Hiring A “Fractional CFO”

Episode 466: Hiring A “Fractional CFO”

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REIS 466 | Fractional CFO


When your business starts to grow, you’re going to need someone to handle the financial side and it’s usually just you for a while, which sucks if you don’t know what you’re doing. How do you step out of the tedious financial nitty-gritty of your business’s finances without having to hire somebody full-time? The answer is to hire a fractional CFO. In this episode, Mitch Stephen interviews Lawrence White, CEO of LKW Consulting, who explains the different roles of a fractional CFO, bookkeeper, & CPA and how they all fit together. His more than 14 years of professional experience in fine-tuning and delivering world-class accounting services is beyond comparable! Listen in and find out if the fractional CFO solution is right for you.

I’m here with Larry White. He’s going to be talking about the different roles between your bookkeeper, CPA, CFO and financial planner. It’s a real interesting maze that if you don’t understand the pieces and the parts of how they all fit together, then this is going to be a great episode for you because we’re going to try to straighten some of that out. Before we get started, I’d like to pay homage to LiveComm.com for sponsoring this episode. It’s the reason why I have all my owner-financed homes for sale with an average of nine days on the market. It might even be shorter than that, but I don’t even want to say that. I can show you how I’m using LiveComm, which is a lead generation plus mass texting platform that’s affordable and easy to use. I have nine days on the market average and I’m not even putting signs in my yard or bandit signs out anymore. I’ll show you how I tied that with Facebook business page and how I don’t have any problems selling houses at all. For about $0.02 per person, you can hit someone who’s already raised their hands. It’s all about smartphone numbers, cellphone capture and mass texting. Stick around and watch the homepage video there. Larry, how are you doing?

I’m doing great, Mitch. Thanks for having me.

Thanks for taking the time. I met Larry at a Multipliers Event. It’s a group of 50 men who get together business-wise and spiritually-wise to talk about and address the problems that men have, especially men who have achieved financial success and control of their own destiny as much as they can. Even that success poses some problems in some places. I invited him to be on the show because he can be a part-time CFO for your company. He can help guide and straighten out your companies or watch over them. We’re going to talk about what that all entails. Where do we begin this subject, Larry?

REIS 466 | Fractional CFO

Fractional CFO: One of the things that a CFO does is to take everything that’s been prepared by the bookkeeper and help the CEO figure out how they can forecast going forward.


People ask me all the time about what I do. I say, “I’m a fractional CFO. I have a fractional CFO business.” People look at me like they don’t know what I’m talking about. I completely get that because it’s like being a doctor. You’re not going to go to your dermatologist to have heart surgery. Somebody would assume that you’re a doctor, you can fix all problems but you go to a specialist. I would be considered a specialist in the industry. It is more or less strategic in nature. I know that everyone’s got to get their taxes done. People have bookkeepers, controllers and people like that.

The difference that I want to explain based on what I do and what those people do is if you’re a business owner, you want to know how you’re doing. You have your bookkeeper or controller prepare your monthly transactions, your numbers. They put them in these financial statements called a balance sheet or a profit-loss statement. Most people I know that I work within real estate do it on QuickBooks. They produce reports either monthly, quarterly or annually for the purpose of preparing a tax return or giving them some idea of how they’re doing from an execution point of view.

The one thing that I have found that you’re not going to get out of those people is they ask for an interpretation of what does that mean and how do I take that information forward in terms of making more money and more cashflow. How do I make more money based upon what I’m seeing in terms of what I’m doing? One of the things that you’re not going to get is a lot of strategies or a lot of forward-looking, “How do I take the numbers, interpret them and figure out, ‘Am I doing the right thing? Am I making the appropriate expenditures on the things that are going to make me more money and more cashflow in the future?’”

What I do is I take the numbers. I don’t just put them together, but I take them for the business owner and interpret them. I tell them and guide them, “How do we make more money in the future? How do we take a business and grow it? Do I need financing? If I do, what types of financing would I need? Would I go to a bank? Would I be able to go and get outside investors? What is the best way to go do that?” I help guide them toward growth in their dreams and trying to build them the biggest business possible to provide them more cashflow, as much autonomy and freedom as we can get going forward because that’s the goal in all of this.

