It’s hard work running an SME. Small business owners and start-up founders wear many hats, from sales and marketing to dealing with staff issues, acting as CEO and even CFO. Being all things can be exhausting and, as the business begins to scale, it becomes untenable. It’s at this point that the business owner or founder may start thinking about hiring an executive team.
A Chief Financial Officer is a vital wheel in the cog of any scaling-up operation. Their detailed knowledge of company data and insight into revenues and operational expenses are what inform the business decision-making process. Without this data and insight, decision-making is based on gut or instinct–becoming much riskier. Plus, if you’re looking for external funding or investment, a CFO will manage the process to ensure you’re getting the right funding from the right places. A CFO isn’t a nice-to-have, it’s a business essential.
“A CFO isn’t a nice-to-have, it’s a business essential”
But CFOs don’t come cheap. Across the globe, salaries for CFOs range from $100,000 to $500,000 per annum, depending on country and company–and that’s only part of the remuneration package. CFOs can also often expect to receive an annual bonus of between 10% and 50% of their salary, again depending on the country and company.
This makes hiring a CFO a serious expense for any SME–particularly if they’re hiring other members of the C-suite at the same time. And, if the SME is being run by founders who don’t come from a corporate background, they may not have a detailed enough knowledge of the C-suite to make the right hire. Making a mistake in the hiring process can be extremely costly; one study found that C-suite turnover can reach figures as high as an eye-watering 213% of salary.
It may also be the case that they don’t actually need a full-time CFO. Many SMEs don’t, but in the past, if they wanted to scale, they simply had to suck up the costs and risks attached to hiring a full-time CFO. This is no longer the case. The gig economy has opened everyone’s eyes to the fact that flexible options are viable in the workplace–and this goes for the C-suite, too. So, why fork out for a full-time CFO when you can get exactly the same benefits from a part-time or ‘fractional’ CFO at a significantly lower cost?
Hiring a fractional CFO is also a lot less risky. Fractional CFOs are normally self-employed and paid either a daily rate or a retainer. They’re not bound by contract to the SMEs they work with so, if it doesn’t work out, both parties can simply end the relationship and walk away, without any protracted legal or financial wrangling.
Of course, accountability is hugely important. Any business wants to feel that their staff, from shop floor to C-suite, are fully embedded within the organisation, perhaps even more so at the executive level, where the big decisions are made. But choosing to work with a fractional CFO does not mean they’d have less accountability than someone hired on a full-time basis. In fact, for fractional members of the C-suite, opting to work in this way is a lifestyle choice to which they’re fully committed.
“The gig economy has opened everyone’s eyes to the fact that flexible options are viable in the workplace–and this goes for the C-suite, too.”
CFOs with portfolio careers include executives juggling other commitments such as caring for children or elderly parents, those coming towards the end of their career who aren’t ready to retire but don’t want another ‘big job’, and those who simply prefer a diverse portfolio of clients to one steady role. The latter, in particular, is something that’s already normalised among Gen Z workers and is why the gig economy is only expected to grow. Gen Z will represent 27% of the workforce by 2025, and as this demographic begins to dominate, the concept of a portfolio C-suite will become fully embedded into the workplace.
In the meantime, the possibility of hiring a fractional CFO represents a serious opportunity for SMEs, giving them the strategic partner and financial expertise they need to scale, without a huge capital outlay. And, in a world where 66% of businesses are still struggling with skills shortages, including at C-suite level, SMEs also get access to a much wider and more diverse pool of executive talent than they could otherwise expect. It could be just what’s needed to send them stratospheric.
