Fractional CFO: a new era of financial leadership

When Utah-based Duke Heninger became a Fractional CFO, it didn’t even have a name. Finance professionals providing these services were either part-time CFOs or consultants. When he entered the space, he recalls, it was his gateway to freedom and a way to achieve his lifelong dream of owning a business and becoming an entrepreneur. Being a fractional meant he could work flexibly and earn an income while pursuing his projects.  

But along the way, Duke found he loved being a fractional. He preferred the freedom it brought him rather than having to be the CEO of multiple companies, and it scratched his entrepreneurial itch. Fast forward six years, and Duke continues to be a full-time Fractional CFO, having also become a partner at Amplēo, a company providing fractional services across multiple functions.  

So, how did this happen in just six years? And is this trend set to continue? Based on Deloitte’s Global Shared Services and Outsourcing Survey for 2023, the answer appears to be an emphatic yes, with 66% of global services businesses (GBS) expanding their work-from-home hours and 44% increasing their flexible hours. But what’s driving this shift? How can it benefit organisations and CFOs? 

While they might often be confused, there are differences between a fractional CFO and an interim CFO, especially regarding availability. An interim often takes a position as a full-time employee for a given time, whereas a Fractional CFO equates to a part-time financial expert working for multiple clients on a project-by-project basis. However, Duke Heninger makes it clear that there’s far more to the role than meets the eye.  

Fractional CFOs have a more refined focus than their full-time counterparts. They work within the core responsibilities of finance, such as reporting & analysis, cash management, forecasting and modelling. Full-time finance leaders often go beyond the core, working in operational functions and perhaps overseeing HR, IT and even legal teams. 

By focusing on the core, their primary objective is to support and guide strategy with relevant information. They look at the data and numbers to get context for what happened in the past so they can understand the opportunities ahead and draw a strategy for the organisation.  

“As a Fractional CFO, I’m often the one coming up with the solution and then figuring out who in that company will be able to implement it”, Duke explains. “It’s the founder’s responsibility to translate all this data into strategy, but they often don’t know how to do that, so they rely on their gut. That’s where a CFO steps in to come up with a good strategy that the finance team will then implement.” 

For Elisabeth Sabin, a fractional CFO from France living in Portugal, this also means fractional CFOs need to provide a certain level of guidance. “I give them clarity, help them understand what’s working or not, and then set up a plan to improve performance, revenue, or profit. A big part of being a fractional is being able to coach people, mentor them, and develop their skills.” 

As you may expect with any emerging career, several paths can lead to becoming a Fractional CFO. In terms of qualifications, both Duke Heninger and Elisabeth Sabin have backgrounds in accounting. Elisabeth’s career path has included being head of accounting and finance for a defence company, working as an auditor for a big ten company and making a nearly bankrupt company profitable again as CFO.  

Her desire for meaningful work and realising that she “liked the challenge, discovering new things and understanding new business models” made her decide to go into the fractional world. For Duke, it was more about embracing his entrepreneurial spirit and pursuing the flexibility he craved. However, the concept of Fractional CFOs was fairly unknown until the pandemic, when companies accepted the reality of remote working and realised they needed assistance from external experts.

This guidance became necessary at a time when the role of the CFO started to shift, leading them to become more involved in the strategic part of the business instead of pushing papers on the sidelines. Both Duke and Elisabeth believe that their journeys in corporate finance were essential to building the skills they required to be a fractional CFO. As Sabin says, being a fractional means always having a strategic view and critical mindset, which only comes from experience.  

“The CFO is not just the numbers person”, she explains. “They’re co-pilots to the CEO and touch on everything, and that’s the main difference between the modern CFO and the old one. As a fractional working with different industries, business models and stages, you gain a lot of experience. You can bring innovative solutions because you have seen how the best practices worked elsewhere.” 

Heninger also points out that a Fractional CFO measures their success on outcomes, focusing on the 20%, which will produce 80% value for the company. He also explains that his role is more about depth than width.

“My value as a Fractional CFO doesn’t necessarily come from doing so many things, but doing the same thing over and over again. That repetition has helped me get better at what I do.”  

