CFO Services for Small Business
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CFO Services for Small Business
Retaining the support of an outsourced Chief Financial Officer (CFO) is one way small business owners can gain executive support and high-level experience to support their financial planning and decision-making. Even for the 10% of US companies that have only one to nine employees, CFO services for small business are a good idea. Do small businesses really need a CFO? The answer is yes—but maybe not at the expense of a full-time salary. that’s why using outsourced or fractional CFO services allows small businesses access to a CFO-level of expertise for a fraction of the cost of salary and benefits if the employee were hired.
When business owners fully understand what do virtual CFO services include, they can start to see how this service, leveraged at key points, will help their business achieve sustainable growth. From there, it becomes apparent how an outsourced CFO salary allows a business to access these benefits without the necessity of a full-time executive salary and benefits package.
Let’s start from the beginning and explore how outsourced CFO services work.
What Does a CFO Do in a Small Business?
A CFO carries the highest level of responsibility at a business for managing and advising about the financial activities and well-being of the company. This might make them sound similar to a bookkeeper or an accountant, but those are professionals the CFO manages and relies on for execution of the day-to-day or month-to-month financial tasks associated with running a business.. It is not the duty of the CFO to record transactions, prepare financial reports, or track and monitor expenses. Rather, the CFO helps make strategic business and financial decisions that are in the best interest of the company and its goals.
So what are CFO services and duties? These include:
- Cash Management: While a CFO will not manage your books for you, they can look at the overall cash flow and deliver recommendations about best practices that work for other small businesses in your industry vertical or around the same size and stage of growth. The CFO may also be able to recommend tools that allow business owners to monitor the state of cash management and better adapt to unexpected needs on a daily basis.
- Financial Projections: CFOs have the advanced analytical experience necessary to provide a business with a roadmap for future growth. This means improving profitability, along with the strategic timing of making new hires and carrying out other investments like real estate or a big marketing initiative.
- Acquisitions Advisory: Whether you have been offered the opportunity to acquire a company or be acquired by another business, a CFO can advise on the soundness of the decision. They can also guide you through the process. In these scenarios, working with an outsourced CFO often gets you better terms and more money, paying for their fees multiple times over.
- Investment and Financing Expertise: Businesses raise capital in any number of ways, from opening up investment rounds to improving their credit to quality for more competitive loans and financing. A CFO can advise the timing of these decisions, as well as the steps of due diligence and preparation that can be taken to ensure they pay off in the long run.
- Financial Turnaround: Lastly, for businesses who know the financials are a source of long-term concern, the services of a CFO can be invaluable to achieve a turnaround in a short period of time. With insights to improve cash flow, stabilize operations costs, and explore other options you might not be aware of, their financial insight can manifest big results in a short time frame depending on the circumstances.
Working with a CFO puts a depth of analytical insight on your side. Just because a business is small, doesn’t mean that depth of experience isn’t deserved or needed. The question simply becomes how to make it affordable.
What Does an Outsourced CFO Do?
An outsourced or fractional CFO provides all the above strategic services on a part-time or as-needed basis. This allows a small business to access enterprise-quality financial advice that also might be better-tailored to their current needs and challenges than a full-time hire.
For instance, if you choose to hire an outsourced CFO because of rapid company growth, you might look for someone with a slightly different skill set than a business owner who needs a CFO to consult about an investment or acquisition opportunity. Many businesses choose to hire well-rounded fractional CFOs who they can develop a relationship with over time and work with to pursue long-term goals in many aspects.
What CFO services are most commonly outsourced? Here is a list of where many startups and small businesses start to leverage this benefit.
- Financial Projections: Predict how the company will perform in the coming months and years.
- Scenario Modeling: Test what the performance of the company will look like under different market and economic conditions. Help a business owner decide when they should make specific hires based on revenue projections.
- Actuals vs Budget: Compare where you want to be to where you are, and strategize steps to align the two more closely.
- Unit Economics: Analyze metrics like cost per customer and average revenue per customer to determine the overall profitability of the business now and in the future.
- Financial Reporting and KPIs: Support from an outsourced CFO in reporting financials for meetings with investors and other stakeholders can even extend to include their presence at the meeting to answer any questions. An outsourced CFO can help set up your financial systems to give you the KPIs your business, board, and investors care about.
- Customer Contract Reviews: An outsourced CFO may be able to consult with you on ways to make your customer contracts more profitable, as well as identify risks that can lead to future costs.
These are just some of the services that an outsourced CFO can bring to the table for a business on an as-needed basis.
CFO Consulting Hourly Rates
If you’re now convinced an outsourced CFO would be an asset to your business, you are likely now wondering “how much does an outsourced CFO cost?” Let’s break this down by the different business models that can define how an outsourced CFO relationship works:
Parttime CFO Salary
While a part-time or fractional CFO won’t have a full-time salary, sometimes these experts do work for a flat monthly rate. This rate is sometimes determined based on the specific services and insights you need to leverage, or sometimes the rate includes any and all of the CFO’s services for a set number of hours per month. Depending on your needs and the specific CFO functions you would like to outsource, a part-time CFO salary will range anywhere from $1,000-$12,000 a month.
