Fractional Is Exploding. Here's What Nobody's Telling You

Leah Neaderthal0:00

In 2022, there were about 2,000 people on LinkedIn calling themselves a fractional executive, fractional CMO, fractional COO, fractional CHRO-you name it. Right. A few years later, there are so many more. Some estimates put the number well over 100,000 people calling themselves fractional today, and that's not a trend. That's like an explosion. I mean, any Zoolander fans out there? I mean, if this was Zoolander, then Zoolander would be saying fractional is so hot right now. And as more and more women consultants either call themselves fractional or offer fractional services, there are a few things I'm noticing. Some of them are really good, but some of them have a you know darker side. There's the expectation of what fractional will do for them, and then the reality. And I'm seeing women fall into some traps. And so today, I want to talk honestly about the fractional trend, or really fractional explosion. What's actually driving it? What it can do for you, the risks, and the little secret that almost nobody's saying out loud. And so, if you've been considering calling yourself a fractional executive, or if you already call yourself that, you're going to want to listen to this and share it. So let's get into it. Welcome to Smart Gets Paid with me, Leah Niederthal. I help women run more profitable consulting businesses, getting more of the clients you want and getting paid way more for your work without sacrificing your time. But I've never been a salesperson. My background is in corporate marketing, and when I started my own consulting business, I learned pretty quickly that it's about 1000 times harder to sell your own stuff than it is to sell someone else's. So I taught myself how to do it. I turned it into a methodology, and now I teach that proven methodology to my clients. So whether your consulting contracts are $10,000, $100,000, or more, if you want more clients you love, more work you love, and they get paid more than you ever thought possible, then you're in the right place. Let's do it together. Thanks for tuning in, and don't forget to rate, review, and share. Hey there, Leah here, and thanks for tuning in. I hope wherever you are right now, wherever you're listening to this, I hope you're having a great week, making some good progress in your business, and taking some time for you. So that explosion I mentioned, the fractional explosion-it's not slowing down, and if anything, I'm seeing it pick up more speed. And I have a lot of women in my world who are either calling themselves fractional, or seriously thinking about it, or adding fractional services to their suite of consulting services. And what's funny is that we use the term consulting, which is sort of an umbrella term for us, which can mean anything from advisory to direct service work and like doing the work to fractional and everything in between. So in this episode, I'm going to talk about it honestly. You're going to hear what's good about the fractional model because there's real opportunity here, and I'm not here to trash it. And you're going to hear some honest truths, the things I would want you to watch out for before you put that label on yourself, and you're going to hear how to avoid some traps, what to do instead, and how to make your business profitable and sustainable, whether you end up going fractional or not. So, before I even get into what's good about it, I have to sort of point something out. From where I sit, there's not a lot of agreement on what fractional actually means, I mean, ask a few people what a fractional CMO does, and you'll get like a handful of different answers. For some people, fractional means advisory. You know, you stay in this expert role, offering guidance. Right, you give your recommendations, and then it's on the team or other people to execute those recommendations, right? For other people, fractional means you're basically embedded. You've got a seat at the leadership table. You're managing a team. You're in the weekly meetings. You're accountable for outcomes, just like a full-time executive would be. And then for other people, fractional means something else entirely. It means you're in the weeds. You're actually doing the work. You're like writing the campaigns or building the pipeline or whatever the deliverables are.

