How to hire a fractional CFO

A fractional chief financial officer (CFO) can provide financial expertise and strategic guidance for a fraction of the cost of a full-time CFO. 

They’re also a flexible solution you can dial up or down as needed, often making them ideal for startups and growing businesses.

This step-by-step guide will show you how to hire a fractional CFO who can help your company navigate its next growth stage.

Define your financial needs and scope of work

Before you begin searching for a fractional CFO, take the time to clarify what you’re going to be looking for. Every CFO brings a unique skill set, so defining your ideal expertise upfront will help you make an informed decision on each candidate.

Start by determining which areas of your finances would benefit the most from expert support, limiting your list to no more than a handful of priorities.

For example, say you founded a healthtech startup preparing for a Series A round. You might want to prioritize fractional CFOs with equity fundraising experience and a proven track record of working with healthtech companies.

It’s also beneficial to define your expected scope of work before reaching out to potential candidates. Engagement structures can differ significantly between providers, and having clarity on your business needs is another great way to filter prospects.

For example, say you’re a small business owner who wants 15 hours of financial guidance per month with the flexibility to scale up or down. In that case, fractional CFOs who only offer one fixed monthly engagement may not be the right fit.

Search for qualified fractional CFO candidates

When you’re ready to hunt for an experienced fractional CFO, your network is a great place to start. Referrals from trusted professionals in and around your industry often lead to candidates with relevant experience and a track record of high-quality service.

Make sure to consult your investors, as they often have a deep bench of trusted financial experts. Be cautious when asking potential competitors for leads, but it may be reasonable if the virtual CFO no longer works with them, depending on the niche.

If your network doesn't yield results, a simple online search may be your next best bet. This route also usually puts you in contact with providers that have a strong online presence, making it easier to assess their track record and expertise.

You can also tailor your online search to find local CFOs. This is particularly beneficial if your company is influenced by regional economic factors or if you’re interested in the possibility of face-to-face collaboration.

Finally, consider using specialized online marketplaces. These platforms often use proprietary software to match your specific needs with a candidate from a pre-vetted talent pool. This can help you find a qualified professional who fits your unique needs.

Evaluate experience and industry expertise

Once you’ve identified a few promising candidates, the next step is to determine if their experience aligns with your business. A strong resume alone isn’t enough. You want to understand how a fractional CFO applies their expertise in real-world situations.

One effective approach is to have candidates walk through examples from their past work. 

Ask them to explain the initial challenge, the financial decisions they made, and the outcomes that followed. You can combine this with similar discussions about novel case studies to thoroughly analyze their strategic financial leadership.

You should also assess their specialized expertise through targeted questions. Ask about the market drivers, regulatory considerations, or growth challenges unique to your industry. A qualified CFO should be able to speak comfortably on these topics.

Remember to consider how well their core competencies align with your prioritized needs. Whether you’re focused on fundraising, cash flow management, or revenue growth, look for concrete examples that demonstrate success in those areas.

Check references and track record

After assessing a candidate’s experience and high-level financial expertise, it’s important to validate what you’ve heard by checking their references. This helps confirm that their past performance matches how they present themselves during interviews.

Go beyond general questions about professionalism or communication. Ask about the scope of the fractional CFO’s engagement, the challenges they were hired to solve, and whether their strategic financial planning delivered measurable results.

Look for concrete outcomes due to their financial oversight, such as more successful fundraising rounds, smoother cash flow management, or faster reporting cycles.

It’s often particularly helpful to ask how the CFO performed during periods of stress. Understanding how they handled unexpected issues, shifting priorities, or tight timelines can provide insight into how they might operate under pressure in your environment.

Don’t settle for a conversation with a single reference, as a strong track record takes more than one success, just like with a traditional CFO. Look for positive results across multiple companies and situations.

In addition to direct references, consider reviewing any publicly available thought leadership. Published articles or speaking engagements can provide extra insight into how they approach financial strategy and problem-solving.

Discuss pricing structure and engagement terms

Once you’ve confirmed a candidate’s qualifications, the next step is aligning on pricing and engagement terms. This is where the scope of work planning you performed earlier becomes especially important.

Every fractional CFO service structures engagements a little differently, but you’ll generally encounter two fundamental approaches:

• Hourly rate: With this model, you pay for whatever hours your CFO works that month. It provides extra flexibility, but costs can be unpredictable.
• Fixed monthly fee: This approach involves paying a monthly retainer for a defined scope of recurring work. Typically, there are multiple tiers to choose from.

If you plan to ask for a baseline number of hours and scale up or down month-to-month, make sure the CFO can accommodate the variability. 

That’s most common with hourly professionals, but fixed-fee providers may let you switch tiers when needed. After all, flexibility is one of the fundamental benefits of a fractional CFO.

In addition to the cost and volume of work, clarify the specific services that are included in your engagement. For example, that involves confirming whether tasks like financial modeling, KPI tracking, and investor relationship management are on the table.

Before signing on the dotted line, remember to go over details like minimum contract lengths, termination terms, and communication expectations. Look for any potential clauses that might cause you headaches later and address them early.

Onboard your fractional CFO effectively

With pricing and engagement terms finalized, it’s time to start onboarding your new partner. However, even the most experienced CFO will need some time to get familiar with your company’s unique financial infrastructure.

Start by granting them access to any relevant financial management platforms. For example, depending on the services the CFO will be providing, that might include your bookkeeping software, financial modeling platform, or bill payment tool.

In addition, make sure to provide whatever documentation your CFO needs to understand your financial history. In addition to the financial statements, that often includes documents like loan agreements, capitalization tables, and forecasts.

It’s also important to help your interim CFO understand how financial operations work day to day. Share internal process guides and approval workflows, and connect them with key managers across departments.

Lastly, establish communication patterns early. Decide how often you’ll meet, who will be involved, and which channels you’ll use to connect. If they’re going to be working on site at all, make sure the logistics are covered.

Red flags to avoid when hiring a fractional CFO

Beyond straightforward issues like unclear pricing or an unproven track record, there are several subtler red flags to watch for when hiring a fractional CFO. Here are some of the most notable:

• Focused on the wrong tasks: An outsourced CFO service should primarily manage tasks no one else can, such as high-level strategic planning or financial system optimization. If a candidate emphasizes transactional work over expert guidance, they may be more of a controller than a CFO.
• Communication issues: CFOs play a central role in translating financial information for other leadership. If their communication style or preferred check-in cadence conflicts with yours, they’re unlikely to be the optimal solution for your company.
• Unstructured engagements: Be cautious of CFOs who offer vague, one-size-fits-all services without a clear value proposition. The right fractional CFO will tailor their work closely to your needs. They’ll also be able to explain the services they provide and the return you should expect.
• Cultural or personal mismatch: In addition to being a financial expert, a fractional CFO is an important financial leader. If they don’t integrate smoothly with your team—whatever the reason—it can significantly undermine their ability to deliver value.

You can learn more about hiring fractional CFOs in our other articles, What is a Fractional CFO and How Much Does a Fractional CFO Cost. 

Hire Zeni’s fractional CFO services

Zen is a financial management platform that offers fractional CFO services for startups. We offer fixed-rate plans starting at just $1,350 per month, all of which include annual budgeting, budget vs. actual analysis, and a 12-month cash flow forecast.

Clients also gain access to a suite of powerful financial tools, including bill payment software, employee reimbursement automation, and an AI CFO agent.

Ready to see Zeni in action? Schedule a demo today.