"We're Too Small for a CFO"
The revenue threshold myth and what actually determines whether you need CFO support.
Key Takeaways
- •Revenue is a poor proxy for CFO need—complexity and growth matter more
- •A $5M complex business often needs CFO help more than a $20M simple one
- •Fractional CFOs scale to your size—you're not hiring a full-time executive
- •The cost of poor financial decisions dwarfs the cost of CFO support
"We're only at $4 million. We're too small for a CFO."
We hear this constantly. Business owners assume there's some revenue threshold—$10M, $20M, maybe $50M—at which you become "big enough" for CFO support. Below that line, you just make do.
This thinking misunderstands what fractional CFOs do and what drives the need for financial leadership. Size is almost irrelevant. What matters is complexity, growth trajectory, and the decisions you need to make.
The Fractional Model Changes Everything
When business owners say "we're too small for a CFO," they're often picturing a $350,000/year executive. A fractional CFO costs $36,000-$150,000 annually and works 5-20 hours per week. The economics are completely different.
Why Revenue Is the Wrong Measure
Revenue tells you almost nothing about whether you need financial leadership. Consider these contrasts:
Simple $15M Business
A professional services firm with 15 employees, one office, simple fee-for-service revenue, and stable 20% margins. No inventory, no complex contracts, no major capital needs.
CFO support is nice-to-have, not essential
Complex $4M Business
A product company with manufacturing, wholesale and DTC channels, inventory management, customer concentration risk, thin margins that swing with raw material costs, and plans to raise capital.
Desperately needs CFO support
The $4M business is making harder financial decisions every month than the $15M business makes all year. Size doesn't create the need for financial leadership—complexity and consequence do.
What Actually Determines CFO Need
Instead of asking "are we big enough?", ask these questions:
How Complex Is Your Business Model?
Multiple revenue streams? Inventory or manufacturing? Complex customer contracts? Multi-entity structure? Seasonality? These complexity drivers create financial management challenges regardless of revenue.
How Fast Are You Growing?
A $3M company growing 50% per year has very different needs than a $10M company growing 5%. Rapid growth strains cash, requires forecasting, and demands better decision-making infrastructure.
What Decisions Are You Facing?
Major hiring decisions? Pricing changes? Market expansion? New product launches? Capital raises? Each of these benefits from rigorous financial analysis. The bigger the decision, the more value a CFO provides.
How Much Is at Stake?
A bad decision at $4M revenue might cost $200K. If CFO support costs $60K/year and prevents one such mistake, it pays for itself three times over. Scale the stakes to your situation— what's the cost of getting it wrong?
The Math Works at Smaller Scale
Let's be concrete about costs and value for smaller businesses:
Example: $5M Revenue Company
A fractional CFO who improves margins by 1.5 points, identifies $100K in unnecessary costs, or helps you avoid one six-figure mistake creates value exceeding their cost. At smaller scales, they work fewer hours at lower monthly cost—the economics still work.
Common Value Sources
- Improved pricing strategy
- Better cash management
- Cost reduction identification
- Smarter hiring decisions
- Better vendor negotiations
- Avoided bad decisions
Common Cost Leaks Prevented
- Hiring too fast for revenue
- Wrong pricing for market
- Poor vendor terms accepted
- Cash surprises from bad forecasting
- Tax inefficiencies
- Bad capital structure choices
When "Too Small" Is Actually Valid
There are situations where size genuinely means you're not ready for CFO support:
Pre-Revenue or Very Early Stage
If you haven't launched or are just getting started, focus on product-market fit first. CFO support adds value when you have a business to optimize—not when you're still figuring out if you have a viable business at all.
No Decision-Making Need
If your business is stable, you're not making major decisions, and you don't plan significant changes, you may not need strategic financial guidance. A good bookkeeper might suffice.
Books Are a Mess
If you don't have clean, accurate books, fix that first. A CFO needs reliable data to work with. Hiring a CFO when your books are chaos means paying premium rates for someone to do bookkeeping work.
Can't Afford Minimum Engagement
If $2,000-$3,000/month for basic CFO support would genuinely strain your cash flow, you may need to focus on fundamentals first. That said, consider what's causing the cash strain— sometimes that's exactly what a CFO helps solve.
What "Small" Companies Actually Experience
Here's what happens when "small" companies engage CFO support:
$4M Manufacturing Company
Owner thought he was "too small" but was losing money on 30% of his product line without knowing it. CFO analysis revealed the hidden losers. Exiting those products improved margins by 8 points.
Value created: ~$320K annually
$6M Professional Services Firm
Partners were making decisions by committee with no financial framework. CFO helped establish decision criteria for new hires, pricing, and investments. Profitability improved, but more importantly, partners stopped fighting about money.
Value created: Partnership harmony + 15% profit improvement
$3.5M SaaS Company
Founders wanted to raise Series A but couldn't explain their unit economics. CFO built the models, identified the metrics story, and supported the fundraise. Closed $4M round.
Value created: Successful $4M fundraise
How to Know If You're Ready
Ask yourself these questions:
- Do you face financial decisions that would benefit from rigorous analysis? (Hiring, pricing, expansion, capital)
- Is cash flow unpredictable or stressful, even if the business is profitable?
- Do you spend significant time on financial management that could go toward running the business?
- Are you planning for growth, exit, or major change in the next 1-3 years?
- Have you made a significant financial mistake in the last year that better analysis might have prevented?
If you answered "yes" to two or more, size probably isn't what's holding you back. You might benefit from a conversation with a fractional CFO—even if just to confirm that you're not ready yet.
Learn More
Return to our main guide: Do You Really Need a Fractional CFO?
Frequently Asked Questions
What's the minimum revenue for a fractional CFO?
There's no fixed minimum. We've seen $2M businesses benefit tremendously from CFO support because they were preparing for growth, and $20M businesses that didn't need it because they were simple and stable. That said, most fractional CFO engagements happen in the $3M-$30M range where the complexity justifies the investment but a full-time CFO isn't warranted.
How do I know if my business is complex enough?
Complexity indicators include: multiple revenue streams or product lines, recurring vs. one-time revenue mix, multiple locations or entities, significant accounts receivable or inventory, complex customer contracts, seasonality, multiple major cost centers, or regulatory requirements. If you have 3+ of these factors, you have meaningful complexity.
Can a fractional CFO work with very small businesses?
Yes, but the scope adjusts. A $1.5M business might only need 5-8 hours per month of CFO time—enough for monthly review, cash forecasting, and strategic guidance. The cost might be $1,500-$2,500/month. Whether that's worthwhile depends on your specific challenges and growth ambitions.
What should small businesses prioritize before getting a CFO?
Get your books clean first. Hire a competent bookkeeper who can deliver accurate monthly financials within 10-15 days of month end. A CFO needs reliable data to work with. Once you have that foundation, CFO support becomes much more valuable.
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Not Sure If You're Ready?
We're happy to have an honest conversation about whether CFO support makes sense for your stage. No obligation, no pressure.
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