What is a fractional CFO and what should a startup look for?

A fractional CFO brings high-level financial expertise to companies on a part-time or contract basis, offering strategic financial leadership without the cost of a full-time executive. These professionals dive deep into a company's financial health, developing comprehensive financial plans and forecasts that align with business objectives. They excel in risk management, identifying potential financial pitfalls and implementing controls to protect the organization's assets. Through detailed cash flow analysis, they ensure the business maintains optimal liquidity while identifying opportunities for improved efficiency. They can also evaluate your finance team structure and recommend improvements to support your organization's growth.

The role extends far beyond traditional financial oversight – fractional CFOs serve as trusted strategic advisors to leadership teams, providing insights on key business decisions, from expansion opportunities to potential mergers and acquisitions. Their expertise becomes particularly important during significant business transitions, fundraising efforts, or when implementing new financial systems and processes. What makes fractional CFOs particularly valuable is their adaptability to each company's unique needs. For growth-focused startups, they might concentrate on establishing financial systems and securing funding, while they could focus on optimizing operations and improving profit margins for established businesses. This flexibility allows businesses to scale their CFO services up or down based on their stage of growth, seasonal demands, or specific projects, making high-level financial expertise accessible to organizations of various sizes and industries.

Bison CFO offers fractional CFO services, and owner Kurtis Hanni says fractional CFOs can really help founders stay away from common financial mistakes: “By hiring a fractional CFO, founders ensure their startup has a firm financial foundation, so they can confidently focus on growth and product. They’ll help founders avoid common mistakes such as underestimating cash needs, missing key variables in their financial forecast, or mismanaging investor and banking relationships.”

Here's a clear sign you might need advanced financial leadership: your business is growing really fast. When your company suddenly takes off, keeping track of money can get complicated quickly. You'll need someone who knows how to handle increased cash flows, make operations run smoothly, and keep the growth steady. That's where a fractional CFO comes in — they can guide you through this challenging period while helping your business continue to grow."

The increasing complexity of your financial landscape is another key indicator. As your business expands, you may find yourself grappling with more sophisticated financial challenges — from managing multiple revenue streams to handling complex liquidity management and operating budget requirements. These complexities demand expert guidance to ensure both compliance and strategic advantage. A fractional CFO brings the depth of experience needed to untangle these financial intricacies, installing systems and processes that keep your operations running smoothly while positioning your company for continued success.

Perhaps the most common sign that your business needs a fractional CFO is the absence of strategic financial planning. Many small to mid-sized businesses operate without a comprehensive financial strategy and find themselves making reactive decisions. This can hinder growth and create unnecessary risks. A fractional CFO can shift your financial approach from a series of responsive actions into a proactive strategy that aligns with your business goals. This is a great time to tap their expertise and implement comprehensive financial plans that serve as a roadmap for sustainable growth and long-term success.

1. Raising capital

If you’re preparing for a round of funding or trying to figure out how to find investors, a fractional CFO can be a crucial asset. They’ll help you create financial models, craft a compelling business case, and navigate negotiations with investors. Their expertise not only enhances the likelihood of successful fundraising but also ensures that the terms of any funding are favorable and sustainable for your business growth.

2. Mergers and acquisitions

Mergers or acquisitions can bring unpredictability to your business’s financial operations. A fractional CFO brings experience in due diligence processes, financial forecasting, and valuation, helping companies evaluate potential mergers or acquisitions effectively. They’ll be key to streamlining integration processes and aligning financial objectives post-transaction.

3. Cash flow management

Every business strives to maintain healthy cash flow. If you’re struggling with cash flow management or forecasting, a fractional CFO can optimize your cash flow processes. They can help secure working capital loans, implement rigorous forecasting techniques, determine how to improve working capital, and develop strategies to ensure sufficient liquidity for operational needs and future investments.

4. Improving financial reporting

Transparent and informative financial reporting can be a challenge for growing businesses. A fractional CFO can enhance the quality of financial reports by implementing more sophisticated reporting tools and managing accounts payable processes. They are adept at creating dashboards that provide real-time insights into financial performance, including accounts payable aging and vendor payment tracking, which helps stakeholders make informed decisions.

