‘More satisfying than being an accountant’: behind the rise of the portfolio CFO

For many small­er busi­ness­es, a full-time chief finan­cial offi­cer (CFO) is a lux­u­ry they can­not afford. With even a small busi­ness expect­ed to pay between £80,000 and £150,000 for such a posi­tion, some are instead opt­ing for a port­fo­lio CFO arrange­ment, per­haps at a few thou­sand pounds a month, to ensure they get the right advice and direc­tion to man­age and grow their com­pa­nies. 

Such pro­fes­sion­als most often work free­lance or in a part-time posi­tion for a num­ber of busi­ness­es at the same time. 

David Gormer, a port­fo­lio finan­cial direc­tor who also runs Square Mile Account­ing, explains: “Com­pa­nies are becom­ing more savvy and con­sid­er­ing frac­tion­al C‑level hires. Not only do they avoid the high salaries of a full-time hire, but they also avoid dilu­tive effects of giv­ing away pre­cious share options, at least in the short term.”

Describ­ing his port­fo­lio role as more sat­is­fy­ing than “just being an accoun­tant”, he says the job includes being able to under­stand the busi­ness mod­el and sen­si­tiv­i­ties, map­ping these out so the chief exec­u­tive can under­stand the impact of any deci­sions he or she makes.

“You get to real­ly work with the busi­ness own­ers to help them make their dreams a real­i­ty. It enables me to have a greater impact as I’m involved in strate­gic con­ver­sa­tions at board lev­el and own the finance func­tion from end to end,” says Gormer.

“Invari­ably issues crop up on a week-to-week basis, such as fund­ing rounds, devis­ing staff incen­tive plans, dili­gence on poten­tial acqui­si­tions and so on. I take the pres­sure off the CEO as they don’t have to mud­dle through try­ing to do a DIY job.”

Work­ing with more than one com­pa­ny may, how­ev­er, throw up eth­i­cal chal­lenges. Gormer says: “Issues with port­fo­lio CFOs can include them also work­ing with com­peti­tors, hav­ing pro­pri­etary knowl­edge gleaned from pri­or engage­ments and con­flicts with poten­tial refer­rers of busi­ness, for exam­ple investors. 

“Also, occa­sion­al­ly, founders may work con­tra to minor­i­ty investors’ inter­ests, the very investors who may have referred the CFO to the role in the first place. Safe­guards include hir­ing reg­u­lat­ed pro­fes­sion­als, such as ICAEW [Insti­tute of Char­tered Accoun­tants in Eng­land and Wales] mem­bers who meet a strict eth­i­cal code.”

Confidence is key among a portfolio of skills 

John Miller, chief oper­at­ing offi­cer at Addi­tion, a Lon­don-based finan­cial ser­vices firm offer­ing out­sourced CFO ser­vices, believes the key areas a port­fo­lio CFO focus­es on are not too dis­sim­i­lar to a full-time one, includ­ing finan­cial man­age­ment and strate­gic plan­ning, fore­cast­ing and bud­get­ing, track­ing per­for­mance and key per­for­mance indi­ca­tors, and cash-flow man­age­ment.

But he says: “One of the key skills to pos­sess and pro­vide to your clients for the rela­tion­ship to be a suc­cess is con­fi­dence. When it comes to num­bers, the CFO’s analy­sis and guid­ance needs to be true and action­able for the client on the jour­ney to achiev­ing their goals. 

“How­ev­er, due to the port­fo­lio nature of the role, this is a chal­lenge. Dip­ping in and out of sev­er­al busi­ness­es means focus can­not be 100 per cent sole focus like the clients who live and breathe the busi­ness every wak­ing hour. 

“There­fore, it is about build­ing sol­id advice on the facts of the busi­ness and I have found that pro­vid­ing expe­ri­ence of how these events have played out in his­tor­i­cal sce­nar­ios real­ly helps clients under­stand ram­i­fi­ca­tions. 

“Fail­ing that, it is about draw­ing on the dili­gence dis­po­si­tion of a CFO to research, inves­ti­gate and pro­vide insight, as well as draw­ing on the net­work of con­tacts.”

Flexibility can encourage a diverse pool of entrants

While a port­fo­lio CFO can be a step­ping stone for some­one look­ing to build expe­ri­ence in a cho­sen niche, devel­op a track record or grow a net­work, it can also offer much-need­ed flex­i­bil­i­ty and free­dom, includ­ing work­ing from home, and pick­ing and choos­ing who to help.

Rachel Arm­strong, a finance busi­ness part­ner deliv­er­ing an out­sourced CFO func­tion at MAP, accoun­tants and advis­ers to the dig­i­tal cre­ative indus­try, cur­rent­ly has a port­fo­lio of 18 clients and explains it is impor­tant for her to work with busi­ness­es “who share my ethics and val­ues”.

“Empa­thy with the val­ues and goals of each indi­vid­ual busi­ness is cru­cial. Your idea of suc­cess may be dif­fer­ent from your client’s ideas and so it’s impor­tant to get aligned to help them most effec­tive­ly,” she says. 

“Ver­sa­til­i­ty and adapt­abil­i­ty to deal with chang­ing eco­nom­ic cli­mates and emerg­ing tech­nolo­gies is also impor­tant. Plus, entre­pre­neurs are always excit­ed about the next big project and often the finances are not top of their pri­or­i­ty list. Find­ing ways that engage dif­fer­ent per­son­al­i­ties with their finan­cial data is a skill in itself.” 

Giv­en the lack of women as full-time CFOs, Arm­strong also sug­gests this new way of oper­at­ing could help redress the imbal­ance. 

She adds: “The need to always be present to per­form the role has also made it less acces­si­ble, but with remote or vir­tu­al work­ing this will hope­ful­ly cre­ate a shift, mak­ing it a more acces­si­ble career path for women. Women are adapt­able, nat­ur­al prob­lem-solvers and mul­ti­taskers, and so I believe they are ide­al in the role of a CFO.”

Hav­ing spent two decades in a cor­po­rate career, Mar­tin Mel­lor has now been a port­fo­lio CFO for the past six years, tak­ing on the role with “the aim of doing things more on my terms than the way the cor­po­rate world worked”.

Cit­ing the vari­ety of his role as one of the things he loves most, Mel­lor offers this advice to any­one think­ing of doing the same: “Think about whether you want to spe­cialise either in a sec­tor or type of work, for exam­ple turn­around; I favour growth. Iden­ti­fy what your ide­al bal­ance is and where you think you will add val­ue.

“The role is about more than just say­ing ‘yes’; ensur­ing deci­sions are appro­pri­ate and effec­tive is a key ele­ment.”