What Can a Fractional Executive Do for Your Startup? 

Fractional executives are experienced freelancers or consultants who a company can hire to work in a c-suite capacity on a part-time basis. Here’s how to get the most out of them.    

Written by Jennifer Barnes
Published on Mar. 15, 2024
What Can a Fractional Executive Do for Your Startup? 
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Running a startup is like juggling several balls at once, from monitoring finances to strategizing marketing efforts. Among the most significant challenges is finding someone with the appropriate expertise to help you manage these tasks efficiently without stretching the budget too thin.

Enter fractional executives.

The recent rise in fractional executives is largely driven by the rapid evolution of technology and market demands, which necessitates a level of specialized knowledge and agility that many organizations struggle to maintain in-house.

4 Reasons to Hire a Fractional Executive

  1. When you need financial expertise on a budget.
  2. To help you navigate a period of growth or scaling.
  3. For project-specific leadership.
  4. To fill a temporary leadership gap.  

As technological advancements and consumer expectations shift at an extreme pace, companies require strategic insights and specialized skills to navigate these changes. Yet the financial burden of full-time executives with such expertise can prohibit that from happening. The fractional executive model offers a solution, providing professionals on a part-time or project basis, allowing organizations to use expert guidance without the full-time expense. 

Fractional executives also bring extensive networks and industry connections, adding value beyond their expertise and helping startups forge new partnerships, expand market reach, or access specialized resources. Here’s how to determine if hiring one is right for your organization.

 

What Is a Fractional Executive?

A fractional executive is typically an experienced individual who a company can hire to work in a c-suite capacity on a temporary, part-time basis. They may work for a firm or as a freelancer.

Sometimes a fractional executive comes in, fixes a bunch of issues, helps to create standard operating procedures (SOPs), streamlines various parts of an organization, improves or reorganizes the staff’s responsibilities makes necessary cuts or additions, and then steps back and provides oversight and direction for just a few hours a week.

In the case of fractional controllers and CFOs, a fractional executive might be a skilled executive tired of the 60-hour weeks or the life of a public CPA. They could also be veteran executives nearing retirement who only want to work 20-to-30 hours a week for multiple organizations, where they can take all the things they have learned over the years and help smaller companies. 

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4 Instances When You Should Hire a Fractional Executive

Founders will often try to bridge the skill gap by having a senior or lower-level employee assume C-suite responsibilities, such as having an office manager play the role of HR or a controller. The allure of costing savings is understandable, but it’s a huge gamble. These roles require deep strategic insight or a greater deal of education and experience that lower-level employees usually lack. 

While these less experienced employees try to do the best they can, they simply aren’t capable of making pivotal decisions and understanding complex market dynamics, which can greatly impact a company’s future.

The other option, hiring a C-suite or senior executive, can lead to financial strain, particularly if the company is not yet generating substantial profits or is in a phase of significant investment in other areas. Allocating a large portion of the budget to executive salaries might limit the company’s ability to fund other critical operations or growth opportunities. 

Here are some situations that it makes sense to consider a fractional executive:

  1. When You Need Expertise on a Budget: If your business requires the strategic insight of a seasoned executive but can’t afford or justify a full-time position, a fractional executive is an ideal solution. They bring their experience and skills to the table without the full-time salary and benefits package.
  2. During a Period of Growth or Scaling: When your company is scaling up, you will need specialized knowledge to navigate the challenges of growth. A fractional executive can guide your team through this phase, offering their expertise in areas like operations, finance or marketing, without the long-term commitment.
  3. For Project-Specific Leadership: Sometimes, a specific project requires the leadership of someone with executive-level experience, but only for the duration of the project. Hiring a fractional executive can provide your team with the leadership they need to complete the project successfully.
  4. To Fill a Temporary Leadership Gap: If an executive leaves unexpectedly or takes a leave of absence, it can leave a significant gap in your company’s leadership. A fractional executive can step in to fill this gap, ensuring continuity in strategic decision-making and operations until a permanent solution is found.

 

How to Prepare for a Fractional Executive?

The effectiveness of a fractional executive depends on a clear understanding of your business goals and a shared vision for your company’s future. It’s crucial to find an executive who is not only well-versed in your industry but also aligns with your company culture and can integrate smoothly into your team. Identifying the specific areas where your business needs expertise and leadership is equally important. 

