CXOs have become necessary for startups and small businesses to compete
The world has been moving to virtual, remote, and offshore work for over two decades. I am not talking about just offshoring data entry, accounting, customer services and web development to cheap labor countries but building a remote, or even global, team of C-Level executives too. Fractional CEOs, COOs, CMOs and CFOs have become a standard step for the most venture worthy companies filling holes in the team without that big full-time salary and commitment. They create a longer runway with less risk by having more senior experience on your team.
The remote and work from home (WFM) trend has allowed the development of many remote work tools to help people work remotely and still be a close part of a team. Even part of the senior management team, In fact, remote and virtual workers can be far more cost effective and productive by eliminating commute time, stress, socializing time, medical benefits, and office space costs and other overhead. I used to travel seven to ten days a month to visit clients until Skype and GoToMeeting (First quality video calling systems before Zoom) allowed me to stop 95% of travel in 2011.
Of course, COVID accelerated this trend further by bringing on companies that had resisted this sea change since 2000. And they quickly found out it works well for them too when managed properly. The debate goes on about productivity for regular WFH employees though it seems obvious it works well for many titles and not as well for others.
Now over 40% of people work from home part-time or full-time and that will likely continue to grow.
Tools like Zoom, Slack, Whatsapp messaging services and other project coordination platforms and tools have reduced the need for in-person meetings. They provide instant access to a chronological history, real-time communications and video meetings that are almost as good as in person to get to know the team. This is not to say meetings are not needed, nor that managers are not critical to coordinating resources, they are certainly. However, these information sharing tools can tap into the entire team’s broad experience, contacts and wisdom developed over many decades. They also allow coaching and mentoring from more senior people to the younger and less experienced employees, setting up guard rails to keep them out of trouble, and from spending weeks or months on wasted work. This is a win-win for the employee, and the company, as it develops the team’s experience too. Research shows that about 85% of employees want training and mentoring from more senior people to accelerate their career.
Another huge advantage of remote work is that you literally 1,300X the possible pool of people you can hire because they do not need to be within a commute distance of your office(s). A 30-mile radius commute circle contains about 2,826 square miles. The USA alone covers 3.7 million square miles. So even if you limit yourself to the USA proper you are able to recruit from an area that is literally 1,309 times larger! Yep, that’s just the math. And just in the USA. In other words, you can likely fill your position faster with a better person. What are the odds you can find a better match doing that? Well probably near 100%. I monitor c-level job openings on LinkedIn and will often see over a hundred applications to a position in just twenty-four hours. These companies are smart because they are tapping into LinkedIn’s 850 million users with a very specific job description and getting very senior flexible help fast with minimal cost.
Recruiting has changed due to remote work, fractional work and the ease of online hiring and applications. The executive profiles available on LinkedIn alone is over one billion members. Of course, these people are not even in the market for a job like on job boards. So they represent the most complete and best source of talent.
On LinkedIn you can get 50 to 100 applications in a day with a ~$195 ad. And also search for exactly the people you want to approach on your team for free.
See job post at right with 43 applicants in an hour! For a Chief Operating Officer (COO) position.
The Pareto Principle says 20% of the work provides 80% of the value. Therefore, for a fraction of the cost of a full-time executive, fractional executives like CEOs. COO and CFOs can provide most of the same value at reduced cost and risk, while also increasing the speed of a company’s development dramatically. This is perfect in the early days of a company to tap the expertise of very senior people when you could never afford that person full-time team. And they can prevent you from making expensive and time-consuming mistakes. This may even be the difference between success and failure. That translates into a very nice ROI for any investment here and likely gets you growing faster sooner.
It is usually best to have a fractional executive like a COO, CFO or CMO commit to a flat number of hours per week and be part of the management team and regular meetings. This is especially true for COOs, CMO and CFOs who will guide strategy and adjust execution as learning comes in from customers and employees. A fractional executive like a COO, unlike a consultant, is there for the long-term to help get a company to its next stage of development and install all the needed processes, policies and systems to grow and ensure quality. Instead of working on a limited project and goal they are there to enhance the company’s overall performance, and be part of the management team, including attending any weekly and monthly meetings to inject more experience from their gray hair and decades of learning in the real world.
Just four hours a week is enough to have a large impact on a company for any CXO at what can as little as 10% of the cost of a full-time executive. I would recommend this as a minimum for a raw startup without any revenue yet. And a day a week (spread over the week as needed) once operations are starting and you are seeking capital, growth and hiring more individual contributors to set and control the culture and quality of people hired. The CEO or COO should always interview and approve the first hundred employees as this is the foundation and these people will hire and train the future employees.
