Hiring A Fractional CXO Is the New Power Move

Speaker A: Welcome to the new F Word podcast where we cut the fluff on business finances and lift the lid on the new F Word, the fractional finance revolution. It's a game changer for small businesses. I'm your host, Colin Hewitt, co founder of Float Cash Flow Management for Xero on QuickBooks. We believe that really understanding your business finances makes all the difference in the world and having a strategic partner like a fractional CFO is the key to unlocking that. So join us as we dive into personal stories and actionable insights from forward thinking finance leaders and seasoned entrepreneurs to discover why fractional finance leaders have become an irreplaceable part of small business leadership.

Speaker B: Stephen, it's great to have you. Welcome to the new F Word podcast.

Speaker C: Good to see you, Colin.

Speaker B: Great, great to just chat. Um, I know we've had a number of conversations in the last sort of few months and it's great to see the rise of what you guys are doing and you know. So tell us about Portfolio xd. Um, I'd love to hear about how you get started and really love to get into the insights that are coming out of uh, that company. So yeah, how did it begin?

Speaker C: Cool. Well, it kind of began as the result of um, me not really enjoying consultancy work and thinking, bloody hell, what am I going to do here? So just to kind of retrace, um, background is entirely in brand marketing, digital commercialization and uh, you know, over the years it's mainly been agencies that have been involved in. So at one stage we had um, the biggest independent agency, um, out West London, uh, up here in Glasgow. And you know, so I exited that business back in 2008, had another agency, uh, another couple of marketing services businesses and a tech business. And all was going pretty interestingly. And as with most people, um, life got in the way. And 2014, um, end of 2014, uh, the youngest of my four kids got very ill and for the next four, four and a half years it didn't work at all. So when I reentered the world in 2019, it was in the guise of a lone ranger consultant for the first time in my life. And I really struggled with the fact that forever, uh, that I'd been involved in working with clients and businesses, SMEs particularly. I'd always had the ability to affect the strategy, the design, uh, the strategy, the plan and the execution. And obviously within an agency environment, the execution piece was the kingpin. And all of a sudden I was in this world where all anybody wanted to pay me for was the strategy. Piece because they had people, teams, departments, agencies that would do the do. And so I would find myself investing myself in a piece of work, usually time bound or project bound, you know, taking it right through the process, bringing then the leadership teams with you, the boards with you, and getting to a point where you're tying the strategy up with a bow and handing it over and then watching from a distance as either nothing happened, as sometimes happened, or when things did happen, you were thinking, for the love of actual God, what are they doing? And you had no ability to do anything about it. And I'm thinking, uh, this ain't going to work for me. And it just out of pure luck, I had been down in London and I'd met up with an old finance director of mines who had left our business some six, seven, eight years previous to go down and work with WP Peaker. And when I bumped into him, um, he had just literally resigned and had nothing to go to. And so over the course of the coming months he fell into starting to do some work through what is now a competitor of ours, what was the FD center, now the CFO center. And it introduced me to the whole notion of part time leadership. And clearly from the economics of it, it was quite interesting, you know, working two, three, three and a half days a week and still earn a reasonable salary. But I, uh, think the big thing for me was the ongoing engagement with the client and the ability to not only do the front end strategy piece, but to be then involved in the delivery piece. And so from my point of view, I started trying to build down to what I was selling to companies. And after getting a couple up and running, where developed the strategy, created the plan, designed a team structure to help deliver the plan, help recruit the team, stay involved, three, four, five, six, seven days a month. It was almost like a hallelujah moment. It was like the skies opened up and the angels started singing. It was the bet that was missing that ability to be involved, to affect and to have an impact on the delivery piece. And at that point, so this is back in late 2019, I'm thinking, actually I think there could be an opportunity here because, uh, I'm only seeing this really happening in finance. Why is it not happening, um, across the rest of C Suite? And that was where the kernel of the idea was born. Obviously Covid then get in the way. Um, and you know, we never really progressed too much, but once we get into uh, 2021, uh, 2022, I was starting to do more and more in and around the whole fractional piece. And uh, we got to a point probably summer 2023 where a couple of projects that, but I had got involved through um, private equity houses, um, had gone reasonably well, we'd managed to get them exits and I had sat down with a couple of companies at that point and said listen guys, let me know what you think about this. But what if you were able to come to a single source to be able to access high quality, highly experienced, pre vetted C suite execs right across the ever growing Alphabet of C suite on a fractional basis. Therefore clearly no upfront fees, the flexibility to dial up, down on, off as the businesses need, eliminate effectively all recruitment risk, allow your companies to hire better than they can afford earlier in the growth cycle than you might have thought possible. And I kind of got a silence and I looked that was like so what's the downside? Where's the catch? When, when can you start looking at X, Y and Z now? And I'm saying well no, it's really just a, a concept at the moment. Give me six months. So by the time I was able to, to clear the desk and get my head onto uh, it, it was probably October, November 2023 before we really get our heads onto it. We made our first hires into the market in the December and last year was a bit of a blur. It's just kind of went mental. And you know, we're now seeing referrals coming in on a daily weekly basis from a number of kind of referral partners and areas of interest for us which are, you know, your investment companies, angel groups through private equity into VC, your kind of tier 2, tier 3 advisory, your banks, uh, the big banks and particularly their high growth relationship management teams and obviously a number of the big UK accelerator programs. So all of our work is coming in, being referred in by those types of organizations.

