Fractional CFOs: Keep your part-time financial experts invested

Financial leadership looks different for every business. Some companies operate with lean teams focused on core metrics like sales and expenses.

Others maintain dedicated finance departments but need to bring in specialist expertise for specific projects or growth phases.

The bottom line is, whatever your size or sector, strong financial leadership matters. 

That's where Chief Financial Officers (CFOs) or Financial Directors (FDs) can make their mark, offering the dedicated financial expertise which so often proves a prerequisite to growth. 

What's a fractional CFO?

Not every organisation needs full-time CFO-level expertise, though. Fractional CFOs – who work on a contractual or project basis – are in massive demand right now. They can deliver strategic value exactly when needed.

But making these arrangements stick? Now that's not always straightforward.

We’ll unravel the role of the fractional CFO and discuss how businesses can build excellent, continuous relationships with them despite some challenges. 

The meteoric rise (and burnout) of the CFO

The 1990s tech boom minted a new wave of CFOs fluent in a wider range of tasks than ever – from managing investment rounds and M&As to ESG and even cybersecurity. 

Since then, the role has gone into overdrive. 82% of CFOs say their remit has expanded dramatically in the last five years. 

Gina Gutzeit, senior managing director at FTI Consulting, described this snowballing of responsibilities to Global Finance:

“When I started years ago, if you were a CFO, you were primarily focused on accounting and debt structure. Now, CFOs have a broader and more prominent role within the C-suite, carrying significantly more responsibilities.”

Rather than sticking it out in an increasingly all-consuming role, many CFOs are choosing to work differently – splitting their time fractionally across multiple businesses. 

Demand for fractional CFOs has surged 103% in recent years as companies seek top-tier finance talent without long-term commitment.

With rocketing demand, stress, and burnout, attrition has struck an all-time high, with 61% of CFOs leaving their companies within five years, jumping to 68% in larger businesses.  

Losing a CFO suddenly can be a huge issue. Their deep understanding of your finances, strategy and operations walks out the door with them – potentially disastrous if you’re heading towards a major event like an investment round or M&A.

This is exactly why companies are looking at smarter ways to structure fractional CFO relationships.

Unlike bonuses or higher rates, equity creates lasting alignment without forcing anyone into the box of traditional employment.

Why equity works for fractional CFOs

When a CFO works with multiple companies, the risk is always that your projects slip down their priority list. Even with the best intentions, their attention naturally flows to wherever they feel most invested. 

When a company hits a breaking point and pressure is at its peak, the risk of attrition surges – right when a CFO is needed most. 

Equity completely changes this dynamic. Unlike standard pay and bonuses, which reward short-term input, equity offers a genuine stake in the business’s success and continuity. 

This aligns with what motivates senior finance leaders today. Data suggests that 60% of CFOs say the quality of projects and teams drives their decisions to stay or leave a company, while 45% seek growth prospects. Only a third even list compensation among their top three factors.

Instead many want to impact strategy and see their work make a difference over time. 

Equity enables this while maintaining the flexibility of a fractional role. It also solves a common tension in fractional arrangements – the balance between independence and commitment.

With well-structured equity rewards, your CFO (and indeed any other part-time advisors) can work with other companies while still having compelling reasons to prioritise your long-term success.

So how can businesses build effective equity strategies that suit fractional CFOs?

Growth shares and unapproved options both work brilliantly. Let's look at each option in depth and explain why they suit fractional arrangements.

Growth shares: Building long-term partnerships

Growth shares are a special class of shares that only benefit from increases in company value above a set threshold. This 'hurdle rate' is typically set at a small premium above your company's current value.

For example, if your company's shares are currently valued at £1 each, you might set the hurdle at £1.10. The growth shares only gain value once the share price exceeds that threshold.

This means your existing shareholders keep all the value they've built so far, while the growth shares incentivise your CFO to help drive future growth.

One of the key benefits of growth shares is that recipients typically pay only the nominal value to acquire them, which is usually a fraction of their potential future value.

Moreover, recipients don't need to pay Income Tax when they receive growth shares – they only pay Capital Gains Tax on any profits when they eventually sell. This makes them particularly tax-efficient compared to other forms of equity.

Why growth shares suit fractional CFOs

Growth shares are perfect for fractional CFOs for several reasons. 

First, they’re synergistic with the advisory nature of the role. Fractional CFOs typically bring expertise to help you scale or transform the business – exactly what growth shares are designed to reward.

You can also attach specific conditions to growth shares. Maybe you want your CFO to stick around until a funding round is complete, or until you've hit certain revenue targets. 

Conditions can be tied to specific projects or milestones, making them ideal for fractional arrangements where the scope of work is often clearly defined.

Growth shares’ flexibility extends to vesting schedules too. You might structure them to vest gradually as targets are met, or all at once when a specific goal is achieved. 

Unapproved options: Maximum flexibility

While growth shares work optimally for CFOs in many cases, unapproved share options offer ultimate flexibility despite not matching growth shares in tax efficiency.

They give someone the right to buy shares in your company at a pre-agreed price (the 'exercise price') at some point in the future, typically vesting over time or when specific conditions are met. 

Once vested, the holder can choose when to exercise them (buy the shares) within your set restrictions. The profit comes from the difference between the exercise price and the shares' worth when sold.

By the way, the term 'unapproved' just means they don't qualify for special tax treatment like EMI options – it doesn't reflect on their legitimacy or value.

The tax treatment is different from growth shares, though. Holders usually pay Income Tax when they exercise the options, based on the difference between what they pay for the shares and their current market value.

Why unapproved options suit fractional CFOs

Unapproved options offer enormous flexibility in how you structure the arrangement. 

You can set any exercise price you want, create custom vesting schedules, and add whatever conditions make sense for your situation. This works very well for fractional CFOs because you can precisely design the terms to match their role. 

Just be mindful when setting the exercise price. Too low and the CFO may face an immediate tax liability, as the difference between the exercise price and market value can be treated as income.

Too high and they may never exercise the options if the potential upside doesn't justify the cost.

The sweet spot is an exercise price that is fair, tax-efficient, and motivating for both sides. If you're unsure, it's worth getting professional advice to make sure you strike the right balance.

Maybe you want options to vest based on specific deliverables rather than time served. Or perhaps you want to ensure they can only exercise their options during certain windows, such as a funding round or exit event.

They're also excellent if your CFO is working with multiple companies. Unlike growth shares, which make someone a shareholder immediately, options let you defer that status until a more appropriate time.

Putting it all together

As we’ve seen, both growth shares and unapproved options can create a link between a business’s goals and the CFO. Each has strengths, and choosing between them depends on your situation.

No matter which you choose, managing equity is straightforward with Vestd. 

• For growth shares, our platform guides you through setting the right hurdle rate and creating vesting conditions that work for part-time roles. 
• For unapproved options, we make it simple to set exercise prices and design custom schedules that match your needs.

Vestd doesn’t just save time and hassle – it makes equity rewards feel rewarding. Your CFO will have access to a personalised dashboard where they can view and track their vesting shares or options, bringing their ownership to life.

Want to explore what might work best for your situation? Book a free chat with our specialists. We've helped hundreds of companies reward their team members – we'd love to help you too.