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What Is a Fractional CFO and Do I Need One?

What Is a Fractional CFO and Do I Need One?

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Pilot Team
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Published: 
May 24, 2023
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What Is a Fractional CFO and Do I Need One?

If you're a startup aiming to scale effectively, invest in growth, or maximize your chance of a successful fundraise, hiring a Chief Financial Officer (CFO) is crucial.  A CFO leads the finances of the company using data-driven strategies, including annual budgeting & forecasting, cash management, evaluating key performance indicators (KPIs), and managing the key deliverables for a fundraise.

A CFO can also manage burn, minimize expenses, optimize cash flow, improve profitability, maximize returns, and help with scenario planning. However, for early-stage startups, hiring a full-time CFO is typically too costly. That's when hiring a fractional CFO, also known as an outsourced CFO, can be a better option.  

What Does a Fractional CFO Do? 

A fractional CFO is an experienced finance professional who manages the critical strategic finance decisions that are essential for a startup to succeed, including:  

  • Creating and managing the company's annual budget
  • Forecasting revenue, expenses, & cash flow 
  • Identifying & tracking key performance indicators (KPIs)
  • Managing a company's cash runway and burn
  • Reviewing vendor contracts and offering advice during negotiations
  • Evaluating the impact of different scenarios, including a base, bull and bear case
  • Supporting the creation of investor reports and board presentations
  • Developing and supporting fundraising strategies 

When Should You Hire a Fractional CFO? 

It's never too early to hire a fractional CFO. Fractional CFOs often work with clients that have yet to launch or have any revenue all the way to clients raising their Series C. Generally speaking, a good time to hire a fractional CFO is when you are:

  • Looking to gain visibility into the future. A fractional CFO analyzes your historical financial reports and uses their industry expertise to help forecast and model your business.
  • Establishing scalable financial systems. A fractional CFO can suggest financial management systems and a financial stack that you can implement to support long-term growth. Getting the proper framework could help your company save time and money later. 
  • Raising capital. If you're preparing to raise a round, having a fractional CFO should be a priority. A fractional CFO can help startups understand the pros and cons of funding options, assist with pitch decks, provide investor-ready financial models, and evaluate term sheets.

How Should You Hire a Fractional CFO?  

When it comes to hiring a fractional CFO there are a few key considerations to keep in mind. It's crucial to ensure that a fractional CFO’s experience and background aligns with your company's specific needs. Some decision criteria you may want to consider include:

  • Experience with similar business models. Ask about their past experience and whether they have worked with companies with goals or challenges similar to yours. 
  • Industry-specific expertise. Industry expertise can help your fractional CFO tailor their approach to your unique needs by tracking industry-specific KPIs and benchmarking against your peers.
  • Assess their communication and collaboration style. Evaluate their style to ensure that they can effectively communicate financial insights and collaborate with your team.

How Should You Build Your Finance Team?

It's never too early to hire a fractional CFO. Pilot's CFO Services team works with many clients that have yet to launch or have any revenue all the way to clients raising their Series C. The flexibility of a fractional CFO, whether you start with a lighter or more in-depth engagement, will help increase your company’s probability of success in any macroeconomic environment.

Now is the time to reach out to a fractional CFO to help your company prepare for the uncertainty of 2023. Book a 1:1 session with a CFO to ask questions, receive guidance tailored to your specific needs, and experience what it would be like to have a fractional CFO join your team and help run an efficient business.

Still have questions?
Book time with our CFO Services team and get your questions answered.
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Still have questions?
Book time with our CFO Services team and get your questions answered.
Sign up
Still have questions?
Book time with our CFO Services team and get your questions answered.
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