Speaker B: Do you think that Covid obviously like you said, got in the way but it seems to have like being the uh, the precursor for a huge change.

Speaker C: Definitely a catalyst. Absolutely. I think what it's done is, is it's taken a lot of preconceived notions of, of both time and location out uh, of the equation completely. You know, I think a lot of recruitment essentially over the years has been clearly driven by recruitment consultancies. Recruitment consultancies are traditionally quite geographically focused. So you know, you're in a situation where companies that you know, were perhaps looking for a certain level of leadership and would go to a recruitment consultancy more often than not it's going to be that localized black book of people in that sphere of competence that they're going to engage with. Um, and I think what Covid did was it completely took all that away. Um, and you're now in a situation where in our view, um, it's about getting out to get the best people regardless of where they sit for the company and for the role. Um, which means that we've got fractional Chief execs of UK companies based in the US we've got fractional CMOs of UK businesses based in Amsterdam, um, Berlin. So it's really about finding the right fit regardless. And I think the whole fractional piece as well, um, the whole flexibility of working not just in terms of location but the ability to really hone in and focus around impact and on output as opposed to necessarily seeing you in the office from half past eight till half past five. I think that again has, has, has kind of um, been been aided and abetted by, by Covid as well.

Speaker B: Yeah, I know, 100%. And something you said there struck me, you know, is this, how do you see like companies, I get the smaller company, you know, the rationale for bringing in fractional, like it makes complete sense. You can't, you want to get the experience without uh, the full, the price tag. Uh, and it's a lot lower risk. I can totally see that. That makes a lot of sense. A lot of my friends who are running startups are really kind of starting to embark on that as a, as a new concept and in their strategy. But you're obviously working with larger companies. I didn't, I, that was, that's a new thing to me to think that they would be going the fractional route as well. How can you tell us a bit about how that's working or you know, what you're seeing there?

Speaker C: I mean, I think the majority of who we're working with is in that uh, SME sphere. I mean I think. And you know, probably in that uh, scale up stage, in fact it's probably worth talking about the fact that, you know, the kind of three or four key points when we're being brought in is either in the lead up to an investment round, just post an investment round. So in the lead up to where you're able to add a bit of rigor to the strategy, to the models that are being developed and to the plan, but also to boost the leadership team in the deck that's going in looking for investment, obviously just beyond investment, where the investment's going in, where everybody's looking to optimize the spend of that. And therefore we're in a situation where at that stage they're then looking to bring in the right people to be able to really deliver that for them. And then the third area that we're seeing quite a bit is in the kind of turn around site where there's maybe, uh, a bit of an issue, a bit of a problem or a better transformation that's required is also when we're being brought in. And I think particularly in that third area is where we're seeing a better impact with slightly larger businesses where there's maybe a function that is still relatively embryonic within the business, even though, you know, they are of a scale, uh, and they're looking for that, you know, that more rounded, more experienced, you know, person that is also able to bring in a better network from the sector from, you know, the area of the business that they're involved in. So, you know, and I think I mentioned to you before, you know, but on an assignment just now, in fact, a CFO, um, in a, in a business for the last six months, um, where the business is, you know, 600 people turning over about 80 million and had about 25 million invested in it so far, you know, and notwithstanding the fact that uh, it's probably a larger fractional assignment, it's not a million miles off full time, it's still not full time. Um, and I think from their point of view, the other big element that is of interest is one, the speed of getting someone in traditional recruitment and at that level to bring in uh, a cfo, you're probably talking six to nine months before you get someone. We had someone in place there in less than three weeks. And also the other big thing is the cleanliness of the recruitment. It's simply and solely based on my dairy. So you're not getting into any discussions, negotiations around equity, around bonuses, around all of that kind of stuff. It's just a, uh, straight, there's the day date, you get what you pay for. So it's really clean in that respect.

