Fractional CFO vs Full-Time CFO: When to hire based on fully loaded costs

Fractional CFO vs Full-Time: A Fully Loaded Cost Analysis

Comparing the cost of a fractional CFO versus a full-time hire requires looking beyond the base salary or monthly retainer. To make a sound financial decision, you must understand the fully loaded cost, a concept that provides the true picture of your cash and equity burn. For most startups from Pre-Seed to Series B, this analysis reveals a stark difference in capital efficiency and is essential for protecting your runway.

The fully loaded cost tells the real story. For a full-time CFO at a Series A or B stage company, this represents a significant financial commitment. Based on 2023 data from Betts Recruiting, a base salary is typically between $225k and $300k+. On top of this, a performance bonus of 20-40% of base is standard. The non-cash cost is equally substantial. An equity grant often ranges from 0.75% to 2.0% of the company, vesting over four years. This equity dilution is a real, albeit non-cash, cost to founders and existing investors.

However, the cash expenses do not stop there. The hidden costs of a full-time hire add up quickly. These include employer-paid payroll taxes, which are around 10% in the United States, and comprehensive employee benefits packages that can cost about $20k per year. Finally, one-time recruiting fees from a search firm typically run 20-30% of the base salary. When you add all these components, the fully loaded annual cash cost for a full-time CFO lands between $350k and $450k+, excluding the significant cost of equity.

In contrast, a fractional CFO operates on a simpler, more predictable cost model. A monthly retainer can range from $5k for basic oversight to $15k+ for deep operational involvement. For specific project work, such as fundraising support or system implementation, hourly rates typically fall between $250 and $500+. The practical consequence tends to be a fully loaded annual cash cost of around $60k to $180k. This model has no associated payroll taxes, benefits, bonuses, or equity costs, making it a far more capital-efficient option for startups where runway is paramount.

To illustrate the difference, consider a Series A SaaS company in its first year with a new finance leader. A full-time CFO with a $275,000 base salary could have a total year-one cash cost of approximately $473,750 after including a 30% bonus, benefits, payroll taxes, and a 25% recruiting fee. This also comes with 1.0% in equity. A high-involvement fractional CFO at $15,000 per month costs a predictable $180,000 in cash for the year, with zero equity dilution. The cash savings are substantial and can be reinvested into product development or growth.

The Tipping Point: When to Move From Fractional to a Full-Time CFO

The decision to transition from a fractional to a full-time CFO is not about hitting a single revenue number. It’s a strategic choice driven by escalating complexity, organizational scale, and future financing or exit plans. Using a framework of 'tipping points' helps prevent costly timing mistakes, ensuring you hire a full-time leader precisely when the business requires one, not before.

For most companies below $5M in revenue or with fewer than 50 employees, a fractional CFO is highly suitable. In this phase, founders are typically managing day-to-day finances with a bookkeeper and accounting software like QuickBooks or Xero. The primary need is for strategic oversight, financial modeling for fundraising, and establishing sound reporting processes. A part-time finance leader can effectively manage these responsibilities.

The transition point arrives when the company begins to outgrow this model. A scenario we repeatedly see is when the scope of work shifts from periodic strategic guidance to daily operational management. This is where the tipping point framework becomes crucial for identifying the right moment to hire.

The Tipping Point Triggers

1. Operational Complexity Increases: Your financial operations become too intricate for a part-time resource to manage effectively. This trigger often includes managing multi-state or international payroll and sales tax nexus, a common challenge for scaling US companies. It can also involve implementing more sophisticated systems beyond QuickBooks, like an ERP, or developing complex pricing models. For industries like e-commerce or B2C SaaS with high transaction volumes, reconciliation becomes a major task. For biotech or deeptech startups, meticulously tracking R&D expenses for grant reporting and tax credits can become a full-time job in itself.
2. Team and Scale Velocity Accelerates: The sheer size and growth rate of the organization demand a dedicated internal leader. The key trigger is often scaling past 75-100 employees. At this size, a CFO is not just a finance head but a key executive involved in HR, legal, and operational scaling. They must build and manage a growing internal finance team, including controllers and analysts, a task that is beyond the scope of a fractional consultant.
3. A Strategic Imperative Looms: The company is heading toward a major strategic event that requires intensive, dedicated preparation. The most common trigger is being 18-24 months away from a potential IPO or a significant debt financing round. These events require a full-time executive to manage auditor relationships, build public-company-ready reporting processes, and navigate exhaustive due diligence. For US companies, this means deep familiarity with US GAAP; for UK companies, it requires knowledge of FRS 102 or IFRS. A fractional resource cannot provide the dedicated bandwidth these events demand.

