Fractional team members are all the rage these days with small businesses, and there is a good reason why. There is a wide range of what a Fractional CXO can help small businesses do, as described by other articles on this site regarding regard to COOs or CFOs. But, specifically for micro or small businesses, would a Fractional help you?
Let’s start with the basic thought process. Hiring a Fractional at any level helps manage the budget. It would be impossible for small businesses with less than 25 employees, to have a $300K salary on the books, even for a spectacular Chief Operating Officer who runs the whole business. And, the owner probably doesn’t need that much help and experience for a business that size.
But, without Fractionals, the owners of small businesses are stuck doing all the work themselves. They are fulfilling the roles of CFOs, COOs, CIOs, CPOs, CROs, CSOs, and CTOs. (I could continue with the alphabet, but you get the gist.) Not one of those roles needs to be filled by a full-time person in a company that size.
Full Time or Fractional?
Owners might think they should go look for an up-and-comer to help them, but then they are also guiding and directing the person who they need for guidance and direction. With a Fractional, small businesses get years of experience because the role is part-time without the high price tag.
Fractionals can go beyond the c-level suite as well. We used to call these part-time employees, subcontractors, or freelancers. Graphic designers, social media experts, project managers… do small businesses really need people in those roles as full-time employees?
Collecting a bunch of Fractionals to help you in your business can impact growth tremendously. All that wisdom at your fingertips, without the huge overhead!
Fractional COOs for Small Businesses
Let’s take, for example, what a Fractional COO might do for very small businesses of various sizes.
At 50 people, an owner likely needs a 1- to 2-day-a-week Fractional who has direct reports. The Fractional COO would help by advising and creating reporting in many areas, would help in developing the culture, identifying risks and opportunities, project management of high-level projects, and strategic planning.
But, at 10 people, owners of small businesses likely just need help getting out of the day-to-day. You can hire by the hour, usually, for these services or at low retainer rates. Before the owners can get to those bigger picture areas noted above, they need someone to advise on things like:
- what the best project management software tool is
- how to implement it
- where there are gaps in the processes (if you have them!)
- how to hold your team accountable
- and, how to make the business run without the owner in every detail
Owners might also need to create job descriptions and some of those non-C-level Fractionals to help execute the work. Essentially, small business owners need help learning how to scale and extricate themselves from the details.
Midrange small businesses (think 10-49 employees) need help with clarifying what those great employees are doing, correcting communication to prevent silos in departments (likely created by those great employees unintentionally), and making sure owners know what those amazing leaders are doing so their gap can be filled should they leave. At this stage, culture and leadership issues might also be becoming challenges.
Choosing the Right Fractional
Small businesses might only be able to afford one Fractional at a time – and that’s ok. But, how does an owner decide?
Fractional CFOs or COOs are usually the first hires. But Fractional CMOs are up there. It might be valuable to have both. Many Fractional CFOs working for small businesses will bring a range of services with them, from bookkeeping to taxes and being a trusted advisor.
Fractional COOs can range from consultants who give strategic advice (but the owner implements the work) to teams similar to the Fractional CFO team – with a COO, process development expert, and project manager for example.
Fractional CMOs will usually need to pull in a team to help execute against their recommendations because everything is so specialized these days. Everything needs an expert from website design and development to social media strategies to physical direct mail.
Small businesses likely need a full array of services as it helps remove burdens from the owners’ task lists. So, owners need to be certain what range of services they will be getting with the Fractional they hire.
About the Author
Susan Fennema is the Chaos Eradicating Officer (CEO) of Beyond the Chaos, a consultancy helping small business owners extricate themselves from their day-to-day business operations so they can grow their businesses and get their lives back. She and her team have served over 100 small businesses. With 30+ years of operations/project management experience in professional service industries, Susan is on a mission to improve American society exponentially. When not making multi-course dinners, she enjoys Texas A&M football games and Blackhawks hockey. She lives and works from her home in McKinney, Texas, with her husband and their dog, Shelby.
