Navigating Business Growth: How CFO Expertise Shapes Financial Outcomes
Every entrepreneur dreams that one day their hard work will pay off, envisioning their business taking flight and experiencing growth fueled by time, investments, and passion. However, with growth comes a new set of challenges that can potentially undermine the new-found success of a business.
The key to overcoming these challenges and ensuring sustained success lies in partnering with a business strategist. One that can bring experience and financial acumen to the table, enter the Fractional CFO.
What is a Fractional CFO?
A Fractional CFO is a highly experienced financial expert who provides the same services as a typical CFO, but on a contractual or part-time basis. This allows flexibility in their schedule and pricing, meaning their clients can expect the same level of experience typically found in a much larger company for a fraction of the cost.
Fractional CFO’s typically work with multiple companies in tandem, often specializing in specific industries because of their extensive professional backgrounds. For these reasons and more, a fractional CFO offers undeniable financial guidance for entrepreneurs, whether their enterprises are nascent or well-established.
Business Growth
A fractional CFO looks at your business’s data and determines how to get from your current state of business to where you’re looking to go. They map your trajectory and create the blueprint necessary to achieve growth in the most efficient and sustainable way possible.
It is complex to scale your business while ensuring profitable growth. The same tools, technology, processes, and vendor relationships that were key to establishing your venture won’t take you to the new heights you’re looking to reach. That is because with growth comes uncharted territory; new product lines, expansion into fresh markets, transactions in different currencies, new staffing needs, and regulatory red tape.
What Challenges Come With Growth?
It’s important to understand and anticipate the unique combination of obstacles that will affect the growth of your venture, because they may not look the same business to business. It may be time to consider partnering with a Fractional CFO if you are finding that your systems, resources, and strategies are no longer adequate in the face of change.
These changes take many faces, but typically look like the following:
Sales Tax Differences: If you are expanding your business into a country with separate provincial or state sales tax regimes, you will need to understand the filing requirements in each, as you expand into those jurisdictions. Rate differences, the sales threshold at which you need to start filing in that jurisdiction, and the timing required to remit payments needs to be understood and planned for.
Income tax In Canada: Does your business still qualify for federal and provincial small business deductions? At some point your growing business will exceed the limits imposed on those deductions as it grows, and your business will start to attract higher cash taxes as a result. Or perhaps it wasn’t earning enough to be taxable in its initial stages. Some sense of cash tax planning is a solid business practice.
A Fractional CFO doesn’t just focus on accurately preparing your taxes through various jurisdictions and deduction limits, they also take a more strategic approach to seek out potential tax saving opportunities. They consider aspects like easing the tax-burden on their clients’ business and payment timing to help with managing the overarching cash flow.
Staff Growth: As your business increases in size, so does its requirement for staff resources.
Your avenues to remedy this may take various forms including developing the skills of existing teams or hiring new talent entirely. Does your current team have the capacity to handle the increasing workload? If not you will soon be considering the options for adding staff compensation, either by salaried employees or contract and freelance staff.
Skill building is a strong suit of many CFOs due to their tenures in leadership roles. They can help position your existing financial team to perform and meet oncoming challenges head on, with better tools and processes at their disposal than ever before. CFO’s may also offer mentoring and professional development to existing team members looking to grow within your venture.
A Fractional CFO may look at your existing team and see that there are gaps that need to be filled through talent acquisition. Not only will they support you in identifying the skills needed to broaden the scope of your team but they will assist you in planning for additional compensation requirements.
Systems & Process Growth As businesses evolve, so do their system requirements. New software and hardware tools, increased security and privacy protection and the processes necessary to run all of them will become a part of your company’s reality as it grows in size.
In addition to expanding your existing systems, it will soon be time to examine if your existing infrastructure allows your business to scale. Doing so requires airtight, repeatable financial processes that offer clear forecasting and consistent results. These data-driven processes are key to informed decision making. If your processes are already well organized and thoroughly documented, a fractional CFO offers avenues to further streamline the existing system in place.
Impact of short-term debt You may need to make significant investments to propel your company to the next level, and those investments may require money that exceeds your business’s current net cash flows. Consider the advantage of financial leverage for your business, the cost of debt to your company, and the timing of repayment.
New owners or partners At some point it may make strategic and financial sense to bring along a new owner or partner in your business. A Fractional CFO will be key in ensuring these new relationships are strategic and sound. They will ensure that expertise and validation is brought to all critical meetings, support the analysis of term sheets and contracts, and oversee any integral due diligence as required. They will always be in your venture’s corner, looking to help it grow and exploring the avenues that suit its needs best.
Navigating the complexities of business growth requires strategic financial management. A Fractional CFO serves as an essential ally, mapping out trajectories and creating critical blueprints for sustained growth. From addressing tax implications and staffing needs to optimizing systems and processes, Fractional CFOs offer tailored solutions to help businesses thrive amidst expansion. Their expertise not only ensures financial stability but also fosters strategic decision-making, positioning businesses for long-term, future-proofed success.
We’ve compiled an ebook, Seven Questions for your Small Business CFO that details examples of practical financial guidance that will help your business to thrive.
It’s free! Download our e-book, Seven Questions for your Small Business CFO by clicking here.
Do you need help making your business thrive?
Contact us at info@guildstreet.ca or at 403-807-2075
