The Rise of the Fractional CFO
Full-time hiring is expensive, especially if that person is a CFO or VP of Finance. Fortunately, the business of “fractional CFO” is booming allowing companies of all sizes, sectors, and stages to leverage the skill set of a CFO without feeling the impact of his or her salary.
What is a Fractional CFO?
A Fractional CFO is not a new term nor a new business model, however, it is becoming more prevalent in our current economy. In its simplest terms, a fractional CFO is a consultant hired by a company for some duration of time.
Why is this business booming?
Companies of all sizes have begun using the model, from the fortune 500 to startups which is driving demand and awareness for this type of work arrangement. Several other well noted reasons include:
- There was a glut of supply created during and post the Great Recession
- Online platforms have made it easier to find consulting jobs
- Online platforms have significantly lowered the transaction costs for all the parties involved
- Companies are beginning to understand the value long-term strategic planning brings a company over the…long term
- Full-time hiring is both very expensive and very risky and more often than not the
- It is becoming more common for people to work remotely thanks in large part to effective collaboration tools
- Companies can hire specialists to get specific tasks or projects completed whereas you wouldn’t want to hire a specialist full-time
Another trend we are seeing is companies leveraging the fractional CFO dynamic as a contract to hire type of working interview. This I believe is immensely valuable to companies looking to make any finance hire, but especially at the CFO level.
Consider you have 2 options when trying to make a decision about who to hire:
- You sit in a conference and ask banal behavioral questions over a series of several rounds that take place over several weeks
- You test drive the candidate through this contract to hire engagement and get actual value-add work done during the process
Clearly Option 2 is going to be the better option, especially when you consider Option 2 is likely to take place over a shorter time span and cost significantly less than traditional hiring because there is not a recruiter fee involved in the process.
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“Beyond their impact on individuals and the broader economy, talent platforms can help companies transform the way they hire, train, and manage their employees. The early adopters are discovering that better-informed decisions about human capital produce better business results.” — McKinsey Global Institute — “A Labor Market that Works” 1-
Originally published at www.financialsontap.co.