Leah Neaderthal4:07

You're the one producing it, either alone or with other internal team members. Same title, you know, fractional CMO. Three totally different roles, and the same goes for fractional executives in any other role, and that's a problem because a client hearing, you know, quote unquote, fractional CMO might be picturing the person who runs the team day to day, and the consultant who's offering fractional CMO services might be picturing herself just offering guidance that the team runs with, and so already you've got a mismatch before the engagement even starts, and that's at the center of a lot of what can go wrong in these relationships. But for now, just sit with this: the word itself doesn't mean just one thing. So if you're going to have the fractional label, you can't just assume the person you're talking to understands that label the same way that you do. All right, so. Having said all that, here's what I'm seeing: more and more women I talk to are either calling themselves fractional or they're seriously considering it. You know, fractional CMO, fractional head of people, you name the function. There's like a fractional version of it now, right? And I get why. I mean, it sounds official. It sounds senior. It sounds like a real title. It sounds like something a client might immediately understand instead of trying to explain. Like, well, I do a mix of strategy and some hands-on execution, and sometimes I run the team. Blah blah blah. Right? Fractional CMO. Like, it seems to sort of shortcut that. Again, there's a lot of interpretation there, but you know, it can provide a shortcut. And I do think that in this moment, there are a lot of senior people who have been laid off, or they're just not working, and they're becoming, you know, consultants or fractionals. They're sort of entering this independent business owner market. Maybe it's because they want to actually run their own businesses and have their own clients, and maybe it's also a temporary thing until they get their next job. But I do think, just in general, that you do have more very senior people in this market than in previous years, and I also think what's driving this growth is just a math problem that people are running in their heads. You know, they take a fraction of a full time salary times you know two or three clients, and that adds up to more than they were making before, and on top of that, fractional engagements can tend to run longer, and they can have less churn. Right, emphasis on can, which we'll get to in a second. And you know, just a quick side note on that math. I mean, a lot of people set their fractional rate by taking what a full time corporate salary for that role would be. You know, not even their own past salary, just what that role would command in corporate, and then taking a fraction of it, or you know, like a percentage of their time. But here's the problem with that: even if you land on the same number that you'd make in corporate, you're already taking a pay cut because when you're running your own business, you're covering your own taxes, your own healthcare, you're covering the infrastructure of running a business, you know all the stuff that corporate salary used to absorb for you. So, I guess when you start with the corporate salary as your anchor, like why would you aim for a number that's sort of already lower when you're already taking a pay cut just to run your own business, right? I mean, I have women in my program who are making well beyond what that role would ever pay in corporate because they know how to scope their work, they know how to price it for value, and they know how to get the right clients. Okay, tangent over. But you know, even with that little wrinkle, I get why the math still feels good on paper. You know, steadier income, fewer clients to manage, less time spent on business development because you're not always you know trying to get the next thing, and all of that can be true.

Leah Neaderthal7:46

Okay, so I get the appeal, but I'm also going to share what's also true once you're really in it, because I think a lot of this is driven by the hope of you know what people think fractional is going to do for them, and I want to start here with you know what's actually good about this because again, there is real opportunity in the fractional model. Some of this is genuinely smart. First, I just want to say that for anyone involved in working with clients, having different levels of service is a good thing, right? I talk to a lot of women doing consulting who basically, when clients work with them, these women basically just offer one thing, and that one thing is like you get all of me, you get all of my brain until this work is done, right? But the problem is that number one, it's hard to have boundaries when you're sort of saying here's all of me, and they don't know how to offer anything smaller. But also, there's nowhere to go that's bigger either because you know your only thing you offer is like the client just gets you know all of your thinking and all of your value and whatnot, so you don't know how to go smaller, but you also can't go bigger, right? Fractional introduces something different. It's a way to work with a client on an ongoing basis at a defined level of involvement instead of it being just like one project with a beginning and an end-that's not a bad model, right? It's just a different way to structure your services, and for some women, that structure is exactly what they need. So it does give a little bit more structure to the "you get all of me" sort of model, right? And second, it can be easier to run a business on the revenue side, and again, I want to majorly emphasize can because in theory it can. Let's say your fractional engagement is $10,000 a month. I mean, your mileage may vary, but let's just say 10k to sort of illustrate the point. And if you're working with that client for six months, a year, sometimes longer, and then you stack two or three or more of those clients together, then that's not a small amount of recurring revenue, right? And so the math can work out as long as you're fully booked. And third, there can be less churn. You know, again, if you have two or three of these longer engagements going at once, you're not managing project starts and ends. You're not trying to find the next. Project or sell in the next project the way you might be with shorter engagements, and so it can create more stability in your business. And so all of that is good, right? If you're somebody who knows how to set real boundaries and who genuinely has the experience to operate at that level, like fractional can be a legitimate smart way to build your business. All right, but and there's a big but here, and I want to share some honest truths. And I say these with so much love because I'm not trying to call out anyone here. And you know, if anything, I'm telling you these honest truths because I want to protect you from maybe finding out the hard way six months into branding yourself as something like a fractional, and you find out that you've fallen into a trap, or it isn't what you expected, or this isn't just you know what you thought it would be, right? Because I think there are a few things going on that sort of need to be. I just want to shine a light on them, okay? And there are four honest truths. Honest truth number one is that the same stability that makes fractional appealing can also be its biggest risk. All right, so I just told you that stacking two or three fractional clients together can mean real recurring revenue. Right on paper, that is good, of course, but the opposite is also true. When your business runs on two or three long engagements, that means a lot of your revenue is locked up in a very small number of clients, and if one of those clients ends a contract, you're not making up a you know small dip in revenue.

