Working Fractional - learnings & advice for others By Ben Johnson
Why fractional? Is it really for you?
Fractional is a fantastic working model which has been enabled by the remote work movement. But it’s important to determine if it is really right for you and what you are trying to get out of it, as it comes with some notable risks and administrative overheads.
I elected to give fractional work a try because I have a young family and wanted to spend time with my son. It also allowed my wife to go back to work full time. I work about 30hrs a week right now and spend the other ~10 working hours being a dad - it’s awesome! So I began with this goal in mind then worked backwards to figure out how I could make it happen.
The challenges of fractional work which are important to be aware of -
Finding new business can be hard. You are regularly doing marketing and sales for yourself, which doesn’t come naturally to everyone.
You must manage the administrative overheads of your own company - such as registering your company/making regular government filings, accounting & invoicing, banking, finding and paying for your own medical insurance (if in America) and setting up & contributing to your own retirement plan are a few to note. There’s quite a bit of upfront work to be done, plus an ongoing % of your time will be spent managing these admin tasks, so ensure you’re accounting for this in your working schedule and your fee structure.
Inconsistency of revenue - ensure you have savings you’re prepared to use at the beginning as you get going, or during periods between active work.
You have to have confidence in your ability to add value to a company quickly. You generally won’t participate in company onboarding and will get little to no training coming into the work - so fractional lends itself to folks who have more experience in their business domain, are self-directed and focussed on impact & outcomes. This last point matters because you are much more expendable. The moment you stop adding measurable value you will likely be (rightfully) discarded.
What is your service model? Fractional vs Consulting/Advisory
Working Fractional is operating as a member of the team. While being part-time, you are doing the work in the same manner that a permanent employee is. You’ll be set up on company email, messaging (ie; Slack) and other company systems. You are very much executing, rather than developing strategies and plans for others to deliver.
Consulting or Advisory is generally working on supporting the business - using your expertise to develop strategy and plans, or using your experience to coach and mentor members of the business. In this model others will generally do the execution.
Both of these models are valuable - but it’s important to be clear about which service you are providing.
As a data point - I’m finding that Fractional work is in demand - particularly with early stage companies (Pre-Seed to Series B) that do not have the budget, or perhaps yet the conviction, to hire a permanent full-time employee in a role.
Defining your value proposition
Before you start - spend time thinking about and documenting what your value proposition is. The more focussed and narrow it is, the better.
For example - my value proposition is that I know how to build partnership programs that enable software and financial technology companies to acquire more customers at a lower cost, as well as app ecosystems that fill product feature gaps without exhausting in-house engineering resources; I have a network that allows me to develop new partnerships; I have built and developed partnership teams and I have implemented tools and processes to make partnership programs operate efficiently and effectively.
Know your target client - and again be as specific as you can - I have two:
Early stage SaaS and FinTech companies (Late Seed to Series C) who sell to SMBs and want to develop a partnership and business development function, but are unclear on how and/or are not ready to hire full time.
Scaling SaaS and Fintech companies (Series C onwards) who sell to SMBs and who require functional leadership to manage change and improve upon an existing partnerships and business development team.
Figure out and define your proposition and your ICP (Ideal Client Profile).
Finding new business
Generally companies are not advertising to hire a fractional employee - so you will need to be proactive in building your pipeline and securing new clients.
Converting a permanent role into a fractional role
I found my first client - Bench while interviewing for their advertised VP Partnerships position - this was a permanent full-time position - I had made the decision to do fractional work when I was in the final stages of the interview process. I was very fortunate that their leadership team had an open mind and were willing to take me on part-time. A key part of making this work was that I came in with a lot of domain knowledge from my 10-years at Xero, and I spent a lot of time clearly articulating how I would deliver on Bench’s primary goals, even in a part-time capacity (I made it about them, not about me). While this method worked - this isn’t a strategy I would necessarily repeat going forward unless I had a relationship with the hiring manager, as you’ll be competing with candidates willing to work full-time.
Outbound prospecting
My approach to finding my second client - Alguna - was more so a repeatable process that I suggest others consider following. I researched companies that had been through the Y Combinator program over the past 2-3 years and identified a list of around 15 companies who were in categories which I had strong domain knowledge in and who I felt I could add value to quickly. I sent well researched messages to the founders of each company, clearly articulating how I could help them in a fractional capacity. About half came back willing to speak and learn more.
Knowing where you can add value quickly matters here. Alguna, for example, is a revenue management system for product companies with complex billing scenarios. I had felt a lot of the pain points Alguna are solving for during my time selling payment infrastructure at Wise - so I felt that I could credibly talk to the problems Alguna addresses when speaking to prospective customers, and I have a network in SaaS and Fintech that provides a starting point to develop new business.
Worth noting - when you get on that first call with a prospective client whom you have done outreach to - the onus is on you to outline how you can help them. Show that you’ve done the research and make it clear what impact you can have by working with them on a fractional basis. Equally, use that first call to qualify whether your assumptions about being able to help them are actually true - and if you find they’re not - be honest about that and walk away from the opportunity, they will respect you for this. Over promising to get the work and then under delivering will cause more harm than good.
