If you’re like most business owners, you’re probably wearing a lot of hats. You’re responsible for marketing, sales, operations, and maybe even finance. It can be tough to manage it all yourself, especially when trying to grow your business. That’s where a fractional COO can help. I interviewed Rachel Beider, CEO of Press Modern Massage, a consultant, and an author of Press Here: Massage for Beginners, to learn more about how a fractional COO can help business owners and whether or not you need one for your business.
What is a Fractional COO?
A Fractional COO is a Chief Operating Officer that works for your company on a part-time or interim basis. They’re there to offer you guidance, expertise, and executive-level leadership to assist you in avoiding roadblocks in your business model and ensure that you’re on the right strategic and operational path for maximum development.
Fractional COOs provide various services at a fraction of the cost of a full-time COO, making them an appealing success tool for small and medium-sized businesses and organizations just getting started without the cash for a full-time COO.
The Fractional COO model is becoming increasingly popular as businesses look for ways to do more with less.
What does a Fractional COO do?
The fractional COO’s duties vary based on the company’s demands, the CEO’s skillset, and the fractional COO’s skill set. There are a lot of tasks that a fractional COO can handle in numerous areas. The sole responsibility of a fractional COO is to run the firm better than it did when they joined it and to handle all operational issues to relieve you of duties and allow you to concentrate on your long-term business goals.
In general, though, these are some of the focus areas most COOs come to handle;
- Strategic Planning: Assists the CEO in long-term strategic planning by focusing on the company’s mission, vision, values, and goals. Long-term and short-term planning are two different things. They also have the knowledge and connections to see their initiatives through.
- Operational development and management: This might be anything from enhancing and reshaping the company’s operational core to identifying opportunities and risks. Creating long-term viable systems and processes, such as standard operating procedures, organizational restructuring of back end and front end systems, policy and procedure creation, and introducing new technology when necessary are all a part of operational development.
- Organizational development and management: Assists in developing and leading a sustainable culture and environment that enables the company’s growth. Consider hiring, communication, team management, and leadership areas to address.
- Project management and planning: Overseeing company projects that have been determined through strategic planning. They ensure that the project is proceeding as planned, that stakeholders are all on the same page, and that the project is progressing as it should. The fractional COO may completely manage or simply oversee projects with project managers depending on the business’s size and the project.
- KPIs and metric reporting: Reports on and improves key indicators to ensure and evaluate efficiency within the company. Consider sales forecasting, website, and social media traffic, data, client retention, and other vital metrics.
When should a Business Hire a Fractional COO?
Most business owners or CEOs wear many hats. They are responsible for the growth and profitability of the company, managing people and teams, developing new products or services, and ensuring smooth operations. But there comes a time when a business reaches a certain level of success that it becomes difficult for one person to manage everything effectively. This is when a fractional COO can be extremely valuable.
This is precisely why fractional COOs exist – to provide an extra set of experienced hands-on-deck without the full-time commitment or cost. Fractional COOs can be brought in for as little as a few hours a week or month, and they can help with anything from developing growth strategies to streamlining processes to hiring and firing employees.
This is true with Rachel. Her business had grown from having one room to nine rooms and more massage therapists, followed by exponential growth to open another branch in a different location with eight rooms. She was excited to take on new challenges; however, she quickly realized that managing two spaces was more than she could handle. She was handling everything herself, from hiring staff to training staff to managing the books. She quickly realized she needed help and brought on a fractional COO to take on some of the operational tasks, freeing her up to focus on what she does best – expanding the business.
The following are some signs that a small business might require a fractional COO. If you can relate to any of these, it might be time to start looking for a Fractional COO for your business:
You’re spending more time managing than improving
When you’re spending all of your time ensuring everything is running efficiently, you’ll have less time to develop new methods for pushing your company forward. If you’re so busy keeping your company afloat that you don’t have time to think about where it’s going or how you can help it get there, consider hiring a COO. A Fractional COO can take charge of the day-to-day operations of your business, giving you more time to focus on the big picture.
You’re expanding rapidly
If your business is growing quickly, it can be challenging to keep up with the demand. A Fractional COO can help you manage this growth by developing systems and processes that can scale with your business. They can also help you manage your finances and human resources, so you can focus on other aspects of running your business.
You don’t have time to plan for the future
When you’re too busy putting out fires, it’s hard to find time to think about where you want your business to be in five years. A Fractional COO can help you develop a long-term plan for your business, so you can focus on the present without sacrificing your future.
Your CEO is overwhelmed
If your CEO is trying to do too many things, it can be difficult for them to focus on the most critical aspects of running your business. A Fractional COO can help take some of the pressure off by handling day-to-day operations, so your CEO can focus on more strategic tasks.
You want to strengthen your company’s leadership
If you want to build a strong leadership team, a Fractional COO can help you identify the most qualified candidates and develop a succession plan. They can also help you implement training and development programs to prepare your leaders for the future. For instance, how Rachel was assisted by her COO in implementing Homebase, a small business tool for managing employee scheduling, time tracking, and communication.