Leah Neaderthal11:28

You're making up like a third or a half of your income. You can get into a situation where you have a whale client, right? And a whale client could be good until it's not. And I see this happen all the time. I was talking to a woman consultant who has one client that makes up the bulk of her work, and she admitted that like she's nervous because if that one client goes away, you know she's really sort of up a creek, right? And I know we're like psychologically programmed to not feel like bad things will happen to us, right? But the truth is that clients do cancel. I mean, I've had a number of people come to me because they had a whale client and they knew, like rationally, that that client could go away, but they sort of put off, you know, doing anything about it, right? And in the course of our conversations about joining the academy, that client, that whale client, ended the contract. So now, not only did they lose their biggest contract and they needed to like replace that revenue, now they didn't have the money to invest in support and systems to get new clients. And this is not like just a one-time thing. I have seen this happen so many times. So even though we might not want to believe it, like clients do end contracts, right? So that's honest truth number one. Having a business built on a few fractional clients can be a big revenue risk. Honest truth number two is that a lot of people reach for the fractional label because they don't know how to actually explain the value of what they do, and I say this with so much compassion because I know that positioning the true value of your work is really hard, and I know this because number one, I've had to figure it out myself, right? But I also know it because the module in the academy where you create what's called your painkiller statement-you know how you talk about your work, how you position your work for value-that is the hardest part of the academy, even with our step-by-step framework, and again, I've struggled with it too. Right, like I've worked on my painkiller so many times over the 10 plus years I've been in business. So I get why putting the label, you know, fractional CMO or fractional whatever, on your business and calling it a day feels like a relief. Right, it's like okay, this is a title that people get, so my clients will get it, right? But again, as we talked about, not everybody like gets it the same way. But the larger point is this: that fractional label that's still not a value statement that doesn't communicate the value of what you do. It's a job title standing in for a painkiller statement, and those are two very different things. For a lot of people, maybe they weren't able or still aren't able to, you know, explain the actual value of what they do. For some other people, maybe they weren't willing to do the hard work and really get to a statement or messaging that works, right? But I know that if you can clearly and concisely explain not just what you do but the value of your work, then clients would respond to that more than the fractional label, and you wouldn't have to lean on a fractional label as a crutch. So again, this may not apply to everybody, but I do know that honest truth number two is a lot of people reach for the fractional label because it's easier than trying to explain the value of what they do. Honest truth number three, it's not actually easier to sell. It's just different. So when you do the math, doing fractional work looks like you only need you know two or three clients to make a good income. Right? We talked about that earlier, and it's. Seems like it should be easier to sell because getting two or three clients is easier than getting like six or 10, right? And if you only need two or three clients a year, then it might be the case that your network, the people who refer clients to you, maybe that can last a little bit longer, right? Because when you start your business.

