The issue
Someone asks what your net margin was last month.
You know what came in. You know roughly what went out. You do not know the answer, and the pause goes on long enough that you both hear it.
That is usually when the thought starts. You need a finance person. Someone senior, part-time, who has done this before and will do it properly.
A fractional CFO.
The case before us
You have decided you need a fractional CFO.
The question is not whether you need senior financial expertise. You may well need it, and soon.
The question is what you are buying.
The claim: a fractional CFO operates a financial picture. They do not find one. If the reason you are reaching for the hire is that you cannot see where your profit goes, you are buying the second half of a job whose first half nobody has done.
Exhibit A: what the hire costs, and for how long
Preferred CFO, a US provider, publishes its own read of the market:
"On average, fractional CFOs cost $3,000/month to $10,000/month. The most common agreements are between $5,000-$7,000/month for most small- to mid-sized companies."
The same page says "the most common starting engagements are 1-2 years."
$60,000 to $84,000.
That is the first year at the most common rate. Over two years it becomes $120,000 to $168,000.
You are approving something that starts at $60,000 and reaches six figures if it runs, at the exact moment you cannot describe your own margin.
In case no. 001 I argued that the gap between what a business earns and what its Owner keeps is structural, measurable and priceable. This is the first time somebody else quotes you a price for it.
Exhibit B: what they are hired to do
Burkland Associates lists the deliverables for a mid-stage engagement. Verbatim:
"Venture debt, Financial metrics and analytics, Preparing for an audit, Continuous Financial Intelligence, Cash Flow Management, Annual planning and forecasting, Board reporting packages"
Every item on that list depends on something that is not on it.
Forecasting depends on knowing where the business stands. Cash flow management depends on the cash being tracked somewhere reliable enough to manage.
It is a list of things that work properly only when the picture underneath them is reliable.
The industry is clear about one boundary. Preferred CFO warns readers to "be skeptical of firms offering services below $3k/month", because cheap means inexperienced. Fair enough. There is no equivalent warning about hiring the right person at the wrong point in the sequence.
Exhibit C: how the institutions do it, which is the opposite way round
For twenty years I built systems inside financial institutions. HSBC Private Bank, Natixis, Zurich. The platforms and structures that let those firms see exactly where their money was and exactly what it was doing.
My desk was on the ground floor, with the back office. Compliance sat on the fourth floor and the trading desk on the third. I went up when I needed them, and most weeks I needed them.
Seeing was never a person's job. It was the architecture's job.
Monday morning was a regroup. Where we stood, what had moved, what was going to block the week, and any new risk that had shown up. The numbers themselves were known, so the hour went on what to do about them.
I would come out of that and go up to global markets, then across to retail, because the same directive landed differently on each part of the bank.
There was a think tank running alongside it as well, the other investment banks and firms working out a single reading of the rules for the UK.
That distinction is easy to miss in an owner-led firm, because there the two jobs have never been separated. They have only ever been one person's problem, and that person is you.
You can have a good bookkeeper and a good accountant and still not have a picture you trust. Neither was hired to build one.
And that is exhausting. It means you can be running a successful business and still have a small voice in the background asking whether the money is working as hard as you are.
You find out around month six, when the reporting is genuinely good and you still cannot answer the question that made you pick up the phone.
The objection
But surely a good fractional CFO sorts all of this out?
A good one will. If they are the right person they will build what is missing and they will build it properly. You will be paying CFO rates for the months that takes, to put in place something that should have been there before they arrived.
There is also a question underneath it. Is the business at a point where a CFO changes the decision at all?
A fractional CFO makes the same argument from the other side. Akshat Agrawal, who sells the service, puts the trigger on decision quality rather than turnover:
"A business doesn't hire a CFO because of its revenue. It hires one because the quality of financial decisions has become more important than the quality of bookkeeping."
He is right, and it moves the question one step back rather than answering it. A decision is only as good as the picture it is made from, and nothing in those stages builds the picture.
The verdict
A fractional CFO is the right hire when you need someone to operate a financial picture you already trust. If you are still working out where your profit went, that is a visibility problem, and visibility comes before financial leadership.
The view itself is your Command Centre. Own it before anyone arrives to run it.
The exception
There are firms where the hire is right on day one, and they have a shape. They already know their numbers and have outgrown their ability to act on them. If that is you, hire, and hire well.
And some of the better people in this industry already point to the number that matters. Bennett Financials, who sell fractional CFO services, say it plainly on their own website:
"revenue is the wrong number to watch. The right number is your gross margin. Below 55%, scaling makes you busier, not richer."
They are right. Now put that sentence against your own business.
To use the trigger they recommend, you have to know your gross margin.
What to do with this
Two numbers. Five minutes.
Write down the monthly figure you would be willing to pay a fractional CFO. If you have got this far, that number comes quickly.
Then, without opening anything, write down your net margin for last month.
If the first came easily and the second did not, you have your answer.
In case no. 002 I argued that what you pay yourself is a number you should be able to say out loud. This is the same test pointed at the business instead of at you.
The sidebar · one number
$400,000.
That is the figure Burkland Associates compares itself against: "the $400K+ median annual salary of a full-time CFO in the U.S.", set beside its own engagements at "approximately $19K to $50K per year".
The comparison is fair and it is the wrong axis.
We keep pricing the person. Nobody prices the picture they are being hired to run.
Next: case no. 004, on taking your profit out before the business spends it, and why the answer is usually visible in what you did the last time a big client left.
P.S. If the second number stalled, that is the finding, not a failure. The Profit Scan measures what is really happening in your profit and your margins, so you know what needs attention before you decide what kind of financial help to buy. $297. No call: See where your profit goes
One question, and a one-line answer is all it takes: which of those two numbers came to you first?
Until next Sunday,
Anwin
Anwin Mbah spent 20 years building the systems inside HSBC, Natixis and Zurich that let institutions see their money. A Case for Profit applies that discipline to yours. Wealthfluency is the practice behind it. The Profit Scan is where owners start, at $297, and the Audit and Advisory are what follow.
Know a business owner who wants to make more and keep more? Forward this.