Speaker B: And I can imagine in those situations it's really, that's been driven by the role, the fractional role. It's not that the companies would probably want them to be as full time as they can. It's not about, they're not trying to save money. It's more uh, it's coming from the lifestyle choices of the person in the role who's saying, I just don't want to be, I don't want to be full time. I'm not at that stage of life for whatever reason or doing other things.

Speaker C: I think there's a real. And again, going back to your earlier point, um, in terms of COVID I think, ah, there can be the misconception that the fractional piece is simply for people who are dialing down their time before retirement. Um, and actually that's not what I'm seeing at all. People are making a very positive choice that this is the way they want their career to pan out. Uh, and so you're getting people in their early 40s that are choosing this level of flexibility, this level of variety and giving themselves a, ah, really different pathway in terms of their own development. Um.

Speaker B: Wow. And I guess once you've successfully done that, once, you know people, they're hooked on that or do they, do you see people starting fractional and becoming full time? What's been your experience there?

Speaker C: I've not seen anyone go that way yet. You know, and that's despite on a number of occasions where the companies haven't had the exec in for three, four, five months of then saying, we'd like to hire them full time. And more often than not the execs are saying, I don't want to go full time, that's not what I want to do. But we'll now help you recruit a full time if that's where you want to go now. And actually what has happened in the majority of those cases is that the companies have then went, no, we really like that person. So we'll work around how they want to work and ultimately do a backfilling behind them, um, in terms of the capability and the requirement, um, within the business that you know, they're not necessarily getting the step up of the, the, the C suite exec, but they're then building um, the team around the fact that the C suite exec is only going to be there two days a week.

Speaker B: And, and so where, where do you guys come into play in terms of. I think you said, said it at the beginning but just to kind of recover. Like what, what are people coming to you for specifically rather than trying to go out to just hire somebody themselves or you're the kind of m. You're vetting everybody or are you, you know, bring in your experience, network, how does, what are you bringing to the table there?

Speaker C: So we're, we're now bringing them into what we got. As of Today we've got 1437 execs in the talent pool, mainly across the UK but you know, just over 300 of them. Are now international and that whole international but is growing. And I think the feedback that I'm getting um, from the people we're engaging with uh, who either have a bunch of clients, a uh, number on current and old cohorts or um, are part of their investment portfolio is the fact that they can come to a single source and access the entire C suite functions for companies at ah, any stage in the growth curve or within any sector. And where we're finding success is the fact that we're curating, the fact that they're only getting to see three or four perhaps in the first instance. But the curation piece is so focused and so well aligned with what they're looking for um, that more often than not that's as far as we need to go. And they'll take on someone from that within probably two, three week period um, of us providing those details. So I think it's the ability to be able to bring in people who are of high quality with lots of experience. But also we've done the vetting process with them and are then curating to the talent against the role, the company, the personalities, the investment profile and ultimately the kind of impact that they're looking for. We can align that really really well.

Speaker B: So Stephen, what's um, on the radar for 2025? I know it seems like it's started uh with the buying but what are you seeing trends wise playing out this year? How do you need to grow as a company?