You need someone to execute ideas
If you have a lot of great ideas but don’t have the time or resources to execute them, a Fractional COO can help. They can develop and implement systems and processes to help you get the most out of your ideas.
The Good News
So what’s the good news? Fractional COOs can be an incredible asset to a business. They can provide much-needed structure and support, freeing the CEO to focus on strategic initiatives and long-term growth.
In addition, a Fractional COO can bring a fresh perspective to the table, providing outside insights and ideas that can help take your business to the next level.
If you’re feeling overwhelmed by the day-to-day operations of your business, or if you’re simply looking for ways to take your company to the next level, a Fractional COO may be just what you need.
If you’re a business owner, then you know that there are a lot of moving parts that go into making your company successful. From sales and marketing to operations and finance, keeping track of everything can be challenging, especially if you’re unfamiliar with all aspects of running a business.
That’s where a fractional CFO comes in. Fractional CFOs are experts in financial management, and they can help your business make the most of its money. From my interview with Nelson Tepfer, the managing partner at ProCFO Partners, which provides fractional CFOs across New York state and Chicago, I have compiled the following on what fractional CFOs are and how they can help your business grow. I’ll also give you tips on deciding if hiring a fractional CFO is the right move for you.
What is a Fractional CFO?
A Fractional CFO is a Chief Financial Officer who works part-time, usually for small to mid-sized businesses. This type of CFO can be an excellent option for companies that can’t afford a full-time CFO or only need someone to handle financial matters part-time.
The CFO is the strategic and managerial head of finance, and they can be critical allies for founders without a financial background. The CFO can set and review financial key performance indicators (KPIs), implement best practices, create budgets and forecasts, and assist the board and potential investors in understanding the company’s financial status.
Many startups are unable to afford a full-time CFO. An outsourced CFO service might assist you in understanding your company’s finances, producing customized forecasts, or formulating a fundraising approach for a short or one-time engagement.
What is the Difference Between a Fractional CFO and an Interim CFO?
According to Nelson Tepfer, a temporary CFO differs from a fractional CFO (part-time CFO) because the interim job is short-term. An interim CFO fulfills an area between a company losing its full-time CFO and filling the vacant position. A fractional CFOs’ services are continual, but their weekly hours are limited to part-time.
Fractional CFOs are often considered more strategic, while Interim CFOs are more operational. Fractional CFOs work with a company to help them grow and scale, whereas Interim CFOs help to keep the company running smoothly on a day-to-day basis.
Another key difference is that Fractional CFOs are usually brought in when a company is doing well and looking to take things to the next level. In contrast, Interim CFOs are typically brought in during times of crisis or transition.
What does a fractional CFO do for Growing Businesses?
A fractional CFO is a crucial functionary who serves many responsibilities in a business, including:
Ensure a Proper Financial Foundation is in Place
As a company grows, its financial processes grow increasingly complicated for the founders to manage. They need someone who can see the whole picture through the nuts and bolts of financial reporting and accounting to maintain their economic health.
This is where a fractional CFO comes in to clear a path through the web of numbers and statistics.
Nelson shares that “as the lifeblood of every small business, cash flow can be a big issue. Small businesses may struggle with getting funding, building their company strategy, and figuring out why their profit margins are shrinking. These are all symptoms of bigger problems that a fractional CFO can help with. A fractional CFO brings experience and expertise to recognize symptoms and build a financial function that will support the business’s goals. This can help small businesses get back on track and be successful.”
A fractional CFO is vital for small businesses, as they provide the financial stability and foresight required to maintain a company’s health and growth.
Help Manage Growth
One of the main benefits of having a fractional CFO on your team is that they can help manage growth. If you’re seeing consistent growth in your business, it’s essential to have someone on your team who knows how to handle that growth and ensure it’s sustainable. A fractional CFO can help you do just that.
For instance, when looking at a potential acquisition, it’s essential to look at more than just the numbers on paper. It would be best to consider how the company would fit with your existing business. Would the acquisition help you to achieve economies of scale? Would it give you access to new markets or technology? What would be the impact on your existing employees? These are all important factors to consider before making an offer. Of course, you also need to ensure that the company is a good financial fit for your business. But by taking a holistic view of the acquisition, you can avoid making a mistake that could cost your business dearly in the long run.
These are the considerations a Fractional CFO can bring to the table to ensure that you make the best decision for your business.
Implement Systems and Controls
When businesses grow, they must create more effective procedures to address their fluctuating needs. This necessitates the oversight and direction of someone who has implemented numerous systems in various situations. Someone who’s seen it all can anticipate what might go wrong and how to address it before it happens. A fractional CFO may draw on their experience to guarantee that the business is always moving forward, even when changes occur.
For example, there was a company whose invoicing process was inefficient. It would often take them four to six weeks to send out an invoice after completing a project. Nelson recognized this was a legacy issue from when the company was much smaller. At that time, a single person was responsible for a checklist of six items that needed to be completed before an invoice could be sent out. As the company grew, those six items became the responsibility of six different people or teams. However, no one took the time to reassess whether this was still the most efficient way to do things. As a result, being a fractional CFO, Nelson helped them implement systems to streamline their process so that invoices could be sent out within five days. This helped improve their efficiency and better meet the needs of their clients.
