What’s in a name? Key Differences between Interim, Fractional and Part-time CFOs

The dynamism of the modern CFO is particularly attractive to Private Equity firms and their portfolio companies, as these agile financial gurus can ensure visions for growth and transformation are implemented at the operations level. As CFOs have become increasingly crucial to the success of these portfolio companies, private equity investors have also turned to a range of CFO options beyond the traditional, full-time C-suite executive. These alternatives, known as Interim, Fractional and Part-Time CFOs, each offer distinct advantages to private equity investors.

Interim CFO

Job Description

Demand for Interim CFOs has witnessed extraordinary growth in recent years.  Executive search firms are reporting growth in requests for interim CFOs upwards of 100% in the 2022-2023 period and this trend is on track to continue through 2024.

Much of this demand is driven by private equity firms. To understand why, consider the advantages an interim CFO brings to the table. By definition, an interim CFO is contracted for a limited period of time, and so needs to hit the ground running. A good interim CFO, therefore, is someone who has deep financial analysis experience and a sophisticated set of skills who is ready to jump into a company with a suite of tools at hand to achieve the company’s goals. These are exactly the capabilities that private equity companies need to rapidly transform a portfolio company during the typical 3-5 year holding period. One of the advantages of an experienced interim CFO is their ability to understand and implement the investors’ strategic vision from day one.

Time and cost-effectiveness are the other major factors behind private equity’s acute interest in top interim CFO talent. Smaller portfolio companies with lower EBITDA might not be able to afford a permanent CFO. But in critical moments such as an audit, a budget crisis, or an upcoming exit, an interim CFO can provide essential support without compromising the bottom line. Due to the wide range of companies that private equity firms often have in their portfolio at a given time, bringing in an agile interim CFO who can quickly get to the heart of a portco’s specific needs is key to success. These investors have increasingly relied on specialized executive search firms like ECA to introduce top-notch CFOs at a moment’s notice. At ECA, we have a proven track record of quickly placing top 1% on-demand finance talent for PE firms and portcos across industries.

Typical Background

Because these individuals are usually hired to parachute into a company and perform all the responsibilities of a traditional CFO while achieving a specific, short-term goal, interim CFOs can be thought of as finance “special forces.” Usually, they have a myriad of experiences within strategic financial management and across industries. The idea is that, like Delta Force, this isn’t their first rodeo: not only do they know not to bring a knife to a gunfight but can also list from memory the top weapons for any battle. Or, in financial terms, they know when to use a DCF versus an NPV.

Fractional CFO

Job Description

Unlike an interim CFO, a fractional CFO is not a full-time employee but only works a limited number of hours at the company. This employment arrangement can take two forms: either an agreed-upon number of hours per week or on an “as-needed” basis.

Private equity has also demonstrated significant interest in hiring fractional CFOs into their portfolio companies that need high-level financial analysis and planning but cannot afford a full-time CFO. Fractional CFOs are a great way to cut costs without sacrificing expertise. One of the advantages of employing a fractional rather than interim CFO is the potential for long-term growth for the company and a more cohesive rapport with the company team. A lower middle market business with 150 employees, for example, may not wish to add the cost of a full-time CFO to their operational costs. However, a revolving door of interim financial gurus could erode company morale and decrease efficiency in comparison to a fractional CFO who not only knows the company’s P&L inside and out but is committed to the long-term success of the business and is a great match with company culture. Because these CFOs are no strangers to the company, they also act as a vital source of information for private equity investors and a catalyst for implementing their vision.

Typical Background

While a smaller company may only need the services of a CFO once or twice a week, no company can afford to compromise on quality, especially when it comes to managing their finances. For this reason, fractional CFOs have similar backgrounds to traditional CFOs. They must be able to identify KPIs, ensure regulatory filings are properly submitted, handle audits, advise on financial strategy, communicate with investors and creditors, and play a key role in raising capital. There are cases, however, where a fractional CFO is hired to achieve a particular goal, such as implementing a private equity firm’s exit strategy. In this case, executive search firms can find fractional CFOs with area-specific expertise relevant to the PE firm’s target.

Part-Time CFO

Job Description
The terms “part-time CFO” and “fractional CFO” are often used interchangeably. Both refer to CFOs who work less than full-time, but there are some notable differences. For one, part-time CFOs do not typically work on an “as-needed” basis—this is limited to fractional CFOs. Moreover, part-time CFOs are almost always long-term employees, whereas fractional CFOs, as noted above, can be hired for a limited engagement, similar to interim CFOs.

Typical Background
Many part-time CFOs provide their expertise and services to multiple businesses. This means that part-time CFOs can be exposed to a vast array of business environments, a clear boon to any small to lower-middle market company. This has not escaped the notice of savvy private equity investors. After all, a part-time CFO is an affordable way to bolster a portfolio company by bringing in someone with a wide spectrum of experiences.

Which CFO type is right for your company?

Whether a part-time, fractional, or interim CFO is best for your portfolio company depends on several factors including size, industry, and type of business. Private equity investors should carefully consider the specific needs and circumstances of the business, including industry-specific financial patterns.

Interim CFOs are ideal for short-term, high-impact situations like audits, budget crises, or upcoming exits, offering deep financial expertise and the ability to quickly implement strategic visions.

For industries with cyclical financial demands, such as retail or agriculture, a fractional CFO might be the most suitable option. They can provide flexible, scalable support during peak financial periods while reducing costs during slower times. Fractional CFOs also offer a cost-effective solution for companies needing ongoing high-level financial guidance without the expense of a full-time executive.

Part-time CFOs offer similar benefits to fractional CFOs but typically work more regular hours and are suited for long-term engagements, which can be beneficial for industries with more consistent financial needs. Investors should assess whether they need short-term transformation, ongoing part-time support, or flexible expertise to match cyclical demands, and select the CFO option that best aligns with their strategic objectives for the portfolio company. To simplify your decision-making process, we’ve provided a chart below.

Still unsure? Connect with ECA’s finance experts to receive a free project scoping and intros to at least 3 candidates who are a perfect fit for your company’s Interim, Fractional, and Part-time CFO needs.