How much should a fractional or part-time CMO cost?

How much does a Fractional CMO cost? What is a typical Fractional CMO salary? These are often your first questions if you’re a CEO or founder, evaluating whether a fractional CMO is right for your business. Getting a clear answer to this question can be challenging because there are a variety of fractional CMO pricing models. This is intended to briefly discuss the different pricing options and offerings for the different levels of engagement and expertise.

BLUF (Bottom Line, Up Front)

 

• Fractional CMOs typically work on a retainer – between $1500 and $5000 per day

• Be clear on expectations, and priorities.

• Negotiate equity, terms, and non-tangibles up-front

The fractional CMO has become especially advantageous for emerging SaaS start-ups or financially constrained companies, where cash is king and managing cash flow is critical. Similarly, for businesses undergoing major transitions, or a shift in business strategy where a new skill set is required. Perhaps, you need to take your business to the next level, or the sudden departure of key talent presents the need to fill a critical leadership role.

Quickly onboarding a fractional chief marketing officer allows businesses to stay on course with business strategy while navigating the demands of the market. It’s a strategic choice, balancing fiscal responsibility with the necessity of specialized marketing leadership.

A full-time Chief Marketing Officer can be an expensive hire. With average annual total compensation, including base salary and cash bonuses, typically well north of $300,000, depending on the industry and size of the company. The actual cost is much higher once you factor in recruitment costs, benefits, and stock options or equity. Conversly, that is not how it works with a fractional CMO pricing model.

There are two primary ways that you can engage a fractional marketing executive. Firstly, there are an emerging number of agencies or Fractional Marketing companies, CMOx or ChiefOutsiders for example. These organizations spend time and resources recruiting a roster of executives to support their diverse client needs. They often have significant administrative support and systems, allowing the executives to focus exclusively on client business, as they invest in business development and promotion to acquire new clients like you. Often, these fractional CMO agencies may also provide tools and frameworks that have been used successfully across multiple client engagements. A typical compensation model is commission-based, and the fractional CMO price you pay, will include between 20% and 50% of agency fees. Consequently, in most cases, your contract will be with the agency, vs the fractional executive you work with on a day-to-day basis.

Recently there’s also been a growth in the number of independent go-to-market, or GTM consultants, true fractional executives building viable independent businesses to serve the needs of CEOs and founders. In many cases, these are experienced C-Suite executives, with Board, Investor, and leadership experience in private equity, venture capital, and publicly traded businesses. So let’s get down to brass tacks.

How much is it going to cost you to hire a fractional CMO?

What does a fractional CMO cost? First a red flag. It’s highly unusual for a senior experienced executive to charge hourly rates. Think about it, you’re engaging with an executive who can understand your business environment, build a go-to-market strategy that will support and accelerate your growth, ensure that your product and vision align with customer and market expectations, help shape and define category, and build brand and awareness. These initiatives are just the tip of the iceberg, (see a full example of services here) and they’re not initiatives that can be chunked down into an hourly fee. The most common model is a Retainer structure, where an executive will commit specific days or weeks out of a month to your business.

Depending on experience, industry, and location, daily rates for fractional CMOs will range from $1,500 to $5,000 and above for the most accomplished leaders.

Do Fractional CMO discount pricing?

Marketing executives are amongst the most creative in the C-suite. Unquestionably, yes, they’re open to creative ways to make a deal work. Discounts for multiple days and length or term of contracts are common.  For early-stage companies where liquidity can be a challenge, equity in the business is common practice. It’s often the case that there will be some element of quid pro quo, perhaps office space is valuable, or access to resources. Make sure in any of these cases that you revisit periodically to ensure that the deal you struck continues to work out for both parties.

Set Clear Mutual Expectations

When you start your due diligence process, establish a clear, documented set of expectations that you’re looking for from the engagement. What does success look like in 90 days? 6 months? First year? Then work with your fractional executive to put in place a realistic plan and set of expectations.

Fractional Leadership – Good Return on Investment?

Fraction executives a good deal, will you save money?

Sure, a daily retainer for a fractional executive may turn out to be more cost-effective than a fully loaded FTE cost. but thinking of a fractional marketing hire purely as a cost-saving is limiting. Firstly, part of the value of a fractional CMO is factoring in how quickly the executive will have an impact on your business. A full-time hire requires considerable expense to onboard and get them up to speed. Comparatively, fractional CMOs should drive quicker impact and be less risky than a full-time hire.

There is a significant opportunity cost associated with waiting to bring on a marketing leader. Unless you’re a marketing expert yourself, the truth is you’re probably missing out on a lot of opportunities a new CMO or marketing leader would identify. Obviously, one of the most painful and expensive lessons is NOT having an experienced marketer on your team. In the absence of clear go-to-market direction, leadership, focus, and accountability, businesses often burn through their resources without knowing what’s working and what’s not.

Founders and executives often have concerns about the expense and the commitment involved in a full-time C-suite hire,. By comparison, a fractional CMO can add considerable, immediate value . Offering guidance, direction, marketing initiatives, and strategies to meet your goals and boost the return on your marketing spend. Consequently, they’re also flexible hires, whose hours (and fees) you can scale up and down as needed.