You can expect the first few weeks of bringing on a fractional executive to be the learning stage where the executive is wrapping their arms around the nuances of your organization and spends time asking questions, writing up SOPs, interviewing team members and creating a game plan with priorities for their next key initiatives. 

An excellent fractional executive will want to add value quickly, get some quick wins with some low-hanging fruit, and then find a few important key initiatives that he or she can execute. Three things you can do to prepare for a fractional executive are as follows:

  1. Be clear about what your goals are, and what you are looking to accomplish in the next year or three.
  2. Set expectations around cost and how much time you need from them. If you aren’t sure, ask them to communicate the first month’s budget and provide weekly or monthly updates on their progress.
  3. Just as you would a full-time executive hire, set goals for this person and be clear on what you would like to see from them. Hold them accountable and set regular meetings with them to debrief on their findings and the status of things they are working on. Ask good questions and seek advice.

When trying to decide on what kind of fractional executive you need at your organization, take into consideration your goals and initiatives. Some questions you can ask yourself are:

  1. Do you have the capable resources on your team to execute the goals or do you need a strong leader to make things happen?
  2. Which departments are less efficient and lack leadership? 

You should interview various candidates and firms and select the one that best fits your culture, has the background necessary to hit the ground running quickly and gives you good advice even on the first call. 

 

Advantages of a Fractional Executive

 

1. They Can Bring a Fresh Perspective and Expertise

Hiring a fractional executive can significantly impact a founder by reducing their workload and stress, allowing them to focus on strategic growth areas and their core competencies. Off-loading responsibilities can also bring fresh insights and expertise to the business, improving decision-making and operational efficiency. 

 

2. They Can Help You Meet Regulatory Compliance

On a business level, having a fractional executive with expertise in compliance or finance ensures that the company meets regulatory requirements and adopts sound financial practices. This expertise reduces risks and can improve the business’ financial health and reputation, making it more sustainable and poised for growth in the long term.

 

3. They Can Allow You to Focus on Your Speciality

The impact of hiring a fractional executive can be large. You are no longer alone in making decisions and you can offload important decisions to someone with the expertise to make sure things go as well as possible. When it comes to the management of your team, you can delegate much of this to an executive so that you are only managing the necessary key people that make sense for you to manage. Hiring a fractional executive can help you get out of the weeds and have more focus on the areas in your business that you are best at.

An example of this is hiring a controller to manage the roles and responsibilities in the accounting department. If you were once overseeing a bookkeeper, then hiring a CFO can get you completely out of this task. You no longer have to think about anything in the accounting department and can delegate all financial decisions to this new fractional controller.

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Disadvantages of a Fractional Executive

 

1. They Aren’t Always Available

One of the main disadvantages of hiring a fractional executive is that they aren’t solely dedicated to your business. They will likely have other clients or companies they are working with and will not always be available. It’s important to understand their time constraints and set expectations as to how many hours a week they will be dedicated to your business. 

 

2. It Takes Time for Them to Acclimate to Your Culture

If the role is remote, acclimating to your company culture can be challenging. Being onsite helps to get them integrated into your business faster. It always helps to spend time together, especially one-on-one time with someone who is helping you steer the ship. If the executive is remote, along with the entire company, then this may be something you have already dialed in and the acclimation process will be much easier. If the fractional executive is the only remote person at the firm, do your best to set some video meetings where each member of the team they will be working with can get to know them one-on-one. 

 

3. They Aren’t Involved in Day-to-Day Engagement 

To further this notion, fractional executives might not be present daily to immerse themselves in the day-to-day dynamics and nuances of the workplace. This limited exposure can initially make it difficult for them to establish strong personal connections with the team and fully grasp the intricacies of the company’s culture and workflow. 

This may lead to challenges in aligning their strategies with the company’s unique needs and potentially slow down the integration process and effectiveness of their role in the short term. To mitigate these challenges, companies can facilitate regular and structured interactions between the fractional executive and the team, and provide comprehensive onboarding materials that capture the essence of the company’s culture and operational nuances. 

Ultimately, there are many good reasons to hire a fractional executive and it’s why the fractional space is growing tremendously. New firms are popping up every month, and it’s for you to decide which firm or freelancer is right for you.

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