Also remember that about 30% of work hours are wasted overhead like vacations, socializing, keeping up with industry trends, dealing with politics and coworkers and other non-productive time. This is why contractors can charge 40% higher hourly rates and it is still a good deal for the company. WFH also enhances quality of life by eliminating most commute time, and that benefit is shared by the person and the company in reduced stress and increased availability.
Fractional CEOs, COOs, CMOs and CFOs are now a standard part of most startup’s development to reduce risk, extend cash runway and avoid the disasters that kill most startups.
Fatal errors that kill companies almost always trace back to the lack of experience on the senior team that is inevitable for an early-stage company. If you do not have a fractional CEO, COO or CTO, and your competitors do, you are likely going to make large strategic errors that they will not make. Losing time and market share, as well as the opportunities to raise investor funds in a timely fashion by being in a new market early is a very costly mistake. It can even cost you your company.
There is a clear catch-22 that comes with starting any company. To create innovative products and services it is likely you need a minimum team of about five full-time people to provide all the needed skill sets and create any true innovation. Even an MVP needs many skills sets from experience people in marketing, product development, market entry strategy and finance. However, in the product development phase you can often do without a full-time CEO, CMO and even CTO.
I would generally say there is a five-person minimum critical mass of staff to build a scalable company in the first year or so ideally. But you can get the input and wisdom of ten or more highly seasoned executives by using a fractional CEO, CMO. CFO and CTO. These strategic areas require big decisions, but not always full-time work.
Adding a fractional CMO, COO and/or CFO with minimal hours will greatly enhance your ability to raise funding and succeed too. It shows outside investors that balance of skills on a team they want and that you take the challenges of starting any company seriously. Without this senior input to guide your plans you will almost always seem bush-league. Back in the early 2000s investors wanted these senior CXOs committed full-time with equity. However, today this is not as important because they also know fractional executives are a bridge to the next development phase of the company and can scale up hours or be replaced easily (without equity/founder disruption) when needed.
Fractional Executives are here to stay. Adjust or you are not as competitive.
Here is a list of the advantages any fractional executive or CXO can bring to almost any small company before it is able to afford a $1M+ clevel team:
- Cost-Effectiveness: Fractional executives typically charge for their services on a part-time or project-based basis, making them a cost-effective option for smaller businesses with limited budgets.
- Flexibility: Fractional executives provide flexibility in terms of work arrangements and can vary their hours and attention as needed during project and company development cycles. Smaller companies can engage them on an “as needed basis”, adjusting their services as the business requires each quarter.
- More Diverse Skill Set: Fractional executives often bring a diverse skill set due to their experience working with multiple organizations. This can be particularly beneficial for smaller companies that need specialized expertise.
- Access to Senior More Talent: Smaller companies can gain access to experienced C-suite executives (e.g., CEO, COO, CFO, CIO) who might not be available or affordable on a full-time basis.
- Reduced Overhead: Hiring a fractional executive can eliminate the need for additional office space, benefits, and other costs associated with full-time employees, reducing overhead expenses.
- Strategic Leadership: Fractional executives provide strategic leadership and guidance, helping smaller companies make informed decisions and grow their business.
- Scalability: Smaller companies can scale their engagement with fractional executives up or down as their business needs change, offering adaptability in a dynamic business environment. You might increase the hours when launching a new product for example. Or bring in a CMO more hour to design an new campaign that can be executed by lower cost staff.
Do not confuse being smart with being experienced.
There is no replacement for 15+ years’ experience at the C-Level.
I pity the young founders that think they can hire their recent college roommate who will be competing with people that have 15+ years’ experience. They have a near zero chance of winning in the Darwinian marketplace.
These many advantages make fractional CEOs, COO, CFOs and CMOs an attractive option for smaller companies looking to access top-tier talent, manage costs, and receive expert guidance without the commitment of a full-time executive role.
I belong to three separate groups of CXOs that meet and share clients, leads and experience so that I can know and refer complimentary skills sets and horsepower as needed for our clients. So, when you find a quality CXO they will likely have a network of complimentary CXOs that can help as needed too. There are thousands of excellent, fractional COOs, CMOs, CFOs and even CEOs out there that can enhance your business rapidly for a small cost. Do not confuse these people with ones that call themselves “Consultants” or “Contractors”. A good CXO as held that position in the same size business you have today and larger for no less than five years. Consultants tend to specialize in narrow areas and solving limited problems. CXOs will help across the entire spectrum of their career domain in operations, finance, product development, or administration.
Here is the link to details about the Fractional CEO and COO work I personally offer:
Learn about our Fractional COO and CEO services here.
