Rather than hire a full-time permanent replacement when its first CFO left the company, Josh Freed, founder and CEO of workplace-management software startup Proximity, decided to do something different. The company contracted a fractional CFO, along with other fractional accounting staff, to take over the company’s finance functions.
The move made good business sense: A fractional CFO, kind of a finance freelancer, costs less than a full-time CFO, and their workload is dictated by the company’s needs. And it made good strategic sense for Proximity as well; by offloading daily accounting tasks to part-time accounting staff, the fractional CFO was able to focus deeply on the company’s strategic activities.
The fractional CFO, actively engaged with multiple clients simultaneously, also brought a wealth of outside knowledge and contacts to the company, experience and vision that a full-time CFO might not necessarily have, Freed said.
“We’re able to take a daily eye off of the metrics of the company when it comes to finance, the day-to-day accounting, knowing that once we onboard them, that they have their arms wrapped around certain aspects of the company,” Freed told CFO Brew.
Fully fractional. But fractional CFO work isn’t just beneficial for companies. For finance professionals with an entrepreneurial spirit, fractional CFO roles can be a path to greater flexibility, accelerated career development, and a way to broaden and diversify their experience.
Anne Marie Dube wanted a change after spending decades working a variety of finance roles for both large and small organizations without making it to the CFO chair, a long-time career goal. So when a venture-capital firm offered her the chance to work as a fractional CFO at a small firm that needed financial leadership, she leapt at the chance.
That first job led to more work, and Dube is now a fractional CFO for multiple clients and hopeful that one of those gigs leads to a full-time CFO role.
“At this point in my life, I can take a lot of clients, I can get to know the different industries to where I fit in, which one suits me the best,” said Dube. “And then, hopefully, a full time position comes of it.”
Duke Heninger started fractional CFO work much earlier in his career than Dube. After stints in public accounting and in industry, he found himself bored and looking for new opportunities.
“I wasn’t really being challenged, so I jumped out and started doing fractional CFO services,” he said. “At the time, I really thought it was a means to an end.” While working as a fractional CFO, Heninger bought, and recently sold, a business.
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“Because I’m fractional and a contractor…it doesn’t matter where I’m at right now,” said Heninger. “I can pursue what I want to pursue and get paid really well for it.”
Stepping in and stepping up. The Wall Street Journal reported last year that the demand for fractional CFOs was on the rise, driven largely by fast-growing startups flush with venture capital and private equity, but weren’t always prepared for the complicated financial matters that an influx of such capital typically brings.
“What we’re seeing more and more is that the small growing companies are blowing up everywhere, especially on the tech side, but also on e-commerce as well. They are needing high-level guidance, but they just can’t afford a $250,000 CFO,” Heninger said.
Although the startup scene is starting to cool, demand is still high for fractional CFOs according to Dan DeGolier, founder of Ascent CFO Solutions, a Colorado-based CFO outsourcing firm.
“It’s expanded very dramatically,” said DeGolier. “There’s definitely been a maturity within the fractional CFO space with the acknowledgement that it’s a really good approach in quite a few different industries for growing firms or firms that are going through transition.”
Not for beginners. To be clear, fractional CFO work is not for entry-level candidates. But for finance professionals with the right accounting, strategic, and soft skills to step into a company and immediately start steering the financial ship, the work offers a range of career benefits.
“You can’t go and just work at a fractional CFO firm from the bottom up,” Heninger said. “You have to have that real-life experience before you can get into it.”
And fractional CFOs are often tasked with more strategic, big-picture work and less with routine accounting and finance processes. For that reason, fractional CFOs often gain a deeper, broader skill set and network than finance professionals staying at one company, according to DeGolier.
“When I’m talking to a potential CFO joining the team, I’m letting them know they’re going to get quite a bit of variety and flexibility by working with several clients, and just doing that higher-level CFO work, it’s almost like putting your career on hyper-growth mode,” he said.—DA