115. Do They Even NEED a Fractional CFO? (5 Signs!)

If you're struggling to get enough fractional CFO clients or you're not able to charge the amount that you know you should, it might be because you're targeting businesses that just aren't ready for a fractional CFO yet. When I first started my firm, I had no way to identify if a business was ready for a fractional CFO or not. And that sucked because it usually ended up meaning one of three things. Number one, I would get on sales calls that went absolutely nowhere. Second, when I did get on sales calls, the clients were constantly haggling price because they couldn't afford my services. And third, when I did land clients, they weren't sticking around very long because, Frank, they just didn't need what I had to offer. In this episode, I'm going to share with you the five signs that I've identified over the last seven years that signal that a business is ready for a fractional cfo. And you're going to definitely want to stick around until the end because I'm going to reveal the one thing that's not on this list that blows everybody's mind. Let's dive in.

I absolutely love the work that we do as fractional CFOs. Everything from analyzing financial statements to putting together cash flow forecasts, to coming up with budgets and projections and developing overall financial strategies. The work that we do as fractional CFOs can have tremendous impact for the right businesses. But the reality is not every business is ready for fractional CFO services. So what are the signs that signal to me that a business is ready for a fractional cfo? Well, the first indicator is that the business is in growth mode. Now, admittedly, growth mode can mean a lot of different things. The business could be growing in terms of adding to their team. They could be growing in terms of adding products or services to their offering. It could mean that the business is looking to grow by adding additional locations or moving into other geographies. All of those things indicate that the business is rapidly trying to grow. Why is this so important in determining if a business is ready for fractional cfo? Well, if the business is content where they're at, and that's completely okay. But if the business is content where they're at, there's not a lot of value that a CFO can typically bring to the table. When we're thinking about fractional CFO services, we're typically thinking about four forward looking strategies. We're helping them lay out the roadmap, put together a game plan to make sure that the things that they're doing differently are going to be profitable, are going to generate the amount of cash that the shareholders need. Those things are all future looking. So if a business isn't looking to grow, a lot of times that's a great signal that there's not a lot of value for the fractional CFO to add. The second indicator that I look for is that the business has hit a glass ceiling and they don't know why. Let me explain. A lot of times you'll come across businesses that are really good at marketing. They can get new leads in the door all day long. They're also really good at sales. They've got a team of people that can convince their customers to give them money all day long. And they're equally as good at operations. They can get product out the door, they can deliver services with excellent. It would seem that everything's fine. But these businesses haven't been able to grow. Nine times out of 10. What's happened is that they have been successful with sales and marketing and operations without keeping an eye on finance. And what ends up happening is they don't have sufficient margin to grow, they don't have sufficient cash in the bank to grow, or they just don't know how to make decisions to continue to grow further. That's a great sign that they need a fractional CFO to step in and help them figure out how to improve margins, how to improve cash flows, and how to make smarter decisions in their business. Which leads to the third sign that a business is ready for a fractional cfo, which is that they have goals, but they lack a financial strategy to know how to make those goals become a reality. What this looks like is sometimes you'll come across business owners that have these huge goals, these crazy ambitions. They know exactly where they're at, they know exactly where they want to go. They know why so important that they get there. But what they're lacking is the how to make it all possible. This is a great opportunity for a fractional CFO to step in and fill in that gap. This is where things like cash flow forecast and projections and financial strategies become worth their weight in gold. Because these business owners are looking for somebody like us that can step in and step beside them to help put that roadmap together so that they know that the decisions that they're making are the right decisions, that they know that the decisions that they're making are going to produce the right amount of cash flow, have the right margins that they need for them to be ultimately successful. The fourth thing that I look forward to signal if a business is ready for a fractional CFO is do they have sufficient revenue and net profit to be able to afford our services? I know this sounds like common sense, but as we all know, common sense isn't always common practice. So what I end up seeing a lot are fractional CFOs that are chasing businesses that are entirely too small to be able to afford their services. Let me give you an example. My firm services start at $5,500 a month. So on the low end, for a business to be able to work with us, we look forward top line somewhere $3 million or more, again on the low end. So I would really encourage you, like ask yourself for the amount that I'm charging, how big does the business need to be that they can actually afford my services? On a similar note, I also want to challenge you. If you're working with smaller businesses, do they really need fractional CFO services? Are they complex enough? Are there problems big enough that the value you're able to provide is in multiples higher than what you're able to charge them? If not, you might need to consider lowering your prices or starting to work with larger clients. The fifth indicator that a business might be ready to work with a fractional CFO is are they preparing for a sale, succession, or investors? As you already know, all three of these come with a lot of moving parts. And all of them require a lot of financial planning, a lot of financial strategy, a lot of intentionality that starts years in advance. So if you find a business that's looking to sell, they're looking for investors, they're looking for succession planning. That's a great opportunity for you, as the fractional CFO to step in and add a ton of value. So those are the five things that I look for that signal that a business is ready for a fractional cfo. But you might have noticed something missing from the list that you probably expected. Good accounting. Yes, it is true that in order for us to do a lot of the things that we do, the cash flow forecast, the budgets, the projections, the tax strategies, all of those things are predicated on having good, solid accounting. But what I found over the years is the the business doesn't have to have good accounting in place in order for the fractional CFO to come in and be able to add value and ultimately have a successful relationship with the client. Here's why. If the business owner is willing to do what it takes to get the books cleaned up. It's relatively inexpensive and it's relatively fast to get the books in a place that they need to be for you to do your job as the fractional CFO. Let's be honest, three or $4,000 in 30 to 45 days can get months, if not years worth of books fully caught up to date, fully accurate, and ready for you to go with all the great CFO things that you do. But a lot of times people will use this as a roadblock to not work with clients, and I think it's completely unnecessary. As long as you're transparent with the business owner that bookkeeping might have to get cleaned up, books might have to get caught up. There's no reason that you can't help guide them through the process of getting the books where they need to be while you're conducting the rest of your onboarding process. So if you do find a business that checks a lot of those other boxes that we talked about earlier, don't let bad books rule that client out. It's relatively fast and inexpensive to get the books where you need them to be so that you can have a great relationship with the client. If you're just starting out as a fractional CFO and you're not sure which services to offer, check out this episode where I break down the four services that every fractional CFO has to offer. All right, that's it for today, my friends. I can't wait to see you back here next week. I'll see you then.