How To Hire a Fractional CFO: A Complete Guide to Finding the Right Finance Leader for Your Company

In today’s rapidly changing business and regulatory environment, small to mid-sized businesses (SMBs) face pressure to adapt quickly. When market conditions shift, they simply can’t afford to bear down and wait it out the way large businesses can. 

And while adding a capable finance pro to your C-suite can certainly fast-track your business to the next level, the expense can be a significant burden, potentially undermining your near-term financial goals. Is it worth the investment?

This challenge has led many SMB leaders to explore an increasingly common solution: hire a fractional CFO. A fractional CFO provides an injection of high-level financial expertise when you need it to help you navigate key milestones and inflection points. It’s a lower-risk approach, offering seniority on demand, without the long-term commitment and overhead of a full-time executive. 

First, Learn the Difference Between Various CFO Roles

A fractional CFO provides their services to multiple clients on a part-time or contract basis. They offer the same quality strategic guidance and leadership as a full-time CFO, but without the full-time salary, benefits or commitment. Interim CFOs fall somewhere between fractional and full-time CFOs, as they’re usually not part-time, and they may have longer-term engagements than fractional CFOs. Here’s how they compare:

Consider How Your Company Can Benefit From Fractional CFO Services

Your company can benefit from a fractional CFO in more ways than just cost savings and flexibility. Here are some examples.

• Higher-level expertise: Access seasoned professionals with experience in your industry, providing valuable insights to aid in decision-making.
• Cost-effectiveness: Avoid the expense of a full-time executive salary, benefits and recruitment fees. You only pay for the services you need.
• No long-term commitment: Engage for as long as you need them, without the obligations of a permanent hire.
• Faster implementation: Skip the lengthy search, hiring and onboarding process associated with bringing on a full-time CFO.

• A focus on growth: Get help preparing for milestone activities that require you to improve valuation and revenue growth, such as mergers, acquisitions and funding rounds. (See how data startup DrivenIQ used a Paro CFO for help in this arena.)
• Scale seamlessly: As your business grows, a fractional CFO can help you build the financial infrastructure necessary to support that growth, which is what one Paro CFO did for identity platform Keyo.
• Corrective action: Fractional CFOs can address specific challenges, such as improving profitability or correcting course when financial performance is off-track, as in the case of a regional bank that achieved its first profitable year with Paro’s help.
• Stronger financial foundation and controls: A fractional CFO can develop robust budgeting, forecasting and reporting systems while ensuring regulatory compliance. 
• Efficiency and cost-savings: Fractional CFOs are adept at identifying efficiency gains and opportunities to save across an organization (to the tune of $500,000 for telecom company inRange Solutions).

Develop a Hiring Plan for Your Fractional CFO Role

Once you’ve decided your business needs external financial expertise, develop a hiring plan. It’s helpful to understand the responsibilities of the role. Core competencies include:

• Financial strategy and planning: Developing and implementing long-term financial strategies, including growth strategy, budgeting, forecasting, strength/weakness assessments and financial modeling.
• Financial reporting and analysis: Providing accurate and timely financial reports, analyzing financial performance and identifying areas for improvement.
• Cash flow management: Optimizing your cash conversion cycle, managing working capital and ensuring the business has sufficient liquidity.
• Risk management: Identifying and mitigating financial risks, ensuring compliance with regulations and establishing internal controls.
• Fundraising and investor/ecosystem relations: Assisting with fundraising efforts, preparing investor presentations, and communicating with stakeholders, potential investors or buyers.
• Process improvement: Organizing financial records, processes and assets, streamlining inefficiencies to optimize cost savings and financial performance.

Follow These Steps To Hire a Fractional CFO

Here are the steps to take to secure the best CFO for your company.

Step 1: Assess your business needs.

Determine the financial challenges your company faces. What are your specific financial pain points? Cash flow, profitability, budgeting, forecasting?

Next, outline the goals you want to achieve. For example: seek funding, improve profitability, expand into a new market.

