We frequently receive inquiries from bankers about how to determine if a client is a strong candidate for fractional CFO services. Below are the top five indicators I always suggest.  

1. Financial Covenant Challenges

One of the clearest signs that a company could benefit from fractional CFO support is if they have missed a financial covenant or are in danger of doing so. These covenants are essential contractual agreements with lenders that dictate certain financial metrics the company must adhere to. A fractional CFO can help the company focus on corrective measures to get back on track, ensuring they meet their obligations and maintain their relationships with lenders.

2. Leadership Frustrations

When business owners express dissatisfaction with their current financial leadership—whether with a controller or CFO—it signals an opportunity for using an experienced CFO. In such cases, we can offer coaching to improve performance, or if necessary, assist in the recruitment and onboarding of a more suitable financial leader. We always say our long term goal is to hire our full time replacement, and we do this by laying the groundwork with the appropriate coaching, tools and processes.

3. Need for Financial Projections

When a client responds to a loan application but lacks the resources to provide comprehensive financial projections for the next 3-5 years, it points to a gap that fractional CFOs can fill. The expertise offered by a fractional CFO enables the company to create robust projections that not only support their loan application but also provide strategic insights for future growth.  The goal at our firm is to have a draft of financial projections within the first 30 days.

3. Upcoming Acquisitions Without CFO Leadership

If a company indicates they are preparing for an acquisition yet does not have a dedicated CFO, this can be a risky venture. Fractional CFOs can offer seasoned advice on navigating the complex financial landscape leading up to and following an acquisition, ensuring that the company is adequately prepared to make informed decisions and maximize the potential benefits of the deal.

4. Preparation for Sale

For businesses preparing to sell, having a fractional CFO can be transformative, especially if they currently lack CFO oversight. A fractional CFO can manage the financial due diligence process, organizing and preparing all necessary data for potential buyers. A few years ago, I spent 6 months working full time on the due diligence of the sale of a company, so it can be overwhelming. Moreover, engaging a fractional CFO early in the sale process can enhance the business’s valuation, improving the multiple paid by buyers.

Schedule a free accounting staffing consultation here.