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Using Fractional Finance Talent To Help Startups Propel Growth

By News Creatives Authors , in Small Business , at September 1, 2021

Anita Samojednik is CEO of Paro, a startup disrupting the way companies access on-demand financial expertise

For growing businesses, it can be complicated for the CEO to manage the company’s finances on their own, and many startups are recognizing the power of leaning on fractional talent to drive growth. The startup community, while often well-equipped with enthusiasm and hunger to tackle issues, must first overcome upfront costs before turning a profit. Startup budgets are often limited and can be singularly focused on improving their product or marketing their company, leaving very little for recruiting highly skilled talent who have been properly vetted to ensure their level of expertise fits your business needs.

Enter the unique advantage of leveraging fractional talent, which can benefit startups along different phases of the journey: growth, fundraising and scaling. I’m the CEO of a fractional talent company, and here are some of my tips for how fractional talent can be used effectively in each stage of your startup’s evolution.

Growth

For a startup, this is arguably the most important stage since this is where founders are tasked with establishing proof of concept and developing a viable long-term business model. This stage is also where startups are generally less inclined to allocate resources to cost centers like a finance department. Instead, they opt to dedicate funds to areas that historically drive growth, such as sales, marketing and product development. However, the idea that investing in finance functions early on can hinder or halt growth should be reconsidered.

At this stage, startup leaders should ask what they really need from their financial reporting. Consider what specific skills you need to drive the most value and gain the best insights, such as financial planning and analysis. Do you have a specific need you can answer without the requirement of the overhead of a full-time role?

An often-perpetrated myth in the fractional world that’s important to correct early on is that fractional talent is a “cheap resource.” This thinking must be debunked. When growing quickly, it may be intriguing to pursue a service with a low-cost option as leaders debate whether they have the funds for a full-time role. However, this could wind up costing more in unrecognized profits, which is likely not worth it in the long run. If leaders are aware they are not ready to fund a full-time role, but they can still benefit from improved understanding of their forecast, cash flow and modeling to help drive growth, then fractional finance talent might be the answer.

Fundraising

With valuations currently at an all-time high, there is immense pressure for startups to compete — making fundraising a crucial step in the process. Fundraising and mergers/acquisitions (M&A) can be complex and time-consuming tasks that require very specific expertise. During this stage, startups may want to consider the value of experienced talent who have gone through the process before.

For example, the beauty of using a fractional CFO with fundraising or M&A experience is that they already have the specific skills needed to help you achieve your goals, and they can be leveraged as needed. A fractional CFO can help prepare your business with the right type of information that venture capital firms want to see before investing, in turn helping to maximize your valuation.

To find the right person to help with fundraising at the CFO level, start by looking for candidates who have gone through successful raises before and understand the KPIs and needs of investors to be successful. Ultimately, the best person for the job will be with someone working at the intersection of functional and industry expertise.

Startup leaders might struggle with relinquishing control and allowing fractional talent to have access to proprietary information that they’d typically like to keep in-house. To overcome this challenge, founders should remember the reason they initially hired this talent. Ideally, they were properly vetted to indicate they could be trusted. However, it’s important to continue building that trust for the duration of their time at the company. Founders should open and maintain a direct line of communication with their fractional talent to understand their expertise and who they are as a person.

Scaling

Though 21.5% of startups fail in the first year, those leaders who reach the scaling phase have proven their business model and may be ready to expand quickly. This can include the need to increase the scope of the fractional talent team, which could encompass taking on additional projects or hiring capable leaders to build out a fully functioning finance department that can operate efficiently at scale. A successful scale-up needs to have the right systems in place, including a plan to finance potential new hires, automating basic processes like payroll, cloud storage, etc., and outsourcing other traditional roles (graphic designer, lawyers, etc.).

Leveraging fractional leadership to overhaul items like financial capabilities can provide clarity for decision-making and avoid struggles related to cash flow, as with rapid growth comes rapidly increasing costs. Many startups at this stage can become stagnant, but it’s important to never stop evaluating your business and finding ways to adjust as necessary. Success is a moving target, so remember to be flexible.

I’ve found successful scaleups can go south quickly if founders don’t take time to not only grow, but listen. At this stage, your fractional talent has been with you for a good period, so it’s best practice to schedule time with them to debrief on what they’ve learned while being at your company, discuss specific KPIs and chat through their recommendations for how to succeed as you venture forward. This allows for growth without ignoring glaring areas of improvement, which could diminish the progress you’ve made.

Startups are often built by innovators looking to break out beyond the traditional — and as such, they may want to consider how new approaches to talent resourcing can help them achieve their goals. Working with experienced fractional finance professionals can be a strategic and cost-effective way to jump-start and build for long-term success.


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