One of the most challenging issues that new startups in Los Angeles face is navigating the complexities of business finance and complying with California’s strict tax regulations. In today’s article, we are going to explore the concept of a fractional CFO, how to find one in LA, and why hiring one can be the best decision you ever make.
What Is a Fractional CFO, and Why Might a Business Need One?
The LA startup scene is truly one of the best in the country. A report released recently shows that Los Angeles contains close to 4000 startups, making it the 3rd largest startup ecosystem in the US. This isn’t surprising, though. The state of California is known for its reputation of being the home to several innovative companies.
While many of the new companies are able to handle the difficulties that come with such a competitive city, some aspects, like finance, can still be really tricky to deal with. You might think you ought to hire a Chief Financial Officer (CFO) to help with this, but let’s look at how much you would need to pay them.
The median annual salary of an experienced CFO in a city like LA is $474,662 and can go as high as $606,515.
If you are a new company, you probably aren’t able to spend that sort of amount on a single employee just yet. Finding a good CFO who can help your company with financial analysis, tax planning, and strategic financial decision-making will sadly be out of your budget in most cases.
However, this is where fractional CFOs come into play.
A fractional CFO is basically a CFO that works on a contract or on a part-time basis, like a consultant.
Due to the fact that they are not full-time employees, their services can be accessed with lower fees. This makes it perfect for small and new companies that lack the resources needed to hire a full-time CFO in a big city like LA. Secondly, they also do not have the level of financial issues that big companies do.
How to Find a Fractional CFO in LA
Finding a Los Angeles fractional CFO can be a bit intimidating. Startups are usually run by a younger crowd, while CFOs with a lot of experience can be a good deal older and experienced. The fact that you may not know what exactly to look for makes the concept of finding a good fractional CFO a little confusing.
Some qualities to look for in a good fractional CFO include:
- Familiar with tax and financial regulations in the state of California
- Is well-connected and can connect you with accountants, lawyers, and other financial professionals
- Has industry-specific knowledge related to your field
- Has experience working with startups and new companies
- Can make connections with investors and potential sources of funding
Some of the most popular means by which you can find a fractional CFO are:
While your first instinct might be to find one online, you shouldn’t overlook how effective networking in the real world can be. You will be surprised by the number of people who know great Fractional CFOs or can put you in contact with people who do.
Fractional CFO Service Providers
There are a number of fractional Co service providers who exist specifically for companies with needs similar to yours. You can often find them via online directories or by joining business associations such as the Los Angeles Chamber of Commerce.
LinkedIn has also become a fantastic place as it allows you to cut out the middleman and find fractional CFOs directly. A simple search should yield a number of people that you can connect with and broach the subject of a fractional CFO arrangement. This personal approach can be highly effective.
The Benefits of Hiring a Fractional CFO
Yes, cost-effectiveness is the most obvious advantage of working, but there are a lot of other great benefits that you have access to.
Flexibility: By not employing one as a full-time employee, you have the freedom to make use of their services only when you actually need them. This is because, as a new company, you may find that it’s not often that you require high-level financial analysis and inputs.
Objectivity: It can be really beneficial to have an unbiased 3rd party who is not influenced by corporate politics that a full-time employee would be liable to experience.
Having your financial advice and assistance come in from outside can greatly help in identifying areas of improvement and pointing out issues that regular employees may be hesitant to point out, depending on the work culture.
Expertise: This aspect is also one of the most obvious benefits that hiring a fractional CFO brings. You are essentially receiving financial advice that is on the same level that companies 100 times your size are also getting. The only difference is that the bigger companies can afford to keep them full-time.
Finding a good fractional CFO in Los Angeles has become something of a necessity if you are a new company. Sure, you might not be able to afford one full-time, but that doesn’t really matter just yet. The highly competitive nature of business in the city means that you want to be able to take advantage of anything that can increase your odds of surviving and thriving.
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