Why A Fractional CFO?

The problems small and mid-sized businesses have when hiring a full-time CFO

Let’s start with company size.  There is a certain critical mass and a certain level of financial resources that result in both the need and ability to have access to experienced financial stewardship.

One problem is that companies typically grow slowly and deliberately, not in exponential leaps that suddenly require a full time CFO.  So what to do in the meantime?  If you hire a full time CFO, a few things become problematic:

They are expensive

A CFO’s compensation package typically includes salary, benefits, vacation and sick time, bonuses and, in some cases, equity.  Further, in small to mid-sized companies, there is a large portion of their job that requires significantly less ability and experience than what you’re paying for.  Remember, for everything they do, regardless of its complexity, difficulty, value, etc., you are compensating your CFO at rate reflective of his or her highest and best use (see graph).

If you don’t grow, they leave

Because of the aforementioned range of duties, a good CFO will not only become bored, they will be concerned about their professional development and career trajectory if the company doesn’t grow.  Also, any equity or long-term incentives lose their appeal.

If you grow, you need to replace them

Many small to mid-sized companies make a common mistake. They simultaneously over-hire and under-hire.  How?  They over-hire for today, not needing a full-time CFO, but attempting to make up for it by hiring a “CFO-lite,” usually someone who has been a controller of a small company.  But they have also under-hired for tomorrow, because as soon as the company starts to grow in size and complexity, the person they hired is not up to the challenge.  The next mistake companies make is that – out of loyalty to the person – they will give this person the opportunity to fail for years, costing the company dearly.

They don’t work out

Both my interim and fractional engagements often come about because a CFO didn’t work out.  It is arguably difficult to find and properly vet a good CFO, especially for a small business owner.  Many get fooled by smooth-talking candidates who are trying to land a high-paying position above their abilities.  I’ve seen first-hand the damage done to a company by a poor hiring choice, and then months (or years!) of hoping the person will be able to step up their game.  Finally, they face reality and that’s when my phone rings.

You may only engage me for a fraction of time, but you get ALL of my knowledge, experience, ideas, creativity, network, etc. I’m helping to make decisions that can transform management teams and companies.  Further, you’re not paying a CFO rate for tasks that can be performed much more affordably.  You’re always getting my highest and best use, adding as much value to the company as I can.

The problems small and mid-sized businesses have when hiring a full-time CFO

Let’s start with company size.  There is a certain critical mass and a certain level of financial resources that result in both the need and ability to have access to experienced financial stewardship.

One problem is that companies typically grow slowly and deliberately, not in exponential leaps that suddenly require a full time CFO.  So what to do in the meantime?  If you hire a full time CFO, a few things become problematic:

They are expensive

A CFO’s compensation package typically includes salary, benefits, vacation and sick time, bonuses and, in some cases, equity.  Further, in small to mid-sized companies, there is a large portion of their job that requires significantly less ability and experience than what you’re paying for.  Remember, for everything they do, regardless of its complexity, difficulty, value, etc., you are compensating your CFO at rate reflective of his or her highest and best use (see graph).

If you don’t grow, they leave

Because of the aforementioned range of duties, a good CFO will not only become bored, they will be concerned about their professional development and career trajectory if the company doesn’t grow.  Also, any equity or long-term incentives lose their appeal.

If you grow, you need to replace them

Many small to mid-sized companies make a common mistake. They simultaneously over-hire and under-hire.  How?  They over-hire for today, not needing a full-time CFO, but attempting to make up for it by hiring a “CFO-lite,” usually someone who has been a controller of a small company.  But they have also under-hired for tomorrow, because as soon as the company starts to grow in size and complexity, the person they hired is not up to the challenge.  The next mistake companies make is that – out of loyalty to the person – they will give this person the opportunity to fail for years, costing the company dearly.

They don’t work out

Both my interim and fractional engagements often come about because a CFO didn’t work out.  It is arguably difficult to find and properly vet a good CFO, especially for a small business owner.  Many get fooled by smooth-talking candidates who are trying to land a high-paying position above their abilities.  I’ve seen first-hand the damage done to a company by a poor hiring choice, and then months (or years!) of hoping the person will be able to step up their game.  Finally, they face reality and that’s when my phone rings.

You may only engage me for a fraction of time, but you get ALL of my knowledge, experience, ideas, creativity, network, etc. I’m helping to make decisions that can transform management teams and companies.  Further, you’re not paying a CFO rate for tasks that can be performed much more affordably.  You’re always getting my highest and best use, adding as much value to the company as I can.

Testimonials

Here’s what clients and peers have to say about my services:

Ron was instrumental in the launch of our company. He successfully guided us through fundraising from some of the top VC’s in the country . . . Continued

Zac Pierce , BumpOut - Founder and CEO

We hired Ron as an interim CFO and advisor.
At the time we thought we needed to get our books in order, vet our processes and introduce some improved procedures.
What we got was a revolution. . . Continued

Adam R. Karasch, Karasch & Associates - Chief Executive Officer

Ron has been instrumental in the success of my business and he has guided my partner and I through all of our early stage obstacles.  Ron’s financial expertise and ability to evaluate risk have allowed my partner and I to scale our business quickly. . . Continued

KC Fordham III, Managing Partner 84 Capital

Ron has been outstanding in helping us to get our businesses organized and establishing strategies for the future. . . Continued

James Wavro, J Wavro Associates - Owner

Ron has it all – the 50,000 foot understanding required in the boardroom; to the ground-level tools, skills, and dexterity required to settle in with the tactical team. . . Continued

Pam Prior, Priorities Group - CEO

Ron’s creativity, candor, knowledge and, frankly, determination proved absolutely invaluable through a very challenging hinge in our company’s 40+ year history. . . Continued

David N. Heffner, CODY Systems - Owner

Ron has helped us look at our business more objectively, he provides a non-biased viewpoint, shares the options and various possible outcomes and helps us make the tough decisions, sometimes decisions that business owners just don’t want to make, but need to make             . . . Continued

Vicki Sack, Juno Search Partners - Co-Founder/Partner

I’ve had the good fortune to work with the same clients as Ron a number of times. He is an exceptional CFO and easy to work with. . . Continued

Steve Smolinsky, Benari LTD, Wharton School, Geneva Global
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