Too Expensive to Hire a Full-Time CFO? Maybe It’s Time to Rent One!

For pharmaceutical companies that have moved beyond the initial 0-to-1 startup phase, systematic financial management is just as critical as innovative products.

The reason lies in the fact that, on one hand, against the backdrop of an economic downturn, enterprises are in urgent need of financing while simultaneously facing increasing difficulties in securing it; on the other hand, the pharmaceutical and medical device industries, characterized by their high-tech nature, are key areas of regulatory focus under China’s relevant laws and regulations. In recent years, compliance supervision over the healthcare industry has become increasingly stringent. These factors have compelled companies to establish robust and professional financial management systems, in which a competent Chief Financial Officer (CFO) is indispensable.

However, for such companies, the cost of a full-time CFO is prohibitively high and often unaffordable. Moreover, given their smaller business scale compared to large corporations, the workload for a full-time CFO may not be sufficient to ensure full utilization.

Meanwhile, bookkeeping agencies and financial consulting firms in the market, due to their relatively limited scope of services, are clearly unable to meet the practical needs of enterprises.

Therefore, small and medium-sized enterprises (SMEs) in distress urgently need a solution that provides deep, professional support at an affordable cost. Thus, the “Old Master” CFO fractional leasing model was born.

To date, Lao Fashi has collaborated with dozens of investment institutions and served over one hundred enterprises, the majority of which are in the pharmaceutical sector. In today’s economic downturn, pharmaceutical companies are facing particularly challenging times; they are urgently seeking financing while simultaneously having to adopt austere measures. Meanwhile, investors in pharmaceutical firms are also under significant pressure. Unable to engage directly in operations, they need to appoint trusted Chief Financial Officers (CFOs) to these companies to help them navigate this difficult period. Through discussions with Li Tairan, founder of Lao Fashi, VCBeat gained further insight into the service offerings of fractional CFO leasing and its industry value.

What Is CFO Time-Share Leasing?

When VCBeat raised this issue, the founder, who has worked at two of the Big Four accounting firms, stated that fractional CFO leasing is not a new concept. As early as 2001, a UK-based company began offering this service. In China, Lao Fa Shi is currently the primary company providing such services.

Li Tairan, Founder of Lao Fashi

In layman's terms, under the CFO time-sharing lease model, companies can purchase specific “service hours” from a CFO and decide whether to terminate the engagement at any time based on their development needs and the CFO’s performance. If a company chooses to terminate the service, the time-sharing lease model does not incur substantial termination fees. Conversely, if the company opts to continue the engagement, the relatively low cost of the time-sharing arrangement helps alleviate its financial burden.

Furthermore, the high flexibility of this service model is reflected in the ability of enterprises to request either comprehensive financial management services or only specific components from the CFO, according to their own development needs.

Among the services provided by Lao Fashi, there are three major dimensions encompassing 12 key areas: under the strategic dimension—enterprise digital transformation, financing, global expansion, and mergers and acquisitions; under the operational dimension—establishment of internal control systems, performance improvement, financial reporting, and cash flow management; and under the support dimension—accounting compliance, budget management, tax planning, and equity incentives. Collectively, these services comprehensively cover all aspects of corporate financial management.

However, due to differences in development stages or industry sectors, enterprises may have varying priorities in financial management. In response, seasoned experts can provide either comprehensive, integrated financial management services or targeted, partial financial management solutions.

Taking the critically important service of matching investment and financing opportunities as an example, “Lao Fa Shi” can provide enterprises with both equity financing and debt financing services. Through years of dedicated effort, “Lao Fa Shi” has accumulated a robust network of resources, including partnerships with mainstream domestic investment institutions and top-tier Chinese banks, thereby meeting diverse corporate funding needs.

Furthermore, when dealing with healthcare enterprises that demand higher levels of compliance and professionalism, as well as greater operational complexity, seasoned experts will adopt a targeted approach to help these companies achieve regulatory compliance through robust financial management and attain their business objectives more efficiently.

For instance, when serving biopharmaceutical and medical device companies, seasoned experts place greater emphasis on financial management tasks in the following four areas: first, closely monitoring the status of applications for drug and medical device registration certificates, i.e., product compliance; second, focusing on the compliance of the company’s business model; third, assisting the company in accurately accounting for R&D expenditures on drugs (or medical devices); and fourth, formulating departmental sales plans for the sales team and establishing a KPI-based performance evaluation system with individual-level granularity.

So, what kind of team has the veteran expert cultivated?

To become a member of the “Old Master” financial management team, work experience at a well-known accounting firm or a leading enterprise in the industry is a basic requirement. If the client base consists of pharmaceutical companies, relevant work experience in the pharmaceutical sector is additionally required. He further added, “Operational professionals with many years of hands-on experience in the pharmaceutical industry may also join the ‘Old Master’ team after undergoing training in finance and economics.”

Beyond professional expertise, seasoned executives also place significant emphasis on a CFO’s “emotional intelligence.” In a case shared by Li Tairan, a CFO stepped in to mediate shareholder conflicts and coordinate resources across parties, helping the company navigate through difficult times.

In this case, by the time the investors approached the seasoned expert, the portfolio company had already been in arrears with employee salaries for several months, and disputes had arisen among shareholders, resulting in the freezing of the founding shareholders’ equity. To make matters worse, the company was due to repay a bank loan of nearly RMB 10 million within the following month.

In this scenario, on the one hand, the seasoned expert stepped in to mediate shareholder conflicts and swiftly adjusted the business model to stabilize morale and attempt to salvage revenue; on the other hand, the expert began liaising with banks and investment institutions to help the company secure financing. As a result, the company’s crisis was resolved.

Furthermore, given the sensitive nature of the CFO role, “Lao Fa Shi” requires hired CFOs to sign non-disclosure agreements (NDAs) to safeguard the confidentiality and security of corporate data. In an interview, Li Tairan emphasized that “Lao Fa Shi” does not operate as a freelance marketplace for CFOs; instead, it enters into direct contracts with them. Companies engaging these services also sign contracts directly with “Lao Fa Shi.” Under this model, CFOs have no basis or justification for disclosing confidential corporate information or data.

Thus, overall, Lao Fashi provides a comprehensive, professional, and secure financial management service suite for small and medium-sized enterprises pursuing scalable growth.

Currently, Laofashi’s business scope has expanded overseas. In Europe and the United States, in addition to financial management services, Laofashi also provides Chinese enterprises seeking global expansion with services such as connecting them to local partnership resources.

From the perspective of the company’s overall development, Lao Fa Shi’s primary objective at this stage is to serve a broader client base and gradually build brand influence. In the future, leveraging extensive experience from individual cases, Lao Fa Shi will develop standardized solutions addressing common financial management challenges across industries, thereby helping enterprises resolve sector-specific, shared financial management issues more rapidly and efficiently.

“After all, certain issues are not unique to a single pharmaceutical company. If systematic solutions can be developed, they will not only resolve problems efficiently but also optimize the allocation of industry resources and avoid waste,” he stated.