When Is The Right Time To Hire A Fractional CFO

When is the right time to hire a fractional CFO? When you meet at least one of these five criteria.

Nirali Thakkar
June 19, 2024

If you’re reading this and wondering, “When is the right time to hire a fractional CFO?” you’re probably nearing that time. Every company has a unique blueprint, with different objectives, systems and processes, needs, and budgets. So, the right time for you to hire a fractional CFO depends on your answers to those categories. 

Hiring a fractional CFO is most definitely a strategic move, and there are a few key indicators that might signal it’s time to start searching for a match. 

  1. You’re experiencing rapid growth. 
  2. You’re facing increasing financial complexity. 
  3. You’re preparing for a significant financial event like fundraising. 
  4. You lack financial expertise. 

A fractional CFO can help navigate these challenges without the six-figure income required of a full-time executive. For most businesses, the right time to hire a fractional CFO is when the financial complexity exceeds your current team's capabilities, but you’re not yet able to justify a full-time CFO. 

The Easy Answer Is As Soon As You Can Afford One

The even better answer is to prioritize funds to hire a fractional CFO as soon you can because that investment will pay dividends. You don’t want to hire any Joe off the street to manage the future success of your business. So, do your research and take the necessary steps to find the right fit for what your organization needs right now and what it requires to take it to the next stage. 

If you’re a founder reading this, you may have handled the financials in-house yourself or with another money-wise founder. Or perhaps you’ve hired a finance expert like a Director or VP of Finance to help with financial planning. 

At some point, you need to pass the baton so someone with real-world experience and knowledge can maximize the opportunities within fundraising, cash flow management, compliance and risk management, accounting, tax prep, and future financial planning. 

As your business grows, so does the complexity, especially regarding financial management. Hiring a full-time CFO isn’t an option for many small to mid-sized companies. This is where a fractional CFO can provide a cost-effective solution. But how do you really know when it’s the right time? 

Let’s look at a few signals that might indicate it’s time to hire a fractional CFO. 

#1: Revenue Growth is Soaring

As you hit new revenue milestones, you will face more complexity. Revenue growth requires strategic financial planning to handle things like: 

  • Expanding into new markets
  • Cash flow management
  • Investment and resource allocation
  • Risk management
  • Identifying where you can cut costs

A fractional CFO has the expertise to help deal with larger budgets, optimize your tax strategies, forecast potential revenue, and ensure the company can meet its financial obligations. 

You may be planning to develop new products, which requires estimating R&D costs, pricing, and how to finance the project. You’ll need to be able to manage your debt strategically and ensure the long-term success of your company. 

#2: You’re Expanding the Business

Alongside revenue growth comes business expansion. Perhaps you’re creating new product lines, entering new markets, or increasing your operational capacity. As long as your trajectory is up and to the right, you will require meticulous financial planning to ensure you have the proper runway to carry out your plans and that all risks are accounted for and mitigated before they become problems. 

A fractional CFO can be the make-or-break difference during this transition period. They can help you: 

  • Secure funding
  • Develop detailed financial models 
  • Optimize your budget
  • Identify potential pitfalls

For CEOs and founders, hiring a fractional CFO during business expansion allows you to focus on driving growth, knowing that your finances are in order. 

#3: Financial Operations Are Becoming Too Complex

If your financial operations are becoming too complex, it’s a clear signal that it’s time to hire a fractional CFO. Complexity can manifest in different ways. 

  • Managing multiple revenue streams
  • Tiresome payment systems
  • Complex inventory management

If you don’t get a handle on your financial operations, it can lead to inefficiencies, compliance risks, and missed opportunities for revenue growth and cost savings. A fractional CFO can come in, download the inner workings of your business and your goals, implement scalable financial systems, optimize internal processes, and ensure compliance where necessary. 

A fractional CFO brings a holistic perspective to your financial operations to: 

  • Identify and address your pain points
  • Provide strategic insights
  • Implement more efficient processes

Ensure your business remains agile, compliant, and well-positioned to seize future opportunities with the help of a fractional CFO. 

#4: It’s Time To Raise Money

Securing funding is no easy feat. You need clean and compelling financial records and a persuasive narrative to go along with those numbers showcasing your company’s growth potential and financial health. 

When is the right time to bring in a fractional CFO? As soon as you begin to gear up for a fundraising round or you’re seeking investments to scale your business. A fractional CFO can help: 

  • Coach you through the entire process
  • Craft a clear financial narrative based on accurate data
  • Assist in creating a compelling pitch deck 
  • Thorough risk assessments and strategies to mitigate risk
  • Through the due diligence period 
  • Negotiate the terms of your investment

The expertise of a fractional CFO is invaluable during fundraising. They have a tangible impact on attracting investors and securing the capital you need to accelerate your business. A fractional CFO is the way to go to approach investors with confidence. 

#5: You’re Not Sure What The Next Step Should Be

When you’re unsure about your next strategic move as a business, hiring a fractional CFO can give you the clarity and direction you need. They bring a wealth of experience and financial knowledge and can translate into valuable strategic insights when combined with your unique business circumstances. 

A fractional CFO can support future planning and next steps by: 

  • Identifying revenue contributors and optimizing sales strategies
  • Creating detailed financial models and projections 
  • Implement financial controls and compliance measures 
  • Assess market trends and potential ROI for different initiatives
  • Offering unbiased advice and recommendations 
  • Supporting your company during periods of transition

You can navigate the unknown with this indispensable partner, aligning your next move with your long-term business goals. 

As the stakes get higher, investing in people who can take your company to the next stage of growth is critical. You don’t have to wait until you can hire a full-time executive role. A few hours a week from an experienced fractional CFO can have a meaningful impact on your future. You probably don’t need a full-time CFO until you’re around $20 million, so lean on a fractional CFO to carry you through those double digits. 

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