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The Benefits of a Fractional CFO

A business strategy is all about figuring out how to grow revenue and create new income streams while keeping things efficient and cost-effective. The main goals usually involve boosting profits and getting better returns. After all, most business owners want to make money—and ideally, find ways to do it with less effort as their business grows.

The Role of a CFO

The core element of the CFO’s role is linking a business strategy to its numbers. The numbers determine a good strategy, so converting the ideas that contribute to the strategy is vitally important. For example, opening a café might sound romantic and fulfilling, but its success will depend on location, foot traffic, and demographics. You have to do the numbers around a plan to know whether it is actually a good idea.

Many successful Australian businesses look to overseas markets like the US to expand. Establishing your brand in these markets and dealing with the competition is very expensive. How will this produce a return? You have to have a plan, build a business model, and do the numbers. The numbers will answer the question.

With these constant challenges and the need for financial analysis, it is somewhat surprising that most small businesses do not have a CFO. This is usually due to the cost of hiring a CFO, which can be in excess of $300,000 per annum. This is where an outsourced CFO, or Fractional CFO, can assist.

What is a Fractional CFO?

A fractional CFO is basically a part-time CFO, which means you only pay for what the business needs. This could be as little as 1/2 day per month or a full day a week. So what it means is that a small business can have access to the services of a $300,000 per annum CFO for a fraction of that cost.

A Fractional CFO can work within the business on a regular basis and assist with key Strategic and Business decisions. Small businesses don’t have smaller issues that require less time, so a full-time resource is not really required to provide the same benefits as having someone full-time.

In the examples mentioned, the Café could engage the Fractional CFO when deciding whether to commence, setting up its business model, and establishing systems and processes. On an ongoing basis, they can assist with monitoring performance and returns. The owner can make coffee the rest of the time!

In the US expansion example, the fractional CFO could assist with developing the business model and testing whether it would be financially viable. This would be done in a “spreadsheet,” which is far less costly than doing it in reality and discovering it doesn’t work.

In the end, the Fractional CFO, outsourced CFO, and part-time CFO will provide any business with access to the same experience and expertise available to larger businesses and engage in services that larger businesses would not consider doing without.

There is a reason why when larger businesses enter new sectors, the CEO or General Manager and the CFO are among the first to be hired, and there is a good reason for that. Larger businesses want all the metrics and measures from day 1. This, of course, comes with the ability to fund those roles whilst the new venture is developing, but the point is that the CFO is considered a priority and not a nice to have.

Please reach out if you want to discuss how a Fractional CFO would work in your business.


About Brian Doughty:

Brian Doughty is the founder of the Outsourced CFO, a part-time CFO service for small—to medium-sized businesses. Brian’s experience in large corporations and small businesses is unique, and it has enabled him to develop a simple-to-understand set of tools that will help business owners engage staff, monitor performance, and achieve their goals. For more information, visit www.theoutsourcedcfo.com.au.

Founder of the Outsourced CFO and The Fractional CFO Centre.