Are you thinking about hiring a fractional CFO? If so, have you thought about the questions you will ask them? Let’s start with the easy ones. Here are the first three right after exchanging pleasantries:
- What is a fractional CFO, and why do I need one?
- What work do you do for similar businesses, and how can you help mine?
- How will this work? What will I do, and what will you do?
Those three questions could take a full hour for your prospective fractional CFO to answer. But we’re not finished yet.
My 10 Favorite Interview Questions for a Fractional CFO
I’m sure you have figured this out by now. I’m considered one of the pioneers in the part-time CFO industry. I pulled off my first consulting project while working full-time in the early 1990s. I loved it. Nearly ten years later, I was doing this work full-time. Accordingly, I understand this niche consulting space very well.
The ten questions below are not comprehensive, but they are close. You don’t have to ask all ten. Instead, pick the most relevant ones. After this list, I’ll give you the answers the fractional CFO should provide.
- What is your background? Please include your W-2 background.
- How long have you been serving other businesses?
- Tell me a success story or two. Be transparent – tell me about a business that didn’t work out well for you.
- What is the first thing you will do for me?
- Will you come to my office, or do you work offline?
- How well will my accounting and reporting improve?
- Can you help me with my cash flow issues and how?
- I’m thinking about implementing EOS in my business. Have you heard of them?
- What do you charge?
- When can you start?
The 10 Questions Answered
I will answer the ten questions as though you were asking them to me. After each answer, I’ll provide my reasoning for each response and share any other insights on the questions. If you prefer to listen, I’ve included my audio responses below.
What is your background? Please include your W-2 background.
Answer: I passed the CPA exam while working for KPMG. I had a short stint at RMS McGladrey before accepting an internal audit management position in my hometown in central Missouri. My title changed about annually during my time with that family-owned organization, comprised of a portfolio of businesses in manufacturing, retail, real estate, and entertainment. I became more than fluent and skilled in complex debt financing, M&A, DRP project management, internal auditing, FP&A, and managing an accounting team of nearly 40 people.
I started my consulting practice in 2001 and did another reboot in 2004. During this time period, I’ve been serving clients in business sectors such as retail, eCommerce, IT firms, consulting firms, vehicle leasing, dealerships, food contractors, QSRs, fast-casual dining, small manufacturing, agriculture, and health care.
My work includes PRA (planning, reporting, and analysis), complex LOC financing, divestitures, acquisitions, data analytics, and simple strategy formulation in entrepreneurial restarts.
Insights: This is the most important question to ask. Feel free to stop the candidate with follow-up questions. You are looking for a unique fit for your greatest issues needing attention.
How long have you been serving other businesses?
Answer: I’ve been in the service business since 1989, when I started working at KPMG. Even during my W-2 tenure, I was serving manufacturing, retail, and real estate business in various financial leadership positions.
I started my practice in 2001, and I’ve served about 130 different CEOs across various industries. Several of my clients have been or are number one in the niches they serve, or they were the first to market in their categories.
Insights: If the CFO is new in their practice, make sure they have deep experience in their W-2 career. Personally, I’d want a CFO with about ten years of experience as either a VP of Finance, Controller, or CFO. Those skills should carry over to your greatest needs. However, if you are a manufacturer, and their only experience is in retail, that will not be a good fit.
Tell me a success story or two. Be transparent – tell me about a business that didn’t work out well for you.
Answer: Because of confidentiality and privacy, I’m reluctant to share success stories. Instead, I’ll connect you with Scott, Shawn, Joe, Arlan, Brian, and a few others I’ve worked for in the past. They’ll share those successes. But please ask them what they didn’t or don’t like about my work. I’m impatient. I can be pushy at times. I want you to know my warts.
I will, however, give you a situation that didn’t work out too well. I’ve written about it, and I’ll pass along the link when I return to the office.
I don’t take on a client unless I know that I could become the CEO of that company for one year without sales, profits, enterprise value, and the company’s culture dropping. After about one year with a new client, I asked to step away because I couldn’t wrap my arms around the business model. The problem was my lack of understanding of the industry.
The company I’m referring to is a vineyard and winery in the state of Washington. The family loved my work. The banker had more confidence in the numbers than ever before. He was ready to fly me out to Washington to meet with his other customers in the agriculture sector. I found the winery’s contract model easy to grasp, which comprised about 70% of its revenue. It’s the other 30% that was distributed to grocery stores and restaurants that I didn’t understand.
I wanted my client to have a CFO who understood the unique marketing and B2B sales challenges I didn’t understand. Thankfully, I knew a CFO who served many vineyards and wineries in Napa Valley. He was thankful for the referral.
My client wasn’t happy, but I was convinced I was not the best solution for them. They didn’t see it like this, but as a financial leader, I was holding them back even though the money was great.
Insights: The reason I want you to ask this question is that we’re trying to figure out if this CFO is the best solution to your problems. Because of my age, I have experience on my side, which means I have many stories that probably overlap with my prospective CEO’s problems and issues. I like the second part of this question because you can get a feel for the CFO’s humility in their response.
What is the first thing you will do for me?
Answer: I do a business 360 as part of my due diligence on you. A small part of my findings includes a one-page Force Field Analysis (I show them an example from my tablet). The second page of my output includes a simple project plan (I show them an example). Accordingly, I’ll start on the work requiring the most attention first. It’s not a cookie-cutter approach. The roadmap is tailored to your unique needs and biggest frustrations that need to be fixed or improved immediately.
Insights: Two of my rules of working with CEOs is to know the answer before the question is asked. The second is to know the question before it’s ever asked. That’s why I always have a few samples of the 360 business analysis and past roadmaps to share from my tablet. We also go online to look at some financial models from the BI tool I use for planning, reporting, and analysis. My biggest insight is to ask for tangible examples of the work the CFO will be doing for you to validate they can deliver for you.
