Does Your Business Need a Fractional CFO? You’ll Know If You’re Asking Yourself These 5 Questions

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As your business evolves, so does your need for financial information and insights. Early on, it’s probably enough to have a competent, reliable bookkeeper for tasks like accounts receivables and payables. Once your business takes off, you’ll need experienced accounting professionals to handle an expanding array and volume of transactions and tasks.

But at some point, your company will mature to the point that you need financial insights to make strategic decisions about how to grow and run the business profitably—and that’s beyond what a staff accountant can provide.

The trick is: When is a small-to-mid-sized business (SMB) at a stage where you need the insights of a finance professional—but not large enough to justify a full-time in-house CFO?

If you’re the CEO of a successful SMB and you find yourself asking any of the following five questions, it’s time to consider a Fractional CFO. Fractional CFO services give you access to highly experienced finance professionals, without tying up capital in a full-time CFO.

1. We’re seeing a lot of growth opportunities, but can we capitalize on them profitably?

It can be tempting to pounce on every opportunity to grow your business. After all, you didn’t start a company just to watch it stagnate. But many factors play into your ability to expand your business and still maintain reasonable margins. For instance:

  • Do you have the capacity to handle more business, or will it require you to add staff or expand your facilities (both of which come with a high price tag)?
  • Are inflationary pressures increasing your cost of goods sold (COGS), which might hamper your ability to add new business profitably?
  • Can you grow by increasing sales of existing products and services, or will you need to expand your product line to achieve growth?

To answer questions like these, you need insights driven by financial data and sophisticated models. The in-house accounting team at an SMB isn’t likely to have those capabilities. But a senior finance professional like a Fractional CFO can help you evaluate those factors and make an informed decision about which growth opportunities to pursue.

2. If we expand our geographic or online footprint, what are the tax implications?

Supply chain constraints continue to plague companies across all industries—especially consumer packaged goods (CPG) companies—and that has many leaders thinking about moving production or warehouse operations to ensure their goods reach customers efficiently and on time. For other businesses, expanding the online footprint might open the door to entirely new markets globally.

While initiatives like these could help you cut operating expenses, reduce transportation timelines, or tap into new customers, taxes are another factor to consider.

Operating within a different jurisdiction or goods delivery system can create new tax footprints, expose you to different tax laws, and result in additional tax liabilities. It’s a complex issue—a fractional finance professional can help you consider the decision from all angles before you get far down the path with your plans. And if you do decide to expand your geographic footprint, they can provide knowledgeable tax advice to ensure you handle the tax liability accurately.

3. Should we go out to the capital markets for another fundraising round?

It takes capital to grow a business, plain and simple.

Whether you’ve grown beyond your initial seed capital and you’re ready for a more substantial fundraising effort, or you’ve already done a Series A round and you’re ready for a Series B, approaching investors is a major decision and a big undertaking.

To secure funding, you’ll need solid financial statements and projections that forecast where your company is headed and the kind of return on investment (ROI) your investors will realize. And if you’re successful in securing that capital, your investors will expect to see frequent, detailed financial reports that demonstrate you’re hitting your targets.

Any fundraising effort also brings up the issue of how to raise capital without diluting too much of your ownership. It’s a difficult balancing act, and one you can’t easily manage on your own.

If you’re considering a fundraising round, you’ll need a CFO-level strategist to help you prepare to attract investors, satisfy their ongoing reporting requirements, and avoid the pitfall of diluting too much ownership. Fractional CFO services can help you accomplish all three.

4. What’s the best way to deploy our capital?

No matter how you secure it, your available capital is finite, so how you choose to use it is a critical strategic decision.

  • If you’ve used debt as one of your financing tools, should you use some of your capital to pay down your obligations?
  • Or would your capital be better used to invest in new product or service development, additional talent, or expanded facilities?

Questions like these are vital to operating a growing, thriving business, but they require more finance expertise than an SMB typically has on staff. An experienced finance professional can dig deep into the data, providing insights that help you evaluate how to deploy your available capital to best meet your business objectives, support your long-term strategy and roadmap, and yield the best ROI. Fractional finance services enable you to access that expertise without taking on high overhead.

5. We’re considering a strategic alliance that could open lots of possibilities, but how do we know if this venture will be profitable?

As you look to scale your business, you might find opportunities to enter an alliance with a company that can help you fast-track your growth. Strategic alliances can help you stay agile, respond to evolving customer needs, and grow with less capital investment.

In fields like technology, where the pace of change is rapid, strategic alliances can give you access to resources and capabilities you might find difficult to obtain otherwise. In the CPG business, an alliance might enable you to offer new products that compliment your existing lineup or to expand your geographic reach.

But while the opportunities may be plentiful, the approach isn’t risk-free. Before you move forward, you’ll want to ensure this endeavor will prove fruitful and profitable. A senior-level finance professional like a Fractional CFO can help you evaluate an alliance opportunity and structure an agreement that meets your business objectives without creating undue risk.

Turn to Simple Startup as Your Fractional CFO

If questions like these are on your mind, it’s time to hire a Fractional CFO. Simple Startup provides fractional CFO services that help you reinforce your financial foundations, transform your strategies, and scale your company for future growth. We become immersed in your business—leveraging our experience and bringing a fresh perspective on the financial drivers that can help you achieve your business goals.

Schedule a call to learn how Simple Startup’s fractional CFO services can help you answer critical questions and make strategic decisions about moving your business forward.

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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