For individuals leading SaaS businesses, it’s perhaps never been more important than it is right now to have a firm grasp on your business’s financial performance. After experiencing years of rapid growth fueled by an influx of capital, the environment is changing fast. As a result, many SaaS businesses are reining in aggressive growth plans and focusing on profitability.
Actively monitoring and managing the financial health of your SaaS business has always been crucial to success, but in this environment, it’s even more important. Amidst this mindset shift, many SaaS business leaders are discovering they lack the level of financial maturity required to achieve clarity in decision-making.
This is particularly true for SaaS businesses pursuing venture capital, private equity, or other institutional funding. A basic approach to finance might work in a company’s early days. But at a certain growth stage, it’s time to build the financial systems that serve as the springboard to take your business to the next level.
As leaders look around their businesses, it’s not uncommon for them to realize they lack the internal financial leadership and resources to tackle this issue. In many cases, hiring a fractional CFO holds the answer to this problem.
But how should SaaS businesses approach finding, evaluating, and ultimately hiring a fractional CFO? In this overview, we answer those questions and more, helping you understand how you can hire the best CFO for your SaaS business.
For a deeper dive on SaaS business accounting, check out our Ultimate Guide to SaaS Business Accounting.
What is a Fractional CFO?
A fractional CFO is an external consultant or organization that provides the skills, experience, and financial leadership that a full-time CFO offers, on a part-time basis.
Often, fast-growing businesses, particularly SaaS businesses, outgrow their initial basic approach to accounting but aren’t yet mature enough to hire a full in-house accounting and finance team.
In those instances, typically around the Series A stage, working with a fractional CFO is the perfect fit for the business’s needs.
Why Do SaaS Businesses Hire a Fractional CFO?
As SaaS businesses scale, they encounter new financial challenges. Solving these complex issues requires the expertise of a CFO. But often, early-stage businesses don’t have a CFO. Instead, the CEO manages finance on their own, or perhaps with the help of a COO or CTO who knows their way around Quickbooks. This is an unsustainable approach that often leads to businesses looking for external support.
As a provider of fractional CFO services, the team at G-Squared Partners typically see three reasons that SaaS businesses need to hire a fractional CFO:
- After Raising Institutional Funding: when venture investors back a company, they typically require that the business provide them with GAAP-compliant financials.
- Preparing to Raise Capital: proactive founders may seek to upgrade their financial infrastructure before raising funding. This can make for a more streamlined due diligence process and faster closing.
- Lack of Performance: some businesses already have some existing resources, such as a part-time bookkeeper. This often fails to deliver the level of financial insight that founders need, causing leaders to seek more advanced solutions.
Of course, this isn’t an exhaustive list. Every business is unique and has its own set of considerations. Overall, if you feel like you lack the financial clarity required to effectively lead your company and plan for the future, it’s likely you would be well-served by a partnership with a fractional CFO.
How to Choose a Fractional CFO
As you evaluate different options for hiring a fractional CFO, focus on finding a partner that’s a good fit for the needs of your business.
SaaS businesses, particularly high-growth SaaS businesses backed by venture capital, operate in a very different way from traditional businesses. If a fractional CFO isn’t accustomed to working with SaaS business models, they may find it challenging to adapt.
Many times, the best way to find a fractional CFO is to reach out to your network for referrals. Investors may be able to recommend an outsourced CFO service that has a strong track record advising other companies in their portfolio. This allows you access to pre-vetted fractional CFO services that you know have the skills required to help you move your business forward.
How to Hire a Fractional CFO for my SaaS Business
The process of hiring and onboarding a fractional CFO to your business can go as fast or slow as you want it to. Often, the speed of this process is driven by the reason your company wants to work with a fractional CFO in the first place.
If you urgently need financial leadership and guidance, it’s possible to get started with a fractional CFO in as little as a week.
SaaS businesses, particularly those at the stage where they’re ready to hire a fractional CFO, tend to be relatively lean businesses. It’s unlikely your business has a procurement process or an extensive legal review that new vendors must go through, which usually means that your new fractional CFO can be brought on board quickly.
Once you’ve onboarded your new fractional CFO, it’s vital to ensure that they have complete access to your internal financial systems. Your fractional CFO will need access to your data room, accounting system, bank accounts, credit card accounts, and other documents.
From there, the initial focus tends to be on bringing your business up to GAAP and aligning on KPIs. After that, you might kick off additional projects, such as compiling a comprehensive forecast that provides the business with a more concrete growth plan.
G-Squared Partners: A Fractional CFO Built for SaaS Businesses
Hiring a fractional CFO shouldn’t be like hiring a new employee. The best fractional CFOs bring significant experience and know-how to your business and will hit the ground running from day one.
For a successful relationship, invest in spending time with your new fractional CFO. They need to know how you think about challenges, understand your goals, and get the information they need to help you make your business a success.
If you’re interested in working with a fractional CFO, G-Squared Partners is here to help. We’re an experienced outsourced CFO to companies in the SaaS space. In recent years, we’ve worked with over 100 SaaS businesses across the nation and have a skilled team backed by a proven track record leading finance at SaaS businesses.
To learn more about G-Squared Partners’ fractional CFO services, contact us today.