Insights / For business owners
Fractional CFO or permanent CFO: what's the difference?
It isn't a cheaper version of the same thing. It's a different tool for a different job. Here's how to tell which job you've got.
Most CEOs arrive at this question at a moment of pain. The FD has resigned. The bank wants a three-year model. A private equity house has just invested and the reporting pack isn't fit for purpose. The instinct is to give in and call a recruiter, and start a permanent search for a role that's going to be mission critical if it doesn't work out. Sometimes that's right, and it's worked out for many businesses. But why take all that risk in one decision? Try before you buy, and understand first where a CFO will add value and how quickly.
What do you get from each?
A permanent CFO gives you a role: someone who owns the finance function every day, leads the team, sits on the board and carries the numbers through every season of the business. A fractional CFO gives you an outcome: senior finance leadership for a defined number of days, focused on the things that most need a CFO's judgement, for as long as they're needed.
| Fractional CFO | Permanent CFO | |
|---|---|---|
| Commitment | Days per week or month, for a defined term | Full time, open-ended |
| Focus | Defined priorities and outcomes | The whole function, every day |
| Time to start | Often days or weeks | Commonly three to six months including notice |
| Cost on entry | A small one-off introduction fee | Recruitment fee of c.20% of salary |
| Cost during | Day rate or retainer, for the days you use | Salary, on-costs, benefits, bonus and, for anyone worth their salt, equity |
| Cost on exit | Nothing | Settlement, the equity they have accrued, and the processes and systems that were only ever in their head |
| Exit | Ends when the job is done | Notice period, then the role to fill again |
| Best for | Change, transactions, gaps, first senior hire | Scale, complexity, a large team to lead |
Let's see those numbers:
Compare the full cost, not the headline. The numbers below are illustrative, for a lower-mid-market business. Your own will differ.
Permanent CFO: £170,000 salary, plus roughly 25% on-costs (employer NICs, pension, benefits) takes you to around £212,500. Add a 30% bonus at target and you're past £263,000 a year, before any equity. A recruiter's fee of 20% to 25% of salary adds £34,000 to £42,500 up front.
Fractional CFO: two days a week at £1,250 a day, for 45 weeks, is approximately £112,500. A small introduction fee, no bonus, no long notice period and no equity dilution.
That is a total first-year cost, without any equity, of approximately £300,000, and that is being conservative. At 45 working weeks a year, or 225 days, it works out at £1,333 a day.
The fractional option isn't automatically more economical. Two days a week means the role has to be more focused on strategy, leadership and sharp processes to facilitate execution, all the things you expect from a CFO. If you need someone in the building every day, holding a team of ten together, doing activities that you could be paying somebody 25% of their salary to do, you're not getting the most from this role anyway. And if the real need is a model, a refinance, a board pack and a finance team that knows what good looks like, you may be paying for three days a week of a permanent CFO doing things your Financial Controller could do.
A good fractional CFO will tell you when you need a permanent one. Be wary of anyone who never does.
Not to be confused: complex, scaling businesses of a certain size absolutely need a full-time CFO. Just don't fall into the vanity trap and assume you automatically do too.
When does fractional make most sense?
You've outgrown your FC or FD, but not by a full-time CFO's worth. Typically when the team is stretched, you're building up technical debt and you value strategic input.
There's a defined event ahead: a refinance, an acquisition, a fundraise, an exit in the next 12 to 18 months.
You have a gap after a resignation and need leadership now, while you take your time over the permanent hire, and absolutely take your time.
The finance function needs rebuilding before you know what the permanent role should look like, so get input from somebody who has been on that journey.
Your investors want better reporting and a voice of authority at the board table, without a fixed cost the business can't yet carry.
When should you hire permanently?
When the business is large and complex enough that finance leadership is a daily not weekly need. When there's a sizeable team consisting of different skill sets: commercial, technical, international or compliance. These need coordinating, managing and developing. When the CFO needs to be a long-term equity partner in the plan. And often after a transaction, when the new structure is clear and you're recruiting for the next five years rather than the next six months.
What about accountability and confidentiality?
Two fair questions CEOs ask us. On accountability: a fractional CFO is engaged on defined outcomes, and should be measured on them, just as rigorously as a permanent hire. On confidentiality: senior fractional professionals work under engagement letters with confidentiality and IP terms, and handle sensitive information for a living. Ask how they manage conflicts between clients. A good one will have a clear answer.
You should also have watertight IT systems, so that the back door is completely shut. Not just for a fractional CFO, but for your entire workforce.
Why does this question get answered badly?
Because the people usually asked to answer it are paid on permanent placements. That isn't a criticism of recruiters; it's how their model works. But it does mean the fractional option often isn't put in front of the CEO at all, even when it fits the problem better. The talent exists. The route to it has been missing.
Start with the problem, not the job title. Write down what you need finance leadership to achieve in the next twelve months, and how many days a month that realistically takes. The answer usually makes the choice for you.
Senior finance capability, for exactly as long as the problem lasts. Fracifind introduces experienced fractional finance professionals, vetted and in confidence. No placement fee, no percentage of salary. Register your interest at fracifind.com.