Waiting too long to hire can leave you unprepared for these milestones. Hiring too early drains precious runway that could be invested in product or growth. The key is recognizing these signals before the need becomes a crisis.

Investor Signaling: What Your Finance Hire Says About Your Startup

Your choice of financial leadership sends a powerful message to investors and board members about your operational maturity and financial discipline. This signal changes depending on your startup's stage. Understanding how your decision is perceived can prevent credibility gaps during critical fundraising efforts.

Early-Stage Signaling (Pre-Seed and Series A)

At the Pre-Seed and Series A stages, hiring a fractional CFO is often viewed as a smart, capital-efficient decision. At this stage, investors prioritize the quality of financial outputs over the CFO's title. They want to see a credible, well-articulated financial model, clean historicals, and a clear understanding of key metrics like burn rate and unit economics. A seasoned fractional CFO who produces reliable data and tells a compelling financial story is a significant asset. Bringing on a full-time CFO with a $400k+ fully loaded cost can be a red flag, signaling a potential lack of focus on capital efficiency. The lesson that emerges across cases we see is that investors fund product and market growth, not a premature C-suite.

Growth-Stage Signaling (Series B and Beyond)

As a company matures toward a Series B round and beyond, the expectation shifts. At this stage, hiring a full-time CFO signals that the company is building the internal infrastructure required for scale. It shows the board and new investors that you are professionalizing the organization and preparing for greater complexity. A company approaching a $10M ARR milestone or 100 employees without a full-time finance leader may be perceived as operationally immature. The absence of a dedicated executive can raise questions about internal controls, risk management, and the ability to accurately forecast and manage a larger budget.

Ultimately, the choice signals your priorities. Early on, the priority is lean operations and leveraging expert guidance efficiently. A fractional CFO aligns perfectly with this. Later, the priority becomes building a durable, scalable organization with dedicated executive leadership. A full-time CFO demonstrates this commitment.

A Practical Framework for Your Decision

Making the right financial leadership choice boils down to a clear-eyed assessment of cost, complexity, and strategic timing. There is no single right answer, but there is a right answer for your company's current stage. To make your decision, focus on these three questions:

1. What is the true, all-in cost? Go beyond the monthly retainer or base salary. Calculate the fully loaded annual cash cost, including bonuses, benefits, payroll taxes, and recruiting fees. For a full-time hire, this is often $350k-$450k+, compared to $60k-$180k for a fractional CFO. Do not forget to factor in the significant cost of equity dilution for a full-time executive.
2. Have we hit a tipping point? Evaluate your business against the key triggers. Are you scaling past 75-100 employees? Is your operational complexity, such as international operations or ERP implementation, exceeding the capacity of a part-time resource? Are you 18-24 months from a major strategic event like an IPO? If the answer is no, a fractional model is likely still the most efficient choice.
3. What message are we sending? At the early stages (Pre-Seed/Series A), a fractional CFO signals capital efficiency. For later stages (Series B+), a full-time CFO signals operational maturity and readiness for scale. Align your choice with the story you need to tell investors and your board. When you are ready to hire, you can use our onboarding plan for first finance leaders to prepare.

What founders find actually works is viewing this not as a permanent decision, but as a stage-appropriate one. Use a fractional CFO to build a strong financial foundation, and hire a full-time leader only when the scale and complexity of the business truly demand it. You can find more resources in the hub on building your finance team.