The business cycle for an owner managed SME and how a fractional CFO can have a positive impact
The business life cycle for an owner managed SME typically follows five key stages:
1. Startup Stage
The business is launched, often with the owner as the primary decision maker.
Focus is on product/service development, market entry, and securing initial funding (such as personal savings, loans or external investment).
Cashflow may be tight, and the owner may be handling multiple roles (such as operations, sales and finance).
Key challenges: Establishing a customer base, refining the business model and managing costs.
2. Growth Stage
Revenue starts increasing, and the business begins to gain a foothold in the market.
More employees may be hired, requiring a shift from a hands-on approach to basic delegation.
The owner may seek external funding to scale operations.
Systems and processes (accounting, HR and marketing etc) begin to formalise.
Key challenges: Managing cashflow, maintaining quality as operations scale and hiring the right team.
3. Maturity Stage
The business is stable, profitable, and has an established customer base.
Growth slows, but the company operates efficiently with structured processes.
The owner may focus on optimising operations, expanding to new markets, or diversifying offerings.
Strategic planning becomes crucial to sustain long term profitability.
Key challenges: Avoiding stagnation, staying competitive and managing leadership transitions.
4. Expansion or Renewal Stage (Optional)
Some SMEs choose to expand through franchising, partnerships, or entering new markets.
Innovation and adapting to industry trends help sustain growth.
The owner may seek additional funding or bring in professional management.
Key challenges: Managing risks associated with expansion and maintaining financial stability.
5. Exit or Succession Stage
The owner decides on an exit strategy, such as selling the business, passing it on to a successor, or winding it down.
Succession planning is critical, especially for family run SMEs.
Business valuation, legal considerations, and tax implications must be managed.
Key challenges: Ensuring a smooth transition and maximising value during exit.
Throughout the cycle, an owner manager faces unique challenges, from wearing multiple hats in the early stages to making strategic decisions in the later ones. Financial planning, leadership adaptability, and external advisory support such as a fractional CFO are key to navigating each phase successfully.
A fractional CFO provides financial expertise tailored to each stage of the SME business life cycle. Here’s how they can add value at each phase:
1. Startup Stage – Laying the Financial Foundation
How a Fractional CFO Helps:
Develops a financial plan, including budgets and cash flow projections.
Advises on funding options and helps secure financing.
Establishes basic financial systems, accounting software, and reporting structures.
Assists in setting up pricing strategies and financial KPIs to track early performance.
Ensures compliance with tax and regulatory requirements.
Key Benefit: Helps the owner avoid common financial pitfalls and ensures sustainable growth from the beginning.
2. Growth Stage – Managing Scaling Challenges
How a Fractional CFO Helps:
Improves cash flow management to support expansion and hiring.
Analyses profitability and cost structures to optimise margins.
Implements financial controls and reporting for better decision making.
Supports in negotiating with banks, investors, or suppliers for better terms.
Advises on tax strategies and risk management as the business grows.
Key Benefit: Ensures financial stability while scaling, preventing cashflow crises.
3. Maturity Stage – Strengthening Profitability & Efficiency
How a Fractional CFO Helps:
Conducts financial forecasting and scenario planning for long-term sustainability.
Identifies areas for efficiency improvements (cost reduction, pricing strategies etc).
Helps with strategic investments, M&A opportunities, or expansion planning.
Strengthens financial governance, internal controls, and risk management.
Provides financial dashboards and KPI tracking for better business insights.
Key Benefit: Maximises profitability and ensures the business remains competitive.
4. Expansion or Renewal Stage – Scaling or Pivoting
How a Fractional CFO Helps:
Develops financial models for expansion, acquisitions, or new product lines.
Assists in fundraising or securing capital for scaling operations.
Helps restructure the company’s finances to support sustainable growth.
Advises on financial risks and creates mitigation strategies.
Provides insights into market trends, pricing, and investment returns.
Key Benefit: Supports strategic expansion while maintaining financial health.
5. Exit or Succession Stage – Maximizing Business Value
How a Fractional CFO Helps:
Prepares the business for sale, ensuring strong financials and a solid valuation.
Develops exit strategies (sale, succession planning, or transition to new leadership).
Optimizes financial statements and ensures compliance for due diligence.
Advises on tax-efficient exit strategies and deal structuring.
Assists in negotiations with potential buyers or investors.
Key Benefit: Helps the owner maximize value and achieve a smooth exit.
Why an SME needs a Fractional CFO throughout the life cycle -
Cost-effective: Access to high level financial expertise without the full time CFO cost.
Strategic insights: Provides data driven decision making at each growth stage.
Flexibility: Scales services up or down based on the company’s needs.
Risk management: Helps navigate financial challenges, compliance, and cash flow issues.
Get in touch with Andy on 07768 777765 or email andy@outoftheordinary.uk to discuss how Out of the Ordinary might be able to assist you.