Developing the right leadership and delegation skills is also a must. Fractional CFOs provide companies with the tools they need and switch from the “doer” to the “analyser”. While they can do all the work they propose to bookkeepers, accountants, and FP&A managers, the cost-to-benefit ratio will drop significantly. “I can do [the work]”, Duke states. “But I would have to charge for that service, which wouldn’t bring the same value to the organisation. Our purpose is to make [their team] better. We give them the strategy and the guidance, and then they’ll run with it, gain the experience, and become much better because of it.”  

The market is changing quickly, with more companies going global. The effects of the pandemic and the rise of remote working have made this even more accessible. It’s now fairly normal for companies to have teams working across multiple countries and markets, which can lead to difficulties in controlling data as there are multiple offices and multicultural teams.  

We’ve also seen a rise in the number of startups, often looking for more funding from investors who want to see the bigger picture instead of just the numbers. While many companies are now focusing on growing sustainably and reaching profitability, others still have their minds set on growing at all costs, which can lead to stress, burnout, internal chaos, and a lack of structure. These key factors have led to a higher demand for Fractional CFOs.  

Fractional CFOs offer startups high expertise without the high price tag. They help companies scale up and down as needed without being bound to pay an annual salary. It’s also a way to bring an external perspective that won’t be biased by internal politics, allowing for the CFOs to remain independent and objective. This allows them to focus more on bringing the right value and strategy to the organisation. 

With a higher focus on strategy comes a need to gather information from large amounts of data, which can become a complex task. Elisabeth Sabin explains that AI greatly assists in handling routine tasks and processing large volumes of data, allowing CFOs to focus on higher-level strategic decisions and make informed decisions.  

However, Sabin notes that while AI can bring great advantages, it has some limitations, as it’s still fairly new and requires human intervention for some processes. However, Elisabeth is certain that it will continue to change the landscape of finance and accounting in the coming years. 

“Finance professionals will need to adjust their work and eventually become specialists in specific areas”, the CFO says. “AI is changing the way we work, how companies are established, and how we understand society. It’s a huge shift, and it can be difficult for us to keep up.” 

With companies aiming for growth, the topic of costs is always on the table. Hiring a Fractional CFO is one way to reduce costs. It’s a cost-effective solution that gives companies access to top-level talent at a fraction of the price. There’s also the potential for a higher return on investment as they need to deliver results and add value quickly.  

Fractional CFOs don’t require long onboarding processes because they’re often external to the organisation. They need to get the full scope of what’s happening to dive deep into the work almost immediately. This also prevents them from getting tangled up in office politics, making them more impartial and objective. 

However, there can be some disadvantages for companies. Elisabeth Sabin explains that: “Integrating a Fractional CFO within your team can be challenging, so you must be careful when hiring a fractional to ensure that their mindset and way of working matches the company’s cultural environment.” Ensuring that you get buy-in from the whole team is essential to whether a strategy succeeds.

Availability can also be an issue for some companies. A full-time CFO is always available, whereas a fractional CFO often manages several projects at once, so it can be a tricky balance to ensure their clients’ needs are always met.  

For CFOs, one of the biggest advantages is the flexibility of clients and hours. “When I started doing this, I would only work for 30 hours a week”, Duke Heninger explains, saying that he is now free to choose which projects he wants to work on, which allows him to collaborate with a multitude of businesses. “You can have a variety of clients, and it feels good to jump from one to the other and focus on that core value you can add. You get to do these things you know and enjoy over and over again, and you get better with it too.” 

Elisabeth Sabin also enjoys the flexibility this career path provides her, as she now has more time to spend with her son and “stop being a weekend mom”, as she recalls, while also getting to enjoy working with a variety of clients. After moving 11 times during her career and working for companies with different cultural backgrounds, Sabin realised she needed constant change. “I craved innovation, challenges, and analysing new business models”, Sabin recalls. “Solving problems is fun for me, so going into the fractional space made sense.” 

However, some challenges come with being in the fractional space. And while flexibility might be a great thing, it can also be, as Duke explained, a double-edged sword, as the work is on you, and clients always expect you to be available for them. “In the fractional space, your clients don’t care if you’re busy with one client”, the CFO says. “They’re going to be mad if you fail, and your value will be diminished.” 