Tell us the outline of what every team needs. When you start out, you’re always a one-man show and you’re winging it. At some point, you start to get bigger and bigger. If you’ve reached that position where you can’t do it all yourself and you have a bunch of people, what are the key players? You got a bookkeeper, CPA, administrative assistant, and then you probably are labeling yourself as the CFO and the CEO. Do you know how to handle that job or are you getting that title by default? What are the pieces that an ongoing concern need?

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At a minimum, in the beginning, you always want to know how you’re doing in the business. Typically, at least initially, what people do is look at their bank statement. They’ll say, “I’ve got more cash than I did the prior month.” That’ll tell them, “I did a little bit better and I’m doing a little bit better. I have less cash.” What people do is they want to see more cash coming in every month than they had the prior month and they want to see their bank account grow.

At the end of the day, they may start amassing some cash and then they want to understand, “How do I put this into some format to understand, am I profitable? Am I not profitable? If I’m profitable, how do I take that cash and how do I get it to work for me to multiply into more cash so that we’re making greater and greater profits? How do we go about doing that?” In the beginning, what’s important is at a minimum, have someone that’s preparing your books monthly, reconciling your bank statements, and they’re at least providing you guidance monthly on how you’re doing from a profitability point of view. Thereafter, as you continue to grow, then you understand you can’t do it all. How do you best spend your time growing the business? That’s also a big deal as well.

I have seen a lot of people run into this problem. The cash comes in the bank but they’re not looking at their contingent liabilities at the end of the year. Their property taxes could be in the tens of thousands of you have 3, 4 or 5 properties, depending on what size they are. That cash may already be spent. It’s just that the bill hasn’t arrived yet. They start going out and they start getting software or creating overhead because they feel like they have more money than they do. All of a sudden, you can’t figure out why you’re not making money. You need to have this way to look inside your business and go, “Where are my expenses are? Where are the ones that I can cut? Why am I not profitable?”

I see that happen all the time. Luckily, I never fell into that routine because I always operated like I was broke, no matter how much money it was. I inherently knew that it’s not all my money. I know it’s sitting in my bank account, but somehow I knew it doesn’t all belong to me. I’m not sure how much of it does. When I finally got a real set of books, it was like, “Holy cow.” I’ve been operating like I’m broke for a long time and I have not been broken at all, but I never know because I couldn’t see that picture of my business.

I’m not a numbers cruncher guy. That might come as a surprise to a lot of people. I have to count on people to dissect these things for me and tell me. Now, I’ve got better at reading my own financial reports, but the terminology that you people use and my language are not the same. There are all these words that you guys are using that you got to sink into. First of all, it might be obvious to some people and there might be more to it than I even think. What’s the difference between a bookkeeper and a CPA?

A bookkeeper will prepare, take the transactions from your bank and put them into a nice little financial statement, which would include your profit and loss, as well as your balance sheet. It tracks all of the assets that you own. Once you sell them, then they ultimately go and you figure out what the profit-loss is, then they go to your profit-loss. Also, you keep your cash on your balance sheet as well and it tells you how much cash you have. The difference between your bookkeeper is they’ll prepare the transactions specifically in a format that allows the CPA to put it basically in a tax return so that you’re able to report a tax return.

Typically, your bookkeepers don’t know tax law or any of that stuff. They will put it in a format that allows your tax preparer/CPA to allow them to prepare the tax return efficiently and easily. What the CPA’s role is to take all of this profit and this cashflow, then they figure out from a tax perspective how to shelter as much as possible so that you don’t have to pay as much taxes. That’s what their role is. The role of somebody like me as a CFO is to help you strategically create the cashflow, the CPA that puts it into a tax return, but also does tax planning to help you shelter as much as possible, so you don’t have to pay as much to the government.

I worked hard for my money as I’m sure all of the readers do. The last thing that we want to do is take all this hard-earned money and pay it back to the government. We want to keep as much of it as possible, not just for ourselves personally but for our families. If we’ve got other things that we want to donate to or other meaningful endeavors, we want to be able to spend the cash the way we want to provide us freedom, wealth and all those kinds of things so we can serve our families and other people.

The bookkeeper is giving a description of all the money in and all the money out. The CPA is saying, “How much of this can we write-off?” They may point out to you, “If you held this property for a year and rented it before you sold it, you’d go from this tax bracket to that tax bracket,” then you’ve got a decision to make. My CPA one time told me because I only need about $200,000 to do everything I want to do. I don’t need anymore. He’s like, “At the beginning of the year, start doing transactions to get your money in the bank that you need for the year. After that, start doing things in your IRAs and 401(k)s. Stop making money for yourself. If all you need to eat, drink and do all you want to do is X amount, run as fast as you can from January 1st. You can get to that amount. Everything after that, maybe we do it differently. You’re still making money, but it’s in some buckets where it’s not as taxable.”

