What is a Fractional Executive?

Written by vChief

December 6, 2018

Fractional executives: all the brains for a small portion of the price

If you’re a startup or small-to-medium-sized business, crafting the ideal executive team may be a challenge. From a financial standpoint, having a whole team of full-time executives may not be reasonable for your bottom line. The trend among startups and small businesses in this quandary is to add a fractional executive to your team who can offer strategy and planning for a specific function of your company in a more cost-effective, efficient manner.

What is a fractional executive?

If you’re unfamiliar with the term fractional executive, we’ll catch you up to speed. Essentially, a fractional executive takes on an executive role at a company for a “fraction” of their time, working more like a consultant and eliminating the need for lengthy interviews, long-term commitments, and high-end salaries. Fractional executives come seasoned with prior experience as a full-time executive within their career span. Often, fractional executives are used in Chief Financial Officer and Chief Marketing Officer roles, as well as Chief Operating Officer and Chief Technology Officer roles. Newer to the scene is our specialty, the fractional chief of staff.

How do fractional executives work?

There are a number of different ways to work with the fractional executive role within your company. Often, the executive has multiple clients and tailors their schedule to account for all needs. They can work virtually or in person. While some executives seek out business partnerships on their own, more and more are choosing to work within organizations that specialize in hiring out fractional executives, thus handling the paperwork, sourcing prospective clients, and offering branding, accounting, and legal support.

What are the reasons businesses choose fractional over traditional executives?

The number one reason businesses choose a fractional executive is because the cost-benefit savings are huge. With the average CFO’s annual salary hovering around $250,000, many smaller or startup businesses don’t have cash flow available to support that amount. By integrating a fractional executive, they still have access to the top talent, but spend less on payroll, plus retain savings on taxes, retirement benefits, and traditional hiring expenses. They can also ramp up over time as their needs grow.

A smaller company may also find they don’t need a dedicated, in-house CFO or CMO, as long as their fractional executive can create a plan and systems to get them on the ground running. Having a temporary person to fill in some gaps and create some action plans may be just what your small business needs.

Where do I look for a fractional executive for my company?

If you’re looking for an independent fractional executive, tap into your network. Your contacts may know individuals who serve in this capacity. They may not market their services as a “fractional executive” per se; they may call themselves a consultant or a contract executive, but they offer the same type of support.

A quick Google search will surface companies offering fractional executives. Some are broad in the domains they cover, while others will focus just on one area, such as finance.

For example, Fine Point Consulting offers accounting and human resources services specifically tailored to young companies that can’t afford full-time executives in those roles. These functions are critical for any business owner that struggles with understanding their numbers, predicting cash flow, or getting the most out of their workforce.

Fine Point’s Founder and CEO Luella Schmidt notes, “Scaling a business is hard. There is a give and take where the entrepreneur must develop core processes and delegate appropriately or it is impossible to grow. And yet, there’s often not a lot of extra cash to hire the appropriately skilled people to delegate to. Fractional executives are a tremendous benefit to companies in this stage. We help our entrepreneurs get through the messy middle while also helping them stay lean.”

At vChief, we have interim support services available to cover leadership gaps that occur when companies experience career shifts from within. We also offer fractional chief of staff support to many of our clients. This allows them the benefits of a chief of staff without carrying the cost of having one full-time on staff.

Your company will need to consider whether adding a fractional executive is the right move. For small and mid-sized companies and, most notably, startups, bringing on someone temporarily to lend an outside perspective and support executive tasks that may not be a strength of anyone within the organization can be a very efficient way to build your growing business.

You may also like…