Today’s consumers are more connected than ever before. As a result, social media has become one of the essential tools for businesses to reach their target audience and drive brand awareness and loyalty. Social Media is playing an enormous role in the growth of businesses these days. In fact, according to studies, almost 80% of internet users now use social media sites daily. Therefore, if you want your business to thrive in today’s digital world, you need to understand how social media can be used as a marketing tool to increase brand awareness and drive sales directly from your website. The trick is knowing which social networking sites are best suited for your business, what types of content will be most effective on each platform and how much time and resources you’re willing to invest in creating engaging content regularly.
Decide on the type of social media you want to use.
The first step in any successful social media strategy is deciding which platforms best suit your business. Understanding that each social media platform has its own unique demographics, you may want to consider focusing your marketing efforts on a couple of the most popular sites, such as Facebook and Instagram, or diversify your marketing efforts across several different platforms. Some social networks, such as LinkedIn, are primarily geared toward professionals, while others, such as Instagram, focus on a much broader demographic, including teens and millennials.
Find your target audience.
Once you’ve decided on the social networks you want to focus on, you’ll need to research the demographics of each site to determine the best way to reach your target audience. While it’s helpful to know the number of users on each network, it’s also essential to research the types of content they’re sharing, how often they visit each site, and their engagement level when they’re there. This will give you a good idea of which networks to focus on and the best times to post your content for the biggest impact. By taking the time to understand who’s using each network and what they’re looking for when visiting these sites, you’ll be able to create more engaging content that resonates with your desired audience and drives more traffic to your website and sales.
Create exceptional content.
Once you’ve decided on the social networks you want to focus on, it’s time to create some high-quality content to post on these sites. There are a variety of types of social media content that you can include on your site, from blog posts and eBooks to videos and infographics. However, you’ll want to make sure that you’re not creating too much content for your audience to consume. Depending on the size of your audience, you may be able to post new content daily or weekly, but you don’t want to create so much content that you exhaust your audience or bore them with too much information. Similarly, you don’t want to just create content for the sake of having new content. You must ensure that each piece of content you post is engaging, interesting, and valuable to your audience.
Don’t just stop at one network.
It’s important to remember that social media is all about sharing content across multiple networks and platforms. While you may have a primary focus, such as Facebook or Instagram, you should also be cross-posting your content to several other sites as well. In fact, according to research, you should be posting your content to an average of 10 social networks. The trick is not just to be posting the same content over and over again. While it’s OK to repost certain articles on different networks, you should be altering the content for each site so that it better resonates with the users on that platform. Additionally, you may want to consider setting up a social media management platform, such as Hootsuite, so you can easily schedule your posts to go live at the optimal times for each network. This will help ensure that your posts are getting seen by as many people as possible on each site.
Social media is a powerful tool for reaching new customers and growing your business. However, it only works if you’re using it for your business and creating engaging content that resonates with customers. Start by deciding which networks to suit your business and target audience. Then, create high-quality content that is engaging and worth sharing. Don’t just stop at one network; post your content on multiple sites to reach potential customers.
RJ Grimshaw is a dad, son, and life learner, and I love the game of business! His passion is business coaching, in which I use the principles to grow and scale businesses by thinking less like a cog in the corporate machine and more like an active “Intrapreneur.” He helps companies revitalize their atmosphere and approach to business management to achieve maximum growth.
There are two types of companies in the business world: small giants and big fish. The small giants are the businesses that have chosen to stay small and focus on quality instead of quantity. They believe this is the better business strategy and succeed because of it. The concept of small giants comes from Bo Burlingham’s book of the same name.
In it, he discusses why small businesses are often more successful than their larger counterparts. From my interview with Rob Dube, Co-Founder and Co-CEO of imageOne, a document management solution company, and the author of ‘Do nothing: The Most Rewarding Leadership Challenge You’ll Ever Take.’ Rob is also the co-founder, with Gino Wickman, of an organization called The 10 Disciplines, which teaches business owners a proven process to help people maximize their energy and help them live their optimal life. I have compiled the following on small giants, choosing great over big. This blog post will discuss the small giant philosophy and how it can benefit your business.
