One of the most important decisions you’ll make as a business owner is whether to hire a part time CMO. Also called a Fractional CMO, a part-time CMO is an outsourced marketing executive: a chief marketing officer that leads your company’s marketing efforts on a short-term, consulting basis. This gives your company all the benefits of an experienced marketing professional without the costs associated with a full-time executive.
Of course, your outsourced CMO still needs to be paid. Even though considerations like health insurance and retirement benefits will not be on the table, it’s important to negotiate a competitive and enticing compensation package for fractional CMO services in order to attract the best talent. Let’s take a look at some of the factors that go into calculating how much you should pay your part-time CMO.
How Big Does My Company Have to Be to Outsource a CMO?
Interestingly, the size of your company isn’t as much of a factor as your company’s capitalization, the revenue your company generates, and the size of your market. Typically, companies that hire a part-time CMO are $5M to $10M companies with 25 to 50 employees. These are companies in growth mode that have identified the opportunity in the market and see the potential. The next step is to find a marketing expert who can create a strategy to focus on lead generation and customer acquisition.
As we mentioned, however, size doesn’t matter as much as you might think. A small company of under 10 employees might want to consider outsourced CMO services if they’re well-capitalized but missing the marketing talent. A good example of this is a small software startup that may be comprised of engineers with an amazing new idea, but don’t have the skill set required to take their product to market. Fractional CMO services allow a small company to focus on what they do best.
What Types of Tasks Are Typical for a Fractional CMO?
The next step in calculating the cost of your fractional CMO is to identify the types of marketing services your company needs. Here’s a great rule of thumb: if you don’t know what type of marketing services your business requires, then you probably need to hire an on-demand CMO.
Here are some of the most common tasks required from a part-time CMO:
- Development of marketing strategy
- Coordinating marketing campaigns with sales & outreach activities
- Creating or overseeing the creation of all marketing collateral
- Managing lead generation campaigns (including acquisition costs and quality of leads)
- Monitoring and reporting on effectiveness of campaigns (ROI, KPIs)
- Maintaining effective communication between leadership & marketing
- Analyzing strategic partnership relationships: finding/refining the target audience and reaching them
The bottom line: the more tasks you require for your part-time CMO—including external team members that the marketing professional will bring to the table—the higher the fractional CMO salary.
Factors in Calculating CMO Costs
Now that we’ve identified whether your company needs a CMO for hire that specializes in strategy or implementation, let’s take a look at some of the other factors that go into calculating fractional CMO costs:
Size of Company
Again, what’s important about the size of the company is whether your business will be supplying the human resources for marketing implementation, or if one of the responsibilities of your part-time CMO is to hire and manage those teams. Another factor to consider here is how much autonomy you will give your fractional marketing director: does she report to a Board that has to approve every step, or is she more independent? The longer the approval process takes, the more hours you’ll be paying for.
Scope of Services
Are you consulting a Chief Marketing Officer to build your marketing plan from the ground-up, or do you have a plan in place that needs refining and/or expansion? The scope of services for a fractional CMO fall under two categories: strategy and implementation. Which do you need? Think of strategy as asking, “What do I do?” If your business has no direction and no organization, then your part-time CMO should develop a strategy to optimize systems within your business to keep it running smoothly. If you already have a strategy that you’ve proven in the market and are looking to expand and grow that strategy, then your fractional CMO needs to help with implementation. This can be done either personally or with teams. If done with teams, the members can either be internal to your business or external teams brought in by your new fractional marketing manager.
Length of Time
How long will your engagement be with your new fractional CMO? Understanding the tasks you need and the scope of services will help you answer this question. If you’re building from the ground-up, you’ll need your fractional CMO for a longer engagement than you will if that person is simply expanding on the current plan. Answering this will make the difference between an hourly engagement or a monthly, ongoing contract.
Online, freelance staffing services like Upwork and Fivver allow you to find a fractional CMO and hire them on an hourly basis. The most popular hourly rates vary between $50 and $200. This may seem like a wide gap, but it’s important to remember that the staffing service takes upwards of 25% of that rate as a finder’s fee. Of course, there will always be a cost associated with any kind of fractional CMO agency, so it’s important to know how that cost will affect your hourly rate.
