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Virtual CFO: A Strategic Business Partner
Small and growing businesses do not always have the funds to hire a CFO but still need advice on strategic, financial, and operational matters. In many cases, these businesses turn to a virtual CFO to guide them through periods of transition or growth.
CPAs and other finance and accounting professionals are well-positioned to be virtual, strategic business partners for these companies.
When Does Your Small Business Need a Virtual CFO?
When I look back over the two and half decades of working with hundreds of business owners (as a CFO, CPA, tax planner, and other contracted financial roles); I believe that the small businesses who have the most success with a virtual CFO are those that:
- Have been in business for at least four years
- Are making north of $500k in gross revenue
- Are emotionally ready to take their business to the next level
- And are interested in the ideas of their business’ long-term sustainability and long-term financial health.
What may surprise many people is that you don’t have to be a huge company to hire or benefit from a virtual CFO’s services. Many small business owners get more benefits from hiring a virtual CFO. That’s because, to the point of bringing on a Virtual CFO, the owner has been mainly guessing at each successive step. So, operationally, there tends to be a significant bit that a Virtual CFO will streamline and optimize. Also, a good virtual CFO will almost always find ways to increase a business’s profitability in line with the owners’ values and desires. Lastly, a huge benefit for small business owners is that they get to relax–knowing that someone else is leading the financial conversation and overseeing the needed changes.
Investing in a Virtual CFO + Your ROI
So let’s talk about money. You might be wondering what it costs to hire a virtual CFO and what kind of return you’ll get on your investment. These are great questions to be asking.
An average CFO hired as a full-time employee makes over $375k/yr + vacation and benefits. Most small business owners (even those with businesses making several million a year) feel that this is too much of an investment. Having someone available full-time in this capacity is overkill for their needs.
So this is where a virtual CFO can save the day. Most virtual CFOs charge a fraction of that average annual cost and work on a contract, part-time basis—while still providing you the insights, leadership, and management you need for your company. You should expect a virtual CFO who is providing CFO services to cost an average of several thousand each month.
Return on Investment
From my experience working as a Virtual CFO, I believe you should be able to directly track the financial savings and additions they’ve made to your company. When I look back at my past clients, every one of those companies has gotten more than double their investment back (even those who didn’t follow through with recommendations). Many saw their profitability, tax savings, cash flow (or all 3) increase over ten-fold. Sometimes this return can happen within one year, but usually, to see the extremely positive results, it takes 2-3 years. It all depends on your company, its history, industry, goals, willingness to pivot, and the speed at which we can make changes.
Hopefully, this article has been able to help you consider if and when your small business needs a Virtual CFO. If you’re ready to explore getting Virtual CFO help, I’d love to talk with you about you and your business’ needs.