There are a lot of ways to find a fractional CFO. Here are several routes to explore and tips for evaluating potential options for your business.

Professional networking platforms

Professional networks like LinkedIn have become invaluable platforms for connecting with experienced fractional CFOs, offering detailed insights into their experience, credentials, and recommendations from previous clients. These platforms allow you to directly assess their industry expertise and track record and make initial connections. Many fractional CFOs actively maintain their profiles and share thought leadership content, making it easier to evaluate their expertise and approach to financial management.

Specialized recruiting firms

Specialized recruiting firms and professional staffing agencies that focus on financial executives can be excellent resources in your search. These firms often maintain relationships with vetted fractional CFOs and can match your specific needs with qualified candidates. They typically handle initial screening processes and can shed light on market rates and availability, saving you significant time in the hiring process.

Industry associations and professional organizations

Organizations such as the CFO Leadership Council or Financial Executives International (FEI) offer networking opportunities and often maintain directories of qualified professionals. These organizations frequently host events and conferences where you can meet potential candidates in person and learn about their approaches to financial leadership. Additionally, many fractional CFOs are members of local chambers of commerce or industry-specific associations, making these venues excellent networking opportunities.

Online marketplaces

Online platforms specifically designed for connecting businesses with fractional executives have gained popularity in recent years. Marketplaces like Paro, Toptal, and others specialize in connecting companies with financial professionals. These platforms often include detailed profiles, client reviews, and specific expertise areas, making it easier to find candidates who align with your industry and business needs.

Professional referrals

Referrals from your professional network, including attorneys, accountants, and other business advisors, can be particularly helpful in finding a trusted fractional CFO. These professionals often work closely with fractional CFOs and can provide firsthand accounts of their capabilities and working styles. Business peers who have experience with fractional CFOs can also offer practical insights into the hiring and engagement process, helping you identify successful candidates faster.

A fractional CFO's working hours are inherently flexible and tailored to each organization's specific needs and budget. Typically, engagement models range from 8 to 40 hours per month for early-stage or smaller companies, while more complex organizations might require 40 to 80 hours monthly. The allocation of these hours often follows strategic patterns throughout the monthly business cycle, including weekly check-ins for financial review and strategic planning, additional time for month-end financial closing procedures, and dedicated hours for special projects or initiatives. During critical periods such as fundraising, mergers and acquisitions, or system implementations, the fractional CFO may temporarily increase their involvement to ensure successful outcomes.

Different business stages demand varying levels of engagement, with early-stage startups typically starting at 8-10 hours monthly for establishing financial foundations, while growth-stage companies might need 20-30 hours to manage more complex operations. The effectiveness of a fractional CFO isn't just measured in hours worked but in the value delivered through implemented systems, trained staff, and established processes. Many fractional CFOs also offer remote availability for urgent matters between scheduled sessions, ensuring continuous support for critical financial decisions while maintaining the cost-effectiveness of the fractional model. Regular reviews of hours billed and value delivered help ensure the arrangement continues to meet the organization's needs and budget constraints while maintaining growth.

There are various pricing models and influencing factors that shape these financial partnerships. Fractional CFOs typically offer flexible pricing structures to accommodate different business needs. Most commonly, these professionals charge either hourly rates ranging from $150 to $500, or monthly retainers between $3,000 and $10,000, depending on the scope of services. For specific initiatives like fundraising or ERP implementations, project-based pricing might range from $10,000 to $50,000 or more, reflecting the complexity and duration of the engagement.

The cost structure is influenced by several key variables that you should carefully evaluate. The complexity of your operations, including revenue size, number of entities, and industry-specific requirements, plays a key role in determining fees. Geographic location also impacts rates, with higher costs typically associated with major metropolitan areas. Additionally, the CFO's experience level, specialized industry expertise, and the scope of required services all factor into the overall investment. This often leads to a customized pricing model that aligns with the business need and the value provided.

When comparing costs with a traditional full-time CFO, the value proposition of fractional services becomes clear. A full-time CFO's compensation, including salary, benefits, bonuses, and equity, can easily exceed $200,000 a year for small to mid-sized companies and top $300,000 for larger organizations. Even at the higher end of fractional CFO pricing, businesses usually invest between $60,000 and $120,000 annually, which is a significant cost savings over a full-time leader.

