Credit: Mars Sector-6

 

Growing a startup from inception to a multi-million dollar enterprise isn’t a task for everyone. It’s an intense process, and experts can tell you it requires support from a myriad of business and financial experts.

However, securing a star-studded lineup of C-suite executives to propel and manage a startup towards greatness isn’t cheap. In 2021, the average salary for a Chief Financial Officer (CFO) in the US was $393,377; that’s before other compensation benefits successful CFOs expect from an employer.

In general, a business in the startup phase of its existence simply doesn’t have the funds to pay c-suite level salaries, and the ones that do tend to invest their capital into product development, research, and marketing efforts.

This can leave a startup feeling stuck between a rock and a hard place: they need CFO-level expertise to help them manage their finances and meet their business goals, but they can’t justify the expense of hiring a full-time CFO.

This is where outsourcing CFO services on a part-time, or fractional basis can prove highly beneficial to startups and small businesses and is similar to outsourced accounting for startups.

Fractional CFOs are an excellent solution for startups that need CFO-level support but don’t have the resources. Fractional CFOs are fully qualified and experienced professionals that work on a part-time or project basis with multiple companies. They provide the high-level financial expertise and support startups need to scale their business.

 

What are the Benefits of Using CFO Services for Startups?

There are many benefits of using fractional CFO services for startups, including:

  • Reduced overhead costs: Fractional CFOs don’t require the same salary and benefits as a full-time CFO, which can save a startup a significant amount of money.
  • Scalability: A fractional CFO can be brought on as needed, which gives startups the flexibility to scale their CFO support up or down as their business needs change.
  • Increased expertise: Fractional CFOs often have a wealth of experience working with different types of businesses, which means they can offer valuable insights and advice that a full-time CFO may not be able to provide.
  • Improved decision-making: Having a CFO on board, even on a part-time basis, can help startups make better financial decisions that will allow them to grow their businesses.

 

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What Tasks Can a Fractional CFO Provide?

A fractional CFO for startups can offer the same services as a full-time CFO, but on a part-time or project basis. This includes:

  • Financial forecasting and capital planning: A CFO can help a startup develop accurate financial forecasts that can be used to make sound business decisions and properly deploy their capital
  • Cash flow management: CFOs can help startups optimize their cash flow and ensure they have the funds available to meet their business goals.
  • Financial reporting and statement analysis: CFOs will analyze a startup’s financial statements to identify areas of improvement and potential areas of concern.
  • Investor relations: CFOs can help startups manage their relationships with investors, and ensure they are providing the information investors need to make informed decisions.
  • Fundraise Support: CFOs can advise startups on fundraising efforts including but not limited to optimal capital structure, valuation, due-diligence and overall investor matters
  • M&A Support: CFOs can advise on both buy and sell-side activity from deal terms / structure all the way through close
  • Tax planning and compliance: CFOs can help startups navigate the complex world of tax planning and compliance by ensuring the business hires the right people for tax accounting.

 

Outsourced Accounting for Startups

Credit: NORTHFOLK

 

How Do I Know if My Startup Needs a Fractional CFO?

There are a few signs that may indicate your startup could benefit from fractional CFO services. Many of these signs are common to startup ventures. Examples of these can include:

 

You’re struggling to maintain control of your finances. 

If you’re finding it difficult to stay on top of your startup’s financial situation, a CFO can help you manage your accounting and bookkeeping services to help you get organized and develop a plan to get your finances back on track.

You’re not sure how to grow your business.

If you’re not sure where to take your business next, a CFO can help you develop a growth strategy and plan that will help you achieve your goals.

You’re having difficulty attracting investors. 

If you’re having trouble securing funding from investors, a CFO can help you put together a strong financial package that will give investors the confidence they need to invest in your business.

You’re not sure how to reduce costs.

If you’re looking for ways to cut costs and improve your bottom line, a CFO can help you identify areas where you can save money.

If you’re experiencing any of these problems, fractional CFO services may be right for your startup.

 

Check out these blogs that can help startup owners with finances:

 

How to Find a CFO for a Startup?

If you’re a startup owner who’s ready to consider outsourced CFO services for small business, here are three tips to help you identify the best outsourced CFO for your business:

1. Look for CFOs with Startup Experience

While all CFOs have experience working with businesses and managing finances, not all of them have experience working with startups specifically. Startups have their own unique set of financial challenges and opportunities that CFOs who haven’t worked with them before may not be familiar with.

2. Consider CFOs Who Have a Track Record of Success

When you’re looking for a CFO in startup to help your business grow, you want someone who has a proven track record of success. Look for CFOs who have helped other startups raise capital, achieve profitability, and scale their businesses.

3. Find CFOs Who Fit Your Startup’s Culture

It’s important that the CFO you hire is a good fit for your startup’s culture. After all, they’ll be working closely with your team and will need to be able to gel with the rest of the company.

Finding the right outsourced CFO for your startup doesn’t have to be difficult. By keeping these three tips in mind, you can be sure you find a CFO who has the experience, skills, and personality that will help your business succeed.

 

Consult inDinero to Assess Fractional CFO Needs

If you’re a startup owner, there are several reasons to explore CFO as a service. Fractional CFOs can help you stay on top of your finances, develop a growth strategy, attract investors, and reduce costs. When looking for a CFO to help your startup grow, be sure to look for CFOs with startup experience, a proven track record of success, and who fit your startup’s culture. With the right CFO on your team, you can take your business to the next level.

For more information about how a fractional CFO can benefit your company, consult the expert CFO outsourced providers at inDinero.

by Brian Johnson

Brian Johnson, CPA, MBA is a CFO Director at inDinero. Brian has a decade of experience in strategic finance and accounting advising on finance department build-out and best practices, FP&A oversight, capital raise/planning, and M&A strategy. Brian enjoys his free time skiing, golfing, traveling, and spending time with family & friends.

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