To Sum Up
A fractional CFO is a financial expert with an extensive background in many areas who works part-time and relieves startups of high expenses. Hiring a fractional CFO is the only way for a young business to gain access to best-in-industry knowledge without having to pay through the nose for it.
It’s a win-win situation like all great business models.
Of course, once startups grow large enough, they may find that having a full-time CFO makes good business sense. Those who are still learning the ropes, on the other hand, should think about employing a fractional CFO at any time.
As a small business owner, have you reached the point in your journey where you’ve hit a “ceiling,” or what I call the Entrepreneurial Catch-22, in your business growth? A point where you can’t scale without bringing on an experienced C-level leader, but you also can’t afford someone like that until after your business has scaled.
Most entrepreneurs who survive the startup phase experience some variation of this. Don’t worry — there’s a solution: It’s called Fractional Leadership (FL). Working with a fractional leader can help your business break through that ceiling and escape the Entrepreneurial Catch-22.
Fractional Leadership means engaging with an experienced C-level executive who’s already scaled an organization like yours. By hiring a fractional leader and making them a part of your leadership team, you will fast-track your ability to break through the ceilings holding you back for a fraction of what it costs to hire someone like that full-time.
Why do so many founder-led businesses hit the ceiling again and again after passing through the startup phase? I believe it is usually because the people on the founding leadership team have never run a business that size before. And they certainly haven’t led a company as big as they want theirs to become.
The data backs this up. Contrary to the stereotype of entrepreneurs as experienced, savvy serial business starters, about 90 percent of startups are founded by people who never started a business before. If you’re feeling alone, like there’s something wrong with you because you don’t know how to solve the problems your business is facing now, you’re not. You’re just like 90 percent of the other small and midsize business owners out there.
Fractional Leadership Can Work for Any Small Business
My first FL client was a media company that creates ad placements on popular websites. In doing so, the media company gives their clients more revenue than they could get on their own. They grew 25 percent revenue in the first quarter I worked with them.
This was not because I have magical or mystical powers or am an ad tech guru. It was because I’d built a business from smaller than theirs to much bigger before. I knew where the pitfalls were and what challenges they were facing, and I’d already learned what to do through trial and error. I helped them skip past the learning curve.
Because they had me on board, there was no need for them to reinvent the wheel. I helped them gain the focus and discipline they needed to immediately attack some of the low-hanging fruit — the little things that were holding them back. They simply didn’t know how to do it.
Another of my clients was a cybersecurity firm that contracts with federal agencies. Their sales team had been hitting the ceiling for a while, and no matter what they tried, they couldn’t breakthrough. When I suggested they consider a fractional chief security officer (FCSO), the CEO was initially hesitant even though he had already retained me as a Fractional Leader!
I assured him he would get a lot further by trying it out than continuing to bang his head against the wall. So he bit the bullet and interviewed three FCSOs I introduced him to, each with relevant federal contracting experience.
Fast forward three months later. Kristen McGarr of Adroit Insights, the FCSO he chose, had embedded herself with the team on the days she spent there. She cost much less than the salary, bonus, benefits, and taxes they would have paid hiring someone full-time, and as a vendor, she started and ramped up in weeks, not months, as a major executive hire would have.
Kristen hit the ground running, learning how things worked and using her past success and knowledge to restructure the sales process. She knew what was important to track, coached the existing team to dramatically increase their closed sales, and hired and trained new team members to position them to grow. They grew more in the first year after retaining her than they had in the previous four.
Outsourcing Customer Service — Fine. But C-Level Leadership?
People know about outsourcing and utilizing freelancers for less-skilled activities like answering phones, data entry, and virtual assistance. In fact, the global outsourcing market for IT alone was $333.7 billion in 2019. But it sounds crazy to think of outsourcing C-level executive Leadership. Right?
But the truth is that Fractional Leadership isn’t as foreign a concept as it initially appears. There are elements of it in the way we have been using attorneys and accountants for decades, if not centuries. We consult with someone about the most sensitive parts of our business and accept their guidance and leadership in our financial, compliance, and legal decision-making even though they aren’t full-time employees and only bill us by the hour.
If your business is hitting the ceiling and you and your leadership team aren’t sure what to do about it but aren’t scaled big enough to bring the experience and expertise you need in-house, full-time, you aren’t the only one.
In the United States alone, the latest data available (2017) from the U.S. Small Business Administration Office of Advocacy shows 5.3 million businesses with 1-19 employees and nearly 6 million with up to 499 employees, with total small firms making up 99 percent of U.S. businesses.
Let me remind you, the vast majority of those business owners have never done this before either. But the fact that you’re reading this blog right now means you’re ready to explore how your business can break through that ceiling and grow!
Visit fractionalleadership.io or contact us today to learn more about how to take your business to the next level.