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How a Fractional CFO Can Help Your Startup Grow

managing business finances

A fractional CFO can help startups by providing services for organizations on a part-time or contractual basis. This means the company can gain the expertise of a CFO without the high costs that an in-house, full-time CFO may bring.

Typically, a CFO is brought on for a specific project to meet the company’s financial goals or to address financial challenges sustainably.

What Can a Fractional CFO Do for a Startup?

Fractional CFOs work on several projects requiring financial modeling, accounting, and business strategy expertise. They usually work on a project or challenge that the company’s current in-house staff are not equipped to deliver on.

Future Forecasting

Many in-house accounting and back-office finance professionals spend their time working on past financial transactions and the present. A fractional CFO may be brought on to forecast the future of the business from a financial perspective, providing strategic recommendations for its growth.

A fractional CFO often contributes to a business by strategizing the best ways to achieve the growth required. This usually requires considering financial goals over the next few years and recommending financing the company through external investment or loans.

Improving Cash Flow

They understand how cash flows in and out of a startup will be a crucial consideration for the founders and investors of a company. A fractional CFO can assist by improving the analytical capabilities of the business data and will then create a plan of action based on the analysis.

They can get to the bottom of where revenue leakage exists to minimize leakages and create innovative ways to improve cash flow depending on the business goal.

How to Make Cost Cuts

A job that many startup founders and management teams do not enjoy is looking for ways to cut costs. However, running a startup in a lean fashion is often a requirement due to the limited funding for the business. A fractional CFO can make this more bearable by analyzing incomings and outgoings and determining what can be cut or reduced for a more profitable business. It can be easier for a fractional CFO to make the required recommendations, as they find it easier to act objectively than an in-house CFO.

Business Acquisition Analysis

Deciding to acquire a business can be a risky but rewarding decision. One crucial factor is valuing a business for sale correctly. Preparing well is how to get it right; a fractional CFO can help with that. An experienced, capable CFO will understand how to analyze detailed company financials and review the market for comparable businesses to arrive at a fair valuation. A CFO can then work on how to fund the acquisition through debt or equity.

Growth Strategy

Many people believe growth is the responsibility of the company’s founder, salesperson, or marketer. However, fractional CFOs are likely able to provide important input for the growth strategy. A modern CFO will use customer acquisition cost analysis and customer lifetime value analysis to work out metrics. An example is identifying ROI on marketing expenses and then looking for ways to decrease customer acquisition costs. Using data analysis to inform them, CFOs are at the heart of a business strategy. A CFO can predict near-term financial performance and engage with marketing teams to help improve practices.

A fractional CFO benefits startups looking to grow their business, lower costs or get a hold of their accounting and future forecasts. A full-time CFO staff member may not be affordable for many small businesses still building their product or getting traction in their market. However, a fractional CFO could give serious value to a growing company if hired to help achieve specific, ambitious business objectives.

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