A diminished value also means fewer clients, a risk many face in this space, especially those not working with a company offering fractional services. Simply put, if you don’t get clients, there’s no guaranteed income.  

For Elisabeth, establishing herself in the space and gaining the customer’s trust is one of the biggest challenges. “Starting a new business and building trust with your clients is incredibly challenging”, she states. “When you decide to take that big leap of faith, you have to understand that you’re not alone. There are plenty of fractional CFOs out there and you need to differentiate from others.” 

It can take a significant amount of time to build up the required network, and this is particularly difficult when the concept of a fractional CFO is still widely unknown, particularly in some countries. Elisabeth, who’s recently moved to Portugal, faces that challenge on a daily basis. “The fractional CFO is not well known in Portugal, and I’m trying to change that.”

Entering this space can take its toll, and CFOs need to be ready to face the challenges. “It requires a headspace, some planning, some confidence, maybe even some savings because it takes some time to get there”, Heninger advises. 

As with any emerging career, there are a number of misconceptions about Fractional CFOs. In particular, there can be confusion over their role and the value they bring. The output can appear to be the same as that of bookkeepers, as people who are less experienced tend to use the title to charge a higher rate.  

Instead, a Fractional CFO needs to understand strategy, raise capital and focus on high-level strategic decisions. “We’re not just bookkeepers or accountants”, Elisabeth Sabin explains. “We look at the numbers and tell their stories so we can help shape a company’s future.”  

This lack of understanding of the purpose of a Fractional CFO can also lead to the misconception that they’re too expensive. In reality, the company receives top-level financial expertise without paying an annual salary, bonuses, or insurance benefits.  

There are also some misconceptions about how you become a Fractional CFO. Contrary to popular belief, this is not a role you can take on straight after graduation or early on in your career simply because you don’t have the experience or understanding of what an organisation needs. “You’ve got to work in the small space or the industry before you can become a Fractional CFO”, Duke Heninger explains, going as far as to suggest working in the type of companies similar to the ones they aim to collaborate with. “You have to become an expert at what you’re offering before jumping into fractional work.” 

There’s also a misconception that these professionals can do everything a full-time CFO can. In reality, a Fractional CFO should focus on what brings the company value – the 20% that produces 80% value —, not take on a full finance team’s workload. “I made this mistake”. Duke recalls. “I did everything and said yes to everything, which bogged me down very quickly. Because of that, certain things weren’t as valuable to the companies, so they questioned my value.” 

Fractional CFOs focus on results, meaning they can work for different-sized firms, not just small companies. Relying on the expertise of an external professional can be crucial in specific moments of a large organisation’s journey and that’s where a fractional comes in. “Whenever there is a big merger or acquisition, for example, or If the full-time CFO needs support for a big project, a fractional CFO can be an option”, Elisabeth Sabin believes.  

Finally, there’s an unfair preconception that Fractional CFOs choose this career path because they lack commitment due to working on multiple projects. However, because Fractional CFOs have no safety net, they quickly add value to their clients to continue working with them. “If we provide value, we get to keep our clients, which motivates us”, Sabin explains. “We don’t have a safety net. We need to work for our clients to be successful so we can be successful as well.” 

So, what does the future look like for Fractional CFOs? The first thing that’s clear is that the number of fractional professionals will continue to rise. Duke Heninger has already noted this increase in the six years he’s been in the industry, and it has continued to grow with the acceptance of remote work after the pandemic. “We were all forced to go to remote for months and, now I can simply jump on a call with somebody in Europe and it feels like we’re in the same room together”, the CFO explains. “Our area of focus has gone from this little geographical region to, basically, everywhere.” 

Sabin agrees with this, believing that there will be more fractional employees than full-time employees in the future. “We already see people quitting their full-time jobs and becoming fractional, and I believe this trend will continue”, she argues. 

It also appears that the concept of fractional will become commonplace in other sectors, such as operations, HR and marketing. As Duke explains, “We’re going to see this expand more and more, and I believe that the fractional service offering is going to be an integral part of a company’s early stage because it just makes sense.” It looks like the future is fractional.