Many grocers operate with small, tight teams that are experts at their day-to-day jobs — but this can leave the company shorthanded when a major project or expansion is just over the horizon. Companies facing these challenges may want to consider hiring third-party fractional CFOs (chief financial officers) on a part-time or single-project basis to add support and expertise without expanding their leadership beyond their needs.
A fractional CFO is someone who lends their financial expertise to a startup on a contractual basis, according to spendesk.com. Fractional or part-time CFOs have extensive previous CFO-level experience, but typically help tide businesses over on a temporary basis.
“It’s really driven by that combination of need and scale,” said Jerry Benjamin, Consultant – CFO Services at Rehmann. “I need some support on this. I have a great team. Maybe I don’t have a CFO, but I have a controller and accounting team. They close the books like clockwork, and I always get my numbers on time, but I need something more than what they’ve been asked to do. I need to dig into profitability. I want to evaluate buying another grocery store or expanding into a new market or even broadening an offering within a store. What does that mean in terms of what’s my investment in equipment? What’s going to be my investment in inventory? Do I need different skill sets for people?”
A fractional CFO is particularly helpful when a grocer is navigating an event, whether positive or negative, that is different from their usual operations. He laid out four areas where fractional CFOs can be of particular benefit:
- Growth: Rapidly-growing grocers might develop a workload that outpaces its teams’ capacities or bring in new systems that they aren’t set up to handle efficiently. A fractional CFO can help the company assess its resources and processes to keep up with the changes.
- Transition: When an incumbent is on the way out of their role, a fractional CFO can help bridge the gap and assist other executives while a successor is found.
- Liquidity: A grocer running into liquidity issues or other forms of financial distress can reach out to a fractional CFO to gain alternative insight into the challenges they face and to potentially highlight solutions beyond what the internal team was able to find.
- Projects: CFOs in smaller organizations wear many hats, which can limit their capacity to handle every task under their purview; assigning a fractional CFO to handle a specific project can provide the assistance needed for smooth implementation.
One of the key elements of a fractional CFO is their flexibility, according to Benjamin. One grocer who needs a little bit of extra help with their teams can bring someone on for a couple days a month. Another grocer in the middle of a major deal can use their services more often, but only for the duration of the transaction. Their services can be used as much or as little as necessary to get the financial analysis and support required.
One current example is a grocer trying to navigate the current need for competitive pricing versus maintaining margins. A fractional CFO could offer additional insight into relevant data to help the company find the right approach to drive traffic without hurting the bottom line.
“What we’re trying to do is, to the extent possible, provide information to make fact-based decisions,” said Benjamin. “The first thing I thought of in a grocery store environment is the profitability by product. What are the margins in my business lines, those primary areas of grocery, meat, produce, dairy, deli, bakery? It can help with understanding my current level of profitability, understanding the organization’s financial strength to absorb reduced margins, and understanding whether that would drive store traffic.”