You brought up a great point that the readers should be aware of and that is planning. Not from a tax planning perspective but from a cashflow perspective. That’s one of the things that a CFO does. They will take everything that you’ve got that’s been prepared by your bookkeeper. They will work directly with the CEO or the owner of the business to figure out, “How do we forecast going forward what everything looks like?” If you’ve got contingent liabilities or you have things going down the road, you’re going to have to be aware of, how much cash do I have to keep and plan for so that I still have enough cash and run my life? Also, plan accordingly for what things that I may have to pay down the road so that I’m not caught unaware that I’m going to have these things to pay.

Here’s a good example, balloons. You have a seven-year balloon. After 1.5 or 2 years, you forget all about it. You’re going about your life, then one day you get a call and someone is telling you, “Your balloon is coming up next week. How are you planning to pay me? I want to give you a reminder.” It’s like, “Now I’ve got to come up with X amount of thousands, tens of thousands or hundreds of thousands because you didn’t get ahead of it enough to go find out who’s going to replace that loan.” I’ve had it happened to me a lot.

The second thing that I would like to point out is 5 and 7-year balloons, especially five-year balloons. I don’t do anything with less than a five-year balloon. It seems like I’m already having to work on fixing the balloon problem before I even snap my fingers. Three and a half years have gone by, and now I got to start addressing this problem again. I look for money that doesn’t have balloons, but sometimes when you’re doing a lot of volumes and you need to buy great deals right now, you have to take the color of money that’s available to you. If someone doesn’t want their money out more than five years, then you either miss the deal or you take that balloon whether you like it or not, and get the deal and then worry about it later. That’s another thing that can surprise you.

We’re talking about real estate-related businesses. I’m sure there are thousand different things like that in all the different kinds of businesses. Let’s talk about a fractional CFO. If you haven’t heard it, it’s like fractional jet rentals. You don’t have to buy the whole jet. You just buy so many hours of the jet per year and you can use them. You don’t have to buy the whole Learjet, or like condos and fractional apartments. They took out every unit and sold it instead of renting it. It had a legal description. What does a fractional CFO look like?

REIS 466 | Fractional CFO

Fractional CFO: There are two types of expenses that make up the majority of the expenses in your business: payroll and marketing. A fractional CEO’s job is to help you determine how much you should spend on each.


I’m a CPA by trade. I happened to be more operational than I am tax-based. What I do is I take a look at everything current and then I try to forecast it going forward to be able to help the business owner see down the road. They’re spending their time and energy more in the business, making money. They don’t have to spend their time that way. I help them accordingly based upon being able to see down that road. When you hire a CFO, we don’t come very inexpensively. We make $250,000 to $400,000 a year. If you’re a small business, you’ll say, “I can’t afford that. My business doesn’t even bring that in per year. How can I afford somebody like you with your expertise?”

What I do is I try to provide my services to someone on a very limited basis where they can have my expertise and background. It’s exceedingly affordable to them, but still gives them the opportunity to be able to provide them with that guidance that they’re going to need on a limited basis. They can get the expertise that I would provide so that they can spend more time in their business, and making money for their business as opposed to doing things like spending more administrative or things like that. Those tasks could take them away from what not only they enjoy, but how they best serve the business making money.

I do it on a limited basis. For example, I do no less than ten hours a month for someone. Otherwise, I can’t get my arms around the business. What I’ll do is I will get what their bookkeeper prepares every month. I’ll take something like that and I’ll help them forecast forward. I help and meet with them once a month to guide them and say, “Here are the pitfalls I see getting down the road.” They always say, “Failing to plan is planning to fail.” I’m a firm believer in that. I’m always asked, “How much cash do I need to keep in the business so that I can make the appropriate decisions so I don’t get down to my last dollar where I’m making bad decisions?”

