If you run a software-as-a-service (SaaS) business, there comes a time when your financial management needs go beyond your personal level of expertise.
You may be able to handle basic budgeting and planning tasks in the early days of your company. But, as you scale operations, you might realize that you need expert support from a financial professional who’s been there before and knows what it takes to push your business forward.
Hiring a full-time CFO might not be the right choice for you. Instead, burgeoning SaaS companies often consider fractional CFO services. In this article, we’ll discuss what a fractional CFO is, what they can do for SaaS companies, and when hiring one for your business might make sense.
A fractional CFO, or chief financial officer, is a financial professional who works with a company on a part-time or “fractional” basis.
The role of a fractional CFO is varied, often depending on the unique needs and objectives of the company that’s hiring them.
In general, fractional CFOs provide expert financial guidance and assess the business’s current performance to help them optimize operations and create strategic plans.
Companies may decide to hire a fractional CFO rather than a full-time one because they’ll avoid paying the high salary, bonus, and benefits that an executive expects. While this may be feasible for larger companies, it may not be the case for growing startups.
Fractional CFOs may charge by the hour or a flat monthly rate based on their specific scope or engagement with the company. Plus, in many cases, smaller businesses may not have the workload needed for a full-time CFO. Rather, they might require limited support on a specific financial challenge or project.
So, hiring a fractional CFO is often a much more cost-effective way to access knowledgeable financial expertise without long-term financial commitment.
Fractional CFOs exist in all industries. However, there are plenty of reasons why a SaaS company might need to hire one. Below, we’ll lay out some of the main roles and responsibilities that a fractional CFO can take on when working with a SaaS company.
One of the main services that a fractional CFO offers is budgeting and forecasting. Given the unique business model, SaaS companies are keenly interested in metrics like their monthly recurring revenue (MRR) and customer lifetime value (LTV) to guide their decision-making.
So, an experienced fractional CFO can help SaaS companies make accurate revenue projections based on their historical and current performance data. From there, they can develop in-depth budgets and expense forecasts that align with expected revenue and the company’s overall objectives.
Optimizing cash flows is an important financial management task for any SaaS company. They need to ensure they have the proper cash reserves to meet their obligations even in a downturn. But, they shouldn’t be so conservative that they’re unable to pursue growth opportunities. A fractional CFO can help find this balance.
They can help a SaaS company assess the health of its cash flows, helping them time expenses against projected revenues to avoid a cash flow shortage. If needed, the fractional CFO can help them strategize potential cost-saving strategies to improve cash flow levels.
It can be challenging to navigate the fundraising process, especially if you’ve never done so before. This is one of the areas where a fractional CFO can offer SaaS companies the most value.
Fractional CFOs can draw on their professional network and hands-on experience with the process to help businesses secure the funding they need to grow operations. This might even include helping SaaS owners discover grants they might qualify for that don’t need to be repaid.
Fractional CFO services aren’t exclusive to large SaaS companies that have already secured funding. In fact, fractional CFOs can deliver support at every stage of growth, depending on their experience and specific areas of expertise.
Here is a brief overview of why SaaS companies might hire a fractional CFO at different growth stages:
When a SaaS company is just starting out, it might require support from a fractional CFO to create a strategic financial plan and maximize the use of its limited resources. During this stage, a fractional CFO might help companies with:
As the SaaS company grows, its financial management needs will likely grow more complex, and a fractional CFO can help the company strategize how to sustain its growth. At this point, they might assist with:
When a SaaS company is preparing for a sale or IPO, the fractional CFO’s role will shift, helping them navigate the complexities of being acquired or going public. Here is what a fractional CFO can do at this stage:
If you’re considering hiring a fractional CFO, only work with experienced professionals with specific knowledge and expertise in the SaaS industry. There are countless fractional CFOs out there with a range of backgrounds. However, your business needs someone who’s successfully led companies like yours and is knowledgeable about the industry.
At Bob’s Bookkeeping, we offer fractional CFO services tailored to the SaaS industry. Our team has deep experience within the industry, offering financial insights and solutions that deliver tangible results. Contact us today to learn how we can help.
