What is a Fractional CFO? Complete Guide for Business Owners

Growing a business past $500K in revenue creates a problem most founders don’t see coming.

Your bookkeeper hands you a profit and loss statement. You see the numbers. But when investors ask about your burn rate, or your partner wants to know if you can afford that new hire, you’re guessing. You’re making $2M decisions based on month-old data and spreadsheets you built at midnight.

This is where businesses hire a CFO. Except you can’t justify $300,000 in salary plus benefits for someone who’ll spend half their time on things you don’t need yet.

The solution: fractional CFO services.

What is a Fractional CFO?

A fractional CFO is a part-time Chief Financial Officer who provides strategic financial leadership to businesses without the cost of a full-time executive. Fractional CFOs typically cost $3,000-$15,000 per month compared to $250,000-$500,000+ annually for full-time CFOs. They work 10-60 hours per month handling financial planning, cash flow management, KPI development, and growth strategy. Businesses with $500K-$20M revenue commonly use fractional CFOs when they need executive-level financial guidance but can’t justify full-time CFO cost.

Key Takeaways

• Fractional CFOs cost 60-80% less than full-time – $3,000-$15,000/month vs $250K-$500K+ annually for equivalent expertise
• Work 10-60 hours monthly – Flexible engagement based on business complexity and growth stage
• Provide strategic guidance, not bookkeeping – Focus on planning, cash flow, KPIs, and major decisions
• Best for $500K-$20M revenue businesses – Companies needing CFO expertise but not full-time commitment
• Month-to-month flexibility – Scale hours up or down as business needs change
• Multiple industry experience – Bring broader perspective than single-company CFO

What Does a Fractional CFO Do?

A fractional CFO handles the strategic financial work your bookkeeper can’t and your CPA won’t.

Your bookkeeper records transactions. Your CPA files your tax return once a year. Neither one is analyzing whether your new service line is profitable, or whether you’ll run out of cash in Q3, or whether you should lease or buy that equipment.

That’s what a CFO does.

Core Responsibilities

1. Financial Planning & Analysis

Fractional CFOs build budgets that actually work. Not the spreadsheet you created three years ago and never updated. They analyze variances between what you expected and what happened, then figure out why. When you’re considering a major decision (expanding to a new market, hiring a VP), they model the scenarios so you’re not guessing about the financial impact.

2. Cash Flow Management

Profitable on paper but can’t make payroll next month? That’s the cash flow problem 82% of businesses face at some point.

Fractional CFOs forecast cash weekly or monthly. They identify when you’ll hit cash crunches before they happen. They optimize working capital so your money isn’t sitting in inventory or receivables when you need it for growth.

3. KPI Development & Dashboards

You can’t manage what you don’t measure. But which metrics actually matter for your specific business?

A fractional CFO defines the 5-10 metrics that drive your business. They build real-time tracking so you’re not waiting 30 days to see last month’s numbers. If you have a board or investors, they create reporting that answers their questions before they ask.

4. Strategic Financial Guidance

Should you hire that salesperson or invest in marketing? Lease or buy? Take on debt or find investors? These decisions compound over time.

Fractional CFOs serve as advisors for major financial decisions. They don’t just give opinions. They run the numbers and show you the trade-offs.

5. Systems & Process Implementation

Many growing businesses outgrow their financial systems before they realize it. Manual processes that worked at $500K break at $2M.

Fractional CFOs implement tools and processes that scale. They fix broken workflows. They build financial infrastructure so you’re not constantly putting out fires.

What Fractional CFOs DON’T Typically Do

Fractional CFOs focus on strategy, not data entry.

They don’t:

• Handle day-to-day bookkeeping (that’s your bookkeeper’s job)
• Prepare tax returns (that’s your CPA, though SDO uniquely combines both)
• Process payroll (that’s your payroll provider)
• Manage accounts receivable or accounts payable (that’s your accounting team)

If someone’s selling you “fractional CFO services” that are mostly bookkeeping, that’s not a CFO. That’s an expensive bookkeeper.

How Fractional CFOs Work

Fractional CFO engagements vary based on business needs, but most follow one of three models.

Engagement Models

1. Monthly Retainer (Most Common)

You pay a fixed monthly fee for a set number of hours. This is the standard model for ongoing strategic guidance.

Typical arrangement: 20 hours per month, scheduled touchpoints (weekly or bi-weekly), plus email/phone access between meetings. Best for businesses needing consistent strategic oversight.

2. Project-Based

You engage a fractional CFO for a specific deliverable: building a financial model, supporting a fundraise, handling M&A due diligence.

Project engagements make sense when you have a defined need with clear start and end dates. After the project, some businesses transition to retainer, others just call when they need help again.

3. Hybrid

A base retainer covers core advisory work, with project fees for major initiatives.

Example: $5,000/month retainer for ongoing CFO guidance, plus $15,000 project fee when you raise Series A. This gives you consistent strategic support plus the flexibility to scale up for big moves.

Typical Time Commitment

How many hours do you actually need?