What is a Small Giant?
The small giants are the businesses that have chosen to stay small and focus on quality instead of quantity. They believe this is the better business strategy and succeed because of it. The concept of small giants comes from Bo Burlingham’s book of the same name. In it, he discusses why small businesses are often more successful than their larger counterparts.
The small giant philosophy is all about choosing quality over quantity. Businesses should focus on providing a great customer experience rather than trying to serve as many people as possible. While this may seem counterintuitive to run a business, it makes a lot of sense. When businesses prioritize quality, they tend to be more profitable. They also have lower employee turnover and can better weather economic downturns.
So if you’re looking for a business focused on quality over quantity, you should definitely consider becoming a small giant. You’ll be glad you did!
What is the Small Giants Community?
Robe Dube being part of the community, explains it as a professional business network for purpose-driven executives who want to learn new methods and systems to implement in their own businesses. There are no membership fees involved with the Small Giants Community — instead, there are three primary ways to participate: study from Small Giant PDFs and other resources, attend the annual Small Giants conference, and join small groups of peers (called “Giants Circles”) that meet regularly to support and challenge each other.
The Small Giants Community is open to any business leader who is looking for an alternative way to run their company. Whether you’re a small business owner, CEO, or president, you’ll find valuable resources and support within the Small Giants Community.
Suppose you’re interested in learning more about the small giant philosophy or looking for a supportive community of like-minded business leaders. In that case, we encourage you to check out the Small Giants Community today!
Qualities of Small Giant Companies
The small giant companies that have been studied all share some common qualities. They are:
The Leader Factor
It is widely accepted that solid leadership is a critical ingredient for any organization’s success. While this is undoubtedly true, it is also important to note that not all leaders are created equal. In particular, the leaders of so-called “Small Giant” companies exhibit unique qualities that enable them to achieve extraordinary results.
First and foremost, leaders of Small Giant companies are highly self-aware. They clearly understand what they want to achieve with their business and are also aware of the deeper purpose that drives their actions. This self-awareness allows them to lead their organizations more effectively without sacrificing the things that matter most.
In addition, Small Giant leaders are passionate and committed to their teams. They know that creating a great company requires the best efforts of everyone involved, and they work tirelessly to inspire and motivate their employees. This passion and commitment often lead to a deep sense of loyalty from team members, contributing to the organization’s long-term success.
Finally, Small Giant leaders are always learning. They realize that the world is constantly changing, and they adapt accordingly. This ability to learn and change means they are always ahead of the curve, giving them a significant competitive advantage.
The Community Factor
Being a good corporate citizen is not just a PR strategy for Small Giant companies – it is part of their core values. These organizations are part of the local landscape and are mindful of their actions’ impact on the community. They work to create a virtuous cycle of support, where the community relies on them as much as they rely on the support of the community.
In this way, they can create long-term relationships of trust and mutual benefit. As a result, Small Giant companies are not only good neighbors but also good stewards of the local economy.
The Customer/Supplier Factor
One of Small Giant companies key qualities is how they nurture their relationships with customers and suppliers. Unlike many large corporations, Small Giants consciously look for values-driven partnerships and treat those relationships with the utmost integrity. This commitment to customer and supplier relations has several important benefits.
First, it creates a support network of like-minded individuals and businesses that can be relied upon in good times and bad. Second, it helps to build trust and loyalty, which are essential for long-term success. Finally, by nurturing these relationships, Small Giants create a competitive advantage for themselves—one that is based on trust, respect, and mutual understanding.
Employee retention rates are incredibly important for any company. Not only does it save money in the long run, but it also creates a more stable and productive workforce. Small Giant Companies are known for their high employee retention rates. This is because they have an’ employee first’ approach to business.
They recognize that to be a truly great organization, their employees need to be happy and advocates of the business. As such, they invest heavily in their employees’ happiness and wellbeing. This includes offering competitive salaries, comprehensive benefits packages, and a supportive work environment. In return, their employees are highly loyal and passionate about their work. As a result, Small Giant Companies can create a stable and productive workforce, which is essential for long-term success.
