As a CFO, you’ve undoubtedly worked tirelessly to achieve your success. But have you ever wondered what it would feel like to have complete control over your own schedule and work-life balance?
By becoming a fractional Chief Financial Officer (CFO), you can use your expertise to help multiple companies grow while also having the time and energy to enjoy your own life.
In fact, many CFOs have left full-time positions to regain control of their careers and their time. But how did they do it? That’s what you’ll find out in this blog post as we uncover how to become a fractional CFO.
Table of contents:
- What is a fractional CFO?
- What does a fractional CFO do?
- Is a fractional CFO the same as a CFO?
- When does a company need one?
- Tips on how to become a fractional CFO
- How much can you make as a fractional CFO?
- How to create a fractional CFO services agreement
- Pros and cons
What is a fractional CFO?
A fractional CFO, also known as a part-time CFO or interim CFO, is a Chief Financial Officer who works for various companies on a part-time or by-project basis.
This flexible way of working allows startups and small businesses to access the same level of financial expertise and strategic guidance as a full-time CFO without the overhead costs associated with hiring a full-time employee.
Fractional CFOs help businesses with everything from financial reporting to budgeting and strategic planning. For the most part, they work on a contract or consulting basis with a services and/or retainer agreement in place.
What does a fractional CFO do?
Fractional CFO services involve a variety of responsibilities, such as:
- Funding and negotiations
- Budget and resource allocation
- Optimizing financial operations, strategies, and internal processes
- Supporting senior management with data-driven decisions
- Overseeing regulatory procedures and changes
- Managing cash flow
- Raising capital
- Forecasting finances
- Support during an acquisition or merger
- Routine bookkeeping and accounting
Is a fractional CFO the same as a CFO?
Although the two share similarities, a fractional CFO and a full-time CFO are not quite the same. They have similar skills and responsibilities, but with a few key differences:
1. Time commitment
A CFO typically works on a full-time basis, while a fractional CFO can be hired for a more flexible arrangement. This could involve working part-time or only for the duration of a specific project.
2. Scope of responsibility
CFOs are tasked with overseeing all the financial activities of a company, which includes everything from financial planning and forecasting to compliance and risk management. However, a fractional CFO may have a more focused role, providing support for specific financial areas, such as reporting, analysis, or strategic planning.
3. Company size
CFOs typically work for larger companies that have more complex financial operations, while fractional CFOs often work with smaller or mid-sized companies. This is because smaller companies and startups may not have the resources to hire a full-time CFO, but still need the expertise of a financial executive to help manage their operations and growth.
When does a company need a fractional CFO?
If you're considering becoming a fractional CFO, it's important to know when a company might need your services.
A company’s financial needs change as it scales. In the early stages of growth, a company might start building a finance team by first hiring a bookkeeper for basic accounting duties. Next on the priority list is usually a controller, who’ll perform financial planning activities.
When companies have scaled enough that the complexity of finance requires more expertise, they’ll often consider hiring a fractional CFO.
There are a few tell-tale signs when a company is ready for a fractional CFO, including:
- Growth: Companies experiencing rapid growth may need a fractional CFO to help manage their finances and strategize for the future. As the company grows, financial planning and analysis become more complex and time-consuming, and a fractional CFO can help keep everything on track.
- Special projects: Some companies want help with a specific project or initiative. For example, if a company is looking to raise capital or acquire another business, a fractional CFO can provide expertise and guidance throughout the process.
- Cost savings: A fractional CFO can provide the same level of expertise and guidance as a full-time CFO but at a lower cost.
- Interim needs: If a company's full-time CFO leaves or is on leave, a fractional CFO can fill the gap until a permanent replacement is found.
- Scalability: A fractional CFO can easily adjust their level of involvement based on the company's needs and resources.
The benefits of being a fractional CFO
If you’re considering leaving full-time employment, a fractional Chief Financial Officer (CFO) role might be for you.
To help you decide, here are some of the main benefits of being a fractional CFO for start-ups and small to medium sized businesses:
As a fractional CFO, you have the power to control your own schedule. No more being tied to a 9-to-5 grind! You can work on a part-time or project basis. This type of schedule gives you the freedom to prioritize what matters most in your life.
Whether it's spending more time with family or pursuing other interests, being a fractional CFO means your schedule is yours.
Tired of working with the same clients day in and day out? Fractional CFOs tend to work with a diverse range of clients across different industries and growth. From start-ups to enterprises, you can offer your expertise and guidance to a wide range of businesses. This keeps your work fresh and exciting, while allowing you to continue learning and growing as a finance professional.
You’ll have greater autonomy and control over your work. You can choose the clients you work with, set your own rates, and determine the scope and nature of projects you work on. This level of independence allows you to be the CFO maverick, forging your own path in the financial world.
4. Competitive compensation
Fractional CFOs often command competitive compensation rates, thanks to their specialized knowledge and experience. If you have a unique skill set or expertise in high-demand areas, you can earn top dollar for your expertise.
5. High-impact work
By offering financial guidance and strategic advice, you can help businesses achieve their goals and succeed in a competitive market. This kind of high-impact work is rewarding and fulfilling. In many ways, you can use your financial expertise to make a real difference.
The essential skills of successful fractional CFOs
Being a fractional CFO is not for the faint of heart. It requires a unique blend of skills that sets you apart from the crowd. Here are the most essential CFO traits and skills you'll need to thrive in this role:
Your clients need someone who can make sense of their numbers and help them make informed decisions. This means you’ll need a deep understanding of everything from financial statements to accounting principles, budgeting, forecasting, etc.