10-20 hours/month: Early-stage businesses ($500K-$2M revenue)

• Monthly financial review and planning
• Quarterly strategic sessions
• Ad-hoc guidance on major decisions
• Basic KPI tracking setup

20-40 hours/month: Growth stage ($2M-$10M revenue)

• Weekly or bi-weekly touchpoints
• Active involvement in planning and forecasting
• Board reporting
• System implementation and team building
• Regular investor/lender communication

40+ hours/month: Complex/scale businesses ($10M+ revenue, multi-entity)

• Near full-time strategic presence
• Managing finance team
• Complex multi-entity reporting
• Active M&A or fundraising support
• Multi-state or international operations

Communication Cadence

Frequency depends on your business stage and current priorities.

Weekly check-ins work during high-growth phases, fundraising, or crisis situations. You need someone monitoring cash closely and making quick decisions.

Bi-weekly meetings are standard for most engagements. Enough time for metrics to move, not so long that you lose strategic continuity.

Monthly strategic sessions suit mature, stable businesses. You’re not changing direction weekly, just need quarterly planning and periodic guidance on major decisions.

Where They Work

Most fractional CFOs work remotely. Technology makes this seamless. Your CFO can see your books, run financial reports, and meet via video from anywhere.

Some arrangements include periodic on-site visits (typically monthly or quarterly). This makes sense if you have a team they need to work with directly, or if you’re in a phase requiring more hands-on presence.

A few engagements are primarily on-site, though this is less common. Expect to pay a premium if you need regular in-person presence.

Fractional vs Full-Time vs Virtual CFO

Not all CFO options are the same. Here’s how they compare:

Fractional CFOs give you strategic expertise with operational involvement, at a fraction of full-time cost. They bring multi-industry experience because they work with several companies. They integrate into your business enough to drive change, but they’re not managing day-to-day operations.

Full-time CFOs make sense when you hit $20M+ in revenue and need 40+ hours per week of dedicated financial leadership. If you’re managing a large finance team, dealing with complex operations that need constant oversight, or investors require a full-time CFO, this is the path.

Virtual CFOs are typically lower-cost, advisory-only engagements. Limited hours, strategy focus, less operational integration. This works for very early-stage businesses or founders who just need periodic advice but plan to handle execution themselves.

Who Needs a Fractional CFO?

You’re an ideal candidate for fractional CFO services if:

Revenue stage matters. You’re between $500K-$20M. Below $500K, the ROI typically isn’t there. Above $20M, you probably need full-time.

You’re making major financial decisions without data. Should you expand? Hire? Invest in new equipment? You’re using gut feel because you don’t have financial models or analysis to back up the decision.

You can’t answer basic questions about your business. What’s your gross margin by product? Customer acquisition cost? Cash runway? If investors or partners ask these questions and you’re scrambling, you need a CFO.

Cash flow surprises keep happening. Profitable but running out of cash. Missing payroll despite good revenue. This is a forecasting and working capital problem a CFO solves.

You’re preparing for fundraising or M&A. Investors expect CFO-level financial sophistication. If you’re raising capital or considering acquisition, you need someone who can build the models, prepare the data room, and handle due diligence.

You’ve outgrown your bookkeeper’s capabilities. Your bookkeeper is great at recording transactions but can’t provide strategic guidance. You need someone who can analyze the numbers and tell you what they mean.

You need KPIs and dashboards but don’t know where to start. Everyone says you should track metrics. Which ones? How? A CFO knows what matters for businesses like yours.

You’re NOT Ready If:

Revenue under $500K with simple operations. Limited optimization opportunities. The cost likely exceeds the value delivered. Better to invest in a good bookkeeper and annual tax planning.

Your books are a mess. A CFO can’t work with bad data. Fix your bookkeeping first, then engage strategic guidance.

No cash flow to implement CFO recommendations. Many CFO strategies require capital to execute (retirement contributions, system investments, inventory optimization). If you can’t afford to implement, advisory value is theoretical.

You prefer to do your own research and just want implementation support. Some founders want to figure out strategy themselves and just need someone to execute. That’s fine, but that’s not what a CFO does. You want a financial analyst or controller, not a CFO.

When to Hire a Fractional CFO

Certain triggers signal it’s time to bring in CFO-level guidance.

Critical Triggers:

1. Planning for fundraising – Investors expect financial sophistication. They’ll ask about burn rate, unit economics, CAC/LTV ratios, runway. If you can’t answer confidently with data, you’re not ready to raise. A fractional CFO prepares you.

2. Considering M&A – Whether you’re buying or selling, you need someone who can handle due diligence, build valuation models, and negotiate deal structure. This isn’t something you figure out as you go.

3. Rapid growth (50%+ annually) – Fast growth creates complexity fast. Cash needs change. Margins shift. Systems break. What worked at $1M won’t work at $3M. You need someone forecasting and building infrastructure ahead of the curve.

4. Cash flow problems – Profitable on paper but running out of cash is the #1 reason businesses fail. This is a working capital and forecasting problem. A CFO fixes it.

5. Board or investor pressure – They’re asking questions you can’t answer. They want financial reporting you’re not providing. They’re questioning your decisions because you can’t show the analysis. Time to hire a CFO.