Selecting the right fractional CFO begins with a thoughtful assessment of your business's unique financial needs. Before beginning your search, evaluate your current challenges. Where do you need the most help — optimizing cash flow, securing funding, implementing robust financial software solutions, or perhaps preparing for significant growth? Your company's stage, industry requirements, and immediate financial priorities should guide this evaluation, helping you determine whether you require weekly strategic sessions, monthly financial reviews, or project-specific expertise.

Once you’re clear on your needs, focus on finding candidates who combine strong technical expertise with strategic capabilities. The ideal fractional CFO should possess not only robust financial acumen, demonstrated through relevant certifications and a proven track record but also deep industry experience that allows them to provide targeted insights and anticipate sector-specific challenges. Communication skills play a pivotal role in a fractional CFO's effectiveness, as they must translate complex financial data into actionable strategies and clearly convey insights to stakeholders at all levels.

During the interview process, evaluate expertise and cultural alignment by presenting real business scenarios and asking candidates to share their approach to similar challenges they've encountered. Key areas to explore include their methodology for prioritizing financial initiatives, approach to risk management, and strategies for handling disagreements with leadership teams. Pay special attention to their communication style and problem-solving approach during these discussions, and request specific examples of how they've helped similar companies achieve their objectives.

Always thoroughly check references to verify their track record. The ideal fractional CFO brings more than just financial expertise — they should offer a working style and value system that aligns with your culture, creating a partnership that drives sustainable growth and success. By taking a comprehensive approach to the selection process, you can find a fractional CFO who not only meets your immediate financial needs but also contributes to your company's long-term strategic vision.

When evaluating potential fractional CFO candidates, their educational background and professional certifications serve as foundational qualifications. Most successful fractional CFOs hold at least a bachelor's degree in finance, accounting, or business administration, with many having pursued advanced degrees such as an MBA. Professional certifications like CPA (Certified Public Accountant), CMA (Certified Management Accountant), or CGMA (Chartered Global Management Accountant) demonstrate a commitment to high professional standards and staying current with industry practices, though more of today’s CFOs aren’t CPAs.

Industry experience and track record will help you get a sense of a fractional CFO's effectiveness. Look for professionals who have held senior financial positions in companies similar to yours in size, industry, and stage. A diverse background across multiple industries can be valuable, as it brings a broader perspective, but just make sure they demonstrate a history of successfully navigating complex financial situations, implementing strategic initiatives, and driving business growth.

Technical expertise in modern financial tools and software is increasingly important. Your ideal candidate should be proficient in financial management software, AP automation software, ERP software, and data analytics tools. They should have experience implementing and optimizing these systems as well as automating related workflows. This technical proficiency ensures they can not only manage current processes but also guide improvements as your business grows.

Leadership and communication skills are equally vital. A fractional CFO must effectively collaborate with various stakeholders, from board members to operational teams. They should demonstrate strong presentation skills, the ability to explain complex financial concepts clearly, and a track record of influencing strategic decisions. Look for evidence of their ability to build relationships, lead teams, and drive organizational change through clear communication and guidance.

Strategic thinking and problem-solving abilities are additional qualifications you’ll want to pursue. Your fractional CFO should show a proven ability to think beyond the numbers, connecting financial decisions to broader business objectives. This includes experience in strategic planning, risk management, and business development. They should demonstrate analytical prowess in identifying problems, developing solutions, and implementing strategies that drive business growth and profitability.

The best fractional CFOs also bring strong business acumen and industry insights to their role. They should understand current market trends, regulatory requirements, and best practices in financial management. Their knowledge should extend beyond pure finance into areas like operations, technology, and business strategy, allowing them to provide comprehensive guidance that supports your company's overall success. This ensures they can serve not just as financial experts but as trusted advisors who contribute to your company's strategic direction and growth.

Engaging a fractional CFO can bring a wealth of benefits to your organization. Below are some of the key advantages:

1. Cost-effectiveness

One of the most significant benefits of hiring a fractional CFO is cost savings. Full-time CFOs come with hefty salaries, benefits, and potentially additional compensation packages that may strain a small to mid-sized company’s budget. A fractional CFO, on the other hand, allows businesses to access high-level expertise at a fraction of the cost. This model enables companies to tailor C-level financial leadership to their specific needs without committing to full-time salaries.

