While life science companies vary in their nature, each requiring unique FP&A support, common patterns have emerged through years of consulting experience.
This article specifically emphasizes the sustained support provided by an Outsourced FP&A consultancy. Separate from this, there are numerous short to mid-term projects where the specialized skills and experience of FP&A consultants prove advantageous to client companies, a topic I will address in a future post.
When should a company consider hiring an Outsourced FP&A service??
Initially, companies typically rely on basic accounting support, covering reporting and some continuity planning with spending patterns mirroring previous periods. This marks a "Pre FP&A" phase, concluding when specific criteria are met:
Limited seed capital or Series A funding at or below $25 million.
Simple management structure with 1-3 C-level executives overseeing all operations.
Employee count at or below 25 Full-Time Equivalents (FTEs).
Program portfolio focused on straightforward research.
Upon approaching these parameters, there arises a heightened demand for dynamic and strategic planning support. Given constrained funding for additional General and Administrative staff, many companies find effective assistance through part-time Consulting (Outsourced FP&A). This approach offers various benefits and well-defined expectations, as elaborated below. Subsequently, I will delve into when the transition to an internal FP&A hire becomes advisable, replacing the outsourced FP&A adv
What expectations should one have from an Outsourced FP&A advisor?
An Outsourced FP&A adviser is typically retained to address specific needs, such as:
Preparing for an upcoming Board meeting by conducting financial multi-year strategic modeling and cash projections.
Developing an Annual Budget to be approved by the Board.
Establishing Management Financial Reporting and Variance Analysis.
Providing interim ongoing planning and analysis facilitation on a part-time basis.
With broad industry exposure and extensive engagement experience, an Outsourced FP&A adviser should be able to onboard quickly, engage with management and operational teams, integrate into existing processes, and influence the organization toward more fiscally mature best practices.
When should the company hire an Internal FP&A lead?
An Outsourced FP&A adviser is often engaged for distinct purposes, including:
Conducting financial multi-year strategic modeling and cash projections in preparation for upcoming Board meetings.
Formulating an Annual Budget for Board approval.
Instituting Management Financial Reporting and Variance Analysis.
Facilitating ongoing planning and analysis on a part-time basis.
Leveraging comprehensive industry exposure and extensive engagement experience, an Outsourced FP&A adviser should demonstrate swift onboarding capabilities, effective collaboration with management and operational teams, seamless integration into existing processes, and the ability to steer the organization toward more sophisticated fiscal best practices.
Bonus Question: What amount of FP&A support does a typical company require?
In my experience, most companies find optimal value in a concise consulting commitment, typically not surpassing the equivalent of half a Full-Time Equivalent (FTE). Assuming an average duration of 3-6 months for an outsourced FP&A engagement, we can delineate three distinct stages, each spanning 1-2 months:
Establishing a New FP&A Practice: This phase involves intensive modeling, process development, and facilitation efforts, accounting for approximately 1/2 to 3/4 FTE time.
Stabilizing FP&A Support: As routine planning exercises become the norm, support gradually tapers off, stabilizing at around 1/4 to 1/3 FTE.
Special Projects and Onboarding Preparation: The engagement concludes with a focus on special projects and preparation for the onboarding of internal resources, operating at less than 1/4 FTE.
This phased approach ensures a methodical progression, starting from the establishment of the FP&A practice, moving towards stabilized support, and ultimately facilitating a seamless transition to internal resources, optimizing efficiency throughout the engagement.
The numerical data and estimations provided earlier derive from our extensive 15+ years of consulting experience, covering more than 100 engagements. It's crucial to note that individual circumstances may differ. We welcome the opportunity to learn about your unique FP&A support requirements and engage in a personalized discussion.
For further inquiries, please contact
Slava Burdman
Email: info@burdmanmc.com
Phone: (781) 296-3139