Moderator: 0:01

Welcome to the Empowering Healthy Business Podcast, the podcast for small business owners. Your host, cal Wilder, has built and sold businesses of his own, and he has helped hundreds of other small businesses, whether it is improving sales, profitability and cash flow, building a sustainable, scalable and saleable business, reducing your stress level, achieving work-life balance or improving physical and emotional fitness. Cal and his guests are here to help you run a healthier business and, in turn, have a healthier life.

Calvin: 0:34

In this episode, we're going to talk about the fractional marketing role and when hiring a fractional chief marketing officer is the right move for your business. Joining me today is Rebecca Schutte. Rebecca started her career in larger marketing agencies and then worked as the marketing leader in a number of startups and technology companies, including as VP of marketing at SmartBooks, where I got to know her. So welcome Rebecca.

Rebecca: 1:01

Great. Great to be here, cal and great to reconnect. Smartbooks is a great business when I was there. I'm glad to see that it's still going strong.

Calvin: 1:09

Great. So I'm excited to get your insights, since you have worked in a variety of roles at agencies, internally as a full-time marketing leader and now leading a fractional CMO firm. So I think you can really help us understand the nature of this fractional marketing role when it's the right decision, when it might be the wrong decision, and if you're going to make that decision as a business owner, how do you position the engagement for success? So maybe we can start with early stage business, where they don't have much of a budget for outside support. The owner may try to do some of it themselves for a while, but a lot of owners are not marketing professionals and we all have blind spots. And so what would you recommend a business owner do to maximize what they can produce for results, given limited resources, budget and time when they're just starting out?

Rebecca: 2:00

Yeah. So I think you're right, Cal. You first have to have a good sense of self. Where are your strengths?

Rebecca: 2:06

Some of these founders and CEOs are coming from a marketing background, or at least a sales background, have a grasp of marketing, and that's great. You probably can run with a bunch. Maybe you have a design resource, whether that's outsourced or not, because designers most likely. They're a low cost resource and they're going to be able to make your ideas look great. But a lot of people come to the table. Everyone has opinions on marketing.

Rebecca: 2:32

That doesn't necessarily mean that they have a solid, foundational knowledge of marketing. What I see often is that founders and CEOs whether it's from a lack of knowledge or, more likely, a lack of time, because we all know that founders and CEOs whether it's from a lack of knowledge or, more likely, a lack of time, because we all know that founders and CEOs, their time and their bandwidth is stretched thin. They're asked to do so many things and wear so many hats and with this, what we'll see from a marketing perspective are a random assortment of marketing activities, absent a foundational marketing strategy, and what that's going to result in is just limited results from your marketing. Take, for example, a trade show, I frequently have CEOs approach me, whether I was in-house or in this fractional capacity. Ceos approach me and say, oh hey, I hear that there's a great trade show next week. I want to be there. I got a great discount at a last minute booth. Like, we're going to be there, let's make the most of it.

Rebecca: 3:31

And the problem with this is that great, you should be able to be agile and take advantage of last minute things. But if you had a marketing strategist, that strategist would be reviewing these events ahead of time, building a calendar of these events and then coming up with an actual pre-show, at-show and post-show strategy to make sure that your presence at that show was as impactful as possible. And it's not just that you go to a show and you have great conversations and then you're like riding high and then a month passes, two months passes, and you're like wait, did that investment mean anything to me? What are the results of that? So I think that's where a fractional CMO can come in. That really can turn both the strategy and the execution together to work really well.

Calvin: 4:23

Right the execution together to work really well, right? And so, in your experience, when in a business's stage of growth and development, realistically are they going to have enough of a budget to justify investing in a fractional CMO, and when does that make sense? And we probably need to consider two different categories of business. One would be the venture-backed startup, where time is of the essence and you've got to get to market fast to improve the concept and generate some revenue, be able to raise a follow-on round. Or the more traditional, conventional, bootstrapped family-owned business that has a little more time on their hands to figure things out has a little more time on their hands to figure things out.

