1799 – The Strategic Edge of Fractional CFOs in B2B SaaS with Kristian Marquez

In this episode of the Thoughtful Entrepreneur, your host Josh Elledge speaks to the President & CEO of Finstrat, Kristian Marquez.

Marquez Wide

With his extensive experience at Finstrat Management, Kristian Marquez shed light on this innovative solution. A fractional CFO is a part-time financial expert who provides strategic financial guidance to companies without the commitment or cost of a full-time executive.

Kristian outlined that if a business is experiencing rapid growth, preparing for fundraising, or navigating complex financial challenges, it might be time to consider this strategic move. A fractional CFO can bring a wealth of knowledge and experience, helping to steer the company towards financial health and scalability.

Kristian highlighted the unique value Finstrat Management brings to founders and investors. Their team of experts provides financial oversight and assists in critical areas such as cash flow management, financial forecasting, and strategic planning. This support is crucial for B2B SaaS companies that operate in a highly competitive and fast-paced environment.

He also emphasized the importance of staying ahead of the curve, whether adopting new technologies or refining operational strategies. He pointed out that businesses that remain agile and informed are the ones that thrive.

Kristian believes that AI is not just a trend but a transformative force reshaping how we approach business operations and decision-making. He shared how AI can streamline processes, uncover insights, and drive efficiency, giving companies that leverage it a competitive edge.

Key Points from the Episode:

  • Role of fractional CFOs in early-stage companies
  • Focus on B2B SaaS industry
  • Insights into the work of Finstrat Management
  • Value provided to founders and investors
  • Indicators that a company may be ready to bring in a fractional CFO
  • Trends in business management
  • Impact of artificial intelligence on businesses

About Kristian Marquez:

Kristian is the accomplished Founder, President, and CEO of FinStrat Management. This renowned outsourced financial department services firm provides accounting, finance, and reporting services for B2B SaaS companies, investors, RIAs, and VCs.

With a robust background, Kristian was pivotal in steering Inovalon through various executive and management positions, contributing significantly to its evolution from an early stage to a multi-billion IPO. Inovalon, a leading provider of cloud-based solutions in data-driven healthcare, benefited from Kristian's expertise.

His extensive career includes senior roles in accounting and investment management services and a commendable tenure as an officer in the United States Marine Corps.

A distinguished alumnus of the United States Naval Academy with a Bachelor of Science in General Engineering, Kristian has held the Chartered Financial Analyst (CFA) charter holder designation since 2004. His multifaceted experience and leadership make him a respected figure in the financial and business sectors.

About Finstrat:

FinStrat Management (FSM) is a premier outsourced financial operations services firm catering to B2B SaaS companies, investors, RIAs, and VCs.

Renowned for its industry expertise and cutting-edge software solutions, FSM delivers specialized reporting, comprehensive accounting, and financial functions, contributing to enhanced bottom-line performance for clients.

Distinguished by tailored financial operations teams, FSM is adept at addressing businesses' unique accounting, financial, and reporting requirements.

The firm prides itself on providing flexibility, seamless implementations, top-tier client support, and cost-effective pricing structures across all stages of growth.

FSM's commitment to excellence positions it as a strategic partner, empowering clients to navigate financial complexities while optimizing operational efficiency and fostering sustainable success in a competitive business landscape.

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Links Mentioned in this Episode:

Want to learn more? Check out Finstrat website at

Check out Finstrat on LinkedIn at

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Check out Finstrat on Facebook at

Check out Kristian Marquez on LinkedIn at

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Josh (00:00:04) - Hey there, thoughtful listener. Would you like consistent and predictable sales activity with no spam and no ads? I'll teach you step by step how to do this, particularly if you're an agency owner, consultant, coach, or B2B service provider. What I teach has worked for me for more than 15 years and has helped me create more than $10 million in revenue. Just head to up my and watch my free class on how to create endless high ticket sales appointments. You can even chat with me live and I'll see and reply to your messages. Also, don't forget the thoughtful entrepreneur is always looking for guests. Go to up my influence. Com and click on podcast. We'd love to have you. With us right now. Kristian Marquez. Kristian, you are a fractional CFO yourself and you're the president and CEO of Fin Strat Management. You're found on the web at Fin Strat That's mgmt. Uh, Chris, it's great to have you.

Kristian (00:01:17) - Josh. Uh, thank you for having me on the show.

Kristian (00:01:19) - Great to be here.

Josh (00:01:20) - Absolutely. Well, I love the service you provide. I am always a big fan of fractional leaders. And we'll get into a little bit more about that and what that is and why that's so helpful for the right kind of stage company. But, uh, Kristian, give us an overview of your work with Fin Strat.