Expected Return on Investment
What should your business expect as a ROI for your outsourced CMO? It depends on the model you use. If you look at your part-time CMO as you would a normal employee, that hire should pay for itself plus the company’s current profit projection for the year. For example, if you plan to increase revenue by 15% this year, take all the costs associated with the hire, then add 15%.
Marketing is inextricably tied to sales, so often times, the performance of your part-time CMO will be gauged by sales data. It’s important to remember, however, that you may have hired your fractional CMO for a specific deliverable, like a plan and its associated collateral. Whether your sales team is able to deliver on that plan is not always an indicator of your CMO’s performance.
Average Cost of a CMO
One way to get a good sense of how much you can expect to pay your part-time CMO is to look at the average yearly cost of CMO salaries across businesses of different sizes:
- 225K to 250K for enterprise
- 150K to 200K for large scale businesses
- 100K to 150K for mid-sized businesses
- 60K to 100K for small businesses
At first glance, this may seem comparable to what you might pay for a full-time CMO, but remember, the employment costs are not there, as this hire is an independent contractor (i.e. no payroll taxes, 401K benefits, etc).
As an hourly rate, most fractional CMOs charge between $125 to $250 per hour with a usual buy-in of about 10 to 15 hours a week of work. Again, these figures represent averages across the nation. We suggest that your search for a part-time CMO start at the local level, where you can potentially find rates for a lot less.
Are There Any Unexpected Costs?
In short, yes. It’s critical that you keep an eye out for two costs that can take you by surprise when you hire a fractional CMO.
Advertising is the big one. Whether you plan on going with traditional media (like print) or digital advertising (like Google Ads or paid social media), advertising can easily double your budget before you know it. It’s a very important cost—one that could mean the difference between success and failure of the marketing plan—but it’s one you should budget in advance and separately from the cost of your fractional CMO services.
Another unexpected cost is one that might surprise you: the cost of networking. We typically look at networking as a cost only in time and not in money, but the opposite is true. Becoming a member of the right trade associations or the Chamber of Commerce can add thousands to your budget. Again, think of these as costs that will come in addition to your fractional CMO costs.
Are There Differences in Cost Per Vertical?
One of the factors that will cause a variation on the amount you’ll pay for fractional CMO services is the type of vertical your business is in. This is because ROI is tied to average customer value. High-valued customers are worth more, therefore your costs will be higher.
For example, restaurants are less expensive than high-end retail or even industrial. An average customer may be worth $1,000 a year maximum for a chain restaurant. However, the customer at a local car dealership will be worth upwards of $60,000 a year. Granted, that customer may purchase less often, but their value is still higher, and they’re harder to target.
The more niche the vertical, the more your fractional CMO will charge (and potentially, the more your part-time CMO agency will charge). It is a lot harder to find an expert marketer in the field of neuroscience pharmacology than it is in real estate, so be prepared to pay for very specific expertise.
Final Calculations: How Much Should You Offer for a Part Time CMO?
As you can see, there are a lot of factors that go into determining how much you should pay for a part-time CMO. We’ve presented these factors as a way to prepare yourself for the cost and to understand how the uniqueness of your situation, your business, your needs, and your industry vertical will affect this cost.
There are two models for payment to fractional CMOs. The first is the retainer Model. This involves an upfront commitment of hours with a salary range of $100 to $300 per hour (depending on the factors we discussed here) for 5 to 10 hours per month. If you need a marketing strategy, 5 to 10 hours per month is typically the standard, but if you also require implementation, think more along the lines of 15 to 20 hours. This creates a range of $500 to $6,000 per month.
The other model is consulting, which is generally used if you need a deeper involvement from your part-time CMO. The low-end of the spectrum is about $1,500 per month all the way up to $10,000 per month. $1,500 per month may seem like a bargain, but keep in mind that consulting may lead to a retainer once your fractional CMO helps you understand what your marketing needs are.
Understanding what your business needs are is key in calculating the cost of a fractional CMO. The range of payment, salary and costs, as well as the length of engagement can vary wildly, but with a little thought and planning around your specific needs, you’ll land on an accurate figure for your part-time CMO budget.