Rebecca: 5:07

Yeah, so I would say the businesses that I work with tend to be in the $5 to $20 million range in terms of ARR. What I've found in talking to lots of different fractional CMOs is that are people who need help earlier in that, and there are fractional CMOs that are really specific at that. So I have had people approach me that they're just in the infancy of product development. Right, they are actually pre-revenue at this stage, but they're recognizing that they have a gap there, whether they're trying to build an e-commerce workflow or maybe they're actually still in product development and they're trying to understand what are the features that we should be building first.

Rebecca: 5:50

In that instance, there are certainly fractional CMOs that have that really early stage experience and you could view this as kind of a shortcut to revenue producing activities. But I would say, if I have my CFO's hat on it, when does it financially make sense? Financially, because it will be an investment. That 5 to 20 million space I think does make sense, because you need a senior strategic leader at this point in time. You probably made do with either doing this on your own or potentially hiring a few, one or two low cost internal resources, but most likely those low cost internal resources are reporting directly to that founder or CEO who has less and less time to actually actively manage that, and that's where the fractional CMO can really fill that gap.

Calvin: 6:50

Yeah, I certainly have had that experience myself as a founder CEO trying to manage a mid-level internal marketing person but not really knowing how to do that so well.

Rebecca: 6:59

Right. I think another way to look at it is problem statements. So I often come in to solve specific problems and that is probably more useful even than the revenue stage that you're at. So are you seeing, maybe, a lack of predictability in revenue growth? Are you seeing an unsustainable cost of customer acquisition? Is there really high customer churn?

Rebecca: 7:25

Some of these problem statements that tons of startups, tons of small businesses are dealing with, that potentially could be solved by a marketing resource, whether that's fractional or in-house. The other thing that I think is smart marketers should be asking the founders when they get there is do you have a marketing problem or do you have a sales problem? I think a lot of CMOs are wearing kind of a co-CMO and maybe CRO chief revenue officer hat where they can diagnose these broader issues. Like, okay, we're getting leads in here, we've got plenty of awareness, but they're not converting to opportunities, or those opportunities aren't converting to close sales, or potentially we're closing the sales, but then our customers are churning. And so that's where I think these fractional resources can help you identify what is the true problem at hand and then let's come up with a strategy to solve that problem.

Calvin: 8:27

Right, and so what you're describing includes the need to have some specific basic data points about what your funnel looks like. Right, you have some way to track leads and, even before that, some kind of engagement that may turn into a lead which could then convert into a sales opportunity, which could then convert into a sales opportunity, which could then convert into an actual customer, right, and so you've got to have a way to measure and report on the different stages of the process, right? So advice on kind of an effective but not too expensive way to get kind of a basic funnel reporting in place.

Rebecca: 9:02

Yeah, basic funnel reporting, I think. For the small business option. I do think that HubSpot's a good. They've got great startup pricing. I think they're a great solution for people just getting into the space. I think, as you grow a bit larger, I prefer Salesforce from a CRM perspective, but you certainly could be doing this in Excel. It's going to be a lot more onerous and it obviously will depend on the scale that you're operating your business at, but you do need just some data that you can look back at and analyze. This is also something that if you, as a founder or CEO, come to the table and do not have this skill set, just don't know how would I set this up. It's a great place to bring in a fractional resource to say, okay, let's just set you up with table stakes and maybe we'll have a short-term engagement for this, and then, when you grow to a certain point, we could reevaluate. I think that goes to the relations, the variety of different relationships that you could have with a fractional chief marketing officer.

Calvin: 10:07

Yeah, and I think just kind of following up, I think founders can work their personal network for some period of time to generate some customers and maybe the close rate's pretty high and they might not need a lot of leads. But then, once they've kind of tapped out the low-hanging fruit, I suspect you need a much wider top of the funnel and a real process to nurture those leads and you've got to be able to delegate the work to somebody who's not the founder, right? Do you have any kind of benchmarks for what? That if you're trying to close let's say you're trying to close four new customers a month, do you have any sense for like what are the parameters for what the funnel would look like at the different stages? That's going to spit out four new customers per month.

Rebecca: 10:52

Yeah, it's going to vary by business, right? It's going to vary by your business model what that top of your funnel looks like, right? Do you have a well-defined ideal customer profile, right? Are you casting this super wide net? It's pretty common early in a business's growth that they're just like I'm going to get whatever business I can get and then I'm going to figure out who is my actual niche. But what you see with that is that you might have pretty severe drop-offs in each stage of your funnel versus at once you get.

