How to Hire a Fractional CFO for Your SaaS Business

Many SaaS companies can manage without a full-on finance and accounting team—at first.

But, as your company (and revenue) grows, your team needs to grow with it.

This is a good thing! You’re bringing in more profits, so it’s only natural to start thinking beyond what you currently have in place. 

It may be time to consider bringing on a Chief Financial Officer, or CFO.

Some SaaS companies opt for a full-time CFO. But, you might not be ready to hire another full-time team member. Or you’re concerned that you simply don’t need one.

There’s another option: the fractional CFO.

Your new and improved finance and accounting team need solid leadership.

Let’s take a closer look at what a fractional CFO is, how much it costs, and whether your SaaS could benefit from one.

What is a fractional CFO?

A fractional CFO is essentially a part-time CFO. They are also sometimes referred to as an outsourced CFO.

These people have experience as a chief financial officer and help companies with their finances on a part-time basis.

They perform all the duties that a full-time CFO would.

We've noticed that oftentimes, as a SaaS business grows, the financial side tends to become much too convoluted for the founders (you) to take on on their own.

Even if you have some sort of makeshift finance team in place, they may not be able to best handle your company’s financial strategy, or determine which moves to make to further increase revenue.

Fractional CFOs aren't involved in any of the other day-to-day operations. As such, they are able to step back and take a look at the big picture of your company.

They will be able to provide you with infrastructure as well as take a look at any specific financial issues your SaaS company may be facing.

How much does a fractional CFO cost?

The cost of a fractional CFO will vary depending upon the size of your business and the level of service you’re after.

Generally, a fractional CFO costs between $3,000 and $10,000 per month. 

Keep in mind that this is nowhere as much as you would pay for a full-time employee with a salary and benefits. At Flight Financial, we offer this service starting at $2,595/month.

Think of hiring a fractional CFO as making a reasonable investment into your SaaS company.

How do I know if my SaaS company needs a CFO?

It’s hard to argue with the fact that as your SaaS company grows, your financial needs grow along with it.

We generally advise to get a CFO at every stage of growth. That said, SaaS companies on a budget could do without one at first. 

But, as sales ramp up and revenue starts pouring in, you need an expert by your side.

Choosing when to hire a CFO for your SaaS company depends on your projected growth and how prepared you want to be once you get there. 

Hint: it always helps to be prepared. Does your current financial team know how to handle your future needs? Your answer will determine whether it’s time to bring on a CFO, either full-time or fractional.

You should consider hiring a fractional CFO when your annual recurring revenue (ARR) reaches between $500,000 and $1,000,000.

Remember: if you’re not there yet, it’s a good idea to hire ahead. It will give you a chance to brief your new CFO about the inner workings of your company, and they will help you reach those 7-figure goals.

Will a fractional CFO increase my company’s value?

Besides growth, most SaaS company’s founders want to improve valuation, so that they can sell somewhere down the line.

A fractional CFO can definitely help get you there. In any case, as a SaaS business owner or executive, you should always go for CFO services that specialize in your industry. 

We've already mentioned that a fractional CFO will save you money.

Good budgeting and financial planning go a long way. This means that you’ll have more room in your budget to invest in other areas.

For example, financial planning can help you predict the potential impact of different financial decisions, such as if you’re considering bringing on more sales reps to rev up sales and bring in more revenue. 

Your financial planning can show the potential impact of this decision not only to your ARR (increase your ARR), but also to your profit margin and the resulting potential impact to your SaaS company’s valuation.

What do investors prefer to see?

Not so long ago, outsourced accounting like fractional CFOs was looked down upon in the business world.

It was a sign that companies weren't serious about their finance and accounting needs. But much has changed in the past five to ten years.

In the face of increased demand, outsourced CFO services are better than ever, and investors have recognized the power of having an experienced CFO professional on your team.

In any case, if you’re hoping to bring on investors, your SaaS company needs to hold up to the test – and the close examination of an investor’s eye. 

In order to hold up to that scrutiny, your finance and accounting team needs an experienced and competent leader.

This can come in the form of a full-time or fractional CFO. A quality CFO is able to understand exactly what an investor may be looking for.

Should I hire a full-time CFO or a fractional CFO?

Both full-time and fractional CFOs have their strong points. Below we’ll take a look at some of the specifics of both.

Full-time CFO

Full-time CFOs will be able to be onsite with the rest of your team if you work out of any office space. They can also go on business trips with you and be there for any on-the-go financial assistance.

They are full-time, which means that you are their sole employer – unless they do a little freelance accounting on the side.

This typically means that your SaaS company has their complete attention.

However, hiring a full-time CFO is a long, time-consuming, and sometimes expensive process.

You also run the risk of choosing the wrong person and having to go through the process all over again.

You should consider a full-time CFO if your SaaS company has an ARR of $50 million or more. That said, you don’t necessarily need to bring on a full-time in-house CFO.

There are some fractional CFO services that will grow with you, even to upwards of $50 million ARR and more.

Fractional CFO

If you don’t have room in your budget for an in-house CFO, or you don’t have the time to weed through hundreds of applications to find your diamond in the rough—that’s where a fractional CFO service comes in. 

A fractional CFO will save you time and money, both essential things to a business owner.

High-quality fractional CFO services are designed to grow with your SaaS company. As you need to bring more people to your finance and accounting team, a fractional CFO will help onboard them with ease.

With a fractional CFO, you’ll get all the benefits of a financial expert without the high cost of hiring one on salary.

You’ll gain important up-to-date financial reporting, forecasts, analysis of your goals and projections versus your actual results, and cash flow projections.

You’ll also get help with annual budgeting, standard financial KPIs, and a general helping hand when it comes to all things finance.

Our business performance management service does all of the above.

If needed, we also offer some pretty stellar bookkeeping services. 

Our goal is to guide your SaaS company on its financial journey.

When you’re ready to bring on a fractional CFO, feel free to contact us so that we can hop on a call.

We’d love to see how we can help.