How Does a Fractional Job Work?

I’m Taylor - the founder of fractionaljobs.io. We help senior talent become successful fractional operators, and we help companies reach and recruit that senior talent directly.

I’m also a Fractional Head of Product, specializing in early-stage startups. In my practice, I work with 3 startups at a time for 10 hrs/week each.

‍

How Does a Fractional Job Work?

A fractional job is a part-time, independent contractor position at a company. A fractional job is generally held by an expert in their field, embedded into the company. They can provide strategic guidance, do hands-on work, manage a department (of full-time employees), hire and fire, and more.

If this sounds like the description of a senior-level full-time employee, that’s the point. The primary difference is simply that the work is done fractionally, i.e. fewer hours per week for less pay. Read “What is Fractional Work?” for more details on this, including how it’s different from freelance or consulting work.

Although the job description of a fractional CTO (for example) is like that of a full-time CTO, there’s a lot more to the fractional job outside of the core CTO duties. This playbook covers all of it, including the intricacies of self-employment, finding clients, balancing multiple clients at once, the career progression, and more.

‍

The Initial Steps

Self-employment

Because fractionals are independent contractors, it typically makes sense to set up what’s called a single-member LLC (legalese for a business-of-one, or self-employment). This adds some cost, and some accounting headaches, to the fractional life. But it also saves so much money on taxes that a fractional’s take-home pay (after tax) becomes meaningfully higher than that of a full-time employee with the same salary. (Technically it's an LLC with S-Corp taxation status, for the fractional accountants reading this.)

An easy rule of thumb:

• If you expect to earn > $80,000 in contractor income in a calendar year, you will save money by incorporating as an LLC. The more you make above $80,000, the more of a no-brainer it becomes
• If you expect to earn < $80,000, you can skip the LLC and get paid to your personal account instead of into a business (often the case for those moonlighting as fractionals alongside a full-time job)

Best practice tip: The best and easiest way to handle your business incorporation, back-office needs, and accounting needs is to sign up for Collective.com. I've been a customer since April 2023. If you use code "FRACTIONALJOBS" you'll get one month free, AND you'll be supporting Fractional Jobs. How cool is that!

The Big Mindset Shift

To do fractional work requires embracing all the ways it’s different from a full-time job. The job of a fractional CMO is the same as that of a full-time CMO, plus all the other tasks that go into being a successful fractional operator.

In other words, that fractional CMO is now also a business owner, responsible for self-employment (covered above), and running a business (covered below).

The mindset needs to shift from “I’m a marketer” to “I’m a business owner who sells marketing expertise”. Do you see the difference? For many of us, it’s a refreshing challenge.

‍

Finding Work

The Job of Finding Leads

Most of us would consider the hardest part of fractional work to be building a steady stream of clients. A typical fractional relationship lasts 6 - 12 months.  When one client rolls off, ideally another client rolls on, and it doesn’t happen magically.

Your first lead might come from a former boss, a friend, or your previous employer. Your second lead might come from someone who heard about your work from a mutual connection, or an inbound from a Linkedin post you made.

After your first few clients, you’ll start to build a track record of work you can point to. Referrals may start to generate too! Finding leads should generally become more frequent and natural. But it’s something that can’t be put on autopilot. You should expect to spend about 5-10 hrs/month on lead generation. This means taking meetings, doing cold outreach, honing your pitch, and more.

Best practice tip: The sole purpose of fractionaljobs.io (the site you’re on right now) is to find great leads for fractionals. If you’re not already, subscribe to our newsletter for email alerts when fractional roles in your job function go live.

Converting Leads into Clients

Like landing a full-time job, it’s your value proposition that secures a client. What is your expertise in, what story does your resume tell, why are you a uniquely good fit for what the company needs?

This is sales work. Those Fractional Head of Sales folks have it easy compared to the rest of us, who likely need to figure out how to do “Sales” from scratch.

The good news though, is that leads for fractional roles are incredibly high-intent. The lead generally needs someone ASAP, and there are few fractional operators today. Moreover, because a contractor position is so much more flexible than a full-time hire, a deal will typically close after a couple of conversations. Do not expect lengthy drawn-out interview processes. You’re trusted to be an expert already, most of the sales process is about ironing out the rest of the logistics.

This doesn’t mean closing leads is easy. But if you have a strong value proposition, you’ll generally find that things will move fast. Which also means more opportunities for experimentation.

Best practice tip: Don’t be afraid to get creative with the value prop. Part of the beauty of building your own business is charting your own territory through experimentation. Offer flexibility via a trial period, offer a discounted rate until the next fundraise, write up that strategy document if you think it’ll close the deal faster. The fractional world is new, and there’s much about fractional relationships that still don’t have best practices. So experiment with your value prop, and report back to us!

How Much to Charge

Fractionals are generally paid on a monthly retainer, meaning $X,000 per month, for a set commitment of hours. A simple hourly rate is a common alternative to a monthly retainer, though.

To determine how much to charge, a rule of thumb is to use the base salary at your last full-time job as a starting point (treating this as your market value). Please keep in mind the below is heavily dependent on your job function, your experience, and market dynamics.