Rebecca: 11:28

Okay, we understand that firms of this size that have you know this, use this software and have these pain points in their customer in their businesses, are going to be great customers for us. So then your funnel is going to look better. From a SaaS perspective, I want to see a 30% probably opportunity to closed one rate, and then same thing with MQL going to your opportunity rate. But that's going to look very differently if you are offering a $120,000 a year enterprise SaaS versus a $2,000 a month service offering. All of those are going to look different.

Calvin: 12:19

Right, and I think that could be very helpful for founders who don't think like that to. I think work with somebody like you who can help them appreciate that Although it seems like by narrowing the NICs you're excluding a lot of potential business marketing and winning new business perspective and then, from an actual fulfillment perspective and being able to have a service offering that really nails the needs of that niche right.

Rebecca: 12:50

Absolutely, absolutely. I think that's one of the things they often say in marketing is that if you're everything to everybody, you're really nothing to no one. You know, yeah, specialization and niching down is a great, great step for small business owners.

Calvin: 13:08

Okay, so could you help us understand a little bit the differences in roles and responsibilities between what a fractional marketing leader would do versus what a marketing agency would do for you versus what a mid-level staff or low to mid-level staff, full-time staff, marketing role would do what the business owner can expect, and if an agency is trying to sell you that they're going to be your fractional CMO and they're going to do your campaigns, is that a good idea, a bad idea? What's the landscape look like in terms of results and responsibilities and roles between these different groups?

Rebecca: 13:40

Sure, yeah. So, first off, I think all of those solutions can be valuable for small business owners, but there's kind of a time and a place for each of them. So, from a fractional CMO perspective, what you're getting there you're going to get someone who's embedded within your team. They're going to be kind of an extension of your team and they're going to guide your strategy and then manage your in-house or outsource resources that are going to execute that strategy. So, again, they'll just play a great go-between between you as the founder or CEO and then the people that are going to be the boots on the ground that are getting the work done. A marketing agency they are likely a specialist in some form of marketing, whether that's demand generation, maybe they're an expert in social media, they're an expert in paid search, they're an expert in public relations, pr execute a strategy that you as the founder or CMO or founder CEO, or potentially your in-house marketing staff, is going to direct. Most of the time, those marketing agencies you're going to be working with a full team of people there, where likely it's those lower cost resources that they have, people who are more junior in their career that will be doing the bulk of the work under the oversight of a more seasoned professional who will kind of come in and go out right. So they need to make it profitable for them, but you do get the benefit of a full team there and then a staff marketer.

Rebecca: 15:30

I think staff marketer as the CEO or founder, you're always going to be balancing okay, what can I afford at this stage and how much experience is that going to buy me? That's why you see a lot of marketing managers who are maybe earlier in their career late 20s, somewhere in that range. They're a great cost conscious option for you. They'll be able to efficiently do all of those marketing activities, but they likely won't have decades of experience that, say, a fractional CMO will have had. They'll be doing more learning on the ground, which is great. Alternatively, you could decide okay, I could hire three specialists, or I could hire one senior resource that I'm going to bring in and that senior resource great, you're going to get that strategic oversight, but you might be overpaying because that person needs to be a generalist. They're going to have to both build your social media execution, they're going to be posting to LinkedIn for you and they also are going to be crafting your full marketing strategy.

Calvin: 16:39

Right, yeah, I mean. Having been through these decisions myself multiple times now in my career, I still feel like I struggle with these decisions about what resources to use for what jobs and when it's worth paying for it, when's it not. I can certainly appreciate how a seasoned fractional leader could help the founder owners work through these issues and make better decisions.

Rebecca: 17:05

Yeah, that's why I got into this space. I've been in that early stage tech startup space for the last 15 plus years and what I recognized was that all of these companies had a burning need for a senior strategic marketer to be kind of driving the ship. But not many of them had the budget to support that role. And so great if I can support three to five customers at a time and then manage those lower cost resources for them, that can execute the strategy that I'm building. I do feel like this is a great strategy for companies at this stage of growth. Once your marketing strategy is really complex and it's requiring a lot of resources to execute, probably makes sense at that point in time to then bring that CMO role in-house in a full-time capacity. But until you reach that stage, if you've got five to 10 in-house marketers, I absolutely believe that an outsourced fractional chief marketing officer could serve that role for you well.

