5 Proven Ways a Fractional CFO Can Fast-Track Your Profitability

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Accelerating profitability is a goal that most early-stage companies and even more mature companies strive for. But determining how to best achieve that goal isn’t always straightforward.

There are various strategies you can use to improve your profitability and a variety of levers you can pull—some on the revenue side, some on the expense side. Which approaches will best help your business increase its profitability will depend on many different factors that can be complicated to assess.

How can a small or mid-sized business take the right steps to accelerating profitability? It starts with leveraging the skills and capabilities of a fractional chief financial officer (CFO).

The Role of a Fractional CFO

Hiring a fractional CFO allows you to get a slice of a highly experienced and strategic finance professional, at a fraction of what it would cost to hire a full-time in-house CFO with similar credentials. You gain exactly the level of finance expertise and support your business needs, without having to commit the capital required for a full-time employee.

A fractional solution to obtaining senior-level finance support is becoming the preferred approach for small and mid-sized businesses—especially if they’re serious about achieving aggressive revenue and profitability growth. If your business wants to take a faster track to improved profitability, a fractional CFO can help in five important ways.

1. Perform Cash Flow Analysis and Management

You’ve heard clichés like “cash is king” and “cash is the lifeblood of a company.” The reason they’re well-worn phrases is, they’re true.

Better visibility into your cash flow and better management of your cash position open a world of possibilities when it comes to improving your profitability.

  • With sufficient cash flow, you can invest in automated systems that reduce operating costs or new products that generate profitable revenue streams.
  • With an accurate view of your cash position, you can make decisions that impact profitability, such as how to adjust your inventory as needed or best manage your accounts payables.
  • By managing your cash proactively, you gain the information you need to evaluate new opportunities that can drive up your profit margin or the funding to invest in operational efficiencies as you scale.

2. Analyze Products, Pricing & Inventory

Do you know which of your products or services are the top contributors to profitability? Are you confident you’re carrying enough inventory to meet customer demand—but not so much that you’re tying up capital for too long, or worse, having to write off inventory? Do you know whether you’re pricing your products optimally, so you’re capturing sales at a price that makes you both competitive and profitable?

Questions like these can be challenging for any business to answer, but especially a small or mid-sized business that doesn’t employ a full-time CFO. Yet, without these data-driven insights, it’s tough to run a growing, profitable business.

A fractional CFO can analyze your products, pricing, and inventory and help you identify adjustments that can help accelerate your profitability.

  • They might recommend you eliminate a poor-selling product that’s tying up resources without generating a good return.
  • At times of rapidly rising inflation, a fractional CFO can evaluate your pricing strategy and help you fine tune your margins without losing sales on price-sensitive products.
  • For consumer packaged goods companies, a fractional CFO can look at inventory through the lens of profitability and help determine when to write-off or reduce inventory.  

3. Use Financial Modeling to Assess What-if Scenarios

While no business leader has a crystal ball, it is possible to forecast the future based on sound assumptions and accurate data. By using financial modeling to evaluate different scenarios and how they would impact profitability, a fractional CFO can help your business make decisions that boost your bottom line. For example:

  • A fractional CFO can use financial modeling to pressure-test new product initiatives you’re considering, to confirm whether they’ll spur profitable growth.
  • They can model how a change in your supply chain (such as switching suppliers) will impact your bottom line.
  • They can run financial models to understand how investing in equipment that drives operational efficiencies will affect your cost of goods sold in the longer term.

4. Ensure Your Financial Statements Support Informed Decisions

Financial statements are the scorecard that show how your business is executing against your strategies. Far more than just a financial tool, they provide a useful window into the health of your operation.

A fractional CFO can ensure your financial statements are accurate and complete—then use those tools to identify trends that signal a need to adjust and improve your profitability. For example:

  • A fractional CFO can review your income statement to determine if your cost of goods sold (COGS) is increasing faster than your revenue is growing, signaling a need to better control your expenses/margins.
  • They can assess your balance sheet to evaluate whether inventory levels are too high or low relative to sales trends, ensuring you don’t tie up too much capital in inventory.
  • They can analyze your financial statements against competitors or industry benchmarks, identifying areas where you’re underperforming and recommending remedies.   

5. Identify Efficiency and Productivity Improvements

A more efficient and productive operation can directly boost the bottom line. A fractional CFO has the experience, capabilities, and insights to identify opportunities to improve your company’s efficiency and productivity.

For example:

  • A fractional CFO can develop and monitor key performance indicators (KPIs) —enabling you to measure how you’re progressing toward your goals and spot opportunities to adjust and improve.
  • They can recommend best practices for improved productivity and efficiency based on a track record of success at similar businesses.
  • They can perform analyses to spot variances between forecasted vs actual figures for production costs or other variable expenses that greatly impact the bottom line.    

How Simple Startup Can Help!

If you’re eager to accelerate your profitability and ready to tap an experienced fractional CFO to get you on your way, then it’s time to partner with Simple Startup. Our fractional CFO services help growth-minded companies achieve their goals—including increased profitability—better and faster.  

A Simple Startup fractional CFO becomes immersed in your business, establishes a strong financial foundation, transforms your financial strategies by turning data into actionable insights, and identifies ways to help you scale the company profitably.

Book a call with Simple Startup to learn how our fractional CFO services can build a secure financial foundation and drive scalable, profitable growth.

About Lorne Noble

Lorne loves finance so you don’t have to (seriously, he plays with Excel sheets on vacation)! He spent 12 years in corporate London as an investment analyst then made the jump to Boulder, Colorado to act as finance mentor to high impact companies at The Unreasonable Institute, Girl Effect Accelerator and Singularity University. He has an MBA from IE business school in Madrid, Spain.

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