Network
Ultimately I believe the most effective way to secure business as a fractional operator is via referrals in your existing network. People who have worked with you before will understand your value and what you can do. They will either find opportunities for you to come join their current venture/team, or they will recommend you to another company when they hear of opportunities. I’m beginning to experience this now that folks in my network become aware that I am working on a fractional basis.
With this - I recommend investing time in nurturing your existing network, and developing new relationships. Be open to meeting new people and try to give value first before asking for something: can you help someone else find a new role, or can you connect them with someone in your network to solve a problem/access an opportunity? Being helpful is a wonderfully effective way to make people want to work with you when opportunities arise - also it’s just frankly a good thing to do.
Marketing
Generally speaking, I think websites are a poor use of time and unnecessary spend for fractional operators. There are exceptions to this (below) - but that time you might spend developing content on your website is better spent on LinkedIn, where there is a built- in network of potential new clients.
Exceptions on the website advice - if you are creative and have a portfolio you’d like to show, then it makes sense to have a website. Equally, it makes sense to invest in a website if you are a consultancy/agency, as you will have a set of services you’d like to market, and it’s easier to communicate a company offering on a website vs LinkedIn. However LinkedIn will remain a key marketing channel to drive awareness of your consultancy/agency.
Setting up a new client relationship
Once you have agreed to work with a new client I highly recommend investing the time to prepare a written scope of work with the person hiring you. In effect, this is a document that outlines what you expect to achieve in the fractional engagement and by when (objectives/timeline), what it is you will actually do (deliverables), how you will work (hours/schedule/initial term of engagement) and the compensation structure (fees/commission/equity/invoicing and payment terms).
You have a few options on compensation - what I’ve found works well for me is a fixed monthly fee tied to the scope of work, as well as some variable incentives if my role is to deliver revenue generating new business through sales or partnerships. Some folks are also negotiating equity with early stage companies that may not have the budget to pay their desired rate - that’s really a personal choice on your part of what to prioritise.
Once you have a scope of work agreed, evolve that into an agreement (contract) - in my case I generally add the scope of work in its entirety into an appendix in the agreement. Often you’ll be presented with an agreement drafted by the client, but it helps to have your own template to hand if needed. Companies like PandaDoc have templates you can use as a starting point.
If you don’t have experience negotiating contracts, one thing I’d keep an eye out for is ensuring you’re not agreeing to non-complete clauses that inhibit you from working with other similar clients in the near future. I think it’s very reasonable not to work for competitors who directly compete at the same time as there is an obvious conflict of interest there. And, non-disclosure terms are and should be in perpetuity, but not being able to go work for another company in a similar industry after you finish an engagement will limit your future options.
Also - be clear about your payment terms. When will you invoice? How many days does your client have to pay? Stay on top of this stuff or you can find your payments might get delayed. Don’t accept invoice at end of month +30 day payment terms.
It might be worth spending a few hundred dollars to have a lawyer look over your first agreement - to help you understand what each clause means. Or, better yet, if you have a lawyer friend they may be willing to help you, ask them. You’ll quickly get the hang of it as most agreements are structured in the same way with common terms.
How to work with multiple clients effectively
This is a personal choice, but for me, I find it very helpful to have set hours for each of my engagements. For example my current schedule looks like this -
Alguna - Monday, Wednesday and Friday 9:30am to 12pm
Bench - Monday to Friday 1pm to 6pm
Tuesday and Thursday mornings - family time
This regular schedule allows me to focus on the client I’m working with at a particular time, giving them my full attention, rather than trying to jump between different client work throughout the day. Also, as I am using dedicated company systems it’s much easier to manage scheduling and avoid conflicts across multiple Google Calendars.
That being said - I do my best to accommodate important calls outside of these core hours where needed. This is the exception, not the rule.
Running your own business like a business
Set up a limited company. Don’t run as a sole proprietorship. The reason is so you can limit your liability. If something goes wrong and a client elects to take legal action, or if for whatever reason your business takes on debt you can’t service, having a limited company means only the assets of the company are at risk, not your personal assets (like your family savings, your home etc)
In the US, a Single-Member LLC is a simple business structure for getting started. It gives you limited liability, but treats you as a sole proprietor for tax purposes.
Once you hit a certain level of profit you’ll find tax savings in evolving into an S-Corp and paying yourself a salary. However this does come with more administrative complexity.
Work with a good CPA to figure this out - you will save more money in tax than the cost of their service fees by making the right choice at the right time. They will also help ensure you’re accounting properly, setting aside enough money for tax payments and maximising your allowable tax deductions.
Set up a separate bank account for your business and don’t mix personal and business spending. This will maintain your limited liability status and make accounting and tax easier.
Use some sort of accounting software. I use Xero and do my own bookkeeping as I have very few transactions and accounting knowledge. If you’re not confident in bookkeeping or don’t want to spend time doing it, outsource it (Bench is a great option for this if you’re US based)
Buy business insurance. Again, it’s unlikely, but if something goes horribly wrong and a client takes legal action, business insurance will cover your legal expenses and damages. It will feel expensive (I pay about $140 per month in premiums) but, as they say, insurance is only expensive until you need it.
I worked with Coverdash, they’re a broker, they helped me figure out what products were suitable for my business type and found the best quote.