I will help them navigate how much cash they need to keep in the business, especially with everything that happened with COVID and happened in 2008, when we had the real estate crash. You saw all of these great businesses go under. Part of the reason is they didn’t have enough operating cash to keep them afloat when something happens. We all know something is going to happen and we don’t want to lose our businesses. How much cash do we need to keep in the business so that we can make the appropriate decisions and plan accordingly? Also to pivot as we need to pivot to keep our businesses going and keep our lifestyles thriving.

One of the things I took from Multipliers where we went was business-wise and personal-wise, we are either heading into a crisis, in a crisis or coming out of a crisis. It’s the three stages of life. There is no other way. If things are going good right now, you’re coming out of a crisis, but nothing stays the same. There’s always change. There’s another crisis going forward personally. When I say personally, I mean people die and people get sick. No one knows when, but it’s going to happen. Everyone you know is going to die or be sick.

Depending on what key role those people are in your life, you’re headed to a crisis sooner or later. Business-wise, we’re always headed to the next crisis. That was a lot easier to understand because nothing about this world or economy stays the same. They seem to be changing now more than ever. The rules that we use to live by seem non-existent anymore in the economics side of things. By all accounts, I don’t understand how anything works anymore, given the national debt and how it runs.

We should be going to places that we’re not going because of some of these decisions, and then you think some things are supposed to happen because of the decision because of the decisions they’re making and they’re not happening. It’s getting scary. My point was it’s constantly changing and you have to forecast as best you can, and/or if you don’t have an opinion or you don’t know where you’re headed, make sure you have enough reserves like Larry said because something’s going to happen.

What people ask me is, “What is the appropriate amount of reserves that you need? How much should I plan for?” I would always say, “It depends on how you spend and what your needs are.” Typically what I would say is, “Give yourself enough time to make a decision so that you’re making a well-thought-out decision.” When we get and we may only have 1 or 2 months’ worth of cash available, we’re not going to make the best decisions because we’re going to get concerned. We’re going to take our eye off the business, and then we’re making decisions to keep our lifestyles going and cash in the bank. I would say minimum of three months of available cash in the bank. What that means is let’s say, you never brought another dollar in. That means you least pay your bills for the next three months at a minimum. It gives you time to figure out, “Maybe I’m going to spend less or figure out my expenses.” You make the right decisions to figure out if I stay in business or how I cut back or do those things so I don’t have to worry that I’m going to run out of cash tomorrow and then I’m out of business quickly.

You say you don’t work less than ten hours. On a lot of these interviews, I’m reasonably interested myself. I want to know personally, and I’m sure everyone else out there, what does the cost of a fractional CFO looks like. We’re not putting anything in stone, and I’m going to tell the readers for you and for everybody. The price that we talk about or whatever we say is subject to change. Everything changes. What can we expect when we’re having a conversation with you?

I’ll do some things for $250 an hour. The minimum that I would do is ten hours. If you do the math for the entire year and you’ve got someone who understands finance, helps you forecast and find those pitfalls, the value proposition that I have is, how would you like a CFO for $30,000 a year? It is half the price of a decent bookkeeper that you’re going to employ full-time.

Ten hours a month, so that’s $2,500 a month. That sounds good if you asked me because to get a full-time CFO, which wouldn’t be busy enough, they’d be sitting on their ass most of the time. In my business, it’s probably a lot of the time. I’d be paying for a full-time CFO when my business isn’t big enough to occupy that person. $35,000, $36,000, $40,000 a year for a CFO, ten hours a month sounds good to me. Maybe I’ll have a conversation with you sometime. I’m going to send everybody over to 1000Houses.com/CFO. Over there, you can get Larry’s website and his contact information. He’s giving away an informational eLetter about some of the upcoming potential changes in the tax code that may affect you or may affect everybody as it may be. Go over there and get a copy of that free eNewsletter. Check it out and see what he’s looking at on the horizon. What kind of businesses do you specialize in? Are they all the same when you get the numbers?

If you're not getting enough return on what you're spending, then you may be spending too much. Share on X

It’s purely a math problem but I do a lot of real estate. I’m not just doing CFO work for real estate. I’m an investor as well. Having been in it for a long time, I understand the way it works and the way the financing works. I can speak to you as a peer, but I happen to know finance as well. I understand a lot of it because I love the idea of passive income and working in real estate. I understand wholesaling, assignment and seller financing. I’ve worked in all of those types of businesses. I have a good idea of how they work.

