Breaking Down the Cost Savings of Fractional CFO Solutions

5 min read
1/16/23 9:00 AM

Professional services firms need to protect their business's profit margins as much as possible. It takes new businesses, in general, between 1.5 to 2 years to turn a profit, and that can be a much longer timeline, especially if you need to pay for specialized equipment, expert staff, and high premiums for errors and omissions insurance. 

That means it's important to trim down costs, which can put you and your company in a bit of a bind: a CFO can help you monitor spending and determine the most financially sound strategies for your short-term and long-term goals, but CFOs cost a lot of money. That's why more and more businesses are turning to fractional CFO solutions to get the best of both worlds.

If you're crunching the numbers and looking for a way to afford the financial expertise your business needs, this guide will walk you through:

  • Why CFO services are so crucial for your business's long-term growth
  • How fractional CFO services can reduce costs
  • What fractional CFO solutions can do to streamline growth

How Can Fractional CFO Services Help You Save Money?

Fractional CFO services are the consulting equivalent of a conventional, salaried CFO. Instead of having to hire a CFO (which includes all of the traditional recruiting and onboarding expenses, training delays, six-figure salary, and benefits), your firm can hire a single individual or a three-person team of financial experts at a fixed contractual rate for fixed contractual services. Not only does this put high-quality financial advice back in your budget, but it also means you receive the services your business needs; after all, a small professional services firm is unlikely to need the full-time, in-office presence of a dedicated CFO. 

Outsourced services are a growing trend that has made small businesses more versatile and scalable in the last few years, and that trend will continue to expand in 2023. From outsourced IT management to outsourced digital marketing management, niche experts are outsourcing elements of their businesses so they can focus on the core services within their own area of specialization. By outsourcing your financial management, you can further streamline your own core responsibilities. You can also gain advice from a team of experienced professionals, instead of rolling the dice on your own financial knowledge or that of a conventional CFO who fits within your budget.

Balancing all of these different factors and decisions might be enough to make you throw your hands up in the air and wonder if you even need a CFO—whether in the form of a single hire or a contracted team— in the first place. But here's why fractional CFO services are worth it:

  • You have a financial expert who can ensure your business is compliant with financial and tax obligations (both in terms of day-to-day processes and for quarterly and annual obligations). 
  • Your fractional CFO team will use financial models so you can track and forecast expenses, revenue, future profit, and the effects of different financial strategies.
  • CFO solutions can determine the best courses of action for both preserving cash flow and scaling your business.
  • When you have a part-time CFO handling financial matters, you can focus more on growing your business, serving clients, and establishing your brand.

Breaking Down the Cost Savings of Fractional CFO Solutions

Before you consider long-term growth and profitability, especially in the first few years of your professional services firm (or after a turbulent past few years during the pandemic), you might be prioritizing cost savings above all else. Here are three key avenues in which fractional CFO solutions can provide those savings:

1. Strategically Looks at Expenses for Areas to Reduce or Eliminate

Almost every business has bloated overhead or wasteful expenses that can be trimmed. Hidden costs can creep into your balance sheet in a myriad different forms, from software licenses you no longer need to subscription services that you've outgrown and aren't paying the most efficient rate for. Your fractional CFO team can sit down with fresh eyes and identify where you can trim costs with minimal disruption to your business. For example, they can look at:

  • Marketing and sales processes that aren't providing a positive or high enough return on investment (ROI)
  • Poor utility contracts that don't match your business's current needs
  • Unfavorable vendor contracts (for example, many of the rates you were offered in the first year of operations are far higher than what you may be offered now)
  • Wasteful unproductivity due to poor training or work processes

Fractional CFOs have years of experience looking into businesses inside and outside of your industry, meaning they bring a wealth of knowledge about how to make businesses run more tightly without cutting off their growth potential.

2. Strategically Looks at Processes and Technologies

Some of your business's processes might not be wasteful or have unnecessary costs; they might just be inefficient compared to other alternatives. Once your CFO identifies the low-hanging fruit of truly wasteful spending, they can start to comb through your daily operation, tech stack, and standard operating procedures to find savvier solutions. Legacy processes are often bad for business, but the upfront time cost of researching alternatives and implementing a better fit can make changing things feel impossible; fractional CFOs get rid of that inertia. They can:

  • Propose different tech stack options that they've seen in action
  • Walk through the costs of staying put or migrating to different software
  • Break down silos between departments that might be causing too many out-of-sight expenses

3. Strategically Helps You Evaluate Business Decisions (Current and Future Impacts)

Making the right business decisions is challenging, especially when you're in the weeds and it's your business at stake. Poor choices, both in the form of risky gambles and risk-averse hesitations, can increase your business's operational costs. But fractional CFOs can partner with you to be a trusted advisor as you discuss the pros and cons of:

  • Renting additional office space or moving to a new location
  • Investing in additional equipment—or simply making a choice between leasing and ownership
  • Hiring additional employees
  • Expanding or decreasing your services to reach your preferred market

When you choose Dillon Business Advisors's expert fractional CFO services, you have a three-person team of a CFO, Controller, and CSM who will model the potential outcomes of different strategies and investments. Even if you're not considering major changes, your Dillon Business Advisors team can clean up your current and past financial data so you have cleaner insights, can forecast future expenses and revenue, and start experimenting with different financial hypotheticals.

See the ROI and Cost Savings of Fractional CFO Solutions for Yourself With Dillon Business Advisors

Good financial advice and services aren't out of reach when you choose a fractional CFO solution instead of a conventional, salaried CFO. Dillon Business Advisors can pair your firm with a three-person team of financial experts that can immediately start identifying expendable expenses, areas for improvement, and long-term financial strategies. Contact us today to learn more about the next steps or to schedule your personalized business analysis.

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