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THE 5 MINUTE FRACTIONAL CFO

027: 6 Prerequisites Before Adding a New CFO To Your Team

Dec 02, 2022

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027: 6 Prerequisites Before Adding a New CFO To Your Team

Dec 02, 2022

Read time: 2:47 minutes

I did a horrible job of hiring the first fractional CFO for my team.

It was January 2021. Our client count had grown and we were officially at capacity. It was time to add a new CFO to the team!  

I posted the position on Indeed and LinkedIn. 
I interviewed dozens and narrowed down the list to 2 people.

The new hire was chosen.
And it was a complete dumpster fire. 

Simply put, we weren't prepared.

Before you hire your first fractional CFO, make sure you're prepared. Don't wing it.

When you add a new CFO to your team, a lack of preparation results in: 

❌ A disgruntled new employee
❌ Clients that are under served
❌ A big black eye on your firm's face

These are super painful lessons to learn! 

But when you are prepared, you unlock tremendous benefits. Because growing your team enables you to grow your impact - and your net profits.

Today, I'm going to share the 6 things you need to do before adding the first CFO to your firm.

#1. Key Processes and Procedures

New team members need to know what to do and how you want it done.

There are 2 keys to success with processes and procedures: 
1️⃣ Don't overthink them.
2️⃣ Don't overcomplicate them.

Identify the main activities that a new CFO needs to be successful at doing their work.

And then either document the process in writing or on video. We love using Loom for this. 

How complex should the processes be? 
They should cover enough such that a reasonably competent professional can follow along and do the work. This need not be step by step by step.

#2. Onboarding and Training

Just dumping some google docs or Loom videos in front of a new CFO isn't going to cut it.

You need to create an onboarding experience for them.

During onboarding and training, you'll want to: 
• Lay out their 90 day plan.
• Get them access to the tech stack.
• Introduce them to key team members.
• Share your company values, vision, and priorities.

If you aren't intentional with onboarding and training, you will miss key steps and the new hire will know it. And the clients will realize it soon as well.

#3. A Compensation Plan

Obviously you have to pay your new fractional CFO.

But before you hire them, you need to put considerable thought into how you want to pay them.

There are a number of ways to do so: 

• Salary
• Hourly
• Percentage of revenue 
• A hybrid approach with a combination of the above

Each of those comp plans comes with their own pros and cons. And some candidates will lean hard towards one comp plan over the others. But you have to figure out what works best for your firm and your growth strategy.

For me, I start my CFOs with a fixed salary for their first 90 days while we train and onboard them. After that, they receive a percentage of their client revenue.

(I should write another blog on why I chose that plan.)

#4. Retained Earnings

Getting a new fractional CFO up to speed and ready to handle clients can take 60-90 days.

That means they won't be generating revenue for 60-90 days.

But they're probably going to expect to get paid during that time.

Make sure you've got enough cash squirreled away to cover their comp during that time.

#5. Predictable Leads

Congrats! 
You hired a new fractional CFO.
But then you realize you don't have any business to hand them.

Yikes.

Before you think about hiring, make sure you've got a proven method(s) for bringing in new clients. 

My faves (in letter count order): 

πŸ‘‰ UpWork
πŸ‘‰ Referrals
πŸ‘‰ Social media
πŸ‘‰ Speaking events
πŸ‘‰ Networking events

Don't get stuck with a new CFO and no business to hand them.

#6. A Hand-Off Plan

Fractional CFOs should have very strong, professional relationships with their clients.

Lots of trust. Lots of rapport. Lots of history.

So handing off existing clients to a new CFO can be extremely challenging.

Is it possible? 
Absolutely. 

But don't roll into that endeavor haphazardly! 

You'll want to consider a transition plan.

I go into detail HERE on how to do that successfully.

I did a really bad job of preparing for my first fractional CFO hire. The employee went running for the hills and several clients almost left with him. 

But your fate doesn't need to be the same as mine.

Use the list above as a checklist to make sure you're ready.

Future you will thank you later! 

You coach,
Michael

Whenever you are ready, here are 3 ways I can help you:

  1. Join us at The CFO Accelerator Live in Dallas, TX from May 15-17. 2024 andΒ learn how to get more clients, increase your pricing, and close more sales! Get your ticket here.
  2. The Inner Circle - every month my team and I go live and share the most impactful lessons we've learned in our journey to start, scale, and optimize our own CFO firm (including live Q&A). Plus you'll get access to our private community of overΒ 200 Fractional CFOs.
  3. If you'd like more amazing (and free!) content about starting, scaling, or optimizing your Fractional CFO firm check out The CFO Report.

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