While growing a startup, financial leadership is perhaps the most important element of long-term success. But, as difficult as the decision can be, there comes a time for many founders to hire an external CFO or even create a role within the company. Both will give you strategic guidance, but either can be the best option depending on your company’s age, budget, and goals.
Full-Time CFO
A full-time CFO is a role that larger or more advanced businesses would bring on. They lead financial operations, take care of teams, secure funding, and connect financial strategy to business growth. There are some advantages to getting a full-service CFO:
- Always there: Their time is dedicated to your business.
- Level of Oversight: They can oversee sophisticated teams, extensive financial systems, and so on.
- Strategic Partnerships: A full-time CFO will generally have deep investor and banking relationships.
But there’s a price to be paid in return for those benefits. A U.S.-based full-time CFO is typically paid more than $250,000 per year, without including bonuses, equity and benefits. This investment is unsustainable for most startups that are still in their early or growth stages
Fractional CFO
A fractional CFO delivers the same expertise a regular, full-time CFO would offer on a time-share or consulting basis. This structure enables start-ups to obtain expert financial strategy without the obligations that are associated with an in-house, full-time executive. Some plus points include:
- Economical: You are charged only for the time and services necessary.
- Strategic Flexibility: Fractional CFOs adjust to your growth level, supplying fundraising, forecasting, or restructuring advice when needed.
- Niche Expertise: A lot of fractional CFOs have cross-industry expertise, providing more universal data than someone who only reports to a single firm.
- Flexible Engagement: Add or edit the number of services as your startup grows.
Fractional CFOs are particularly useful for startups gearing up for rounds of funding, cash management, or establishing financial systems that appeal to investors.
For startups, timing is a vital part of the decision, as well as who has available resources. If your company is scaling fast, has high-level financial needs, and a high budget, a full-time CFO might be warranted. But for most startups, hiring a part-time CFO provides the optimal mix of affordable finance expertise.
Deciding between a fractional CFO success model for startups and a full-time CFO is an important decision for every startup. Although there are advantages to utilizing a full-time CFO, most startups will gain more from the cost savings and flexibility that come with hiring a fractional CFO. At Starpoint CFO, we focus on helping new companies establish a firm fiscal footing without the weighty perception of executive overhead costs.
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