A former Head of Product of a growth-stage startup might make $200,000 in base salary. This same person, as a Fractional Head of Product, should shoot for a rate that is about $200/hr. Yes, remove three zeros and add a /hr to the end of it.

Remember that most fractionals do opt to charge a monthly retainer with an hours commitment. If our Fractional Head of Product closes a new client for 10hrs/week, the correct retainer is calculated as (hourly rate) x (hrs/week) x (weeks/month). So, $200 x 10 x 4.34 = $8,600 monthly retainer for that client.

You might be able to adjust that rate up if your background is exceptionally unique (e.g. former founder or unique industry experience). You might want to adjust that rate down for various reasons too, e.g. if your previous salary was from BigTechCo but the clients you want are all super early stage. Or if you’re just starting out, it’s a great strategy to get some fractional experience at a lower rate and step it up incrementally.

‍

Doing the Work Itself

Structure the Client Relationship

When the work begins, make sure that the expectations of the relationship are clear. Corporate full-time employment has 100 years of best practices and mutually understood expectations. Fractional work does not.

Set clear expectations in two ways, 1) with a contractor agreement, and 2) with your words (e.g. over email).

A contractor agreement will cover all the necessary legalese: monthly or hourly rate, payment schedule, termination clauses, IP assignment, etc.

The rest of the expectations are better set via conversation, written or otherwise. You may want to cover things like:

• In a monthly retainer, how do extra hours get treated? Will it balance out in future weeks, or will you bill for overages?
• Are you available on Slack/email after normal work hours?
• What does success look like?
• When it comes time for a transition, will you help hire a replacement (either fractional or full-time?)

The goal here is to set the relationship up for success, get the awkward stuff out of the way early, and leave little room for surprises down the road.

Best practice tip: Payment is typically done monthly, promptly after an invoice is sent. Termination can happen at any time from either party, with advanced notice, e.g. 14 or 30 days. These expectations, along with any others that come up, should all feel negotiable and part of experimenting on your value proposition.

Now Do the Work

Finally, we’re at the point in the relationship where we can actually do the work we’re experts in. Most of this we’ll leave to you, since you’re the expert in your function, not us. This is the part that will feel most like a full-time job.

Onboarding might feel a bit different, in that there’s unlikely to be much of it. You’re on the clock and expected to start delivering value. We can't skip building context on the business if we want to do our job well, but we can make it more efficient. Successful fractional operators figure out (through iteration) how to ramp up super fast.

The rest of the (likely full-time) team might look at you a bit curiously. Who is this person working fractionally, and what the hell even is that? Particularly if you’re brought in to lead a team, it’s your responsibility to prove the immense value of fractional work. 

Remember that your work product is the number one way to get new business. Your happy clients will refer you. A full-time employer is certainly not the most common way to get your next full-time job, but in the fractional world referrals from previous clients is your goldmine. Never forget that.

Balance Multiple Clients

Many fractionals choose to stack multiple clients to make up a full work schedule. This balancing act means frequent context-switching, and requires time management techniques that will be unfamiliar to most new fractionals.

Context-switching means changing the channel in your brain from one client to another. For some functions, like fractional Finance work, this might be relatively benign because a lot of the activities you’re doing will be the same across clients. For other kinds of work, like fractional Engineering work, context-switching between codebases is daunting.

To balance multiple clients effectively, be thoughtful about a time allocation strategy. For functions with high switching costs, consider dedicating days or half-days to given clients. For work with low switching costs, consider bouncing around more fluidly wherever the more urgent priorities lie. This may mean averaging 2hrs per day per client, for example.

As you balance clients, be considerate of the time you’ve committed to each client, too. If you’ve never thought about your work in terms of time investment before, it may feel particularly foreign and require an active focus to do this.

Best practice tip: Get a time tracker, and log the hours you do for each client. It doesn’t mean you have to report hours to your clients if you don’t want to. Particularly when you’re starting out, you should know for yourself how you’re investing your time across clients. If you’ve never done this before, you will be surprised, guaranteed. Knowing your time also helps plan out context-switches in advance, making you more effective at it.

‍

The Meta-Game and End-Game

How to Measure Success

Success in the fractional world is more multi-faceted than in the full-time world. There are unlikely to be performance reviews or bonuses.

Of course the first way to measure success is through your added value. The key metrics to look out for here are renewals (i.e. does your client indicate they want to keep working with you), and referrals from clients to other leads.

The second key metric is your pipeline of leads. You can crush your client work, but if you don’t have leads coming in, eventually there won’t be any more work to do. Are you having regular conversations that could lead to new business for you? Are you turning down leads because you are booked up? These are great signs that your pipeline is in good shape.

The third metric is your solo business’ revenue. Are you making the money you want to be making?

Best Practice tip: A focus on your core work product, your value, should lead to success across all three metrics. But paying close attention to all three allows you to re-prioritize your time, identify weaknesses faster, and in general lead to a more successful practice.

