Every business owner understands the importance of a Chief Financial Officer (CFO), but the idea of a fractional CFO is a relatively new concept in the business world. Fractional CFOs are also referred to as virtual CFOs. Fractional chief operating officers (COO) are also a relatively new development. Both of these fractional, instead of consulting services, have been steadily growing across a wide variety of industries in recent years.
So how exactly does this fractional consulting concept work, and how can a business know when to hire a fractional CFO or COO? You can learn more about fractional consulting and other business consulting services by contacting the 3Sixty Consulting Group at (404) 398-3888.
What Is a Fractional CFO or COO?
Just like a traditional CFO, a fractional CFO acts as the most senior finance executive in a business or organization. CFOs are in charge of the business’ finance department and usually work closely with the Chief Executive Officer (CEO). The main difference is that fractional CFOs is at a reduced time commitment that fits the need of the client, either for a flat fee or an hourly rate. Fractional CFOs often work remotely but can also attend the office depending on the needs and preferences of the business. Many fractional CFOs work a hybrid schedule between remote and on-site.
The COO is the senior executive in charge of the daily operations and administration of a business. COOs are generally considered second-in-command to the CEO and work closely with them. The concept of a fractional COO is the same as a fractional CFO – they conduct the same duties as their traditional counterparts but on a non-salary basis and a schedule that fits the needs of the client.
What Types of Businesses Can Benefit From Hiring a Fractional CFO?
Hiring fractional COOs and CFOs is often a great option for both new and established businesses that do not yet have the resources to pay the high salaries these senior executive roles command. According to the Bureau of Labor Statistics, the median annual wage for chief executives in the United States was $185,950 in May 2020. However, CFOs earn much more than that, with a median salary of $399,879 as of December 2021, according to Salary.com estimates. Naturally, the higher-ranking COOs earn even more, at an average salary of $457,026.
Hiring the right CFO and COO is critical to the success of a new business, but these sky-high salaries can be a major hurdle. Turning to fractional CFOs and COOs is often a more cost-effective way for new businesses to find the elite and experienced executives they need without breaking their budgets. Fractional CFOs and COOs often have many years, if not decades of experience helping larger companies succeed and use this expertise to help newer and smaller companies grow in similar ways.
Qualifications to Look For in a Fractional CFO or COO
Fractional CFOs and COOs share the same qualifications as their full-time counterparts. The specific qualifications that businesses owners should look for may vary slightly depending on the needs of the company. However, here are a few qualifications that should be emphasized for most businesses in search of a fractional CFO or COO:
- Previous experience in the same type of role
- Experience in the same industry
- Experience working with both big and small companies
- People skills for helping other members of the team
- Ability to communicate and connect with management
- Flexible to your needs as a company
- Strong management skills
In most cases, the more years of experience, the better when it comes to searching for any type of executive officer. At 3 Sixty Consulting Group, founder Chris Echols has over two decades of experience as a CEO, CFO, and COO. Our team can help your business understand when to hire a fractional CFO or COO to meet your needs.
How Can a Fractional CFO Help a Business?
Fractional CFOs work to improve businesses in several ways:
- Create short-term and long-term financial plans that encourage stability and growth
- Help new businesses lay a secure financial foundation that reduces the risk of failure
- Manage the business as it continues to grow and adapt to the changing needs that come with growth
- Assist with major financial projects, such as raising investments
- Assists in creating both short-term and long-term budgets and forecasts
- Advise on day to day financial issues
- Navigate financial audits from the IRS and state and local tax agencies
- Work together with the CEO, Board of Directors, and other company leaders to plan a sound financial strategy
- Deal with banks and other third parties
- Assist with software selection and implementation
- Conduct research for mergers and acquisitions
- Help with hiring and onboarding new financial team members
These are some of the most common duties of a fractional CFO, but specific duties may vary depending on what the company is looking for.
Benefits of Working with a Fractional COO
There are several reasons why businesses should consider outsourcing their chief operating officer role to a fractional COO:
- Early growth – Fractional COOs can use their leadership and experience to help new companies grow.
- Assembling a talented team – A fractional COO can help build a well-rounded team that can work together to meet the company’s needs.
- Flexibility – The company only needs to pay the COO for the amount of time they work, and their services are offered on an as-needed basis.
- Affordability – New companies can save much-needed funds by paying hourly or flat rates for the services of a fractional COO, instead of a mid-six-figure salary.
Additionally, fractional COOs bring a wealth of industry experience, people skills, and knowledge that can prove invaluable for newer businesses that currently lack this type of leadership. Hiring the right fractional COO can reduce the risk of a business becoming one of the 65% of companies that fail within their first ten years, according to the U.S. Bureau of Labor Statistics.
Learn More About Fractional Consulting Services
Finding the right talent that a business needs to succeed is not always easy. Hiring major executives like CFOs and COOs is often cost-prohibitive for smaller and medium-sized businesses. Opting for fractional services in lieu of making traditional salaried hires is one of the most effective ways to overcome this financial hurdle.
Business owners who are wondering when to hire a fractional CFO often turn to professional consulting firms for advice on the matter. At 3 Sixty Consulting, we understand the needs of growing businesses and how fractional CFOs, COOs, and other services can help these businesses meet their needs. For more information about how fractional services can benefit law firms and other businesses, give us a call today at (404) 398-3888.