Calvin: 18:15

Okay, and so with other fractional roles, there probably are different types of fractional marketing leaders. They have different service models, different price points, different target client profiles. So how should the small business owner go about picking the right fractional CFO or CMO if they think that's the right decision for them?

Rebecca: 18:37

I mean. What I will say is that I think right now, founders and CEOs have a bulk of resources to choose from. So there are I think the economic downturn in the tech industry has a lot of senior level marketers who are available and are recognizing hey, there's a different way that I could deliver my expertise. So there are just there are so many people who have very specific knowledge. So first I'd look at like, all right, broadly, do I have a B2B model or do I have a B2C model? Then you can kind of carve the pool by that. And then also, what is my go-to-market model? Do I have kind of a product-led growth motion? Do I have a marketplace offering? Do I have a sales-driven go have a sales driven go to market motion. Is it a marketing driven? Go to market motion. Am I big on e-comm? So with that, I think you're going to have marketers who have different skill sets and expertises in any one of those layers. And then also, what stage of growth are you in? There are marketers out there who I mentioned earlier are like great at that super early stage, that growing from like zero to one and building the playbook. And then there are some who are better at the scaling stage that, okay, I do want to do some of the figuring out, but then I want to help you scale one to end. And then there are those that have kind of that big company experience that are going to help you get from 20 million to 100 million. So I think you can start there, ask some of those questions.

Rebecca: 20:15

And then there's also the differences in delivery model. So the same fractional resource oftentimes has a few different offerings. So I, specifically, I may start with a client on like an audit type basis. Let me just take a look at what you've been doing in all of your marketing and give you an evaluation of that. And it's a great kind of try before you buy approach to hiring a fractional. Okay, great, let's get some experience without hooking me into the ongoing relationship of a monthly retainer. So that could be like a project basis that then may grow into great. I want a true fractional CMO where I'm going to engage their services for one or two days a week on an ongoing basis. Then maybe I don't have the budget for that, but I do want the ear of a senior strategic leader. So maybe I hire them for advisory services only, and advisory services versus full fractional CMO you might be looking at a couple thousand a month versus eight to $10,000 a month could be an investment benchmark there. So yeah, different delivery models there that you can consider.

Calvin: 21:39

Okay, and then, once you've selected a fractional CMO, what does the business owner really need to do to support that engagement, to make sure that it's successful?

Rebecca: 21:56

Yeah. So I think some of it is making sure one there's kind of proper documentation happening, right? So if there is a funnel that the marketing team is building on the front end, let's just make sure that the sales team is following up on the back end and that there's documentation in whatever your CRM system is, so that there is kind of that continuous loop of information so that marketing can learn and optimize everything that they're doing. Okay, we wanna do more of what's working and less of what isn't, and you can only do that if there is the proper data infrastructure in place. I think you should rely on your fractional resource, share knowledge with them.

Rebecca: 22:36

So if you have questions about something, if you have ideas, make sure there's space in your engagement to be sharing those with the fractional resource, while keeping in mind, I think, one thing that trips up many business owners is that they hire a fractional resource but then they want the value of a full-time resource, and that there's always going to be the balancing act there of okay, this person is fractional, the full-time resource. Sure, invite them to every single meeting. Person is fractional, the full-time resource. Sure, invite them to every single meeting. The fractional resource. Okay, I need to do a better job of synthesizing the information that I'm getting from the broader organization and then sharing it with the fractional resource in more abbreviated fashion.

Calvin: 23:55

Right. So you mentioned some of the differences between the fractional and the full-time model, right, the time availability, how complex a marketing operation they can manage and some other things. But if you could kind of highlight the differences between what you can expect from a fractional versus a full-time and if there are any kind of milestones or benchmarks where the business owner should realize maybe it's time for me to consider a full-time position.

Rebecca: 24:19

Business owner should realize maybe it's time for me to consider a full-time position. Yeah, I think in an ideal relationship, your fractional is going to come to you and say okay, I think we've outgrown this step. Great, I got you to this place. Now it's time for you to move on. But what I'd say you should be looking for again. So some of it may be the complexity that you are dealing with from a marketing execution standpoint.