Speaker C: Clearly the economic landscape's tough right now and I think from the point of view of how do companies deal with that, uh, I think the C suite as a service um model um is only going to increase the level of interest and conversation and contracts exchanging has been nuts. So I think we're going to see an acceleration of what we've started to see during 2024. And I think the whole opportunity to mitigate risk, create flexibility in a world where the economics are not great, it has to be good. And I think we're only going to see um, an increase in what we are doing and what's happening in the market. I think in terms of us last year was really about trying to prove the model for us which I think we have and put some of the systems, processes, QA processes um, in place that will allow us to grow which we have. Um, so this year is going to be about starting to come above the parapet a little bit because the last 12 months have really been old school, old fashioned business development relationship building with the referral partners. This year we'll start to turn the communication volume up a little bit and um, hopefully build the pie, uh, across the entire fractional landscape and make it even more, uh, a part of the strategic plans of businesses that are in any way ambitious, um, or in any way looking for growth. And it's for that reason that we're starting to create some partnerships out in the marketplace. We've already announced a partnership with Space Network, what was Scottish Space Network, now Space Network, we're about to, and I think it'll be announced this month. Um, we've just created new partnership with Entrepreneurial Scotland where again, we're just bringing the whole notion of fractional, um, C Suite as a service to more and more companies that we believe will have a need or have a requirement for. And I think, you know, as part of that we're starting to have negotiations or conversations with um, a lot of the economic development agencies, Scottish Enterprise up here, you know, Manchester Combined Authority, West Midlands Combined Authority London and Partners. Because I think there is a big economic development piece to what we're doing and what C Suite as a service can deliver to help grow companies within those geographies, um, not only throughout the uk but on an international basis. Because already we are seeing, um, companies that are looking to internationalize. We can again provide that speed, quality and risk mitigation as part of that hiring process of looking internationally. So we recently placed a fractional CEO, um, for a UK media company in Toronto, recently hired a, uh, fractional CEO cco, uh, for a bioscience business, UK Bioscience business out in Boston. Um, we're currently looking at a couple of things, one in Singapore, one in Australia. Again, for UK companies that are taking that first step to taking their product, their services abroad. And I think in terms of keeping the cost down, getting there quickly mitigating any risk, it's a really neat way of doing it.

Speaker B: Well, it sounds like it's going to be a big and a busy year for you, so congrats on that really, uh, being sometimes being in the right place at the right time, isn't it? And just like catching that, catching that wave and I finally, I think just, you know, what, what would your advice be to people who are considering going fractional? Obviously there's a rising demand, but there's probably also a rising supply. What, what can people do to make themselves stand out and jump to the top of the, the pile? Like, what would be your advice to them?

Speaker C: I mean, again, like most things in life, it comes down to networks and if you've got a good network. There's no reason why you can't have a steady flow um, of work coming through. If you've been in and around the kind of early stage or entrepreneurial or SME ecosystem, I think there'll be no shortage of opportunities. If however you're maybe coming at it, um, without those networks, my suggestion would be to get yourself involved with an organization. I'm not saying only us, but um, there are clearly other companies out there that are doing similar mainly in a vertical functional basis. But I uh, would suggest using them but not stop developing your own networks because that is the thing that will generate your, your work and your value in the market and get yourself as, as, as much as possible a few assignments um, in the space. Even if it means potentially loss leading a little bit in order to get, get it onto the cv. Because one of the things that we found there's a lot of big corporate players that are looking to enter this market. Um, and actually a lot of the times we are sitting on go and get a couple of assignments first. Um, because the, the, the gap between, and the chasm that exists between working in a corporate environment and working at SME level is massive. And, and from our point of view it would be useful if you had a couple of reference points of, of being able to do that before we'll take you on and, and start pushing you into organizations. Um, because we found to our detriment early in the process that quite often it doesn't, it doesn't always work. Putting a corporate beast into uh, a nimble, fast moving fleet of foot company.

Speaker B: Hey, that's great advice. I mean so much value there for people who are thinking about it. Obviously we'll put links to Portfolio XD in the show notes and uh, people can get in touch with you that way presumably.

Speaker C: Absolutely. Or just you know, drop me a note on LinkedIn.

Speaker B: Well look Steven, uh, it's been fantastic talking to you. I will hopefully speak to you very soon.

Speaker C: Amazing. Good to see you Colin.

Speaker A: Thanks for tuning in to another episode

Speaker C: of the new F Word.

Speaker A: I hope you enjoyed it. Remember, expert financial advice shouldn't be limited to those with just big budgets. You can access the same level of advice for a fraction of the costs thanks to this fractional revolution. I believe that every growing business needs to know how much a game changer this can be. So if you love the episode, please consider subscribing to the show. It'll help us keep doing what we're passionate about. And feel free to share this episode. With others who might find it useful. Finally, we'd love to hear your thoughts. Feel free to connect with us on LinkedIn. See you in the next one.