Let’s delve into understanding the how much does a Fractional CFO cost and what is associated such as hourly rates and retainer fees. We’ll also explore the value and services they offer businesses, customized to meet specific needs and objectives.
According to a national recruiter’s 2021 salary guide, the national average salary for a full-time, experienced mid-market CFO is between $203,750 and $211,250.
Updated May 2024: From PayScale In the 25th percentile: CFO in Texas salary is 273,800 with Total Cash Compensation (i.e. plus bonus, equity, etc.) of $340,300.
Keep in mind, this is before benefits, bonuses, stock options, and cost-of-living adjustments by location. (For example, this number is 10-11% higher for CFOs in the DFW area.)
This is one of the main reasons companies opt for a fractional CFO before considering a full-time CFO.
An experienced fractional CFO can typically handle all CFO responsibilities for mid-market companies – but on a part-time basis (usually around 20-40 hours a month). In other words, fractional CFOs are a “fraction” of the cost of a full-time CFO.
Let’s break down what the fractional CFO cost is, what outsourced CFO services this cost includes, and why fractional CFOs are good for business.
Fractional CFO costs are determined by the needs
Every client will have different needs, and fractional CFO costs will be determined based on those needs.
To determine needs, a fractional CFO will review company financials and CEO goals. This will help them figure out how much time and what type of services will be required. Upon doing so, they can establish costs and how services will be charged. This is usually broken down into two categories:
- Hourly Rate: Some fractional CFOs bill on an hourly basis, while others bill on a retainer (which is calculated based on an assumed number of hours). As client needs increase or decline, scope and fees are reviewed and adjusted.
- Retainers: Monthly retainers typically range between $5,000 and $7,500, but they can be higher if your needs are greater or if your business is highly complex. However, they can also be lower if you have staff in place that can support the fractional CFO.
Fractional CFO services depend on the area of need
Companies have different needs when engaging fractional CFOs; however, the most common fractional CFO services deal with the following:
- Specific financial challenges
- The need to drive performance and growth
- Forward-looking strategic business planning
- Trusted advising and partnerships with internal and external financial partners
- Preparing for and assisting with acquisition or exit goals.
With each area, different services will be required. For example, when fractional CFOs are leveraged to drive performance and growth, this may or may not include:
- Evaluating their employee bench strength
- Recommending developmental opportunities
- Recruiting new employees with skill sets that support company growth
- Developing dashboards with meaningful metrics
- Utilizing data insights to educate the management team and employees on actions they need to take to improve financial performance
- Evaluating and optimizing systems and processes to support scalable growth
As another example, forward-looking strategic business planning might involve:
- Developing future-oriented financial business plans (quarterly, yearly, and 3-5 years) and forecasts
- Creating budgets and 13-week cash flow forecasts
- Assessing new products, services, customer targets, and markets in terms of company capabilities and financial viability
Engaging with a fractional CFO firm can deliver greater value
Hiring a fractional CFO typically delivers great ROI, even when compared to hiring a full-time CFO or an independent CFO contractor.
Unlike part-time employed CFOs or independent CFO contractors, fractional CFOs can often tap into a larger team of CFOs. This results in more experience in industry and technical expertise, more robust processes and technologies, and more educational tools and resources.
The cost of a fractional CFO is worth every penny.
If a company doesn’t have a CFO and is between $5 – $200 million in revenue, engaging with a Fractional CFO can provide forward-looking strategic financial leadership. When companies only rely on reviewing backward-looking accounting reports each month, revenue and profit growth can be significantly hindered.
New Life CFO is the leading fractional CFO entrepreneurship firm in the Dallas Metroplex, representing over $400M under management. Let us earn your trust and help you grow. Schedule a consult today or give us a call at (214) 775-0803.
