When you started your company, you likely split responsibilities between yourself and a few trusted people. However, with every successful startup, there comes a time when a dedicated CFO is essential for the company to move forward.
If you’re considering bringing on an in-house CFO, you might understandably balk at the costs of recruitment, onboarding, and ongoing compensation. For a small to mid-sized company, hiring a full-time CFO isn’t always financially feasible, but there’s an alternative: an outsourced, fractional CFO.
For these companies, working with an outsourced CFO is almost always more affordable, and it’s likely to deliver a better ROI, too. Here’s a closer look at some of the main reasons fractional CFOs are more cost-effective.
Most Outsourced CFOs Take a Pay-as-You-Go Approach
When you hire an in-house CFO, you’re committing to paying a full-time executive salary. For very large, established companies, this ongoing expense may not be an issue.
However, smaller, growing companies often don’t have the capital to pay a full-time salary, and that’s a major part of why so many turn to outsourced CFOs. Outsourced CFOs typically offer more flexible payment and engagement models:
- Monthly retainers
- Payment by the hour
- Project-based pay
With an outsourced CFO, you only pay when you need advice or help with a project. This feature is especially helpful for growing companies. If you need more help from your CFO as your business evolves, they will likely be able to accommodate you.
You Don’t Have to Cover an Ongoing Salary and Benefits
This is one of the most significant benefits of working with an outsourced CFO. The average CFO salary is almost $140,000, and it’s not unusual for CFOs at large companies to make more than $1 million.
Covering the base salary alone can be a challenge for smaller or newer companies, but executive compensation packages almost always come with benefits (like health insurance) and various kinds of equity-based compensation.
Working with an outsourced CFO costs considerably less, and it’s also far less complicated. Instead of trying to put together a compensation package to attract qualified candidates, your company just needs to agree to your fractional CFO’s fee schedule.
You Can Make Each Dollar Count
Your outsourced CFO isn’t with your company on a daily basis. So when you do meet with them or ask for their help with a project, you’ll likely be focusing on high-impact, meaningful work. For instance, you might ask your CFO to create a cash-flow forecast or develop KPIs for the coming fiscal year.
Because you’re only paying your CFO to work on critical efforts, your ROI will likely be far greater than it would be if you’d hired a full-time CFO. You aren’t just investing in an executive — you’re putting your money toward tangible results.
Recruitment Is Far Less Expensive
If you’ve been weighing the benefits of hiring a full-time CFO versus an outsourced one, you already know that the difference in pay is stark. However, you may not have considered the additional cost of an executive search.
Looking for a company executive is an extremely time- and resource-intensive process, and most businesses choose to hire an executive search firm. These firms usually charge about 20% to 30% of the executive’s first-year salary. Once the firm has found a suitable CFO, your company must still cover the cost of onboarding.
The price of finding an outsourced CFO is a small fraction of the total cost of recruiting an in-house executive. Outsourced CFOs can typically jump in and get started right away, so the time and money spent on onboarding is minimal.
Ready to Find Your Fractional CFO?
The larger a company grows, the more complex its finances become. If your business is in need of a financial professional to guide it into the next chapter, Zabel & Co. is here to help.
When you work with us, our experienced team will help you find strategic, customized financial advice that fits your budget. If you think your company could benefit from an outsourced CFO, get in touch with us to start a conversation today.