The Smarter Startup

Cost Benefits of a Fractional CFO vs. Full-Time CFO for Startups

For venture-backed startups looking to optimize costs without compromising on financial expertise, hiring a fractional CFO can be a game-changer.

As a startup scales and its founders navigate the complex world of financial management, one crucial consideration is whether to hire a full-time Chief Financial Officer (CFO) or a Fractional CFO. In this article, I’ll share what I consider to be the main cost benefits of a Fractional CFO over a full-time counterpart, particularly for early- to mid-stage startups.

Bottom-Line Cost Benefits of a Fractional CFO

  1. Compensation Cost: The median salary for a full-time CFO in the United States is currently over $400,000 per year. Fractional CFOs, on the other hand, typically work on a contract or project basis and charge based on the services provided. This equals significant hard cost savings compared to the salary and benefits package of a full-time CFO.
  2. Reduced Overhead: Hiring a full-time CFO often entails additional overhead costs such as hardware, software, office space, and other resources. Fractional CFOs typically work remotely using their own resources, reducing your startup’s overhead expenses.
  3. Immediate Availability: Full-time CFOs usually require a lengthy and expensive recruiting and hiring process. Fractional CFOs are available immediately via an efficient selection and onboarding process. This quick availability allows your startup to save on HR costs and address urgent financial matters promptly without delays.
  4. Mitigating Hiring Risks: Recruiting a full-time CFO is a substantial commitment that comes with inherent risks. Working with a Fractional CFO allows your startup to assess the impact of hiring a financial expert before making a long-term commitment.
  5. Flexibility: Venture-backed startups often experience fluctuations in their financial needs, and Fractional CFOs offer flexibility in terms of the number of hours worked and the scope of services provided. Startups can scale down or adjust their CFO services as needed.
  6. Scalability: Conversely, your financial needs will evolve as your startup grows. Your Fractional CFO can adapt to these changing requirements, providing scalable financial management solutions without the need for restructuring or hiring additional full-time staff.
  7. Company Valuation: An experienced CFO can help maximize your company’s valuation during a raise by identifying and presenting KPIs that matter most to investors. Developing a compelling financial narrative that clearly illustrates your current growth, future potential, and Total Addressable Market (TAM) opportunity are all imperative for communicating your company’s actual value. Because your startup is likely to be able to afford to bring on a Fractional CFO much earlier than a full-time CFO, you can realize these benefits as early as your Seed or Series A round instead of waiting until a later funding round.
  8. Focus on Core Competencies: Startups can focus on their core business activities while outsourcing financial management tasks to fractional CFOs. This allows your startup’s leadership team to dedicate more time and resources to product development, marketing, and other areas that directly drive top-line revenue growth.
  9. Crisis Management: In times of crisis or uncertainty, startups may require immediate financial expertise. A fractional CFO can step in during these critical periods, providing guidance without the need for a long-term commitment.
  10. Access to Networks: Thanks to their depth and breadth of experience serving multiple startups, Fractional CFOs often have extensive networks of professionals in various industries, including bankers, investors, and other financial experts. Startups can leverage these connections for fundraising, strategic partnerships, and other business opportunities. Burkland’s Fractional CFOs also have direct access to our team’s tax, accounting, and HR experts, as well as our VC partners and other financial partners. Additionally, our Fractional CFOs participate in Burkland’s company-wide Knowledge Share, keeping each other up-to-date on all the latest rules, regulations, and changes in the startup ecosystem.

In the dynamic and competitive world of venture-backed startups, certain key decisions can make a significant impact on a company’s trajectory. For venture-backed startups looking to optimize costs without compromising on financial expertise, hiring a fractional CFO can be a game-changer. By leveraging the expertise of a seasoned financial professional on a flexible, as-needed basis, you can strategically position your startup for sustainable growth and success.

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