Warning Signs

Watch for these patterns:

• Making big decisions based on gut feel, not data
• Can’t explain why last quarter missed budget
• No visibility into cash runway (when will you run out of cash?)
• Your bookkeeper is overwhelmed, your CPA only talks once a year
• Spending hours in spreadsheets trying to figure out finances yourself

If you’re seeing 2+ of these signs, fractional CFO services will likely deliver significant ROI.

For a deeper look at the 12 specific signs you need a fractional CFO, read: When to Hire a Fractional CFO: 12 Signs

How Much Does a Fractional CFO Cost?

Pricing depends on complexity and hours, but here’s the typical range:

Pricing Models

1. CFO Assessment (Entry Point)

• Cost: $5,000-$10,000
• Timeline: 2-3 weeks
• Deliverables: Financial analysis, opportunity identification, 90-day roadmap

This is how most businesses start. You get a comprehensive assessment of your financial situation, priorities identified, and a plan. Then you decide whether to continue with ongoing services.

2. Monthly Retainer

3. Project Work

• Financial modeling: $10,000-$25,000
• Fundraising support: $5,000-$20,000
• M&A due diligence: $15,000-$35,000

Compare to Full-Time CFO

Full-Time CFO Total Cost:

• Base salary: $150,000-$400,000
• Benefits (30%): $45,000-$120,000
• Recruiting fees: $30,000-$80,000 (one-time)
• Total Year 1: $250,000-$600,000+

Fractional CFO Total Cost:

• Assessment: $5,000-$10,000 (one-time)
• Monthly retainer: $3,500-$15,000/month
• Total Year 1: $47,000-$190,000

Savings: 60-80% cost reduction with similar expertise.

For complete pricing analysis and ROI framework, read: Fractional CFO Cost & ROI Analysis

How SDO CPA’s Fractional CFO Service is Different

Most fractional CFOs coordinate with a separate CPA firm. That creates gaps.

Your CFO makes strategic recommendations without seeing the tax implications. Your CPA files returns without understanding the strategic context. You’re stuck coordinating between two separate firms who don’t talk to each other.

At SDO CPA, your fractional CFO IS your CPA.

Why This Matters

Tax-Optimized Strategy Every CFO recommendation automatically accounts for tax impact. Should you distribute cash or reinvest? The CFO decision and tax decision happen simultaneously, not sequentially.

Entity Expertise 80% of our practice is S-corps and partnerships. We understand reasonable compensation rules, QBI deduction strategies, partner basis tracking, and K-1 allocations.

When your fractional CFO recommends a distribution strategy for your partnership, they already know how it affects each partner’s basis and tax liability. You’re not coordinating between separate advisors.

Multi-Entity Structuring Many businesses use holding companies plus operating companies for liability protection and tax optimization. Managing the cash flow, distributions, and tax coordination between entities requires someone who sees both the CFO side and the tax side.

We’ve done this hundreds of times. Operating company cash flow funds the holding company. Holding company owns real estate or equipment. Distributions flow through with proper basis tracking and allocation. It’s complex. It requires integration.

No Coordination Meetings When your CFO and CPA are different firms, you spend time in three-way calls explaining the same thing twice. When they’re the same firm, we already have context. Faster decisions, less friction.

Learn more about our integrated approach: How Fractional CFO Works with Your CPA

Making the Decision

Start by asking yourself these questions:

1. Can I answer basic financial questions about my business (gross margin, cash runway, CAC)?
2. Am I making major decisions based on data or gut feel?
3. Do I know my cash position 90 days out with confidence?
4. Is my current bookkeeper providing strategic guidance?
5. Am I preparing for fundraising, M&A, or rapid growth?

If you answered “no” to questions 1-2 or “yes” to question 5, fractional CFO services will likely deliver significant ROI.

Next Steps

Most businesses start with a CFO assessment ($5,000-$10,000):

• We analyze your prior financials and tax returns
• Identify your top 3 strategic priorities
• Build a 90-day roadmap
• Provide upfront estimate for ongoing services

After the assessment, you decide whether ongoing fractional CFO services make sense. No pressure, no long-term commitment.

Ready to explore whether fractional CFO services make sense for your business? Schedule a consultation to discuss your situation and service fit.

Related Resources

For more on fractional CFO services and financial strategy:

• Fractional CFO Services – Complete hub with all CFO resources
• Fractional CFO Cost & ROI Analysis – Pricing transparency and ROI framework
• When to Hire a Fractional CFO: 12 Signs – Detailed readiness assessment
• Fractional vs Full-Time CFO – Detailed comparison and decision framework
• Tax Advisory Services – Integrated tax planning approach
• Outsourced Accounting Services – Complete accounting department capabilities
• S-Corp Tax Planning – Entity-specific optimization
• Partnership Tax Planning – Multi-partner coordination

About SDO CPA: We provide fractional CFO services integrated with tax advisory for S-corporation and partnership owners. Our approach combines Big Four technical expertise with the accessibility of a focused practice. Your CFO sees both your financials and your tax returns for seamless strategic guidance.

Schedule a consultation to discuss whether we’re the right fit for your business.