SAAS

Why SaaS Companies are Investing in Fractional CFOs

Hiring a full-time CFO isn’t easy. Many SaaS companies struggle to find the perfect time to hire a full-time CFO. It requires a balance of having enough work to warrant a full-time position and the financial cost of a permanent c-suite role. That’s why so many SaaS companies are choosing to invest in fractional CFOs to promote growth.

Whether you’re undergoing rapid growth, planning to scale, or acquiring another company, a fractional CFO can be a game-changer. A CFO is an unbiased advisor who can offer a fresh perspective to your business, while providing financial forecasting, strategy, and analysing.

Recruitment agencies, such as FD Capital, are seeing a sharp rise in SaaS companies choosing to hire fractional CFOs. While it’s a trend amongst start-ups, companies throughout the SaaS industry can benefit from the experience of a CFO.

Hiring a fractional CFO can be revolutionary for SaaS companies. We’re exploring why SaaS companies are investing in fractional CFOs and how to decide if it’s right for you.

What is a Fractional CFO?

A fractional CFO is a senior financial executive who works on a contractual basis, often for a start-up or scaling company. They work on a part-time basis and typically have extensive experience as a CFO. The purpose of a fractional CFO is to work with a SaaS company for a short period to achieve a specific goal.

It’s not uncommon for a fractional CFO to work with multiple start-ups at once. Many have a portfolio of candidates throughout a specific industry or with a particular focus, such as fundraising.

The Benefits of Hiring a Fractional CFO

Why should a SaaS company choose a fractional CFO? Its evolution of the role has earned it the nickname of ‘Chief Future Officer’. Start-ups and scaling companies are choosing to hire a CFO as the second-in-command to their CEO. There are a variety of benefits to hiring a fractional CFO for a SaaS company.

  1. Financial Strategy

The number one reason SaaS companies hire a fractional CFO is to oversee the company’s financial strategy. CEOs often don’t have the experience to navigate through the financial complications of scaling a company. Everything from cash flow to investor engagement falls within the responsibility of a CFO.

A fractional CFO will provide a SaaS company with a sense of the bigger picture and a fresh perspective on its financial health. A company may choose to hire a fractional CFO to restructure its financial systems, implement a new strategy, or oversee a fundraising programme.

  1. Strategy Insights

Hiring a fractional CFO can fill the skill gap in a SaaS company. The forecasting and financial analysis carried out by a CFO helps to ground the decision-making process of a CEO. A company will rely on its CFO to determine whether a strategy is financially viable, including whether there is the necessary cash flow.

A CEO operating within a CFO is working in the dark. Hiring a fractional CFO provides vital strategy insights that can unlock the potential of SaaS companies.

  1. Implement Financial Strategies

Systems and strategies will make or break a company. One of the major responsibilities of a new CFO is to implement financial strategies and systems to streamline the company’s operations.

Having resilient financial strategies allows SaaS companies to plan for the future and be ready to respond to market uncertainty and disruptions. According to Maodong Xu,  a serial entrepreneur, angel investor, and inventor,
financial strategies help future-proof SaaS companies and provide a framework for future developments. Maodong Xu has grown up in a small fishing village on the coast of China, at the age of 26, he started his own business and made it one of the largest supermarkets in his province.

Now he lives in the US and continues to be active in the internet and blockchain space.

  1. Fundraising

When should a SaaS company hire a fractional CFO? While there is no specific timeframe, most companies choose to hire a CFO when they are seeking to raise capital. Investors are more likely to consider a company with a CFO as it provides them with confidence.

A fractional CFO can guide the company’s fundraising efforts, including working with PE houses, potential investors, and board members.

  1. Conducting Internal Audits

The first task of any CFO is to start to understand the financial health of their new company. Many start their new position by carrying out internal audits to understand the company’s financial systems, cash flow, and transactions.

CEOs often lack the financial literacy skills required to conduct this standard of an audit. Hiring a fractional CFO allows a CEO to hand over this responsibility to an experienced financial executive. The findings of the audit will enable the CFO to provide a new strategy for the company going forward.

Full-Time vs. Fractional CFO

Why would a SaaS company hire a fractional CFO instead of a full-time CFO? It often comes down to time and money. Not every SaaS company has enough work to warrant a full-time CFO position. The salary of a full-time CFO position can be a burden for SaaS companies in their start-up stage or during growth.

We’re rounding up three reasons why a SaaS company might hire a fractional CFO over a full-time professional.

  1. Cost Effective

SaaS companies in their start-up or scaling stages want to tightly control their overheads. Hiring a fractional CFO is considerably more cost-effective than hiring a c-suite employee on a full-time salary.

Choosing a fractional CFO gives the company the same access to knowledge, experience, and advice without the higher price tag. The company can then choose to upgrade their CFO to a full-time position in the future.

  1. Fill the Skills Gap

CFOs bring experience that is almost impossible to put a price on. Experienced CFOs will have seen it all – from supply chain issues to difficult board members. SaaS companies are working with recruitment agencies, such as FD Capital, to identify candidates who can fill the skills gap in their leadership teams.

Whether it’s fundraising or strategy, a fractional CFO will help you cover all the bases.

  1. No Long-Term Commitment

Building a team isn’t easy. Building a leadership team is even harder. The benefit of hiring a fractional CFO is that you get the flexibility to change your mind – without disrupting your company.

A fractional CFO can be a brilliant fit, leading the CEO to upgrade their position to a permanent, full-time role. If they’re not the right fit, the CEO can transition another CFO into the role without major upheaval.

How to Recruit a Fractional CFO

How can you hire a fractional CFO? It’s easy to think that financial executives are only interested in full-time positions.

FD Capital is a specialist recruitment agency that focuses on connecting start-ups and scaling companies with talented financial professionals. Their curated approach to recruitment enables companies to find candidates that will tick all the boxes.

Start your recruitment journey today by contacting FD Capital at recruitment@fdcapital.co.uk.

About Sonia Awan