The Fractional Value Proposition

The Fractional Value Proposition

Growth-stage tech companies have a burning need for a strong executive suite, but many aren't in a position to hire a full-time, seasoned CTO or CFO. One factor is simply cost: recruiting and hiring a top-tier, strategic CxO may be too much of a stretch for a growth stage company. Another factor is the difficulty finding and landing such a person: top CTOs are considered the most difficult CxO to hire. Finally, speed is a consideration: the hiring process for a seasoned CTO can take 6-12 months. What growing tech company can afford that kind of delay, especially if a funding round is looming or has recently closed?

TechCXO was built from the ground up to deliver seasoned C-suite executives "on demand." Our most common delivery model is fractional, where a TechCXO partner works one or two days per week as the client's CTO, CFO, or in another C-suite role. The client gets a seasoned CxO quickly, painlessly, and affordably compared with hiring for the full-time position. These factors alone make the fractional model appealing, but there's an 80/20 rule at work here that amplifies the value.

I recently talked with Kent Elmer, TechCXO's co-founder and Managing Partner, and he emphasized that one of TechCXO's deeply experienced, veteran finance or technology executive can usually deliver 80% of the value of a full-time CFO or CTO in 20% of the time. Granted, successful tech companies eventually reach the point of needing a full-time CxO and the full 100% value that only a full-time person can deliver. But for the typical growth stage tech company who badly needs a strategic CTO or CFO, getting 80% of the benefits at a fraction of the cost is a big win.

I mentioned that TechCXO was built from the ground up to support an on-demand executive model. Let's explore that a little.

The traditional consulting model is a pyramid, with a small number of seasoned partners at its peak, and legions of high-margin junior resources at its base. The junior consultants produce the vast majority of the firm's work product; seasoned partners at the top deliver only a tiny fraction. Margins are high, overhead is high, markup is high.

Photo by Les Anderson / Unsplash

TechCXO's model is the opposite, an inverted pyramid. Our workforce is made up primarily of seasoned partners, people who have actually held the CxO positions they deliver on a fractional or interim basis for TechCXO customers. The vast majority of our work is executed by these partners. In other words, the partners are the product, very much in contrast with a traditional consulting firm.

To make the inverted pyramid model work, because TechCXO doesn't rely on high-margin junior resources, we're forced to operate lean. Margins are low, overhead is low, markups are low. And that's another big win for TechCXO's clients, who don't have to bear the cost of traditional high-overhead consulting.