs to continue growing, without covering the full cost of an in-house, full-time CFO.
Many fractional CFOs are former full-time CFOs with broad experience guiding companies across various industries. These professionals are experts at overcoming financial challenges, driving growth, optimizing cash flow, managing capital, maintaining compliance and reporting, and working through advanced audits. Given their deep understanding of the most complex financial challenges new and mature businesses face, fractional CFOs can be one of the most valuable partnerships your company invests in.
What does a fractional CFO cost?
The specific cost of your fractional CFO can vary based on factors like their expertise, track record of success, and how many services they offer. But in general, fractional CFOs work on a contract basis, providing essential services like reporting, compliance and forecasting, for a fraction of the cost it would take to bring in a full-time, in-house CFO.
As an added benefit, fractional CFOs can often scale with your company as your startup expands. That means in the early stages of your startup’s growth, you can work with a fractional CFO on a handful of services for just a few hours every week or month, then add additional services and hours in the coming months, as your revenue increases.
What are the benefits of fractional financial services for startups?
In addition to giving your startup’s leadership access to high-level and affordable financial expertise, there are several additional benefits of working with fractional CFO companies:
Fractional CFO services offer more flexibility than a full-time hire because you can leverage the specific services you need at each stage of your startup’s growth. As you move through the funding stages, you can add or remove services as needed, ensuring your company is supported at every critical milestone.
Ever feel like you could use a fresh, unbiased perspective ahead of a major financial decision? Fractional CFO consulting gives your team access to a professional who is not involved in the day-to-day operations of your business. That allows them to provide a completely objective and highly accurate perspective of your financial situation. This advice can be the invaluable guidance you need to identify key issues or opportunities your internal team may overlook.
Managing finances can be time-consuming, complex and distracting if it’s outside of your core strengths. By outsourcing this key function to a fractional CFO, you and your team can stay focused on your core business activities, like product development, sales and marketing. Financial operations and forecasting are essential services, but they can be handled just as effectively by a dedicated fractional CFO.
Ready to compare fractional CFO services? Consider these 3 factors:
Once you’ve decided to outsource your financial services and partner with a fractional CFO, narrowing down your options can be overwhelming. If you’re comparing multiple outsourcing providers, consider these three factors to find a partner that fits your startup’s needs and resources:
1. Experience of the CFO.
One of the best benefits of hiring a fractional CFO is expanded access to the kind of high-level guidance you wouldn’t be able to afford full-time in-house. That’s why it’s important to look for a CFO who has extensive experience leading a startup like yours, in a similar industry. Look for a fractional CFO who understands the unique challenges your startup may face, and how to access the best opportunities in your field.
2. Services offered.
Some CFOs may specialize in only a handful of services, while others have a full team of experts in their network — and can offer a wider range of valuable services. Make sure the fractional CFO you’re thinking about hiring can provide the services your startup needs now, and in the years to come.
While cost shouldn’t be the only determining factor, it’s an important one to consider. Make sure you understand the cost structure of the fractional CFO company you’re vetting, and compare those costs to the value you expect to receive from the fractional CFO.
Is hiring a fractional CFO for startups the right move for your venture?
Managing your cash flow and maintaining clear and compliant finances is essential to the growth of your startup. But hiring an expensive full-time CFO isn’t always feasible — especially if you’re at an early growth stage. By considering a fractional CFO, you can access the experience you need to navigate financial challenges and maximize new opportunities, without straining your cash flow in the process.
Want more? In addition to taxes, accounting, bookkeeping and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting and payroll) and Risk (business insurance). Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact ushere.
As a professional copywriter in the finance and B2B space, Grace Townsley offers small business leaders big insights—one precisely chosen word at a time. Let's connect!