I’ve worked in it for a long enough period of time where I also understand a business type that you have, Mitch. There are two types of expenses that make up the majority of the expenses in your business. That’s payroll and marketing. Those make up 75% of the expenses in your business. What I help you do is I help you understand how much as a percentage of what you’re bringing in should you be spending on payroll, and how much you should be spending on marketing. The goal of marketing is to bring in business. If you’re not getting enough return on what you’re spending, then you may be spending too much. I also help you determine what’s your bottom line should look like. Let’s say that you have a million-dollar business and that’s how much gross revenue you’re bringing in.

For the most part, we could come up with a rule of thumb that I should be netting 20% of that in cash after payment of all my expenses which is 25%. We work from the bottom up to figure out how much of that am I spending on the payroll and marketing. We can figure out what’s the right amount to spend so we have enough cashflow on the bottom line. That’s what my role is. It’s to help you navigate that, figure it out, and making sure that whatever you’re spending on is bringing in enough revenue for you to have enough cashflow that you can utilize for your family or whatever purposes you need it for.

As a business owner, you spend money or you take on these expenses if you’re to take on the expense of a CFO. Give us some case studies how someone who hired you to be a CFO saw the money come back in and then some.

I’ve worked with quite a few businesses where we’ve had the opportunity. For example, on the marketing side, I’ve looked at direct mail expenditures which a lot of the readers will send out letters to potential home sellers. They try to figure out who’s out there and what they can buy a property for. Some may use radios or the web. I help one business owner where they realize they weren’t getting enough return on their direct mail that they were spending as much as they were getting in. There was no profit to be gained from it. We found out that by utilizing the web or radio, they were getting a better return. What we did was instead of spending a specific amount of money on direct mail, we put it into radio and web. We found out that we were getting a greater return.

We reallocated the spending in marketing to a specific place where they were bringing in more business and became even more profitable. For example, they spend $30,000 on marketing in a specific month, but maybe they were spending $10,000 on direct mail. We took that $10,000 in direct mail and we put it more into radio. They were getting a greater return and were able to get in more money, spending it on radio as opposed to direct mail. Those are the types of things that we look at. It’s where you are spending and where are you getting the greatest return to drive your cashflow and business.

Is there anything you’d like to say to the readers before we wrap it up?

If you’re new at this or you’re getting involved, get an idea of what your monthly expenses are and try to figure out how much operating cash you need to have in the business. As a rule of thumb, try to plan for 3 to 6 months’ worth of cash. If you can, save every month to develop that. Determine what your spend would be if you’ve got nothing in the door, so that you had enough cash as your rainy-day fund or to weather the storm. You have the ability to stay in business when something happens. That would be the thing that I wanted to share with the readers.

Figure out your burn rate and how many months you think you need to be comfortable, and then how you’re going to whittle some money out of business every month until you get there.

It’s not a matter of if. It’s when it will happen because it happens to all of us. When you plan accordingly, you’ll be able to stay in business. it’s not to say that we don’t have issues, pitfalls or things that we need that are difficult to get our arms around, but at least it provides you more time to make better decisions.

I like to thank you, Larry, for coming on. I’d like to encourage the readers, if you think you might be in a position where you need a fractional CFO, I want you to go to 1000Houses.com/CFO. Get over there and see Larry’s website and all his contact information. You’re offering a free consult to people. What do they need to do? Do they send their finances or whatever they have to you, you go over and see what it’s going to take?

For your readers, I’d be happy to take anyone’s call, walk them through what I do and how I do it. I’ll walk them through my website. We can talk about creating a relationship. If it isn’t the right time, I’m always here to talk. We work toward a relationship and help them get to a point where they need somebody. That way I could help them.

1000Houses.com/CFO, get over there and get the paper that Larry wrote about the pending tax changes. It’s the stuff that’s in the pipeline that may or may not happen, but you need to be prepared in case they do. Take a look at what he’s got his eye on out there for the future and potential tax changes. I’m sure you’ll be impressed with his foresight. I’d like to thank everybody out there for stopping by to get you some Larry White and talk about fractional CFOs. I want to thank LiveComm.com for being our sponsor. Check it out. It got to do with smartphone numbers, lead generations, mass texting and very affordable form of advertising. When you figure out how it fits in your business, you’re going to be amazed.


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About Larry White

REIS 466 | Fractional CFOFractional Chief Financial Officer with over 30 years of insight as a financial executive serving real estate, manufacturing, hospitality, sports and entertainment and service businesses.





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