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When Does a Startup Need a Fractional CFO?

Writer's picture: Tatyana AnastasovaTatyana Anastasova

The fractional CFO model has seen a big rise in popularity among startups in recent years. Just as startups use the external services of a law firm for their legal needs instead of hiring a general counsel, utilizing the professional financial services of a fractional CFO without the commitment of a full-time hire makes the most sense for growing startups. It is an easy and cost-effective way to get strategic finance support until a company is ready for a full-time CFO.


Fractional CFOs work well for Seed and Series A-B startups


Fractional CFO services are especially beneficial for early-stage startups which do not need and also cannot afford a full-time CFO. Most Pre-seed and Seed startups need financial support only around accounting and tax. And these are usually outsourced to small accounting firms and tax advisors.


A Fractional CFO can be useful when the companies identify a strategic necessity and need help with one-off situations (cash management issues or creating a financial forecast) or long-term advisory services.


It can be during financing rounds - a fractional CFO helps with strategic planning, financial modeling, and financial due diligence. Young startups should also consider hiring a fractional CFO when founders have a knowledge gap in finance and this knowledge is important to grow sustainably.


What does a Fractional CFO do for startups?


Typically, fractional CFOs are not responsible for regular bookkeeping and administrative work. They are also unlikely to prepare tax filings or ensure tax compliance. What can a Fractional CFO help with?

  • Strategic financial planning

  • Financial modeling

  • Revenue modeling

  • Preparing for funding rounds

  • Preparing for mergers and acquisitions

  • Strategic decision support

  • Financial KPIs and metrics

  • Cap tables and valuation

  • Resolve cash flow issues

  • Raise low gross margins

  • Cut high expenses

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