The Facts on Fractional CFO Services for Startups

4 minute read

What is a Fractional CFO?

A fractional CFO is a part-time or on-demand chief financial officer who provides financial management and strategic support to businesses. Fractional CFOs have the same skills and experience as full-time CFO, but they work on a contract or retainer basis. These CFOs allow businesses to get the financial guidance they need without the cost of hiring a full-time CFO.

Fractional CFOs often work with small to mid-sized businesses that need to manage their finances and grow their business. They work with the company's management team to provide strategic financial planning, manage finances, raise capital, navigate audits and transactions, and help the company achieve its financial goals. The fractional CFO model has become popular in recent years as businesses realize the value of having a CFO without a full-time commitment. Fractional CFOs provide a cost-effective way for businesses to access high-level financial expertise and support without the expense of hiring a full-time employee.

What Does a Fractional CFO Do?

A Fractional CFO provides a range of financial services to businesses, including financial planning, analysis, and reporting. They can also help optimize a company's strategy, identify areas for improvement, and develop and install systems that streamline financial processes. Fractional CFOs can also help raise capital for the business. They can assist with equity or debt financing, or complex financial transactions like mergers and acquisitions. They can also provide support during audits, assist in the preparation of financial documents and lend insight into financial matters.

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Why Hire a Fractional CFO?

Hiring a Fractional CFO can bring several benefits to a business, such as:

Expertise: A Fractional CFO is a highly experienced financial expert who can provide valuable financial guidance and support to a business, especially in complex situations such as fundraising, mergers and acquisitions, or audits.

Cost-effective: Hiring a full-time CFO can be expensive for a business, especially for a startup or a small business. A Fractional CFO provides a cost-effective solution by offering their expertise on a part-time or retainer basis.

Flexibility: A Fractional CFO can work remotely or on-site, depending on the needs of the business. They can adjust their workload and availability to accommodate the business's changing needs.

Strategic planning: A Fractional CFO can help a business create and execute a financial strategy that aligns with the business's goals and objectives. They can provide valuable insights into financial planning, forecasting, and risk management.

Time-saving: A Fractional CFO can take on the burden of managing financial tasks and responsibilities, freeing up the business owner's time to focus on other important areas of the business.

Full-Time vs Fractional CFO

When it comes to CFO services, there are two options: hiring a full-time CFO or a fractional CFO. While a full-time CFO is an integral part of a company's senior management team and handles all financial aspects of the company, a fractional CFO provides part-time or as-needed financial expertise to a company.

There are advantages to both options. A full-time CFO can provide ongoing strategic guidance and financial planning, while a fractional CFO can provide the same expertise but on a more flexible and cost-effective basis. Fractional CFOs are often used by startups or smaller businesses that may not have the resources to hire a full-time CFO but still need financial guidance.

Fractional CFOs can also provide specialized expertise in areas such as raising capital, navigating an audit or transaction, or implementing financial systems. This allows companies to access high-level financial expertise without having to pay for a full-time CFO's salary and benefits.

The decision between a full-time or fractional CFO depends on the specific needs of the company. Companies that need ongoing financial guidance may find a full-time CFO to be a better fit, while those with more flexible financial needs may find a fractional CFO to be a more cost-effective solution.

Fractional CFO Services for Startups

Fractional CFO services for startups can be invaluable, as they provide strategic financial guidance and support at a cost-effective price point. Some of the services provided by a fractional CFO for startups include:

  1. Financial planning and modeling: A fractional CFO can help startups create financial plans that offer direction and growth for the business. They can provide diversified growth plans and scenario analysis to help make smart business decisions.
  2. Capital raising: A fractional CFO can help startups identify funding opportunities and create investor pitches, as well as assist with due diligence and valuation.
  3. Cash management: Managing cash flow and deploying cash wisely is a key challenge that grows along with your business. A fractional CFO can help with cash management by creating cash flow projections and optimizing working capital.
  4. Strategic decision support: A fractional CFO can provide insight into strategic decisions, including mergers and acquisitions, growth plans, and sales compensation planning.
  5. Financial reporting and compliance: Fractional CFOs can ensure that startups have proper financial reporting and compliance processes in place, including tax planning and preparation, regulatory compliance, and audit support.
  6. Board meeting support: A fractional CFO can take care of the heavy lifting preparing for board meetings and even presenting on your behalf.
  7. Implementing financial systems: A fractional CFO can help startups implement financial systems and processes to increase efficiency and accuracy in financial reporting and analysis.

How Much Do Fractional CFOs Cost?

The cost of a fractional CFO can vary depending on a few factors such as the level of experience, location, and specific services required. Generally, fractional CFOs charge by the hour, day, or month, with rates ranging from $150 to $300 per hour, or $1,500 to $5,000 per day, or $5,000 to $15,000 per month.

The cost can also vary depending on the scope of the project or engagement, with some fractional CFOs offering fixed-price packages for specific services such as fundraising or financial modeling.

Conclusion

In summary, a fractional CFO provides startups with the strategic financial guidance and support they need to grow and succeed, without the cost of a full-time CFO.

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