On average, fractional CFOs cost $3,000/month to $10,000/month. The most common agreements are between $5,000-$7,000/month for most small- to mid-sized companies. The cost of a fractional CFO depends on the scope of work provided, the size and complexity of the company receiving services, the current state of the financials, and the strength of the current internal finance team.
A fractional CFO should not be considered a cost; it should be considered an investment. You should see a measurable ROI from your relationship with a fractional CFO. If you don’t, then you’ve hired the wrong CFO.
A fractional CFO is a remote, outsourced advisor that works with the company on a part-time basis to improve the financial health, growth, and success of a company. Fractional CFO services vary based on the company’s current needs and stage of growth but often include consulting on strategy, creating or updating forecasts and budgets, improving processes, training personnel, analyzing client contracts, negotiating better terms with suppliers, and facilitating a robust monthly financial review and dialogue with company leadership.
Fractional CFOs are different from financial consultants who consult on a short-term or hourly basis but do not participate in implementation. A fractional CFO not only provides high-level financial strategy, they also help to implement the strategy, fine-tune systems, train personnel, facilitate strategic partnerships and relationships, and more.
A fractional CFO is a great choice for growing companies who need the strategy, forecasting, and industry experience of a CFO but who do not yet have a full-time need for an in-house hire. This often occurs when companies are growing quickly, have outgrown their current financial systems, are preparing for a transaction, or who have other needs—such as significant cash flow problems—that require the help of a senior finance professional.
How Much Does a Fractional CFO Cost?
The cost of a fractional CFO differs depending on the scope of work provided, the size and complexity of the business, the current state of the financials, and the strength of the current internal finance team. On average, fractional CFO costs range from $3,000/month to $10,000/month. The most common agreements are between $5,000-$7,000/month for most small- to mid-sized companies.
Companies that are experiencing high levels of growth, are preparing for a transaction or other highly hands-on project, require significant systems reorganization or analysis typically have fractional CFO costs at the higher end of the scale, as will companies whose fractional CFO packages require supporting finance personnel including senior controllers, systems experts, and bookkeepers.
A fractional CFO should not be considered a cost; it should be considered an investment. You should see a measurable ROI from your relationship with a fractional CFO. If you don’t, then you’ve hired the wrong person.
Make Sure You’re Getting a Real Fractional CFO
One of the biggest challenges in hiring a fractional CFO is that many so-called fractional CFOs advertise their services as “fractional CFO services” when they are actually offering bookkeeper-, CPA-, or controller-level experience.
Here are some tips for finding a legitimate, high-impact fractional CFO:
- Avoid CPA firms. Since CPA firms are seasonal, they will usually try to augment their off-season with CFO services. However, CPAs offer a much different skillset and capacity for strategy than an experienced operational CFO. CPAs are experts are organizing existing numbers and providing tax or GAAP advice, but most lack the forward-looking, operational, and strategic approach you’ll find with a fractional CFO. Read more about the differences here: What’s the Difference Between CPA and CFO? 4 Key Differences
- Avoid services that seem bookkeeper- or controller-oriented. You should be skeptical of accounting or bookkeeping companies offering CFO services. If services seem mainly focused on accounting or financial reporting, you may not be getting what you need (and will be overpaying for the services). Bookkeepers and controller are typically experts in past and current financial numbers but are significantly less experienced in future numbers and operational strategy. When searching for a fractional CFO, look for an emphasis in short- and long-term business/financial strategy and forecasting, not just number-crunching. Read more about the differences here: What is the Difference Between a Controller & CFO (and How to Know Which You Need)
- Look for extensive, high-value networks. One of the benefits of hiring a fractional CFO is the level of high-value introductions and connections they can help you make. This is especially true when you partner with a fractional CFO group with multiple CFOs who have rich business networks that you may benefit from. In business strategy, growth, and profitability, much of your opportunities rely on the quality of people you meet.
- Ask for case studies and referrals. A fractional CFO is a big investment. If you can’t find case studies or reviews on their website that show proof and success in the services they’re offering, keep looking. Watch for evidence of strong forecasting experience and a capacity to give real, impactful strategic advice.
