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20 August, 2021

Why Small Businesses Need a Fractional CFO

If you are a small business owner, your main incentive in how you operate your company is to increase your profit margin. This places a premium of importance on sound money management and competent financial practices as you also, as needed, implement fiscal austerity measures to keep your business in the black.

Small business owners wear a lot of hats and contending with the financial side of their company can put enormous pressure on their limited resources and expertise. There is a great deal of time involved when it comes to analyzing a company’s evolving financial situation and planning for future growth.

Because your focus as an owner of a small business is tending to the day-to-day operation of your company and to the needs of your customers, it could prove beneficial to acquire the services of a fractional CFO, or chief financial officer.

What is a Fractional CFO?

A fractional CFO – known as an outsourced CFO – is a part-time CFO that works with companies to solve financial problems. As opposed to a full-time CFO, who oversees and manages all aspects of financial operations, the role of a fractional CFO is to address one-off tactical issues and serve in the capacity of a long-term strategic financial advisor.

A fractional CFO brings a sophisticated level of knowledge and considerable expertise for significantly less money than a full-time CFO, making this a viable option for small business owners, who often have limited budgets.

As a rule, small companies rely on fractional CFOs to drive growth at an earlier stage than bigger, more established firms.

These experienced financial executives offer services on a project or contract basis. In essence, a fractional CFO performs similar functions as a full-time CFO, except they are part-time. A fractional CFO’s role is entirely strategic, so they can streamline processes, drive goal setting, and create a financial infrastructure that supports your company’s ability to grow and scale.

A fractional CFO can take on comprehensive responsibilities for your business that could include raising capital to invest in product development or expansion. They can also help you decide when you can afford to expand your staff or spend money to open a new line of business with your team to build a cash flow forecast.

There are, however, limits to what duties a fractional CFO can perform for your business. For example, a fractional CFO is not a comptroller or a bookkeeper.

Why Your Small Business Needs a Fractional CFO

Your fractional CFO serves your business as an experienced financial expert who can effectively address several types of business-specific challenges. These could include the following scenarios:

Market Expansion – Fulfilling the duty of conducting competitive research in order to determine which markets to strategically expand into to optimize return on investment.

Your Company Going Public – Your fractional CFO can create an Initial Public Offering (IPO) and put together a business plan for investors.

Cash Flow Management – Your fractional CFO will establish a viable plan when your company’s growth exceeds its capacity to produce product.

Fundraising – Your fractional CFO can offer strategic guidance having to do with venture funding or raising debt to finance growth, as well as developing pitch decks, financial modeling, and completing due diligence.

Company Transitions – Your fractional CFO can perform the role of interim CFO during periods when your business is going though organizational restructuring.

Benefits of a Fractional CFO for Small Businesses

As is the case with other outsourced accounting positions, a fractional CFO offers tangible benefits that are usually beyond the scope of your company’s staff. They provide expertise and specialty knowledge, as well as cost advantages – all trademark qualities of an outsourced position.

Fractional CFOs deliver considerable value to any small business. Their benefits span numerous areas that include competitive industry knowledge, strategic insights, and serving as a low-cost alternative to more expensive full-time CFOs.

Strategic Insights

Outsourced CFOs can put together custom action plans for businesses that experience financial stresses or even crises, helping companies respond effectively and quickly. Fractional CFOs are highly skilled to evaluate your business processes and recommend areas for improvement and identify ways to operate according to best practices.

They will match their specific insights to your company’s goals. Fractional CFOs bring extensive experience and industry knowledge to resolve any challenges that might arise in your financial operations.

Competitive Industry Knowledge

Because fractional CFOs typically work for many companies representing numerous industries, they offer your business a varied perspective on best practices for financial operations. Working for so many types of companies means they accumulate a great breadth of knowledge in financial management that your business can exploit to your advantage.

The expansive knowledge that fractional CFOs possess can give your business a competitive advantage. For example, a fractional CFO is able to compare your processes, accounting software systems, and bookkeeping productivity against similar businesses where they worked. This can also prove to be a valuable benchmarking tool.

Low-Cost Staffing

Fractional CFOs offer your company financial acumen at a fraction of the cost of a full-time CFO. Full-time CFOs can make upwards of $400,000 annually, according to, and this is in addition to the expenses associated with hiring, onboarding and providing benefits for a full-time employee.

When you hire a fractional CFO, you are paying exclusively for the value added to your business. Fractional CFOs typically are compensated on a contract or project basis without Human Resources costs.

Your business will not have to cover the cost of compensation packages usually afforded to a c-suite professional. This means the outsourced nature of fractional CFOs gives your business the opportunity to utilize their expertise at a significantly lower cost.

Provide Smooth Transitions During Financial Upheaval

When your business goes through periods of high growth or an unexpected downturn, a fractional CFO can use their vast experience to help your business avoid financial pitfalls.

Major growth, acquisitions, and revenue losses can all create pressures on the financial systems of your business. But a fractional CFO who has relevant experience can lead your organization through these turbulent episodes and provide smoother transitions for your company.

Ensure Stability During Staff Shakeups

In the event of your business suddenly finding itself without a CFO, a fractional CFO can effectively run the financial side of the company until a replacement is hired. The advantages of a fractional CFO in this circumstance include being able to adeptly handle all financial operation duties on a short-term basis, quickly evaluating the company’s fiscal needs, and help in determining the level of the ongoing full-time need.

A fractional CFO can even play a role in the development of the job description and the hiring of the permanent CFO.

Drilldown Solution Can Help Your Small Business Optimize Profits

At Drilldown Solution, we are all about helping small businesses to be profitable. Our fractional CFOs are highly skilled and able to assist you in establishing a robust financial system while providing you with keen insights, strategic guidance, and fiscal leadership to support your growth and ascendance in the marketplace.

Drilldown Solution offers a full suite of financial services that includes bookkeeping, accounting, and tax preparation. We have the expert team to help any small business thrive, even under the current COVID-19 pandemic circumstances. We accomplish this with a three-part system comprised of patient-experience excellence, financial focused operations, and accountability.

Our goal at Drilldown Solution is to put your small business in the best financial position possible, utilizing proactive processes and personal care!

Note: The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.