Understand what part-time or fractional CFOs are and do, and see if this is the right time to hire these finance professionals for your startup
.svg)
Early-stage startups can have big boys or big girls challenges – from fundraising from venture capital investors to needing a solid strategy to generate financial efficiency and extend their runway.
In these cases, and in the many other challenges that will still arise for your baby turned adult, it would be pretty cool to have the help of a Chief Financial Officer (CFO). That's the most senior finance professional there is, focused on solving the most critical problems or finding the most critical solutions that can take your startup to its next milestones.
But having such a professional on your team comes at a cost, and you know that pretty well. That's why many startup founders are eyeing part-time CFOs, also called fractional CFOs. They are the same CFOs. But they work only at specific times to achieve specific goals, focusing on ultimate efficiency.
Remote work has only made this on-demand alternative even more accessible. In a recent McKinsey survey, 40% of American workers will be self-employed by 2025. In Future Insight, from Brazil, 18% of employers consider it likely to recruit on-demand leaders as early as 2023.
Are you considering a part-time or fractional CFO? Before hitting the hammer, here's everything you need to know about part-time or fractional CFOs:
Let's start with the ABCs. Or rather, with the CFOs. A Chief Financial Officer (CFO) is the most senior executive when it comes to the financial management of a company. A good CFO ensures that your startup has a solid and effective financial strategy, aligned with your company's goals.
A part-time/fractional CFO works the same way but on a part-time basis. In other words, you have a fixed-hour contract to solve a specific project or challenge in the finance area.
The distribution of this workload can be arranged, ranging from full-time for a short period to a few hours over several weeks.
Your startup needs to take into account both its business objectives and its resources at this very moment, from software to member count, to define the number of hours it will demand from a part-time/fractional CFO.
A part-time/fractional CFO can do everything a full-time Chief Financial Officer or CFO can do. The difference is that your contract will determine a certain time to work on a certain challenge or project. (And let's remember that this contract can always be renewed, depending on the interest of both parties.)
The smaller the company, the more practical the CFO. But ideally, the rest of the team deals with accounting, treasury, financial analysis, financial planning, financial modeling and forecasting, financial reporting, risk management, and financial compliance.
Meanwhile, the CFO is responsible for leading the long-term strategy. And because of that, the CFO can also have a closer look at legal aspects, payroll, and even products and operations.
Another function of the CFO or CFO is to communicate effectively with the other executives of the company and even with external investors about the finances of the startup, ensuring that the company's fundamentals are solid and aligned with the objectives.
As always, there is no one-size-fits-all answer for every startup. Even so, some variables should always be evaluated when deciding whether or not to bring a part-time/fractional CFO to your startup:
Does the business have a strong need for a senior finance professional? If not, the business will fail to take full advantage of the budgetary efficiencies it can have with a part-time/fractional CFO.
You will have a greater gain if you already need a CFO to solve tasks that only a professional of this level can take on. If you realize that your startup just needed an accountant, for example, it's better to focus on this type of professional and leave CFOs for later, part-time or not.
Does the timing of your startup justify investing part of your already tight budget in this type of professional? Even if it justifies itself, does your business really have the money to keep this professional for the time necessary to meet your objectives?
There are the right professionals for certain challenges, and the world of fractional jobs is made up of experienced professionals precisely because you don't need to invest in training them for these challenges.
Is your business really able to attract the necessary profile of part-time/fractional CFO for your startup?
Working on your value props can be a good homework assignment not only to attract the best talent but also to face the lack of budget that we mentioned a little while ago. We are talking about offers such as purpose, brand, challenge, work model, and compensation.
Remember that, in the beginning, the founders are the startup. They must work to share the mission and make the first hires. Who knows, maybe you can find the right person because they admire the purpose of your startup or they're excited about the challenge you proposed to them.
Do you have conviction about who to bring to this position, or would you like to test before creating a deeper and lasting relationship? Testing or not, could this person have space in the business for years to come or will it definitely be a temporary position?
It is important that you have your expectations well-defined and aligned before looking for a part-time/fractional CFO. For example, there's no point in wanting a professional who can later join your company's staff but hiring a part-time/fractional CFO who definitely doesn't want to work for years and years for the same company.
For each stage of a startup, a part-time/fractional CFO can act in different ways. As we have mentioned previously, this professional can act from structuring the financial team to supporting fundraising.
Even so, remember to consider the potential constraints on demand, investment allocation, attractiveness, and conviction that we just mentioned.
Let's say you've already approved your demand, investment allocation, attractiveness, and conviction. To go with a part-time/fractional CFO, it is important to consider:
You can spend hours looking for professionals on LinkedIn (and not paying attention to other areas of your startup in the process).
Another option is to rely on subscription platforms that connect executives available to work on-demand to companies, such as Chiefs.Group.
Around here, we have more than 1,200 talents, approximately 20% of which are part-time/fractional CFOs. We understand your business and your challenge to find the best professional on the base in just one week, ready to start working.
The cost depends on the context and challenge of the business but is basically made up of the seniority and workload of that professional.
The on-demand hiring model can generate up to 80% savings for a startup when compared to CLT. In addition to flexible working hours, there are also other costs that are not incorporated, such as equipment, benefits, paid vacations, etc.
.svg)
Disclosures for Latitud Finance
Latitud is not a bank. Banking, brokerage, FX, and other regulated activities are provided by our licensed partners in the United States and Brazil.
To become a Latitud Finance customer, you must agree to Latitud Finance’s Privacy Policy and Terms of Use.
Disclosures for US-Domiciled Latitud Finance Business Accounts
Some services that are part of your Latitud Finance Business Account are offered through Synapse Financial Technologies, Inc. and its affiliates (collectively, “Synapse”). Synapse is not a bank and is not affiliated with Latitud, Inc. Brokerage accounts and Cash Management Services are provided by Synapse Brokerage LLC (“Synapse Brokerage”), a registered broker dealer and member of FINRA and SIPC. You can find additional information about Synapse Brokerage on FINRA’s BrokerCheck. Please see Synapse’s Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library for more information.
Synapse Brokerage is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Funds maintained in the Synapse Brokerage Cash Management Program are deposited into one or more banks (“Program Banks”) where the funds are eligible for FDIC insurance up to $250,000. Please see your Brokerage Account Agreement and Synapse’s Terms of Service for further details. You can find a list of Partner Financial Institutions participating in a Synapse cash management program here.
