Shields Up! Defending Against Fractional CFO Misconceptions"

Over the past few months, I have had the chance to talk with the leaders of some companies that were contemplating working with a fractional CFO (FCFO) and some had concerns. While I understood some of their concerns, I felt like there were answers to every concern and would be a great issue for The Fractional Frontier. As such, I have accumulated their concerns and will attempt to address each concern. As we start, let me state clearly that many of their concerns weren’t experienced by them first-hand, rather many of the concerns were shared with them by other leaders of companies that had experience with FCFOs. With that disclaimer, let’s jump in:

Concerns about Availability and Commitment

Concern: "They're not fully invested." A common complaint is that a fractional CFO, due to their part-time nature, may not have the same level of commitment as a full-time employee. They might prioritize other clients, leading to delays or a perceived lack of urgency.

The Fractional Frontier Response: It's true that a fractional CFO may have multiple clients, but that doesn't mean they're any less committed. A well-organized fractional CFO will prioritize tasks based on urgency and importance, ensuring all clients receive the attention they need. For example, a fractional CFO I know successfully managed multiple clients by using advanced project management tools and setting clear expectations with each client. Clients reported high satisfaction due to the CFO's timely and dedicated support.

Concern: "Availability is limited." Scheduling can be challenging. Because they have multiple clients, their availability for urgent matters or impromptu meetings might be restricted.

The Fractional Frontier Response: While fractional CFOs may have scheduling challenges, clear communication and advanced planning can mitigate this. For instance, regular scheduled meetings and real-time collaboration tools can ensure timely responses. As a documented example, one of my clients found that using Slack and regular weekly check-ins maintained seamless communication and availability.

Concern: "They don't understand the day-to-day." Some business owners feel that fractional CFOs lack the in-depth understanding of the company's daily operations that a full-time employee would possess. This can lead to less effective strategic advice.

The Fractional Frontier Response: While fractional CFOs might not be present every day, they can still gain a deep understanding of a company's operations through regular updates, team meetings, and reviewing operational reports. For example, a fractional CFO working with a manufacturing company regularly attended monthly strategy meetings and reviewed daily operational reports, leading to effective and actionable strategic advice.

Concern: "Transition issues." If the fractional CFO leaves, finding a replacement or transitioning to a full-time CFO can cause disruptions.

The Fractional Frontier Response: To address potential transition issues, it's essential to have a structured handover process. Documenting processes and maintaining clear records can ease transitions. For instance, a client of mine successfully transitioned from one fractional CFO to another with minimal disruption due to detailed documentation and a well-planned handover process.

Concerns about Cost and Value

Concern: "It's still expensive for part-time work." While fractional CFOs are often more affordable than full-time executives, their hourly or project rates can still be significant, leading some to question the return on investment.

The Fractional Frontier Response: While the upfront cost of a fractional CFO might seem high, the value they bring often outweighs the expense. Their expertise can lead to significant financial improvements. For example, a tech startup I worked with saw a 30% increase in profitability within a year of engaging a fractional CFO, highlighting the ROI.

Concern: "They focus too much on high-level strategy, not enough on practical implementation." Some businesses need someone who can roll up their sleeves and get into the details, not just provide theoretical advice.

The Fractional Frontier Response: A good fractional CFO should balance strategy with implementation. Clear role definitions and setting expectations can help. For instance, one client found success by setting specific actionable goals for their fractional CFO, leading to both strategic guidance and practical results.

Concern: "Scope creep." It's easy for the scope of work to expand, leading to unexpected costs. Clear contracts are essential, but even with those, managing the cost is a concern.

The Fractional Frontier Response: Clear contracts and regular check-ins can prevent scope creep. It’s crucial to outline deliverables and monitor progress. For example, a client used monthly performance reviews to ensure the work stayed within the agreed scope, keeping costs predictable

Concerns about Integration and Communication:

Concern: "They don't integrate well with the team." Building rapport and trust can be challenging when someone is only present part-time. This can lead to communication breakdowns and a lack of team cohesion.

The Fractional Frontier Response: Building rapport takes effort, even for part-time team members. Regular team meetings and open communication channels can foster better integration. For instance, a fractional CFO joined all-hands meetings and company events, resulting in strong team cohesion and trust.

Concern: "Communication can be slow or inconsistent." Due to their multiple commitments, fractional CFOs may not respond to inquiries as quickly as desired.