Step 2: Define the fractional CFO role, responsibilities and scope.

What specific tasks should this person be responsible for within this engagement? Revamping processes, reporting, interfacing with stakeholders? How often do you expect them to deliver on these tasks? How will you measure their success? Be clear about your wants, expectations and limitations, and work with your candidate to align on what’s reasonable.

Next, think about your budget. A fractional CFO’s cost depends on their experience as well as the scope of work and pricing model. Consider your preferred model, whether it’s an hourly rate or a fixed fee for a set number of hours per month.

Step 3: Know what to look for in a fractional CFO.

Familiarize yourself with the essential skills and qualities of a modern CFO, and ask your candidate to share examples of projects they’ve worked on that demonstrate those relevant to your goals and needs. 

You may find that some candidates are stronger in building and interpreting complex financial models, while others may have excellent communication and interpersonal skills to interact with stakeholders. All candidates should be competent in the following:

• Strategic planning: The ability to think strategically, not just tactically, and develop long-term financial plans.
• Adaptability: Flexibility to adjust to changing business needs and priorities.
• Problem-solving: Strong analytical abilities with the capability to handle complexity.

Consider whether a CFO with experience in your industry or one with a broader base of experience is more appropriate for your needs.

Step 4: Decide whether to hire independently or seek the help of a service.

You have options when you hire a fractional CFO. You can find independent contractors by searching your professional network or through an internet search. Other options include working with a recruiting service or using a talent marketplace.

There are benefits to using a marketplace like Paro, including:

• Immediate access to vetted, qualified professionals: Paro has a network of fractional CFOs who have been thoroughly vetted. We only accept the top 2% of applicants and ensure they have a successful track record as well as the necessary skills and experience. 
• Matching expertise: We use an advanced algorithm to match you with a CFO whose skills and experience align precisely to your needs, goals and business size.
• Ongoing support and scale: We monitor the engagement to promote success and to ensure you continue to have the right person on board as your needs evolve.

Step 5: Prepare your interview questions.

Here are a few ideas to help you get started:

• Describe your experience with [specific financial challenge or goal].
• Tell me about a time you helped a company achieve [specific financial outcome].
• What is your approach to financial modeling and forecasting?
• How do you communicate complex financial information to nonfinancial stakeholders?

Step 6: Create an onboarding plan.

Once you select a candidate, you’ll want to ensure they onboard successfully. 

Work with your IT team to provide your fractional CFO with access to the necessary financial information, systems and tools ahead of time, including any new ones they recommend based on your goals. You may need to purchase additional user licensing or grant special permissions.

Next, establish a communication regimen. What kinds of meetings should they attend and how often? What’s the protocol before reaching out to stakeholders? What are your preferred means of communication? How and when will you check in with your CFO to review progress toward goals?

Avoid These Mistakes When Hiring a Fractional CFO 

After you’ve given your hiring needs some thought, check over your plan for these common mistakes:

• Hiring without a clear business vision/objectives: Define your short- and long-term goals before engaging a fractional CFO. They can help you develop a strategy to support those goals, but they need to understand your vision.
• Overlooking cultural fit: Ensure the CFO’s personality and work style align with your company culture and operational processes.
• Failing to set clear KPIs: Clearly define key performance indicators (KPIs) and deliverables to track their progress and ensure accountability.
• Overhiring: If you mostly need bookkeeping or basic accounting support, a fractional CFO may be overqualified. Consider hiring a bookkeeper or accountant instead.

Stop Waiting for Better Financial Performance

Hiring the right fractional CFO can be a game-changer for your business, providing the expertise you need without the burden of a full-time executive salary. By following the steps outlined in this guide, you can find a qualified part-time CFO to help you navigate financial challenges, optimize your performance and drive sustainable growth.

Paro is committed to helping businesses thrive by providing access to top-tier finance leadership. Explore our fractional CFO services today and take the task of hiring a fractional CFO off your to-do list this quarter.