Hiring a Fractional CFO: The Top 7 Questions From Company Owners

By Robb Thomas, Former Arthur Andersen Bankruptcy/ Turnaround Consultant

I receive quite a few emails from business owners/founders asking about working with a fractional CFO (fCFO). Many of the emails contain the same handful of questions which means, at least to me, that there are undoubtedly a lot of others asking the same questions to fractional people they may know. In this issue, I attempt to answer the most asked questions. Please note that my answers are based on my own experience as a fCFO for the past 7 years. Obviously, cost savings is a common question, but since there are a lot of sources that answer this question, I don’t spend much time on this question.

Owner’s question 1:

“I’m considering hiring a fCFO instead of a full-time CFO. But what are the financial trade-offs? Can I really save money? And are there hidden costs I need to watch out for?”

Answer: This question is almost always the first one asked. The financial picture is often favorable for a fCFO—if you structure it well—but there are caveats.

What you can save vs full-time

  • A full-time CFO in the U.S. often commands base salary, benefits, bonus, equity, and overhead. Many sources cite full compensation north of $200,000–$400,000+ for experienced CFOs in mid-sized firms
  • Because you avoid full benefits, office costs, equity allocations, and full overhead, your effective “all-in cost” is often 30–40% lower than a full-time hire. Some virtual CFO firms claim exactly that margin
  • Also, fCFOs are often available quickly, which means you don’t wait months in recruiting before seeing value.
  • Perhaps the main benefit of working with a fCFO is that you work with them when you need them and for as long as you need them

Hidden costs & traps to watch

  • Scope creep: If your fCFO is doing bookkeeping cleanup, system implementation, or chasing after missing data, hours can pile up quickly
  • Mis-allocation of time: If much of your “fCFO time” is consumed by low level or low-value tasks, you lose leverage and incur costs perhaps unnecessarily. Your fCFO should recommend that low level tasks be performed by lower cost options
  • Onboarding inefficiencies: Slow access to your systems, data, stakeholders, etc can make the ramp up period drag and reduce effectiveness of your fCFO
  • Risk of underperformance: A fCFO with weak domain fit or little experience may deliver reports or forecasts with little to no analysis or recommendations and as such, little value. Many critiques of fCFO services speak of dashboards that look good but don’t drive decisions. Your fCFO should not just report data, they should help you understand what the data means and recommend action items if needed
  • Internal resistance: Some staff may feel threatened or unsure how to work with a part-time CFO, especially in finance or accounting teams. As the leader of your company, introducing and empowering your fCFO is a necessity.

In short: yes, you can save money and get good value—but only if you manage scope, ramp efficiently, and pick the right person.

Owner’s question 2:

“What are the most common reasons fCFO engagements fail or disappoint? How do I avoid making those mistakes?”

Answer: Failures often trace back to mismatched expectations, weak fit, and poor integration. Here are some key pitfalls and mitigation strategies to avoid them:

Pitfall 1: Vague or shifting scope

If you engage without a tight scope (what deliverables, which metrics, timing, what level of hands-on vs oversight), the CFO and your team may interpret differently. Many reported failures in fractional engagements (some survey data suggest ~65% underdeliver on expectations) arise from poorly defined scope including timelines

Mitigation: You may consider starting your fractional engagement with a short contract with 15- to 30-day deliverables. If the fCFO delivers, you can move on to the heavy lifting needs. If the fCFO doesn’t deliver, you can end the business relationship and try again

Pitfall 2: Siloed thinking / disconnect from operations

Some fCFOs operate as outsiders who don’t tie in with your accounting, operations, or team. In most cases this will not work.

Mitigation: Require system access (accounting, CRM, dashboards). Insist the fCFO participate in leadership meetings. In most cases, your fCFO could share their calendar with clients so they can see when you have availability. To be blunt, your fCFO should be a true member of your team

Pitfall 3: Static forecasts, vanity dashboards

A template forecast or dashboard is useless if it is outdated or doesn’t connect to decision levers. Many failed engagements deliver dashboards or models filled with metrics that look good but don’t mean much or guide action

Mitigation: You should ask for tools that will be meaningful for your business. Tools like rolling forecasts (e.g. 13-week cash models, scenario planning). Choose 3–5 key KPIs tied to your business (e.g. CAC payback, gross margin, cash runway). The tools must be updated frequently

Pitfall 4: Overcommitment or overextension

Some fCFOs stretch themselves across too many clients, reducing focus and responsiveness.

Mitigation: During the interview, discuss how many clients they maintain, how many hours they will commit to you, and how they prioritize their time between clients. This is another reason to start with a short trial engagement.

Pitfall 5: Cultural or internal resistance

Accounting staff or leadership may not accept an external fCFO’s authority. This leads to friction, lack of execution, or communication breakdowns.

Mitigation: Involve key internal stakeholders in selection and onboarding. Openly communicate the role with your team and set expectations on their collaboration with the fCFO. The fCFO must actively build trust early.

If you avoid those pitfalls and insist on alignment, clarity, and integration, your odds of success rise dramatically.

Owner’s question 3:

“How do I pick a fCFO who will be accepted internally and effectively partner with my team? What criteria or red flags should I watch for?”