- Be skeptical of firms offering services below $3k/month. CFO services under $3k usually indicate that the CFOs are very inexperienced or may not be CFOs at all. Would you hire a CEO coach or consultant who had little to no experience running successful companies? Your fractional CFO can transform your financial strategy, growth, and profitability—but only if they have the expertise and background to do so.
- Use a fractional CFO company over freelance. When you hire a fractional CFO services company you are benefiting from the collective knowledge, networks, and experience of multiple CFOs, whereas hiring a freelance CFO gets you access only to what that one person knows.
How Long Does a Fractional CFO Agreement Last?
A typical engagement with a fractional CFO may last from 6 months to 5 years, with some arrangements lasting indefinitely. The most common starting engagements are 1-2 years. However, most companies continue to engage beyond the initial arrangement to maintain the growth and business success experienced under the fractional CFO until they reach a size that can support a full-time hire.
Many fractional CFOs will provide turnaround, cash flow, restructuring, growth management, or other CFO services for the short term, then will train an in-house financial team member to take over duties associated with maintaining those changes. A fractional CFO may also work with a company until they are large enough to afford and justify a full-time in-house CFO hire.
Fractional CFOs are “on-demand” CFOs providing financial strategy and expertise when your business needs it. However, fractional CFOs are also different from short-term consultants or financial strategy advisors who may only provide a framework or initial strategy for making changes. In most cases, a fractional CFO not only designs the financial strategy, but also implements it, trains personnel, oversees its impact, and manages progress.
What Factors Influence How Much a Fractional CFO Costs?
Several factors may influence how much a fractional CFO costs. Larger companies or companies with more financial complexity will often see higher costs, especially if they have outgrown their existing systems and require reorganization. Smaller companies with simpler financials will often have decreased fractional CFO costs.
1 – Complexity of Financials
The size, growth, and industry of your company will play a huge role in determining how much a fractional CFO costs. This is because the larger your business and the faster your growth, the more complex your financials become. There’s a greater interplay of systems, more complicated cash flow, and significantly more factors to consider during forecasting and budgeting.
2 – Systems Design & Implementation
If your current financial and operational systems are insufficient to manage your current level of growth, your fractional CFO may help put new systems in place to better support your business. This is often more hands-on, sometimes including in-person visits to train staff members or overseeing systems or ERP implementation. Because of the intensiveness of this process, the costs of a fractional CFO may be higher when arrangements include this level of management.
3 – Supporting Team Members
Depending on the fractional CFO services being provided, you may need the support of an expert to implement financial strategy. This is especially true when the CFO services provided include creating and delivering monthly financial packages. In these cases, it would be inefficient to use the time of the CFO for basic bookkeeping and reporting. Instead, the fractional CFO will most likely have expert bookkeepers and controllers on-staff to provide these services; however, they may also work with your in-house accounting department if you have one.
Request a Bid
Preferred CFO is one of the most experienced fractional CFO services companies in the United States. For more information about our services or to request a bid, contact us today.
Additional Insights & Articles
A virtual CFO, also called a VCFO or fractional CFO, is a consultant or company that provides CFO services to one or more businesses on a part-time or ad-hoc basis. In the past, a true CFO was usually a highly paid, full-time employee that only large corporations...
What Is the Purpose of Accrual Accounting? There are two methods of accounting: cash and accrual. In cash accounting, transactions are recorded when payment occurs. In the accrual method, revenues and expenses are matched and recorded at the time the good is delivered...
Gross profit is one of several key profitability metrics that help companies evaluate their financial health. It is necessary to determine gross profit before you can calculate other important figures such as net profit, EBITDA, and the company’s bottom line. Gross...
Selling a business, especially in the current economic climate, can be a complicated process. You want to get the best price from the right buyer and smoothly transition the business to the new owner. The process takes a significant amount of planning, negotiation,...
An essential factor in business management is the ability to discern where the company is headed and what course to chart for maximum profitability. Intuition and guesswork are not sufficient to create a rational roadmap for the future. For that, the process of...
Cash management is the lifeblood of any business. It can make or break any company regardless of how great the product or service is. In fact, cash-flow related challenges are the reason 82% of small businesses fail. Cash flow is a metric that every company should...