2. Extensive expertise

Fractional CFOs typically have extensive backgrounds in finance, often holding senior positions in various industries before transitioning into fractional roles. They’ll typically bring a ton of great insights around best practices, risk management, and strategic financial planning. Engaging a fractional CFO means tapping into this pool of expertise, allowing for more informed decision-making and strategic insight that can accelerate growth.

3. Flexibility and scalability

Businesses today are dynamic, and as such, they require financial leadership that can adapt to changing circumstances. A fractional CFO allows organizations to scale up or down based on their unique needs and growth trajectories. Whether you’re expanding into new markets, managing seasonal fluctuations, or navigating financial challenges, you can adjust the level of engagement with a fractional CFO accordingly. This means you can rely on their expertise during critical periods without the long-term commitment of a full-time hire. The scalability offered by a fractional CFO ensures that your financial strategy evolves with your business goals, enabling you to respond swiftly to market demands and maintain a competitive edge.

4. Renewed focus on core functions

With a fractional CFO overseeing the financial complexities of your organization, your leadership team can concentrate on core business activities. This division of responsibilities enhances overall efficiency and allows internal resources to focus on growth strategies, customer service, and operational excellence. By alleviating the burden of financial management from your executives, a fractional CFO empowers your team to innovate and excel in their respective roles without getting into the weeds of intricate financial tasks.

5. Targeted financial strategy

A fractional CFO brings a fresh perspective to your financial strategy. They can conduct detailed assessments of your current financial position, develop a comprehensive operating budget, and identify areas of opportunity or concern. With their specialized knowledge, they can help develop targeted financial plans tailored to your organization’s goals. Whether it’s improving cash flow, optimizing expenses, or maximizing revenue streams, a fractional CFO evaluates your economic landscape and crafts strategies that align with short-term and long-term aspirations.

In developing these targeted strategies, a fractional CFO leans on industry benchmarks and best practices, ensuring that your organization is not only competitive but also positioned for sustainable growth. They also instill performance metrics to track progress, enabling ongoing adjustments and improvements. This targeted approach helps prevent reactive decision-making, allowing your business to seize opportunities as they arise.

Moreover, a fractional CFO can help align the financial strategy with operational objectives. They understand the interconnectedness of different departments and can create cross-functional initiatives that drive efficiency and profitability. For instance, they may collaborate with sales and marketing teams to coordinate efforts that boost revenue while maintaining careful cost oversight.

6. Enhanced risk management

Every business faces financial risks, but a fractional CFO can help you stay ahead of problems before they happen. They're experts at navigating risk and responding to new information — whether it's changes in the market, new regulations, or issues within your company. They'll look carefully at these risks and create plans to protect your business, while also finding opportunities to make more money.

This strategic risk management involves establishing robust internal controls for accounting and monitoring systems that protect your assets and ensure compliance with industry regulations. A fractional CFO will help ensure there are checks and balances in place to minimize risks of fraud and errors. They can also help you understand the implications of regulatory changes and make any necessary changes to comply with new standards.

Additionally, a fractional CFO will conduct scenario planning and stress testing, preparing your business for unexpected changes in the market or economy. By exploring various “what-if” scenarios, they can help you develop financial models that illustrate potential outcomes based on evolving variables, such as changes in demand or increases in costs. Such proactive planning allows you to make informed decisions under uncertainty, positioning your organization to adapt quickly to evolving circumstances.

7. Cost efficiency and financial streamlining

A fractional CFO excels at developing comprehensive cost reduction strategies across your organization, taking a strategic approach that goes far beyond simple budget cuts. They identify and execute targeted initiatives such as vendor consolidation, contract renegotiations, and strategic outsourcing of non-core functions, while improving operational efficiency through detailed expense analysis. This thoughtful approach ensures that cost-saving measures — whether streamlining software subscriptions, reducing inventory carrying costs, restructuring insurance coverage, or optimizing utility consumption — align perfectly with your organization's strategic goals.

