Want To Be Rich? Don't Become a Fractional CFO

Eight years ago, I became a fractional cfo. It was the best decision that I had ever made because within a year of starting, I had become a multimillionaire. That statement isn't just false, it's completely bullshit. In fact, it's pretty much impossible to become rich as a fractional CFO. Here's why. As a fractional CFO, you can probably manage five, maybe six clients in a 40 hour workweek. Why so few? You have a bunch of other crap you've got to deal with as well. Invoicing, scheduling, client calls, answering emails, slack sales calls, prospecting. So let's map it out. Let's say that you've got six clients, each paying you $5,000 a month. That comes out to $360,000 a year pre tax. But if you start factoring in payroll taxes, medical insurance, processing fees, and all the other costs associated with running a business, you're quickly back down to what you might have made as an employee, if not less. Now, that's not bad money, to be sure, but it's also not get rich money. Now for the good news. You can absolutely get rich and become an extremely wealthy person in the fractional CFO industry. But you have to shift your mindset from being a fractional CFO to being the CEO of a fractional CFO firm. Let's look at the math again. Let's assume that you're now rolling big as a CEO. You've got five fractional CFOs working for you, and each of them are handling 10 clients at $5,000 each. That's $3 million a year, top line. Let's assume that your net margin is 25%, which includes your salary. That leaves you sitting at $750,000 in net profit. And that's got a bonus assumption built in that you're not even seeing any clients. You can do the math to see what 10 or even 15 fractional CFOs look like. That's why I decided to move from being a fractional CFO to being the CEO of a fractional CFO firm. Today, I'm gonna share the five biggest lessons I've learned about the mindset shifts that I had to make on that journey from being a solo fractional CFO to being a CEO. Let's dive in. The first mindset shift that I had to make to become a CEO was that if I wanted to be a good CEO, I'd have to understand how a lot of different things in the business work so that I can hire and Manage and lead well, there's this false assumption that exists that you can just hire out whatever work you don't like or that doesn't light you up. I found that to be a complete recipe for disaster. If I don't have a fundamental understanding for how things work, it's impossible to know when, what skills that I need to hire for and how to manage the people once they're in those roles. Take hiring a team of fractional CFOs as an easy example. Do you think that any rando wannabe entrepreneur could just start a fractional CFO firm? They could just go out and drop some ads looking for fractional CFOs, hire some of them, and then have a successful firm? Absolutely not. That person would have to have some sort of clue about the skills and talents to hire for. He'd have to have some idea how to train them and how to make sure they're doing a good job. For me, that holds true with most of the roles on my team. My marketing, sales, hr. It's important for me to have a functional. Not great, maybe not even good, but a functional level of knowledge about all those different roles so that I know what good looks like. Another mindset shift that I had to make to become a CEO was that I had to document processes and procedures so that my team could execute things my way. One of the hardest parts for me about becoming a CEO is delegation. It's not that I don't know how to delegate, it's just hard for me to do it sometimes. Why? Why? Because I'm afraid that my team won't do things my way. And let's be honest, my way has worked out pretty well for me so far. But what I've learned is that for the most part, if you hire well, your team will do things just as well, if not better, than you do. Now keep in mind that just because they don't do things your way, doesn't mean that it's the wrong way or even a bad way. In many cases, their way's better. But despite all of that, there are certain things that you know need to be done your way. There are also things that need to be done consistently so that you have a repeatable, consistent client experience as well. That's why it's important to document those things in the form of processes and procedures. In the early days, I didn't document much of anything. Then I went out and hired all these great people and they had no idea what I wanted them to do or how I wanted them to do it. So they made things up on their own and that turned out poorly. Every single time. I was frustrated because they weren't doing it right, the clients were annoyed, and the people that I hired quickly burnt out and quit. I should have started documenting these key processes and procedures way before I did. I waited probably three to four years too long to get started started. And I'm still paying the price for that today.

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The third lesson that I had to learn on the journey from being a fractional CFO to a CEO was that I had to actually go out and hire people. Hiring is one of the biggest mistakes that I see the vast majority of fractional CFOs making. It's not that they're hiring bad or they're hiring the wrong people. It's that they're not hiring at all. They're trying to scale a firm on their own. So they keep on taking clients and they keep on doing all the work, and next thing you know, they're working.

50, 60, 80 hours a week.

Then they sit back and wonder why their firm is stuck and why they're so damn burnt out. You've got to be willing to hire and build a team if you truly want to build a business. One of the biggest objections I hear though, when it comes to fractional CFOs hiring is they say, I don't know if I can afford it. Which brings me to my fourth lesson. You've got to be on top of your financials, including forecasts and projections, if you want to build a business. So when a fractional CFO tells me that they don't know if they can afford to hire somebody or when it makes sense to hire, I always ask them the same thing. Hey, show me your forecast and projections. And then they sit there and they look around all confused and I hear nothing but crickets. It's because they don't have forecast and projections for their own firm, which is completely mind boggling to me. Okay, it's not really that mind boggling because I didn't have forecasts and projections for my firm for years. Hell, there was even a point in time where I didn't even have my books updated for like nine months. So I totally get it. And I'm not judging you if you don't have that stuff in place. Even though I'm not judging you, I am telling you that today is the day to start getting your shit together. I mean, what advice would you give to one of your clients if they were in a similar spot? You'd say this. Go get your books in order and let's put some projections in place to figure out when you can hire. Look, guys, you gotta drink your own Kool Aid. You can't build scale a business without having your financials in order and without having forecast and projections in place. Finally, if you want to shift from being a solo fractional CFO to being the CEO of a business, you have to have business development as part of your daily operating system. I mean, name a company that's been around for more than 30 seconds that doesn't do marketing or business development daily. So why the hell do you think that your business or your firm should be any different? As a CEO of a fractional CFO firm, you've got to make business development.

Part of your daily schedule. You've got to build it in on.

Your calendar every single day. You can't just go out and get leads when you're ready to hire or when you're ready for some new clients. It doesn't work that way. The prospecting process takes anywhere from 60.

To 90 days to see any kind of results.

And by the time you need clients, that means you're already 60 to 90 days behind if you haven't been doing it daily. So you've got to build that process into your daily routine. Look, I know a lot of you listening to this really struggle with prospecting and business development and getting leads. But you've got to have those skills in place if you have the ambition to build a 7 figure fractional CFO firm. That's why I'm excited, excited to announce the 2024 CFO Accelerator Live, happening May 15th through 17th, 2024 in Dallas, Texas.

Over those three days, I'm going to.

Be doing a deep dive into how to get prospects, how to find more leads, and how to close those leads at higher prices so that you can scale your firm to seven figures. Go to www.thecfoacceleratorlive.com or click the link in the description below to learn more. In the meantime, I can't wait to.

See you back here next week, my friend.

I'll see you then.