Graduating From a Client

A typical fractional relationship lasts between 6 - 12 months. Ending relationships is a normal part of the job, and often should feel like a successful graduation. The company got what they were looking for, and now either needs a different fractional skillset or is ready for a full-time hire. Awesome!

Both parties should be aware, at the start of the relationship, what a successful graduation might look like. What will the next need likely be for? When might that need come? What will your role be as the fractional leader in facilitating that transition? For example, a fractional Sales relationship may determine that there will be a need for a full-time Head of Sales when the company hits $100,000 ARR.

It’s very common, for example, to hire your replacement. It’s also not unheard of for a fractional leader to decide they want to join the company full-time themselves. Both are fantastic outcomes.

Of course not all relationships will end successfully. Part of the beauty and benefit of fractional work is that independent contractors offer a much more flexible relationship for both parties. Fractional relationships tend to kick off and get into the work very quickly, which means it may also become very clear quickly that it’s not a fit. This flexibility is part of the value proposition for fractional work, and benefits both companies and fractionals equally in the long-term.

Best practice tip: Often fractional contracts will state a mutual termination clause of 14 or 30 days, to respect each parties time equally and allow for a professional transition as needed.

Long-term Career Progression

No more career ladders, yay! So then what? Where do fractionals go from here, how does our career continue to progress?

One important progression path is via rate increases. Particularly as your pipeline of leads grows to the point where you have to start saying no, this is a sign that you might be in a position to increase your rate. Some fractionals start out with a $50/hr rate. The most experienced fractionals are making north of $500/hr. This offers immense room for progression as you build your practice, hone your craft, and carve out your unique niche.

Some fractionals choose to progress their practice by growing it from a business-of-one to a business of two, three, and ten. Over time this path likely begins to look like an agency, which can be a very lucrative and fulfilling path to pursue.

And counterintuitively, some fractionals choose not to progress at all. In particular, fractional work for some is an opportunity to spend more time pursuing something other than fractional work, e.g. a creative passion, family life, or a startup. (Breaking the fourth wall, I’m able to build and grow fractionaljobs.io because my fractional practice allows me the time to do so.)

‍

‍

So, how exactly does a fractional job work?

A fractional job means getting set up as a self-employed business. Doing taxes, too! It means acting like a business owner, including finding clients, setting your rate, and managing the relationship. A fractional job means doing the core job you’re paid to do, but doing it with less time and more efficiently. And it means charting your own path for growth. All of this to say it’s not for everyone. Having a steady full-time job to focus on your core job function alone can be rewarding enough. For those of us that want to take more ownership over their career and/or craft, a fractional job is now an incredibly appealing option.

If you haven’t yet, subscribe to the fractionaljobs.io newsletter for job alerts in your function, along with playbooks like this one to set you up for success.

‍

Other FAQs

Can you moonlight as a fractional employee?

Moonlighting is when you work a contract job outside your full-time job. Yes, some fractionals do so by moonlighting a full-time job. Be clear up front with your client(s) when you expect to be able to work (e.g. nights or weekends). Also, be sure to check your employment agreement to make sure your full-time employer permits it. DO NOT use your full-time employer’s computer or other equipment to do it.

Do fractional employees get paid with equity?

They surely can, but it’s not the default means of compensation. Taking equity in a company is the same as getting paid in cash and then investing that cash into the company. Do you want to be an investor? Another way to think about this is to assume the equity will be worth zero (it very likely will be). Is your compensation enough outside the equity to make you happy? If so, then feel free to take on this risk.

Can fractional employees take a vacation?

Of course. You simply give your clients ample heads up notice, and then take your vacation. You can either complete the hours you've committed to before & after your vacation, or you just don't charge the client for the lost time. Imagine you're working for a client for 10hrs/week and you want to take a Friday off. You can get those 10 hours done before Friday. If you want to take the whole week off, you'll want to skip charging the client for that week.

How do fractional employees get health insurance?

Health insurance is, admittedly, an achilles heel of fractional work. If you're fortunate enough to have a spouse who's health insurance you can join, that's a great option. If you've recently left a full-time job, you can also opt into COBRA for up to 18 months. Lastly, the open market does have increasingly reasonable options. For an equivalent healthcare plan compared to your previous employer, it'll likely be more expensive. But remember that your fractional work will net you more take-home pay which more than makes up for the extra healthcare cost.

Can fractional employees contribute to a retirement plan?

Yes. And ready for this... you get to manage it yourself instead of your employer. You can set up what's called a Solo 401K for yourself, and contribute to it as both an employee of your business AND as an employer. There are several options for solo 401Ks, but the best we've found is Carry Money. They are specifically designed for self-employed business owners like fractional employees.

Do fractional employees work remote?

Most do, yes. Especially given the thought of commuting to several different office locations per week, remote work is quite necessary for fractionals to do their job well. However, some companies, particularly non-tech companies hiring back-office fractional roles like Finance and Accounting, may still opt for an in-person role. It's rare, and it's a safe assumption that your fractional work will be done remotely.

‍

What FAQs did we miss? Email hello@fractionaljobs.io and we’ll get your question answered ASAP.