Will you come to my office, or do you work offline?
Answer: Since you are local, I’d prefer to come to your office weekly during the first three months of our engagement. After that, we might pair that back to monthly. If you travel a lot, I’m good with Zoom calls.
I’m not sure I’ve mentioned this, but most clients are scattered across the U.S. That means my work is 100% remote except for the occasional trips I’ll make to those clients at my request at my expense.
However, I prefer being at your office because I want to ‘feel’ as though I’m part of your team. I also want to observe your culture and business philosophy firsthand.
Insights: COVID changed the way many consultants work. However, if the CFO says they prefer working at your office, that’s a good thing. That means they are going to be engaged and that they care not just about you but the business as a whole.
How well will my accounting and reporting improve?
Answer: As a former corporate controller, I take entrepreneurial accounting seriously. After I get started, I’ll teach you and your team The Four Roles of Accounting™, The Smart Close™, and several other frameworks you’ll have access to that will lead to timely, accurate, and complete accounting data. I’ve written extensively on this topic, and I will find my favorite posts for you to read when I get back to the office.
Insights: Be prepared to share your accounting frustrations. However, be aware that not all CFOs have accounting backgrounds. If your need is more accounting centric, ensure they have the qualifications to guarantee what I’ve mentioned above about accuracy, timeliness, and completeness.
Can you help me with my cash flow issues and how?
Answer: Let’s go to my website and bookmark three posts I’ve done on this topic.
Accordingly, the answer is “Absolutely.” There are two prongs to cash flow improvement. One prong is upstream cash flow, and I define that as your business model. After our first week, I will evaluate your business model, looking for problem areas leading to poor operating cash flow. The other prong is downstream or administrative cash flow. This is about managing the balance sheet of your business, and you’ll have access to my online rolling cash flow forecast, which we’ll update weekly.
This discipline will also tightly integrate with your LOC. I’ll ensure we’re using it properly and that our LOC limit is adequate for any forecasted 12-month period.
How does all of this sound to you? Do you have any questions? Those three blog posts will be helpful in explaining my unique process.
Insights: My best advice is to ask for examples. I’ve met numerous CFOs who are good at talking about cash flow, but their execution on easing cash flow pains is poor. That’s why I’ve written extensively on this topic, and I’m always prepared to show the prospective client real-world examples of what I’m talking about.
I’m thinking about implementing EOS in my business. Have you heard of them?
Answer: Absolutely. When we have time, I even have a Gino Wickman story I learned from a friend of his at Strategic Coach.
Please don’t construe this as a criticism, but when we get started, I’ll have two suggestions on how you can improve your Level 10 Meeting™. Also, I have three serious concerns about their approved vendor for the scorecard. It’s okay, but it’s excluding three tools I’ll teach you in reading performance indicators and how to implement improvement projects in your organization.
Once we start our process, I’m anxious to learn how EOS is working for you, and I’m looking forward to meeting the coach.
Insights: The answer above is the answer I give to non-clients too. EOS is good; it’s not great. The entire framework consists of smart practices that have been around for years, and they have been masterfully bundled and packaged with catchy names. I’m more impressed with their marketing and delivery channel than the product. I don’t dislike it. It’s better than having no management cadence whatsoever.
What do you charge?
Answer: Great question. I’ll send you a link to my pricing page, which explains my thought process on this topic. The short answer is, “It depends.” Earlier, you asked me how the CFO process works. It begins with due diligence on my part, which includes doing a simple 360 on your business model, your leadership team, and your financials. We also do a simple HLP, which I explained earlier. Once that process is completed, I’ll provide my pricing for the first three months and the shift to maintenance mode starting in month number four.
If you are curious, I’ve served clients for whom I’m paid $1,250 monthly, but that’s a once-a-month coaching call with the client. At the other extreme, I’ve been paid as much as $9,500 monthly, but those clients are bigger with greater needs.
Accordingly, I tailor the pricing for your specific situation. I’m a believer in 10x. That is, you should easily be able to 10x the amount you pay me. But how you do that will be up to you and your team.
Insights: I love answering this question even though I’m rarely asked about it. It’s usually me that needs to bring up pricing before we get started. I left out the part about being able to quit the service at will (on your part, not mine). Additionally, when I start a new client, I bill the first month in arrears. After each of the first three weeks, I ask the client, “Are you still happy with the relationship? Do you want to back out? If so, you owe me nothing.” Those questions come from a state of confidence. No one has ever backed out. To put this another way, there are no contracts in this relationship.
When can you start?
Answer: Can you give me 30 days to wrap up two other projects that are in the startup phase of my client base? I could possibly start now, but I fear that would be a disservice to you. When I start, I want to hit the ground hard and move fast in our startup phase with you and your leadership team. Will that work for you?
Insights: I realize you want your CFO to start right now. Waiting is good because it means they are busy and in demand. I’m not raising the red flag if the CFO says they can start immediately. If they can, ask them why they can start right away.
The Second-Biggest Decision You’ll Ever Make
One of my favorite clients has told me that I was the best decision they ever made. I don’t think they were referring to me. I think he meant, “Hiring a part-time CFO was the biggest and best decision he ever made.”
Who am I to disagree with him? However, I suggest starting the business was the biggest decision he ever made. Hiring his first, second, and third managers came next. Then I’d toss in the decision to hire a CFO as the next-biggest decision he ever made.
Regardless, hiring your first fractional or part-time CFO is a big deal. And you want to make it a smart hire. Start with my questions, and definitely swap out the questions for ones you like better.
If you liked this discussion, here are some additional posts to augment the questions above: