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SMBs Can Avoid Financial Drain By Leveraging Part-Time Expertise

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Sound financial strategy is an essential ingredient in any business’s success. Seth Morgan, co-founder and CEO of MLA Companies, speaks on the advantages enlisting the services of a fractional chief financial officer to avoid monetary pitfalls that could drain the bank account.


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Leveraging Part-Time Expertise

(Dayton, OH) December 14, 2021—Businesses with fewer than 500 employees play a major role in the U.S. economy, generating about 50% of the gross domestic product.(1) They also have a very high failure rate. On average, 20% of new businesses in the United States fail within their first year of existence; about half will fail by the end of the fifth year, and by the end of a decade only 30% of new businesses will still exist.(2) “In many cases,” says MLA Companies co-founder and CEO Seth Morgan, “startup companies fail not because the founder lacked vision or misunderstood the market, but because the company lacked a growth- and survival-oriented financial strategy.”

In larger companies, notes Morgan, there is normally a suite of “C-level” executives—chief executive officer, chief technical officer, etc.—with broad oversight of a given area of the company’s operation. The chief financial officer (CFO) is the highest-ranking financial professional in the organization and is responsible for the fiscal health of the business, helping the CEO grow both market share and the company’s overall earnings.(3) Though valuable, these executives can be expensive; median compensation for a CFO in the U.S. as of May 2021 was $393,337 per annum.(4)

A growing number of SMBs are availing themselves of an alternative to employing a full-time CFO, says Morgan.  This is the engagement of a fractional CFO, a professional who divides his time among two or more noncompetitive companies. For example, Morgan notes, a specific skill set is required to make financial projections for a company. Without a CFO (or a fractional CFO), the owners are forced to make decisions without those essential forecasts. But the intersection of business decisions with forecasts, banking, option analysis, and other areas make a CFO’s role and perspective crucial.

The Achievable Benefits Of Remote Work

The time is particularly ripe, Morgan says, for SMB owners and managers seeking financial guidance to consider engaging a fractional CFO. For one, the cost of a fulltime CFO is, as noted, significant. For another, there is a lot of talent available. From 2019 to 2020, there was a 27% increase in CFO resignations in the U.S.(5) Since then, he says, the pandemic has caused many other financial professionals to discover the achievable benefits of remote or part-time work.

Morgan also notes that some businesses try to hire a CFO and then ask them to play roles inside the business that do not exercise their CFO skills. For instance, many companies will ask a CFO to play the role of controller or even bookkeeper. Or a CFO may be asked to oversee IT or HR. Morgan advises against this approach.  “CFOs should bring a particular perspective and skill set to the business decision,” he states. “When they are asked to operate in more than one role, they normally will gravitate to whichever seems most urgent at the time.”

These competing roles often limit a CFO’s contribution in all of the jobs you’ve asked them to do. The challenge for these CFOs, Morgan observes, is being pulled in multiple directions. This is not usually a skill set problem, but it does limit their perspective. Such CFOs are constantly having to ask themselves what hat they are wearing, and even the most skilled individual will normally only be able to play one of those roles consistently well.

Most entrepreneurs, Morgan points out, do not come from financial backgrounds, and their failure to seek outside financial guidance contributes heavily to the startup failure rate. “There are a lot of reasons not to hire a full-time CFO, including hiring difficulties, not having to pay someone in the position, or not wanting to use a big chunk of startup capital on a CFO,” says Morgan. “But it is very important to have an expert outside view of your company’s finances. For many SMBs, a fractional CFO is the best way to go.”

About MLA Companies

MLA Companies is not a CPA firm that also does consulting. They are consultants whose customized, value-driven approach offers processes and services that align to client’s needs and future growth. Founded in 2006 by CEO Seth Morgan, they are financial experts positioned to understand a client and their business – to protect, guide, and empower. Clients who invest in building relationships with MLA Companies know that their purpose will not change but their service offerings can grow as the business grows. At MLA Companies the discussion with a client is centered around purpose and growth first – then finance and services second. Visit https://mlacompanies.com/

  1. “The Importance of Small Business to the U.S. Economy,” saylordotorg.github.io/text_exploring-business-v2.0/s09-02-the-importance-of-small-busine.html.
  2. Carter, Timothy. “The True Failure Rate of Small Businesses.” Entrepreneur, 23 Dec. 2020, entrepreneur.com/article/361350.
  3. “Chief Financial Officer (CFO) Defined: Role, Responsibilities and Skills.” Oracle NetSuitenetsuite.com/portal/resource/articles/accounting/chief-financial-officer-cfo.shtml
  4. “What’s the Average Salary of a Chief Financial Officer (CFO)?” Investopedia, 24 July 2021, investopedia.com/ask/answers/010915/whats-average-salary-chief-financial-officer-cfo.asp.
  5. “The Rise of the Fractional CFO.” financialexecutives.org/FEI-Daily/September-2021/The-Rise-of-the-Fractional-CFO.aspx