Who is a Fractional CFO?

published on 01 May 2024

For a startup aiming to scale effectively, invest in growth, or maximize chances of successful fundraising, hiring a Chief Financial Officer (CFO) is paramount. A CFO spearheads financial management, employing data-driven strategies such as annual budgeting, forecasting, cash management, and evaluating key performance indicators (KPIs). However, for early-stage startups, a full-time CFO may be financially impractical. This is where hiring a fractional CFO, also known as an outsourced CFO, becomes a more viable option.

What does a Fractional CFO do?

A fractional CFO, an experienced finance professional, handles critical strategic finance decisions crucial for startup success, including:

  1. Creating and managing the company's annual budget.
  2. Forecasting revenue, expenses, and cash flow.
  3. Identifying and tracking key performance indicators (KPIs).
  4. Managing cash runway and burn rate.
  5. Reviewing vendor contracts and providing negotiation advice.
  6. Evaluating different scenarios, including base, bull, and bear cases.
  7. Assisting in investor reports and board presentations.
  8. Developing and supporting fundraising strategies.

When Should You Hire a Fractional CFO?

It's never too early to consider hiring a fractional CFO. They work with startups at various stages, from pre-launch to Series C fundraising. Key times to consider hiring one include:

  1. When seeking visibility into the future through financial analysis and forecasting.
  2. When establishing scalable financial systems to support long-term growth.
  3. When preparing for fundraising rounds, fractional CFOs can provide crucial support in understanding funding options, preparing financial models, and evaluating term sheets.

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