Kristian (00:01:38) - Uh, so today we provide, uh, three lines of business, but predominantly working with founders of early stage companies, big emphasis on venture backed companies. Uh, most specifically B2B SaaS software as a solution. Uh, but we also work with investors, both angels and venture capital. Uh, the way I describe it is we operate at the intersection of shared interests between the groups. So as you mentioned, fractional CFO of effectively accounting and finance, but also reporting services. Founders want to understand what their strategy should be to monetize their business. You can imagine there are a whole host of milestones along the way. Like any good CFO. Uh, we have a material hand in that conversation.

Kristian (00:02:21) - But also as months and quarters, uh, evolve, helping answer the question, are we on track? And if we're not, what changes need to be made in order to get us back? And then working with investors, you know, they have investors of their own that they need to report to. And so we're in this unique position of straddling the fence between founders and angels and VCs to give them insight into how their portfolio companies, uh, are performing. And just key. Um, because there's so many great people out there doing so many great things. But if the information stays in a silo, what good is it?

Josh (00:02:56) - Yeah, I would imagine it's pretty rare that you get a founder, particularly those that are of the kind of visionary personality that is going to be too enthusiastic or even adept at, you know, the kind of insights that that someone with the background the CFO is going to bring to the table. Is that kind of your experience?

Kristian (00:03:19) - Well, I mean, they definitely run the gamut.

Kristian (00:03:20) - My sense is that majority of founders realize their time is best served in it's there's phases, but in the beginning, their time is best served in sales and marketing. We know cash is the lifeblood of any business. In fact, all businesses fail for the same reason they run out of money and in the beginning, ensuring that there is a consistent source of leads at the top of the funnel, and that those are appropriately making it through the sales cycle to close. One is just key before you can hand off that function to a dedicated sales and marketing team. And so even if the founders know accounting and finance, the majority we work with realize that their it's not their core competency, not the reason their business exists and they are best served, uh, handing it off to somebody else. If there's a number two on the list, it would then be product development, you know, simply ensuring that their service or product has the features and functions that the market's looking for so that they can monetize.

Speaker 3 (00:04:18) - You know, um, can.

Josh (00:04:20) - You share maybe just a bit about, you know, what does it look like when you go from not having a fractional CFO to now having a fractional CFO? How does life change? And maybe contrast that with a little bit with how someone might say, well, that compared to having a full time CFO as part of the organization?

Kristian (00:04:42) - Sure. So the way I describe it, when I work with founders, at least I've worked with founders in the past, is first and foremost is what's our destination? And I don't know if when you were a kid, you recall doing mazes. I used to work backwards, you know? So down. Get your happy meal, find the end, and you trace it back and say, I solved it. Well, it's somewhat similar. We're going to put together a budget or forecast. The first thing we'll ask is what's your outcome? And generally it's going to be, hey, I'd like to walk away with X amount of dollars after taxes, and we'll simply back into what, uh, revenue needs to look like factoring multiple expectations, growth expectations, time expectations to come up with a reasonable plan.

Kristian (00:05:27) - And so fractional CFO is going to lead that conversation. They're going to put together the models that provide a roadmap to get there. And then as I mentioned earlier is quarters unfold. You're either tracking above or below. And so you know setting in the way it's business intelligence, you know, what are the levers that we should or shouldn't pull to ensure that we're we're on the right trajectory. And so elements like pricing or spending X amount of dollars on product development or sales and marketing or all types of answers that are good cfo's going to answer whether they're fractional or full time, though really, just in my experience, boils down to the stage of the business, both from a budget perspective, but simply time. I would say, you know, most companies that are doing under $40 million in trailing 12 month revenue don't need a full time CFO simply because there's just not enough work there to cost justify the spend. Good CFO is expensive, but once you start getting a critical mass and you see that all of your core functions are growing readily, and yes, I think it makes good sense to have someone you have full time access to to answer answer questions.

Kristian (00:06:36) - And really, that's at the heart of it. And a financial planning analysis help me understand my metrics, help me understand if I'm leaving money on the table. Um, you know, are there any anything that I should be doing different to get a the best outcome?

Speaker 3 (00:06:49) - Yeah. And, you know, kind.

Josh (00:06:51) - Of touched on this a little bit already. But, you know, someone that might be listening and at some point in the future they may be ready to bring in a fractional CFO, bring in some leadership in that regard. Um, what would be some of the indicators that they would be ready for that move?

Kristian (00:07:08) - Say it falls into two categories. Category number one would be revenue. And so million dollars in annual revenue is generally what I would see. A good rule of thumb. You've now got to a point where you'll have the budget to pay for a fraction of somebody's time. Uh, there are exceptions. The exceptions. And the other category would be if you're preparing to bring on outside investment, whether it's debt or equity.

