The Fractional Difference
What Is a Fractional CXO/GC?
Fractional leadership is a model that provides organisations access to expertise and leadership in a specific area of the organisation. This leadership model is typically part-time or project-based, making it a flexible and cost-effective way for organisations to obtain executive-level guidance. Fractional leadership suits organisations of all sizes and across various industries.
Fractional leaders apply their knowledge and experience to help organisations streamline processes, improve performance, and achieve strategic goals. Small businesses and startups can benefit significantly from fractional leadership, where they may require expertise in a specific area but lack the financial resources to hire a full-time executive.
According to a Forbes post: “Fractional hiring allows [companies] to skip the imprecise recruiting and onboarding process to go straight to doing the work. You can find strategic executives with hands-on experience across a range of functions, from CMO, CTO, to CFO, ready to go to bat for your brand. With the marketplace demand for expertise intensifying, the fierce competition allows you to find budget-friendly options that pack a powerful punch.”
MassBio shares that “In 2022, CEO turnover reached its peak in 20 years…[and]…as we enter 2023, the uncharted conditions don’t appear to be changing any time soon,…As businesses look for ways to spark new growth and outrun competitors in this unpredictable market, on-demand executives can offer a fresh, experienced perspective combined with a reduction of risks and expenses associated with a long-term commitment.”
They’re a fantastic option for businesses that need top-tier leadership but aren’t ready or able to invest in a full-time executive role.
How does a Fractional CXO or GC differ from other non-FTE alternatives?
|
Fractional |
Consultant |
Interim hire / secondee |
Secondee |
Advisor |
Law firm |
|
|---|---|---|---|---|---|---|
|
Embedded in your team |
✓ | ✖ | ✓ | ✓ | ✖ | ✖ |
|
End date |
✖ | ✓ | Yes | Yes | ✖ |
Usually hourly or project based event costed |
|
Full time? |
Not usually, but possible |
Maybe |
✓ |
Could be |
✖ | ✖ |
|
Represents the company |
✓ | ✖ | ✓ |
No, acts under supervision |
✖ | ✖ |
|
Leads team? |
✓ | ✖ | ✓ |
Maybe |
✖ | ✖ |
Cred: Fractionals United (adapted to capture the needs of alternative to fractional GCs as well)
Why Hire a Fractional CXO/GC?
Fractional CXO/GCs are a powerful resource for companies in various stages of growth. Whether you’re a startup needing strategic direction, a growing business navigating expansion, or a mature company looking to refine operations, a fractional CXO/GC can bring the expertise you need—without breaking the bank.
How Much Does a Fractional CXO/GC Cost?
Now, onto the big question: How much does a fractional CXO/GC cost? The cost of a fractional CXO/GC can vary widely depending on several factors, including the CXO’s level of experience, the scope of work, industry, geographic location, and the amount of time they’ll dedicate to your business.
Here’s a breakdown of what you can expect:
1. Hourly Rates
Many fractional CXO/GCs charge by the hour, which gives both you and the CXO/GC flexibility. On average, you can expect to pay anywhere from $300 to $700 per hour for a fractional CXO or GC, depending on their experience and the complexity of the work involved. Highly specialized roles, may command rates at the higher end of this spectrum.
2. Monthly Retainers
Another common pricing model is the monthly retainer. This is a great option if you need consistent support and ongoing strategic leadership and operational responsibilities agreed by both parties. Monthly retainers for fractional CXO/GCs typically range from $5,000 to $20,000 per month. The cost varies depending on the number of hours worked and the level of involvement required. For example, if you need a fractional COO to oversee a critical new project a few days a week and in person, you might be looking at a higher retainer compared to a fractional CMO who provides strategic guidance but only works one day a week. Some engagements can also involve a mix of a retainer fee + surge hours where additional fees apply beyond the fixed hourly allocation for overtime hours.
3. Project-Based Fees
For companies with specific, time-bound projects, fractional CXO/GCs may offer project-based pricing. This model is particularly beneficial when you need a CXO’s expertise to tackle a defined initiative, such as launching a new product or entering a new market. Project-based fees can range from $10,000 to $50,000 or more, depending on the scope and duration of the project. The advantage of this model is that you know exactly what you’re paying for a specific outcome, which can make budgeting easier.
4. Per day rate
This model often features different rates for recurring engagements versus one-off events, workshops, etc. For example, if a business is holding a strategic planning offsite and needs a skilled facilitator to help the team unpack the needs of the business and set clear priorities for the next cycle.
5. Coaching & mentoring packages
May involve a strategic planning workshop accompanied by additional one-on-one weekly calls to deliver coaching results. For example, see our Venture Bench Sole GC program which can involve a mix of coaching, monthly retainer and hourly rates.
6. Advisory Role
A fixed rate for monthly calls offering strategic and operational guidance.
Factors That Influence Cost
As a rule of thumb, anticipate paying around 60-70% of what you'd spend on an equivalent full-time executive for 2.5 days per week. This strategy allows you to apply experience and expertise in a highly targeted and controlled manner, ensuring cost-effectiveness and flexibility.
Several factors can influence how much you’ll pay for a fractional CXO/GC:
-
Experience and Expertise
The more experienced and specialized the CXO, the higher the cost. However, this often translates to greater value for your business, as seasoned professionals can deliver high-impact results.
-
Industry
Certain industries, such as technology or finance, may have higher market rates due to the specialized knowledge required.
-
Time Commitment
The more time a CXO/GC dedicates to your company, the higher the cost. However, even a few hours a week from a seasoned CXO/GC can make a significant difference in your business.
-
Geographic Location
Rates may vary depending on the CXO’s location. For instance, CXO/GCs based in major metropolitan areas or regions with a high cost of living may charge more than those in smaller markets.
Is Hiring a Fractional CXO/GC Worth the Investment?
Absolutely!
Hiring a Fractional Executive offers several significant advantages (credit: thefractionalexec.com.au):
Early Access to Experienced Executives: Fractional Executives can be engaged at an earlier stage in a company's development than would be feasible for a full-time hire or at a strategic turning point where the current functional leader would have reached the extend of their expertise. This provides the company with an immediate boost in expertise and leadership in the required area(s).
Efficiency and Focus: Fractional Executives apply their experience and expertise in a highly targeted and efficient manner. They can assist with launching a new product or entering a market, reviewing and implementing a sales/marketing strategy, or developing a new feature or product.
Access to Top Talent: In the wake of the COVID-19 pandemic, many senior executives have transitioned away from full-time employment. Engaging these executives in a fractional capacity may be the only way to access their unique skill sets and industry experience.
Overall, Fractional Executives provide a flexible, cost-effective solution for companies seeking experienced leadership and strategic guidance.