Fractional CFO Hourly Rate
Some businesses are more interested in paying a fractional CFO an hourly rate based upon the amount of time they spend each month serving the business. In these cases, owners can expect to pay anywhere from $250-$400 an hour for the CFO’s time and insights. This is a great way to pay only for what you need if you think only a few hours of support a month will be necessary.
Virtual CFO Rates
Virtual CFO services encompass all the functions and expertise we’ve already described. They are simply provided across a distance through virtual conferences and other cloud communication, instead of meeting in person. The rates for a virtual CFO, on average, will not differ much from the other costs above. The monthly fee for a virtual cfo starts at $1000 per month, while their hourly rate will be in alignment with industry standards of $250-$400 an hour.
Yes, at the high end, these rates can still represent a significant investment for a small business. For instance, if your part-time CFO is at the high range of the salary, you could be spending upwards of $100,000 a year to retain their experience as an asset. But the average salary for a full-time CFO starts at around $300,000 annually, and can be as high as $500,000 or more, especially including benefits. So under any of these models, you are still working with a seasoned C-suite professional at a savings of 60% or more for your business. Most small businesses will not need this much time unless they are experiencing a significant financial event like a money raise or acquisition.
Evaluating CFO Consulting Services
As you begin to shop around for an outsourced CFO, it’s important to find someone who aligns with your values and goals as a business, has the experience you need, and will be responsive and supportive when they are needed. Here are some of the factors to consider as you choose between outsourced CFO service providers:
- Education: While education isn’t everything, there are some basic qualifications you should look for in a CFO. In addition to a bachelor’s degree, they are likely to have an advanced degree in business or finance and may carry additional certifications like a certified public accountant (CPA).
- Expertise in Your Vertical: In addition to general financial expertise, it’s a good decision to look for an outsourced CFO who is knowledgeable about your industry vertical, and perhaps even your regional market. While some aspects of small business finance are universal, there are other elements that can differ widely across industries, especially highly regulated industries. This type of knowledge is especially important for consulting on scenario projections, mergers and acquisitions, and helping business owners strategize growth and set goals.One of the advantages in working with an outsourced CFO is that they have likely worked with multiple companies in a similar position to your business. This will give them the necessary experience to chart a path forward even beyond what an executive that you hire fulltime can provide.
- Overall Career History: Any individual working as an outsourced CFO should have at least 8-10 years experience in the field. This includes maintaining certifications and taking on continuing education to stay up-to-date on how finance is modernizing and evolving.
- Professional Network: One major asset an outsourced CFO can bring to the table is their professional network, especially if you are trying to raise funding or attract investors. Even if their network isn’t an asset to you, it may be an asset to them if they need to seek advice about solutions to a challenge or ask questions when they want to confirm their analysis.
- Personality and Communication Skills: It’s important that you feel listened to, respected, and understood by any outsourced service provider, especially one that will be serving in an executive capacity. You will be relying on the CFO to help you grow the business and potentially adapt to unpleasant, high-risk situations. You need to feel confident they are someone you can trust and get along with, and who will take the time to explain complicated concepts when knowledge needs to be shared.
- References: One way to evaluate many of these qualifications is by asking for references from other clients the individual also serves as an outsourced CFO. These other small businesses will be able to speak to the provider’s experience, the quality of their advice, their work style, responsiveness, and more.
- Agreement Structure: Lastly, it’s important to make sure the agreement itself is also something you are comfortable with. What protections are in place to ensure the CFO will give your business advice in your best interest (i.e., serve as a fiduciary)? What happens if you are unhappy with the services and want to terminate the agreement? Make sure it’s also defined what services you are entitled to, and what your responsibilities as a client are under the agreement, too. How will the CFO be onboarded? What information do you need to provide about your business? All these are important considerations.
Hiring an outsourced or fractional CFO is a major step in the life of a small business, empowering owners to level up their strategy and make high-stakes business decisions with greater confidence. Take your time and explore your options to ensure you find the partner that is right for you.
Outsourced CFO Services Helping Small Businesses Grow and Thrive
At Milestone, we approach every client interaction asking ourselves how we can make life easier for our clients. As small business owners and entrepreneurs, we are sensitive to the challenges, stresses, and questions that are encountered along the entrepreneurial journey. And with over 25 years of CFO experience, we have seen it all.
Whether you’re looking for advice to grow a blossoming business, insights to sustain the excellence you have already achieved, or succession planning to pass the reins to the next generation of company leadership, we consider it our privilege to help you achieve those goals on your terms. We provide the experienced leadership and cutting-edge tech tools you need to unleash the power of your back office. Since we operate without binding long-term contracts, it is our priority every day to wake up and keep earning your trust and your business.Through service, leadership, integrity, and a commitment to helping our clients and ourselves achieve work-life balance, we are proud to see our refreshingly forward approach making a difference for each of the clients we serve. Get to know us a little better and learn how our experts can meet and exceed the need for a CFO at your small business.