Answer: This is a great question. Cultural fit, credibility, and communication are everything. Here’s a practical selection checklist and list of red flags:

Key criteria to judge

  • Domain experience / specialization: A CFO familiar with your vertical (SaaS metrics, manufacturing margins, e-commerce) will hit the ground faster. This is becoming more important as the fractional offering matures
  • Track record & references: Demand two or more client case studies with measurable results (cash saved, growth accelerated, capital raised). Talking with several previous clients is also a good idea. If you are using a platform like Upwork, look at any comments provided by previous clients
  • Hands-on vs advisory balance: A great fCFO can shift between advisory and execution, not just hand you reports
  • Availability & bandwidth: As mentioned previously, make sure their time commitment to you is real, not aspirational
  • Communication & storytelling ability: They must convert data into strategic narratives and direction for you and your team
  • Systems fluency: They must know accounting systems (e.g. QuickBooks, NetSuite) and analytics tools. Being able to build usable tools in Excel or Sheets is a must. Understanding AI and how it might be used in your business is a growing requirement
  • Collaborative mindset: They should want to build with your team, not override them. They should want to be your business partner and not just a consultant

Red flags to watch for

  • They can’t show real outcomes (only vague promises).
  • They provide overly generic dashboards or forecast templates.
  • They refuse or delay access to systems or data.
  • They decline to be involved in operational meetings or leadership syncs.
  • They carry an excessive client load (you sense you’re one of many).
  • They criticize your team too early without seeking context or building rapport.

By vetting carefully and insisting on collaboration, you increase your odds that the fCFO will be accepted and effective.

Owner’s question 4:

“How do I ensure the fCFO doesn’t feel like an outsider and is embraced by my finance, operations, and leadership teams?”

Answer: This can be a cultural & structural challenge. Each engagement and company are different, but here are some thoughts that might make acceptance smoother:

  1. Kick off with a “360 orientation” - In month one, schedule structured sessions between the CFO and each key function (accounting, ops, sales, marketing). Let them ask questions, see workflows, understand interlocks.
  2. Make them part of your leadership team - Include your CFO in strategic meetings, weekly leadership huddles. Let them contribute insight, not just get updates.
  3. Set clear governance & feedback loops - Define meeting cadences (weekly, monthly) and feedback mechanisms (what works, what doesn’t). Refresh the scope quarterly.
  4. Recognize their wins publicly - When their input saves cash, improves margins, or accelerates decisions, acknowledge it. That builds credibility internally and can make the fCFO feel appreciated and part of the team and not just a financial mercenary.
  5. Limit surprises - The fCFO should not come in cold, then spring sweeping changes. Start with diagnostics, incremental wins, quick wins.

If you structure adoption intentionally, the fCFO can become a trusted partner, not an external guest.

Owner’s question 5:

“When would you advise against hiring a fCFO? Are there scenarios where a full-time CFO or internal hire is better?”

Answer: Yes, there are times when the fractional model is not ideal. You might opt for a full-time CFO or a hybrid model in these cases:

  • When the workload justifies it - One of the main reasons companies use the fractional model is because there isn’t enough work to justify a fulltime CFO. If they hired a fulltime CFO, they could be paying fulltime compensation for part-time performance
  • When your finance function is already large or complex - If you have multiple direct reports (controllers, FP&A, treasury) and you need ongoing daily oversight, a full-time CFO makes more sense
  • You need constant in-house presence - If you need someone making urgent, minute-by-minute decisions or embedded in all operations, fractional can feel too distant
  • During major transitions - In some cases, major M&A, IPO prep, or large restructurings may demand full-time focus from day one, not part-time attention

A hybrid approach is also common: start fractional, validate fit, then transition to a full-time CFO while retaining the fractional for overlap or special projects

Owner’s question 6:

“How should I structure the agreement, payment, and incentives so the fCFO feels invested yet performs?”

Answer: Your contract and structure can greatly influence success. I am not a lawyer and to protect your company, you should consider seeking legal advice, especially if you have not used a consulting agreement previously. Here are some options to consider to align incentives and guard your downside. Some of the options only work if they have direct impact on the outcome

  • Phased approach: Begin with a short discovery phase (15–30 days) to diagnose gaps and propose a roadmap. Only after that commit to a longer consulting agreement.
  • Retainer + milestone pay: Base retainer for baseline hours, plus bonuses or project fees for defined deliverables (e.g. raise closed, cost reduction, margin improvement).
  • Performance metrics: Link some payment to KPI achievements (cash flow improvement, runway extension, margin targets) but only those within the CFO’s control.
  • Termination flexibility: Include a 30- or 60-day exit clause if things don’t go well.
  • Review & adjustment clause: Quarterly review of scope, hours, deliverables, and pricing.
  • Ownership of deliverables: You retain ownership of models, dashboards, forecasts. If they leave, you keep the assets.
  • Non-compete or exclusivity limits (reasonable): Ensure they don’t take competing clients in your vertical or client base.
  • Transparency and reporting cadence: Require weekly touchpoints, monthly reports, and stakeholder updates.

With structure and fairness, you align your interests and reduce the risk of under delivery.

Owner’s question 7:

“How long should I plan the engagement for? When is the right time to revisit or end the relationship?”

Answer: I am not trying to dodge this question, but in my experience, each engagement is different. I have had engagements last 3+ years and others that lasted a month. It really depends on the work that is needed

Closing Thoughts

A fCFO can bring powerful leverage to your company—expert financial guidance without the full-time cost—if you pick wisely, define clearly, and structure for accountability and integration. The financial benefit is real: companies may see 30–40% lower cost compared to a full-time CFO, yet gain access to the skills and experience they need

But your success hinges on avoiding pitfalls along the way; some of which were discussed previously. Even though the relationship may not be long term, it could be one of the most important hires you make. Do your homework, vet your candidates, and hold them accountable to help your engagement with a fCFO be a successful one.

Robb Thomas is a Seasoned Fractional CFO with over 25 years of hands-on experience across SaaS, healthcare, real estate, and service industries.