Leah Neaderthal15:20

The first clients you'll get-that sort of first wave-comes from people you already know. After all, you know, getting two or three clients is easier than getting six or 10. But as anyone who's been running their business for more than two years will tell you, and you know, we have women in our program who've been running their business for two or 10 or 20 years, they will all tell you that getting two clients isn't actually easier than getting six. The truth is that getting clients is hard, no matter what. You have to do the steps. You have to do marketing to get in front of clients. You have to lead a sales process. You have to get the work sold in, and all that takes time. I mean, if you've been listening to this podcast for a while, you've heard me say that the B 2b sales process takes anywhere from three to 18 months, right? And even though you know a lot of the like business coaches want you to believe that getting clients should be fast and easy, getting B 2b clients is a whole different ball game. And you know, I saw something about this recently that I really agree with, where somebody said that the most common mistake she sees new fractional consultants making is leading with a fractional retainer right out of the gate, and she's right. I mean, if you're selling into your existing network, you know, sure, that might work because there's already trust there. Like, if the person you're selling to also worked with you for 10 years in your last job or whatever, then that might be a successful sale because they already know that you're good at what you do. But if you're talking to clients that don't know you that well yet, I mean, even if you really like hit it off, right? You're kind of asking a total stranger to commit real money in a long relationship without any proof of what it's actually like to work with you, and a lot of clients are actually shying away from longer engagements these days. You know, in this economy, sort of waves hands and all the things, and so you might be like, "Well, I'll just do a smaller fractional engagement, right? But a smaller fractional engagement, like a three-month trial, that usually doesn't give you enough time to get a real result, especially if you've been brought in to solve a higher level, like often systemic problem that clients would look to a senior executive to solve. Right. So the fractional engagement that sounds like an easy sell is actually a high ticket engagement for a longer time frame to a client that might be gun shy about a longer contract, right? It can actually be one of the hardest sales there is. So that's honest truth number three. It's not actually easier to sell. It's just different. And finally, honest truth number four: fractional work is a really slippery slope to being treated like an employee. I mean, I kind of liken it to being a firefighter, right? There's no such thing as a fractional firefighter. When the alarm goes off, when the client needs you, you're all in, like whatever fractional was supposed to mean on paper. And that's the thing about fractional work that I think nobody really prepares you for. When a client has access to you, whether that's all of you or some you know made up fraction of you, and that client isn't good at holding boundaries. Like they will want more. You know, clients are going to client. They will want more of you. It's ripe for scope creep. You know, the requests that are like, "Can you just fill in the blank? Right. So that's on the client side. On the other side, you've got women who have expertise who want to solve problems, who want to be helpful, and we also don't have like a lifetime of experience championing our own boundaries, right? I mean, think about it. Like, as little girls, as young women earlier in our careers, we were not exactly encouraged to like say no and assert ourselves, right? Assert our boundaries. If anything, we were rewarded for the opposite, right? For being agreeable, for being easy to work with, for not making waves, right?

Leah Neaderthal19:09

So by the time you're running your own business, holding a firm boundary with a paying client, it's not just like hard and annoying. It goes against a lot of what you were trained to do or conditioned to do your whole life, and it actually gets harder. I found the more the client is paying you, because some part of you feels like you owe them, you know, more for that. And if you've ever gotten, you know, your biggest paying client ever, I think you know what I mean by that. And you don't want to say no, right? You don't want to say no and risk making them mad out of fear that they'll cancel the contract either right away or you know when it comes up for renewal. So put those two things together: clients who will always want more, and consultants who were never really taught how to hold the line. Right, that's a terrible combination. And so before you know it, the thing that was supposed to be this like. Contained relationship can start to feel a lot like a job, like your last corporate job, even. And I've seen this play out so many times. I'm watching this right now. I know a woman who has a fractional engagement as one of her services. The fractional client asked her to come in, you know, on site or whatever, at a time that actually really did not work for this woman for my client, but she doesn't feel like she can say no. Right. On top of that, they recently told her that they were going to change who she reports into in this, you know, fractional role, which I thought was really interesting language. Right? Reports to-that's language you'd use for an employee, not someone running your own business, right? So, in a fractional role, treated more like an employee than you know an expert, that's a real risk in fractional work. So, those are my honest truths. Number one, the same stability that makes fractional appealing can also be really risky. Number two, a lot of people reach for the fractional label because they don't know how to explain the value of what they do, which is still an important thing to know how to do, even if you are fractional. Number three, it's not actually easier to sell; it's just different. And number four, fractional work is a really slippery slope to being treated like an employee. And I promise we're almost to the good part-the part where I tell you like what to actually do about all this, but before we get there, there's just one more thing I have to say. And depending on how you feel about fractional work, you might either hear this and be like, "Yes, you know, preach, or this might feel kind of harsh. Okay, here's the dirty little secret about this fractional explosion: a lot of people calling themselves fractional aren't actually operating anywhere near the level that the title implies. Take fractional CMO, right? That's the one I hear the most. A CMO in a company, a real CMO, has run an entire marketing team, overseen you know every channel all at once, organic paid brand partnerships KPIs tied to revenue with you know the experience of having seen how it all moves together and the judgment to know how to make it work right that's the job, but a lot of people picking up the fractional CMO label came out of marketing in their career, right? And they think, "Well, I did marketing, so I can call myself a fractional CMO. But having a marketing background, or even having done marketing in your career, isn't the same thing as having been a CMO. And doing your client's marketing for a fraction of your time doesn't make you a fractional CMO, and you know you can take this same logic and apply it to a fractional COO, CHRO, you know on and on, right? And clients are starting to notice. I actually saw this firsthand just about a year ago. My marketing person was rolling off, and I started looking for a fractional marketing person for my business, and I talk to a handful of people billing themselves as fractional CMOs, and I cannot even tell you the range of experiences and the range of expertise in the people I talk to. And I'm just a small business, right?