Seeing the bigger picture and providing strategic advice to help clients achieve their business goals is a must-have skill. Therefore, you need to be an expert at analyzing financial data. Not to mention making informed decisions that align with the client’s long-term vision.
You must be a master communicator to succeed as a fractional CFO and explain complex financial concepts in a language your clients comprehend.
If you're working with multiple clients at once, time management skills will help you stay on top of deadlines and deliverables.
Adaptability and versatility
As a fractional CFO, you’ll work with clients across many different industries, each with its unique financial challenges. Learning about each industry and adapting your strategies and approach as required is another important skill to master in this role.
How to become a fractional CFO
Becoming a fractional CFO may seem like a daunting task. But with the right combination of education, experience, and networking, it's an attainable goal.
Here are five tips to help you transition into the exciting world of fractional CFO services:
1. Strengthen your financial foundation
To become a fractional CFO, you'll need a strong educational background in finance, accounting, or a related field. It’ll also help if you stay up-to-date with industry trends by attending conferences and seminars, and reading relevant publications.
2. Develop your consulting skills
To succeed in this role, strong consulting skills are a must. This includes understanding client needs, developing strategic plans, and communicating effectively. If you lack these skills, consider taking courses or obtaining certifications to help build them.
3. Build a strong professional network
Networking is key to building a successful career as a fractional CFO. Attend finance events, connect with other financial professionals, and build your online presence.
Joining a professional organization or networking group can also help expand your network. Our free Slack community for finance professionals is a prime example of a thriving community that can help you build a strong network and find new opportunities.
4. Gain experience in a variety of industries
Consider gaining experience in different sectors to broaden your skills and expertise. This can include taking on consulting or advisory roles, or even volunteering your services to non-profit organizations.
5. Join a fractional CFO network
Joining a fractional CFO network can provide access to clients, additional resources, and support. These networks can also provide training and development opportunities to help you grow in your role. Research different networks and determine which one aligns with your goals and values.
How much can you make as a fractional CFO?
What you make as a fractional CFO varies but you can expect anywhere between $150 to $500 per hour (with $300 being the overall average hourly rate).
Rates usually depend on your location, industry, and level of experience. Professionals in this position tend to set rates depending on the complexity and scope of the work requested, as well as the existing state of the company’s financials.
According to research, fractional CFOs make $3,000 to $10,000 per month. In comparison, full-time CFOs make an average salary of $202,654 per year according to our Finance Salary Report 2023. However, the lower end of the salary range was $101,250 and the higher end reported an average salary of $278,900 for very experienced CFOs.
How to create a fractional CFO services agreement
As with any business arrangement, it's important to have a solid agreement in place to ensure that both parties are on the same page.
For fractional CFOs, this typically means having a Fractional CFO Services Agreement that outlines the scope of services, duration of engagement, fees and compensation structure, and other important details.
This agreement serves as a contract between you and your client, providing a clear understanding of expectations and responsibilities. It also helps to ensure that everyone is in agreement when it comes to the deliverables and timelines.
But it's not just about protecting yourself legally. Having a strong service agreement can also help to build trust and credibility with your clients. By clearly outlining the terms of the engagement, you demonstrate your professionalism and commitment to providing quality services.
Of course, developing a solid services agreement isn't something you should do alone. It's important to work with an attorney who can help you navigate the legal complexities and tailor the agreement to your specific needs. With their guidance, you can create a document that not only protects your interests but also helps to set the stage for a successful and productive engagement.
A new era of CFOs: Pros and cons
The rise of fractional CFOs is changing the game when it comes to financial leadership. These talented professionals are redefining what it means to be a CFO in the modern business world, bringing flexibility, expertise, and innovation to the table.
With the benefits of fractional work becoming more and more apparent, it's no wonder that so many CFOs are leaping into this exciting realm.
But is it always a good idea to transition to a fractional role as a CFO? Below, we look at some of the main pros and cons:
- Flexibility: You’ll have more control over your schedule.
- High demand: As more businesses turn to fractional CFOs, there are plenty of opportunities available.
- Variety of work: You’ll get to work with a range of clients, providing exposure to different business models and industries.
- High earning potential: You can command higher rates than traditional CFOs due to your expertise and specialized services.
- Uncertainty: As a freelancer, you face a level of uncertainty when it comes to finding new clients and maintaining a steady income.
- No benefits: You may not have access to traditional benefits such as health insurance and retirement plans unless you secure them yourself.
- More administrative work: Without a team, administrative tasks such as invoicing, taxes, and marketing will all land on your plate.
- Less job security: There isn’t the same level of job security as traditional CFOs, and your clients may end the engagement at any time.
Frequently Asked Questions (FAQs)
What is a fractional CFO?
A fractional CFO is a financial executive who provides part-time, interim, or project-based CFO services to companies in need of financial leadership and strategic guidance, without the cost and commitment of hiring a full-time CFO.
How much can you make as a fractional CFO?
Fractional CFOs make between $240,000 to $480,000 per year. The average hourly rate of a fractional CFO is $300, but rates vary depending on location, scope of a project, experience, and other factors.
What are the qualifications of a fractional CFO?
To become a fractional CFO, you’ll need a bachelor’s degree in finance, accounting, or a related field. Many fractional CFOs also have a master's degree in finance, accounting, or business administration. In addition, many fractional CFOs hold professional certifications, such as Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), or Certified Management Accountant (CMA). Prior experience as a CFO or VP in Finance is also expected.
Do you need ACCA to be a CFO?
Yes, you need ACCA to be a CFO. To qualify as a CFO, you must be a qualified accountant as well as a member of a professional body such as ACCA.