Managing a company’s finances is a critical task that can make or break a business. For this reason, many companies often rely on the expertise of CFOs to manage their finances and make sound financial decisions. However, not all companies, especially early-stage startups are at the scale or have the financial resources where a full-time CFO hire makes sense. This is where a fractional, consulting or interim CFO can come into play for an early-stage startup. I will explore the differences between these three types of CFOs and when each one might make more sense than the other.
Fractional CFOs
Fractional CFOs are part-time CFOs who may work with multiple clients simultaneously but are hired on a long-term basis and are considered part of the leadership team and company (eg. they are on the company Slack and email). They are ideal for startups that need financial expertise for both tactical and strategic tasks but do not need the bandwidth of a full-time finance leader.
Consulting CFOs
Consulting CFOs are also part-time CFOs who may work with multiple clients simultaneously and are typically hired for specific projects or advisory services and are thought of as an external resource for the leadership team. Consulting CFOs are often hired for their specialized expertise and are not involved in day-to-day operations. A startup might hire a consulting CFO to help with a fundraising or M&A process, build out a finance org or implement systems and tools.
Interim CFOs
Interim CFOs are hired as temporary full-time CFOs to help quickly build out the finance function and team. Interim CFOs are hired on a short-term basis and are responsible for managing the day-to-day financial operations of the company and also strategic tasks. Interim CFOs are often hired for their ability to quickly assess the financial situation of a startup and provide guidance during times of change or transition until a full-time CFO can be hired.
Key Differences
The main difference between fractional, consulting, and interim CFOs is the level of involvement in the company.
- Fractional CFOs work on a part-time basis but are treated as part of the leadership team and company and typically support a startup on both day-to-day operational and long-term strategic tasks.
- Consulting CFOs work on a part-time basis and are treated as an external resource to the leadership team and company and typically support a startup on strategic projects and advisory work.
- Interim CFOs work on a full-time basis and are treated as part of the leadership team and company and typically support a startup on day-to-day operational and long-term strategic tasks.
How Much Does It Cost to Hire a Fractional, Consulting or Interim CFO?
Hiring an experienced finance leader to help support your early-stage startup as it scales is an ROI-positive decision. What it costs is dependent on the experiences, skillsets, and level of commitment you are looking for from this individual.
- Fractional CFOs typically work 5-20 hours a week per client and will charge $250-400 per hour.
- Consulting CFOs will charge an hourly rate or flat fee based on the specific project or advisory work you need support with. Depending on how specialized the skill you are looking for is, the hourly rate may be in the $300-$600 range.
- Interim CFOs are typically cheaper on a per-hour rate, but your overall spending might be higher since they are committed to your team on a full-time basis. Expect to be charged $150-300 depending on the experience level.
My Final Thoughts
Seeking out the support of a startup finance expert can impact your business in a multitude of ways. Whether you hire an FTE or a Fractional, Consulting or Interim CFO, these hires will not only be able to create bandwidth for your team to focus more on product and/or GTM, but will also help advise your team on strategic decisions at the earliest stages of your business, which will have a compounding effect on your startup’s growth.