Through sophisticated management techniques like value chain analysis and zero-based budgeting, fractional CFOs bring a systematic approach to expense management. They implement practical solutions such as energy-efficient systems, optimized workforce scheduling, and improved procurement processes, while also exploring opportunities for debt restructuring to get better interest rates. By conducting thorough cost-benefit analyses across all departments and processes, they can help identify opportunities to reduce expenses without compromising operational quality or integrity — a delicate balance that requires both expertise and strategic insight.

The modern fractional CFO also leverages technology for financial optimization. By implementing automated expense reporting, automated bill pay, and sophisticated expense management software, you’ll get more efficient workflows that reduce costs. These technology-driven solutions deliver significant savings through reduced labor costs and decreased error rates while improving cash flow management. The result is a more streamlined operation where your team can focus on core activities rather than getting bogged down in administrative tasks.

8. Financial forecasting and strategic planning

One of the primary responsibilities of a fractional CFO is facilitating long-term financial forecasting and strategic planning. Their analytical skills can improve cash flow forecasting and create detailed financial projections, which are essential for setting realistic financial goals and developing growth strategies.

Using historical data and market analysis, a fractional CFO can provide insights into future revenue trends and potential market challenges. By presenting various forecasting models — such as conservative, moderate, and aggressive estimates — they allow business owners to visualize potential outcomes. This especially aids in securing funding, whether through investors, banks, or other financial institutions, as it demonstrates a clear understanding of future profitability and risk.

Moreover, fractional CFOs are adept at aligning financial plans with business objectives. They’ll build financial strategies that support broader company goals, such as entering new markets, launching new products, or expanding the workforce. By integrating financial decisions with operational strategies, a fractional CFO ensures that the company's resources are aligned with its long-term vision.

While both fractional and interim CFOs provide high-level financial expertise to organizations, these roles serve different purposes and business needs. The primary difference lies in their engagement structure and objectives. A fractional CFO typically works with multiple clients simultaneously on a long-term, part-time basis, providing strategic financial guidance while scaling their involvement based on the company's needs. In contrast, an interim CFO steps into a temporary, usually full-time position to bridge a specific gap or manage a transition period within an organization, often serving for 3 to 12 months while a company searches for a permanent CFO or gets through a specific challenge.

The strategic focus and scope of each role also reflect their distinct purposes. Fractional CFOs typically concentrate on long-term strategic planning, helping organizations scale and optimize their financial operations over time. They bring a broader perspective from working with multiple clients and can implement best practices across different scenarios, dedicating anywhere from a few hours to several days per month to each client. Interim CFOs, meanwhile, often focus on immediate needs and specific projects, such as implementing new processes, managing a financial crisis, or preparing for a major transaction. Their role frequently involves stabilizing operations and setting the stage for permanent leadership, requiring full-time dedication to one organization.

The ideal scenarios for engaging each type of CFO differ based on organizational needs. A fractional CFO is often the best choice for growing companies that need ongoing strategic financial guidance but don't require or can't justify a full-time CFO. They're particularly valuable for businesses looking to optimize their financial operations or planning for long-term growth while maintaining cost flexibility. An interim CFO becomes essential during periods of transition or when managing specific financial challenges that require dedicated, full-time attention. Both roles offer value, and the key lies in matching the role's characteristics with your organization's specific circumstances, timeline, and objectives.

Taking your business to the next level requires more than just financial expertise — it demands a combination of leadership, vision, and technology. While a fractional CFO can provide strategic guidance to your company, their impact multiplies when paired with modern financial solutions.

This is where Brex comes in. Brex’s all-in-one spend management platform transforms how growing companies manage financial operations, combining corporate cards, startup banking, automated bill pay, and accounting automation into one integrated solution. You’ll set your fractional CFO up for success when they have real-time visibility into every transaction, automated expense tracking, and powerful reporting tools at their fingertips. Not only does this eliminate hours of manual work, but it also helps any CFO make faster, more informed decisions about your company's future.

Whether you're ready to bring on a fractional CFO now or are considering a future hire, business growth starts with a clear and optimized financial foundation. Sign up for Brex today to modernize your financial operations and set your finance team up for success.