How I Became a Contract CFO

Forbes calls the freelance economy the future of work.  They estimate that one in three Americans works as a freelancer and that by 2020 one-half of Americans will freelance. A freelancer can be defined as someone who does work for more than one client as an independent contractor as opposed to an employee of one company. The CFO role is perfect for freelancing. All companies need the CFO role, but not many companies need and can afford a full-time CFO. I learned about the role and benefits of a contract CFO largely by accident. In this post I’ll describe how I became a contract CFO and then outline the benefits both to the CFO and to the company. 1174069_23051170

Fresh from University

I began my career with a Big 4 accounting firm in its IT and financial audit departments. I loved the experience and people I worked with, but at the same time I wrestled with the direction I wanted to take my career. Gradually I came to the conclusion that I would eventually love to serve small and growing companies grow in the CFO role.

Full-time CFO

Eventually came quickly. Soon after I came to that conclusion I received a phone call from someone I worked for in high school. He had just started a company that was growing much faster than he could handle. He needed a CFO. I took the position and labored long hours to set up scalable business processes, hire clerical staff, secure financing, and create financial models.

I spent a lot of time on these CFO-level tasks at first, but the initial growth slowed and clerical staff ran the processes with minimal involvement from me. I realized I had worked myself out of a full-time, high-level position. The option of spreading myself out to other companies as a contract CFO never crossed my mind. In hindsight, this may have been a great option. Instead, I left to take another CFO role with another new and fast-growing company.

Full-time CFO (Again)

History repeated itself. I spent a lot of time at first on CFO-level tasks. I cleaned up the books, consolidated the accounting and business processes between divisions, and set up more efficient and scalable processes. I also helped the CEO evaluate the business model, identified the need to evolve, and developed a plan to make the necessary changes.

After a while I realized I had again worked myself out of a full-time job. The business processes had stabilized, clerical staff handled the day-to-day transactions, and the financial crisis had slowed our growth. Again, it didn't make sense for the company to pay a full-time CFO.

Contract CFO

During this time, a business owner I knew was about to lose his controller and was looking for a replacement. As I considered what to do about my CFO role, I had a light-bulb moment. I approached my friend about the idea of replacing his full-time controller with a part-time CFO combined with his clerical staff. He liked the idea, and the arrangement worked out great for both of my employers (now clients).

Benefits of a Contract CFO

After these experiences I took on CFO roles at other companies and continued to see the benefits of a contract CFO for both me and my clients.

The benefits to the contract CFO include: 1. Career development. CFO’s can multiply their experience and contacts by taking on multiple roles at the same time. I was able to work with different management teams in different industries at different company stages, all at the same time. 2. Increased Income. Most small companies can’t pay market rate for a full-time CFO, but most can at least pay the percentage of the market rate that they need a CFO for. 3. Diversification. Many start-ups fail, which gives their executives little job security no matter how valuable they are. If a contract CFO loses one position, they still have their other clients.

The benefits to the client include: 1. Cost. I wasn’t spending more than half my time on CFO-level tasks anyway, so for a little more than half the cost they got the same amount of CFO-level attention. The only difference is they didn’t have as much of my help in other areas, for which they could hire less expensive help. 2. Insight. Working with more than one company gives the contract CFO insights that can benefit the other clients. 3. Flexibility. Clients don’t have the obligation to a full-time employee. As the business needs change over time, they can adjust a contract CFO’s time and pay.

If you are a finance professional, becoming a contract CFO might be a good career option for you. If you are a small company with the need for CFO services without the full-time commitment, a contract CFO is a great solution.

Question: What experiences have you had as a contract CFO or working with a contract CFO?