When a fractional CFO
beats a permanent hire.
A fractional chief financial officer suits a company that needs senior finance judgement regularly but lacks a full week of work at that level. The usual threshold is somewhere between five and twenty million in revenue, though the better test is whether the finance questions arriving each week are strategic or transactional.
What a fractional CFO actually does
The title covers a wide range in practice, and the useful distinction is between work that requires seniority and work that merely requires finance.
- Strategic finance. Cash runway, scenario models, pricing decisions, unit economics and the question of whether the plan is fundable.
- Fundraising and transactions. Preparing the numbers, running diligence, and sitting opposite investors who will test them.
- Board reporting. Turning management accounts into something a board can govern with, and taking the questions that follow.
- Building the function. Deciding what the finance team should look like in eighteen months, and hiring the layer beneath.
What it rarely covers is bookkeeping, payroll and transaction processing. A fractional CFO who spends their days there is an expensive financial controller, and the arrangement will disappoint both sides.
The revenue point where the maths changes
Revenue bands are a rough guide rather than a rule, and they are the question most often asked, so here is the shape of it.
| Stage | Finance need | Usual answer |
|---|---|---|
| Below £2m | Bookkeeping, compliance, basic reporting | Bookkeeper plus an accountant |
| £2m to £5m | The above, plus cash planning and board reporting | Financial controller, fractional CFO above them |
| £5m to £20m | Strategic finance, fundraising, building the function | Fractional CFO, moving towards permanent |
| Above £20m | Continuous, and increasingly complex | Permanent CFO |
The bands move with complexity rather than turnover alone. A business at four million raising a round, operating across three currencies or preparing for sale has a CFO-shaped problem that a business at fifteen million with one product and one market may still lack.
A better test than revenue
Ask what kind of finance question arrived in the last month, and who answered it.
- Transactional questions concern what happened. Invoices, payroll, reconciliation, the management accounts. A controller handles these and does so more cheaply than a CFO would.
- Operational questions concern what is happening. Cash position, margin by product, whether a hire is affordable this quarter. A strong controller or a fractional CFO handles these.
- Strategic questions concern what should happen. Whether to raise, what to price at, which market to enter, what the business is worth. These need a CFO, and a founder answering them alone is usually the reason the search began.
Where strategic questions arrive weekly and consume a day each time, the case for permanent has already been made. Where they arrive monthly, fractional covers them at a fraction of the cost.
Where a permanent CFO wins
Four conditions argue for the full-time seat, and any one of them is usually enough.
- The finance team needs managing daily. Once there are five or more people in finance, someone has to be present for them, and a two-day-a-week leader becomes a bottleneck rather than a resource.
- The board expects a named executive. Some investors and most lenders want a permanent CFO in the seat, and the preference hardens as the numbers grow.
- A transaction is running. Diligence is a full-time job for months, and it arrives alongside the ordinary work rather than instead of it.
- The role is a succession step. Where the CFO is expected to become chief operating officer or chief executive, the arrangement wants permanence from the start.
We recommend permanent more often than a firm with a fractional practice probably should. A fractional arrangement that turns out to want a full-time seat costs the client two searches and costs us the credibility of the first recommendation.
What it costs against a permanent hire
The comparison people make is day rate against salary, and it flatters the permanent option by leaving out everything that sits on top of a salary.
- A permanent package carries pension, benefits, employer taxes, equity and, in time, severance exposure.
- A fractional arrangement buys days used, with weeks ending on notice measured in weeks.
- A permanent hire takes three to six months to appoint. A fractional arrangement starts in two to four weeks, and the gap between those two has a cost of its own.
Taken together, a fractional CFO at two days a week commonly lands between a third and half the annual cost of the permanent equivalent, with materially less commitment. What it withholds is presence, and presence is exactly what a growing finance function eventually needs.
What can go wrong
Three missteps account for most disappointing fractional CFO arrangements, and all three are scoping problems rather than people problems.
- The role was really a controller. Where the weekly work is reconciliation and reporting, a CFO will either do it expensively or decline to, and both outcomes frustrate everyone.
- Authority was left vague. A finance leader who has to seek approval for decisions inside their own function slows the business down rather than speeding it up.
- The days were ad hoc. Finance runs on a monthly close and a weekly cash rhythm. A leader who appears when summoned misses both and spends each visit catching up.
The tell in all three cases is the same: a month in, the founder is still answering the finance questions they appointed someone to answer.
Structuring the arrangement
Five things settled at the start account for most of the difference between arrangements that work and arrangements that quietly end.
- Days, and which ones. Fixed days beat an equivalent number taken ad hoc, because the finance rhythm is weekly and monthly rather than continuous.
- Board attendance. Whether they attend, whether they present, and whether board preparation sits inside the retained days or outside them.
- Authority limits. What they approve alone, and where the founder or chief executive signs.
- The team beneath. Whether they manage the controller and the finance staff, or advise alongside them. Both work; ambiguity between them reliably causes trouble.
- The exit. What triggers the conversation about a permanent hire, and whether this person is a candidate for it.
Moving from fractional to permanent
Most fractional CFO arrangements end because the company outgrows them, which is the arrangement succeeding as intended. Planning that transition while things are calm is considerably easier than planning it under pressure.
Two useful habits. First, review the arrangement every six months against the question of whether strategic finance work is now arriving weekly. Second, have the fractional CFO write the specification for their permanent successor, because nobody understands the shape of the role better and the exercise removes any awkwardness about whether they want it themselves.
Marquee runs permanent and fractional mandates through the same evaluation, so a fractional appointment that converts has already been assessed against the standard a permanent search would apply.
Frequently asked questions
Commonly a day rate well above the daily equivalent of a salary, with a total landing between a third and half the permanent cost. The rate is higher per day because it sits outside employer costs, notice periods and severance exposure, and because the person absorbs the gaps between clients themselves.
Commonly above twenty million, though complexity matters more than turnover. A business raising a round, operating across currencies or preparing for sale can need one at four million. A single-product business at fifteen million may still be well served fractionally.
A controller reports what happened; a CFO decides what should happen next. Controllers own the accounts, the close and the compliance. CFOs own the strategic questions: whether to raise, what to price at, whether the plan is fundable. Many companies need both.
Commonly four to ten, with two days a week the usual upper end. Regular fixed days work considerably better than the same number taken ad hoc, because finance runs on a weekly and monthly rhythm the person has to be present for.
It is one of the most common reasons companies appoint one. Preparing the numbers, building the model, running diligence and sitting opposite investors are all CFO work, and they arrive in concentrated bursts that suit a fractional arrangement well.
Most do at early stage, and the preference for a permanent appointment hardens as the numbers grow. Where a term sheet or a lending covenant specifies a full-time finance executive, that settles the question regardless of what the workload suggests.
Often, and it is worth establishing whether they want to before the arrangement starts. Many fractional specialists choose the model deliberately and will decline. Where they are open to it, the company has effectively run an extended assessment already.