The Fractional Frontier Response: Setting clear communication protocols can address this. Using tools like Slack, Trello, or Asana can facilitate real-time updates and consistent communication. For example, a client used Asana for project tracking and found the fractional CFO's responses timely and reliable

Concern: "They use too much financial jargon." Some business owners feel that fractional CFOs communicate in overly technical terms, making it difficult to understand their advice.

The Fractional Frontier Response: It's essential for a fractional CFO to communicate clearly and effectively. Providing explanations in layman's terms ensures everyone understands. One fractional CFO I know used visual aids and simplified reports to make financial information accessible, earning praise for their clarity.

Concern: "Lack of company culture fit." Because they are not in the office full time, they may not understand the company culture.?

The Fractional Frontier Response: Spending time understanding the company culture and participating in company activities can help. For instance, a fractional CFO who regularly attended company social events and team-building activities quickly integrated into the company culture, enhancing their effectiveness.

Concerns about Expertise and Fit:

Concern: "They're not specialized enough for our industry." While fractional CFOs often have broad experience, they may lack the specific industry knowledge needed to provide optimal support.

The Fractional Frontier Response: While fractional CFOs often have broad experience, finding one with industry-specific expertise is possible. For example, a healthcare company successfully hired a fractional CFO with extensive experience in healthcare finance, resulting in tailored and effective financial strategies.

Concern: "Their experience doesn't match our specific needs." Even with relevant industry experience, their past roles may not have involved the same challenges or opportunities faced by the current business.

The Fractional Frontier Response: Customizing the search and vetting process to find the right match can address this concern. A client of mine needed expertise in international finance and found a fractional CFO with a strong background in global financial management, perfectly matching their needs

Concern: "They're more of a consultant than a CFO." Some businesses need someone who can take ownership and drive results, not just provide advice.

The Fractional Frontier Response: Ensuring the fractional CFO has a hands-on approach and clearly defined responsibilities can mitigate this. For example, a client set clear performance metrics and project ownership for their fractional CFO, resulting in a proactive and results-driven partnership.

Concern: "The provided advice was too generic." Some owners felt that the fractional CFO gave them the same advice that they give all of their clients, and that the advice was not tailored to their unique circumstances.

The Fractional Frontier Response: Tailoring advice to the specific business context is key. For example, a retail company appreciated the customized financial strategies their fractional CFO provided, which were specifically designed to address their unique challenges and opportunities.

Other Concerns:

Concern: "Security and confidentiality concerns." Sharing sensitive financial information with an external party can raise concerns about data security and confidentiality.

The Fractional Frontier Response: Confidentiality agreements and secure communication channels can address these concerns. For instance, using encrypted communication tools and having clear confidentiality agreements in place helped one client feel confident in sharing sensitive financial information with their fractional CFO.

Concern: "Difficulty measuring ROI." It can be challenging to quantify the impact of a fractional CFO's work, making it difficult to determine whether they are delivering value.

The Fractional Frontier Response: Setting clear goals and KPIs from the outset can help measure the impact of a fractional CFO’s work. For example, a client tracked specific financial metrics such as cost savings, revenue growth, and process improvements, clearly demonstrating the value provided by their fractional CFO.?

Summary,

While there are valid concerns about fractional CFOs, many of these can be addressed through clear communication, structured processes, and careful selection. By addressing these issues proactively, businesses can leverage the expertise and flexibility of fractional CFOs to drive significant value.

However, it must be said that every FCFO is right for each engagement. It really is up to the FCFO to be honest with themself to determine if they are a good fit or will they be trying to put the proverbial square peg in a round hole - which is not fair to the client, or honestly to the FCFO.

Stay Ahead of the Curve: Follow These Minds

LinkedIn Articles Worth Reading:

Bojan Radojicic Bojan "How I Build a Cashflow Statement in 3 minutes" Radojicichttps://www.dhirubhai.net/feed/update/urn:li:activity:7300784310935040001/

Josh Aharonoff "Financial Modeling Best Practices: https://www.dhirubhai.net/feed/update/urn:li:activity:7299433752265392128/

Aleksandar Stojanovi? "7 Tools Every Fractional CFO Should Use to Scale Their Practice"https://www.dhirubhai.net/feed/update/urn:li:activity:7297615912474480640/