Kristian (00:07:36) - Um, in the beginning, many founders will go to family and friends. Don't need a CFO for that. I would say a lawyer will suffice. But as companies want to start putting a convertible or a safe note or a private equity round, or work with a lender to do a debt facility, they're going to have due diligence requirements that what I've my experience has been, are best suited being fulfilled by a CFO. And given their stage it should be fractional.

Speaker 3 (00:08:03) - Yeah.

Josh (00:08:04) - Um, where did fin Strat come from, by the way? And I want to point this out. I didn't realize this until I started kind of going through your LinkedIn profile. You and I were both in the Navy.

Kristian (00:08:13) - Yes. Uh, so graduated from the Naval Academy long, long, long time ago. Ended up getting an engineering degree because I was like, well, if I'm at the Naval Academy, I guess it makes sense. Thank you.

Speaker 3 (00:08:25) - Yeah, sure. Degree.

Josh (00:08:27) - They need engineers.

Speaker 3 (00:08:29) - Yes, but.

Kristian (00:08:30) - Knew my I wasn't going to be an engineer, but I had a love for numbers. So after I got out of the service, I decided to pursue accounting and investment analysis. And so, uh, within our industry, there's a professional designation, uh, CFA. So it's a charter financial analyst. And so next year will mark two decades as a charter holder. And it just suit my personality. Well, since then, I've held a whole host of In the Trenches, plus leadership roles around accounting, finance, investment analysis. And, um, I'm happy to give you any more background, but coming off of a failed startup that I co-founded, um, I realized I wanted in telemedicine. I realized I wanted to get back to my accounting finance investment roots. So started finish track management in January 2017.

Speaker 3 (00:09:18) - Wow.

Josh (00:09:19) - Well, congratulations. Um, would have been some companies that you've been able to work with and do a little storytelling about how that went.

Kristian (00:09:27) - Yeah. So, um, most of the companies we work with are either we have a handful of pre-revenue, uh, so just starting out, but they realize that because of IP or because of their unique business model, they're able to attract investor dollars out of the gates.

Kristian (00:09:43) - And those investors are generally sophisticated to the point that they insist you have a fractional CFO. But as I mentioned earlier, sweet spot. I would say it's about a million plus, though our clients today go all the way up to 40 million. When today I'm serving more as a corporate role. But when I started the company, I was wearing a fractional CFO hat, and the clients that I directly work with were industry agnostic health care, transportation, uh, cybersecurity, but all had something similar in common was software. And it's important to call that out. Is because, you know, accounting. Not sexy, but important.

Josh (00:10:19) - Speak for yourself, I don't know.

Speaker 3 (00:10:24) - If the.

Josh (00:10:24) - Numbers are good.

Speaker 3 (00:10:25) - Enough, it's.

Josh (00:10:25) - Really sexy.

Speaker 3 (00:10:26) - Yeah. Um, but.

Kristian (00:10:29) - You usually don't find yourself at cocktail parties talking about debits and credits.

Josh (00:10:33) - Probably not.

Speaker 3 (00:10:33) - Yeah, right.

Kristian (00:10:34) - But having accurate financials has the consequence of being able to have meaningful business intelligence. And so, you know, basically helped me understand what I vaguely remember from elementary school when the teacher said, guy, go garbage in, garbage out.

Kristian (00:10:49) - And I was like, you know, what does that mean? And now I understand. It's, um, you know, understanding your customer acquisition cost or your return, your customer acquisition cost, payback period. A whole host of metrics isn't possible unless the accounting is done correctly. And so with software, especially companies that are selling subscriptions that are greater than a month. It creates the need to be able to appropriately reflect when that revenue is earned on your financials. And most accounting systems don't do it for you automatically. You have to incorporate process or third party pieces of software that plug into the likes of QuickBooks online, Xero to bring it to life. And so we realized that there, for whatever the reason that I have my theories, there's a deficiency of solutions out there that make it easy. And so we realized that, hey, it's a great sort of business when there's demand and, you know, you can do a great job. And so that's the road we started down, you know, not just debits and credits, but really an emphasis on business intelligence for the purpose of monetizing the businesses.

Kristian (00:11:57) - So we've helped collectively our clients raise $100 million in debt and equity financing. We've helped clients sell their business. And, you know, along the way, a lot of those investors are doing due diligence. They're making sure that when they're going to cut a check that they know what they're getting themselves into. And so, notwithstanding day to day, we have an amazing group of clients. We're on calls talking with founders and the C-suite, a lot of blocking and tackling type items, but heavy emphasis on strategy. So how's the sales pipeline? You know, do we make changes? Are you going to meet budget expectations? If not, what needs to be done different, if at all, or if we're going to engage a next set of banks or VCs or an acquirer? Um, let's make sure that we're presenting an accurate picture of the success of the business. And so, yeah, in any given quarter, we're doing any of all, any and all of those things.