Rebecca: 24:45

I think once you get more than 10 or so in-house resources, you may not need to hire a CMO, but you probably want maybe a VP of marketing or at least a director of marketing, somebody who can be managing the boots on the ground, and it may continue to be a viable relationship with that fractional CMO. I think that happens as well where there is a VP or a director who maybe has been homegrown, who has a lot of promise. You'd like to grow them into it. They just don't have the experience, so great. Then maybe you can have some advisory or coaching type relationship there.

Rebecca: 25:26

I think financially the company is going to need to support the jump from fractional to full-time. But also I think one of the great things to think about is that early in a company's life cycle they may go through a number of different pivots in business model in target market. So this fractional delivery perspective you can be continuously evaluating this. Okay, is this the right fractional for me at this stage of my company? Or have I pivoted and maybe I want to ask that fractional for me at this stage of my company? Or have I pivoted and maybe I want to ask that fractional for a referral for somebody who might have more skillset or expertise in this business model? I think that's the nice thing about the fractional delivery service.

Calvin: 26:15

So if I use an analogy in the accounting and finance space, I guess to help draw this out a little bit, when you're really small you're a part and finance space, I guess to help draw this out a little bit, when you're really small you're a part-time bookkeeper. You grow. Maybe you need to upgrade to more fractional accounting solution. You can do some real debits and credits accounting and do a great job managing a real monthly close, and then you may want to do some planning and analysis and forecasting and you may want to bring in a fractional CFO.

Calvin: 26:39

And then the fractional CFO starts to manage your fractional bookkeeping and accounting and you've got an outsourced fractional tax advisor. And then you keep growing and you reach a point where it doesn't really make any sense to hire a full-time CFO when you've got still very fractional people doing bookkeeping and accounting and tax. And so the logical step is typically to hire a full-time controller to manage that more larger, complex accounting operation and then continue to get the strategic benefit of a senior fractional CFO until you get really big and really have enough work for a full-time CFO to do. And I don't know enough about marketing functions and roles to really illustrate the difference between a director and a VP and a chief marketing role, Right? So is there any way you could summarize that to help business owners understand these titles?

Rebecca: 27:31

Yeah, I think some of it is going to come down to organization, right. Titles mean different things at different organizations, right? But I think I think your analogy does make sense. I think you are looking for that senior strategic leader. If there is a highly complex marketing motion and you are wildly profitable, where you could afford a CMO who's probably going to come in the $300,000 to $500,000 a year range in a market like Boston, then great, your marketing needs to be pretty complex to afford that role right there and have that be a full-time role from a fractional capacity, as you mentioned. Yeah, if you could have someone who has significant experience but maybe isn't CMO level, that's managing the boots on the ground in-house and then continue with that fractional marketing leader, it's a good way to approach it. You're not incurring the costs of benefits, you're not bearing the cost of that full-time salary there. I think that does make financial sense for the company while still maintaining that senior strategic leader who can pull everything together the conductor of the orchestra while the musicians on the ground keep everything going.

Calvin: 28:51

That's a good analogy too. And then I think I'm going to ask another question. I think business owners may think okay, I've hired a fractional marketing leader. Great Right, I've committed my marketing budget, I may do a little bit of SEO or AdWords or website maintenance. But now I've got this fractional CMO. So now, great, I'm going to get all these new leads we can go sell, right.

Rebecca: 29:14

Right right.

Calvin: 29:16

The reality is you hire the fractional CMO and they're going to try to provide strategic guidance and manage the people doing the marketing. So you've got this fractional CMO and now they're real excited. They want to start doing some marketing, but they need money to do marketing right. What could you say about kind of balancing the budget for the different components of the marketing operation in the context of having a fractional marketing leader?

