The Fractional CFO Concept
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The Fractional CFO Concept

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The idea of fractional or part time use of a valuable resource has been around since the 1960s. It was pioneered by the vacation real estate industry. The concept of a fractional CFO is no different. ...

The idea of fractional or part time use of a valuable resource has been around since the 1960s. It was pioneered by the vacation real estate industry. The concept of a fractional CFO is no different. Most business leaders recognize the need for trained, experienced financial expertise on their management team. However, they simply do not need and cannot cost justify a full time CFO. Retaining a fractional or part-time CFO presents a cost effective solution customized to a business' exact needs, budget and life cycle.

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The Fractional CFO Concept The Fractional CFO Concept Document Transcript

  • The Fractional CFOConceptBy: Dale R. Schmeltzle, CPAThe idea of fractional or part time use of a valuable resource has been around since the1960s. It was pioneered by the vacation real estate industry when a French ski resortowner recognized few people could afford, let alone needed a resort condominium forall 52 weeks of the year. He addressed this challenge by dividing every room into 52separate units of time.Using the slogan "stop renting a room, buy the hotel" he launched a worldwidemarketing phenomenon we now know as the time share industry. Units were sold to time-sharedifferent owners, each of whom purchased the full use and enjoyment of the week thatbest suited their schedule, and at an affordable price. If a buyer needed more than oneweek a year, they bought as many units as they wanted. And while other "bells andwhistles" have been added through the years, over 4 million American families now ownat least one vacation timeshare.The concept of a fractional CFO is no different. Most business leaders recognize theneed for trained, experienced financial expertise on their management team. Manysimply do not need a full time CFO. Therefore, they cannot cost justify the investment of justifya full time salary. Even if an owner or manager has the required skill sets, a professionalCFO can likely generate a superior work product in less time. This in turn frees up themost valuable and scarcest resource of all, TIME!No successful entrepreneur ever launched a business with the intent of spending all dayanalyzing balance sheets, determining marginal profit contribution, dealing with bankersand tax accountants or addressing regulatory inquires. They launch businesses to eexploitcompetitive advantage in their chosen field by servicing customer needs. Any time spent"working on the books" is time away from their real mission and a costly distractionfrom their value proposition.Retaining a fractional or part- -time CFO presents a cost effective solution customized to tsa business exact needs, budget and life cycle. The key to a successful fractional CFOrelationship is to design and staff that engagement with a professional who willunderstand your business and address your financial needs. They must also become an financialintegral (if part-time) member of your management team. Your fractional CFO should time) 1
  • meet with you to tailor an affordable program to address your specific business needs.Together, you will establish a regular schedule of dedicated time to service those needs.That schedule can vary from just a few hours per month to several days per week, andcan be adjusted as future needs require. You the client can typically terminate yourfractional CFO at any time and for any reason without incurring additional costs, just asyou would if you had hired a full time employee.Frequently Asked Questions• What exactly does a CFO do, and how does that change if I use a fractional CFO?The chief financial officer or CFO is the person primarily responsible for managing theoverall financial operations of an organization. This position is responsible for planning,cash flow management, record keeping, financial reporting, etc. The only differencebetween a traditional CFO and a fractional CFO is the nature of their relationship to thebusiness. While a CFO is full time officer and employee, a fractional CFO is a part-time,independent contractor. However, their duties and responsibilities are virtuallyidentical.• Will I retain a fractional CFO for a one-time assignment, or will they continue to provide on-going services?Occasionally, a client will request that that their fractional CFO provides services for aone-time, special project. The CFO will likely endeavor to accommodate all client needs.However, their primary focus will be on providing on-going fractional CFO services,including the development, implementation and monitoring of a long-term businessplan. While the time allotted to this process can be adjusted and even reduced as initialobjectives are met over time, it is a continuous process that typically requires someeffort at least monthly.• How much should I expect to pay for my fractional CFO?The cost of fractional CFO services are primarily determined by only two things, thenumber of hours spent on an account, and the billing rate of individuals providing clientservices. Barring temporary or emergency situations, a reputable fractional CFO firm willendeavor to staff assignments using associates with skill sets and experienceappropriate to your needs. Ultimately, they will provide the level of service youdetermine based on your needs and within a budget determined by you. Your schedulecan vary from just a few hours per month to several days per week, and can be adjustedas future needs require. Typical clients should expect to spend from $500 to $5,000 permonth, depending on their needs. 2
  • © 2012 by Dale R. SchmeltzleAbout the author: Dale R. Schmeltzle, CPA is a founding partner of CFO America, professionalconsultants dedicated to helping business owners define, implement and monitor the strategicand tactical elements necessary to achieve long-term financial and operational success. CFOAmerica provides fractional or part-time executive management expertise not available on anin-house basis.Dale has been a frequent author and speaker for numerous professional, civic and non-profitgroups. He wrote Highly Visible Marketing, 115 Low-cost Ways to avoid Market Obscurity. Hehas also taught college level accounting and financial courses to non-business audiences. Formore information, please visit http://www.CFOAmerica.biz or follow us on Facebook athttp://www.facebook.com/CFOAmerica. Consulting CFOs & Executive Managers 3