Speaker 3 (00:12:54) - Yeah.

Josh (00:12:54) - So any Kristian, any trends that you've seen maybe on that front, um, you know, whether it's, you know, obviously, you know, I don't know if interest rates impact business is a great deal right now, but anything is.

Josh (00:13:07) - You know, we're kind of going into we're recording this at the very, very, very, very end of 2023. Um, but if you were to look into your crystal ball, knowing the kind of things that you know and things that you do on a regular basis, um, what's kind of the, uh, well, from my vantage point, business owners listen up. Here's what I'd be paying attention to in 2024. And any immediate thoughts come to mind?

Kristian (00:13:29) - Uh, 100%. So favorite subject and probably can talk about this longer than we have time. But in no particular order. Artificial intelligence is here to stay.

Speaker 3 (00:13:37) - Um, um.

Kristian (00:13:38) - My sense is that, uh, we're not even close to getting started and there going to be significant consequences to the majority of industry. And for any business owners who can take the time to stop, understand what role I can play in their business will be at an absolute advantage very practically, even out of the gates. For those of you who haven't used OpenAI's ChatGPT, I mean, you're now able to spend a fraction of the amount of time for writing anything, whether it's.

Speaker 3 (00:14:11) - An.

Kristian (00:14:12) - Or a memo or a white paper. So that's significant. But, you know, within our company we've already started like what are the processes that we can automate now it's work. Um, and and so I do think though that it brings up another big topic, one that I often get asked about. It's it's like what's the hallmark of a successful business? And I my sense is that a lot of founders don't appreciate that. You don't always have to have a brand new product or shiny object. Um, a lot of times it just takes taking a complex process and turning it into a well-oiled service. And so I right now is really creating a tremendous amount of opportunity for service providers, uh, to do that. And so that's a big one. Uh, other big one is, is just how founders manage their business. And so you pointed out interest rates, I think is very important. The consequences is the amount of available capital that was there when interest rates were near zero has changed materially.

Speaker 3 (00:15:07) - Um, and.

Kristian (00:15:08) - It means now that because there's less money available, because investors have more options, founders need to do a better job of managing their bottom line, either breakeven or profitability. And so that changes how you spend. That changes the amount of capital that you allocate within a budget to product development and sales and marketing, and what you consider to be important and so absolutely relevant. I see it now consistently. So yes, I would if I had to give you two things, those would be it now.

Josh (00:15:38) - All right. Your website fin strat and it's fin strat. And then it's the mgmt. I don't know if the whole domain also works with spelling out management, but uh, um, so our friend that's been listening to our conversation and suspect you've got some resources that may be, uh, valuable. Um, but where does someone go from here?

Kristian (00:16:01) - Yeah. So, um, as a courtesy or listeners, if anyone finds themselves in the B2B, say, a SaaS or venture backed space, and they'd like a free consultation with one of our fractional CFOs, absolutely happy to extend our time to them.

Kristian (00:16:15) - And, um, you know, we we love founders. We love enabling their vision. And so they're welcome to go out there and reach out to schedule some time on our calendars, and we'll happy to listen and give them feedback on anything that's top of mind.

Josh (00:16:28) - Yeah. What else happens in a, uh, again, a free consultation.

Speaker 3 (00:16:32) - Uh, big.

Kristian (00:16:32) - Things I hear. Just, you know, questions on strategy. Uh, help me understand how I should approach my clients, how I should approach pricing. There are a whole host of variables. You know, here's where actually where algebra comes into play. But there's also a lot of approaches that work and don't work. And as you can imagine, we've seen a lot and we absolutely have opinions on relevant milestones as a company matures and what the founders and C-suite should do to bring their company alive. And so a lot of times it's just fielding questions of, hey, um, this is what I'm doing right now. What do you think? Or hey, I want to go raise capital, you know, dial me into this secretive process that that I.

Speaker 3 (00:17:13) - Don't know about.

Kristian (00:17:14) - And, um, no obligations. Happy to happy to give back our time. I think there's been a realization, at least on my part, that community is extremely important, coupled with the fact that innovation is awesome, not lost on me, that, you know, my iPhone makes my life easier because someone had a vision and they brought to life. And so yeah, free consultation. Would love to talk to you and your listeners who would have some questions about their business.

Josh (00:17:39) - Kristian Marquez again. You are the CEO and president, fin strat management, the website fin strat mgmt. Com Kristian, thank you so much for joining us.

Kristian (00:17:50) - My pleasure. Thank you, Josh, for having me.

Josh (00:17:57) - Thanks for listening to the Thoughtful Entrepreneur show. If you are a thoughtful business owner or professional who would like to be on this daily program, please visit up my influence common Guest. If you're a listener, I'd love to shout out your business to our whole audience for free.

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