Rebecca: 29:39

Yeah, I do think that's something that the CEO or founder absolutely needs to go to the table with at the beginning, with some guidelines around what budget they can, they can dedicate. Excuse me, all right, let me. I thought I had my notifications turned off, so let me just tackle that. If we can, sure pause, pause and then you'll. Then you only have to edit this once, as opposed to it happening a second time. One sec, let's see. Okay, we are good now, okay. So yeah, I think it's really important to have the conversation upfront with whatever fractional CMO that you are hiring as to guidance around budget that they'll have to play with, because that is going to inform their strategy and it certainly can be a chicken or the egg scenario, right? Do you want your fractional CMO to come up with a marketing plan and bring you the budget, or do you want to give them the budget and then they work backwards from that plan? It should be collaborative.

Rebecca: 31:03

I think it is mistaken for a founder to say, great, now I've hired the fractional CMO and she's just going to make leads appear from out of the sky.

Rebecca: 31:14

There will be marketing investment, but smart marketers know what to do from a scrappy perspective versus great, we've got a well-funded marketing strategy now and we're going to grow from there. I think a great way to think of things is running pilots in marketing. Great, we're not going to suddenly blow out something that's a million dollar campaign, but I'm gonna test something in the $50,000 realm and let's see what we can learn from that. And great, if we've got a positive ROI, then that's an easy financial decision for a CEO to make or a CFO to make to say, great, I invested a dollar and you brought me two dollars back in revenue. I'm going to do that all day long. But I think it does make sense to at least have some guidance for that CMO, because it honestly will help direct the CMOs that you're selecting for that. Is this somebody who is used to doing more organic work and can pull this together, or are they more versed in kind of paid demand generation? That, frankly, just takes a budget and an investment.

Calvin: 32:23

Right, and I know this whole budget planning varies a lot, a whole lot between company, industry, business model, objectives of ownership, right. And so just directionally, just say you're spending $8,000 to $10,000 a month on a fractional marketing leader and maybe you were spending $2,000 or $3,000 a month before on kind of minimum baseline marketing that's going to have to go from. It's not going to be $10, 10 or $12,000 a month total. It may be $20,000 a month total. It might be $30,000 a month total, right. So it's kind of multiple of what you're paying for the fractional marketing leader to actually do good marketing, right.

Rebecca: 33:01

It can be. Oftentimes. What I see is that is that they if you have some, some initial marketing resources in-house that have been managing campaigns for you, or maybe you have outsourced agencies you already are doing some marketing activities, but maybe you don't have the strategy on the backend to turn those activities into actual opportunities. And that's where a fractional leader can really help you optimize that spend, and so it may not be incremental spend. If you're doing nothing, it probably will be incremental spend, but you may already be doing spend. You're just not getting the best ROI from it because there hasn't been a comprehensive plan surrounding those tactics.

Calvin: 33:51

Right, and that's where the marketing audit that you mentioned you do comes into play. Right, you can do the initial audit on a relatively affordable project basis. Then try to figure out how the current marketing is working. And if you were to engage on a fractional leadership basis, what would you recommend as far as the plan and the budget leadership?

Rebecca: 34:09

basis. What would you recommend as far?

Calvin: 34:11

as the plan and the budget. Right, exactly, yes, yep, cool, yeah. Well, is there anything else you want?

Rebecca: 34:18

to mention, while we're chatting, rebecca, before we wrap up this episode, let's see Nope. No, I think I'm good for now.

Calvin: 34:23

Okay, well, thank you so much for your time and sharing these insights, because I am certainly not a marketing guy, but so I was like learning from these conversations. If listeners want to follow up with you directly, what's the best way for them to get in touch with you?

Rebecca: 34:36

Sure, they can find me on LinkedIn. I'm Rebecca Schuette, s-c-h-u-e-t-t-e. They can also visit my website, which is start the number to scaleio. Start to scaleio.

Calvin: 34:52

Great, we'll get those into the show notes too, to make sure everybody has them. Well, thank you so much for your time, rebecca.

Rebecca: 34:57

Excellent. Thanks, cal. It was a pleasure talking to you today.

Calvin: 35:01

Likewise.

Rebecca: 35:02

Thanks.

Calvin: 35:06

Reference show notes and find other episodes on empowering healthy businesscom. If you would like to have a one-on-one discussion with me or possibly engage smart books to help with your business, you can reach me at Cal C-A-L at empowering healthy businesscom or message me on LinkedIn, where I am easy to find. Until next time, this is empowering healthy business, the podcast for small business owners. Signing off.