Leah Neaderthal23:17

Think about what a mid-size or a larger business would expect from somebody with a fractional label, right? When you adopt the fractional label and you aren't doing that level of work, it doesn't just hurt your credibility; it hurts the credibility of the people who are operating at that level because it makes it hard for clients to know who's legit. All right, okay, that's my soapbox. That's it, right? It's not that fractional is bad; it's that for a lot of people, the label doesn't match the credibility. All right, so here's the good news: none of this means that fractional is off the table for you. It just means I want you to think about it differently than most people are doing it right now. So first things first, figure out how to position your work for value. It's something you're going to have to do anyway if you want to run a profitable and sustainable business, right? Don't shortcut it by using a fractional label as a crutch. And of course, if you want help to do that, we do that in our module called the Painkiller Statement. Second, have more than one service type and don't just lead with a fractional retainer. Remember what I told you, right? The fractional retainer can be one of the hardest sales there is, right? So instead, lead with a clearly defined project. In our world, that's called an Etsy. An Etsy stands for easy to say yes. It's a specific engagement that solves one clear problem with a clearly defined scope and price. It's not easy to say yes because it's cheap, and in fact, a lot of academy members are selling Etsy's in the 10s of 1000s of dollars. It's easy to say yes because the value is clear. The client knows exactly what they're getting and when. And in terms of fractional, it lets you. Demonstrate value, and it protects you from scope creep because the scope is defined before you ever start. Then, once you've actually delivered, you know, once the client has seen what it's like to work with you and gotten a real result, that's when you start talking about an ongoing relationship, the advisory work or the direct service work, you know, whatever you want the scope to be, and that's an easier sale because you've already proven your value, and that's really what this is about. You know, the thing that's underneath what I've said today. None of this is really about whether you call yourself fractional or not. It's about whether you know how to scope your work and price it for the value you create, regardless of the label on your LinkedIn headline. This is something I talk with our academy members about all the time, because when you know how to do value-based scope and pricing, you can scope a service large or small, and you get to define the relationship and set the terms right. So, if you do want to offer something that's fractional, like you've got the experience, you know how to hold a boundary, then it can be a smart way to build steadier, long-term revenue. But get the foundation right first. Know your value. Know how to scope a project. Know how to price for the value you create, because that's what makes any service level work, fractional or otherwise. Right? Not the label. All right. So let's bring this one home. If you're already doing fractional work, or if you're thinking about it, if you take nothing else from this episode, I want you to take this. Fractional is not a silver bullet. It doesn't make selling easier. It doesn't make delivery easier. It's not a substitute for knowing how to get clients and run a profitable business. It's just a different way to structure your work, and like every way of structuring your work, it only works if you've already got the fundamentals in place.

Leah Neaderthal26:45

So before we sort of wrap this up, the one question I want you to sit with isn't should I call myself fractional, but it's do I actually know how to scope my work and price it for the value I create? Because that's the real skill. That's what protects you, whatever you end up calling yourself, and of course, if you want help doing that, and if you want the coaching and support to get there faster, that's exactly what we do in the academy. So, if you know a woman who needs to hear this, I hope you'll share it with her. Thanks so much for listening, and I'll see you next time.