The Margin Factor
Small Giant companies realize there is more to success than simply increasing volume and top line revenue. These innovative businesses have sustainable models that protect their gross margins.
By keeping a close eye on expenses and focusing on quality over quantity, Small Giants can maintain a healthy bottom line. This allows them to reinvest in their products and employees, creating a virtuous growth cycle. In addition, Small Giants tend to be nimble and adaptable, another key quality contributing to their success. By being open to change and willing to experiment, these companies can stay ahead of the curve and remain competitive in today’s ever-changing marketplace.
The Passion Factor
The owners and leaders of Small Giant companies are passionate about what they do. They have a deep love for what they do, which gets them out of bed in the morning and enables them to maintain their passion through highs and lows. Their passion is evident in their commitment to their work and their continued efforts to improve their products or services.
It’s this passion that sets Small Giant companies apart from other businesses. When customers can see that the company cares deeply about its product or service, they’re more likely to trust the company and become loyal customers. This passion is also contagious and often rubs off on employees who are more motivated to do their best work. Ultimately, the passion of the owners and leaders of Small Giant companies is what sets them apart from the competition and helps them thrive.
Growth isn’t the Only Measure of Success
It is often said that growth is the only way to measure success. However, this is not always the case. While growth is certainly an important metric, it is not the only thing that matters. Sometimes, a company may be doing very well in terms of revenue and profit, but its workforce may be unhappy, or its products may be of poor quality. In these cases, growth is not indicative of success. Instead, success should be measured by a combination of factors, including growth, profitability, customer satisfaction, and employee satisfaction. By looking at all of these metrics, you can get a more holistic picture of how a company is performing.
If you’re like most business owners, you’re probably wearing a lot of hats. You’re responsible for marketing, sales, operations, and maybe even finance. It can be tough to manage it all yourself, especially when trying to grow your business. That’s where a fractional COO can help. I interviewed Rachel Beider, CEO of Press Modern Massage, a consultant, and an author of Press Here: Massage for Beginners, to learn more about how a fractional COO can help business owners and whether or not you need one for your business.
What is a Fractional COO?
A Fractional COO is a Chief Operating Officer that works for your company on a part-time or interim basis. They’re there to offer you guidance, expertise, and executive-level leadership to assist you in avoiding roadblocks in your business model and ensure that you’re on the right strategic and operational path for maximum development.
Fractional COOs provide various services at a fraction of the cost of a full-time COO, making them an appealing success tool for small and medium-sized businesses and organizations just getting started without the cash for a full-time COO.
The Fractional COO model is becoming increasingly popular as businesses look for ways to do more with less.
What does a Fractional COO do?
The fractional COO’s duties vary based on the company’s demands, the CEO’s skillset, and the fractional COO’s skill set. There are a lot of tasks that a fractional COO can handle in numerous areas. The sole responsibility of a fractional COO is to run the firm better than it did when they joined it and to handle all operational issues to relieve you of duties and allow you to concentrate on your long-term business goals.
In general, though, these are some of the focus areas most COOs come to handle;
- Strategic Planning: Assists the CEO in long-term strategic planning by focusing on the company’s mission, vision, values, and goals. Long-term and short-term planning are two different things. They also have the knowledge and connections to see their initiatives through.
- Operational development and management: This might be anything from enhancing and reshaping the company’s operational core to identifying opportunities and risks. Creating long-term viable systems and processes, such as standard operating procedures, organizational restructuring of back end and front end systems, policy and procedure creation, and introducing new technology when necessary are all a part of operational development.
- Organizational development and management: Assists in developing and leading a sustainable culture and environment that enables the company’s growth. Consider hiring, communication, team management, and leadership areas to address.
- Project management and planning: Overseeing company projects that have been determined through strategic planning. They ensure that the project is proceeding as planned, that stakeholders are all on the same page, and that the project is progressing as it should. The fractional COO may completely manage or simply oversee projects with project managers depending on the business’s size and the project.
- KPIs and metric reporting: Reports on and improves key indicators to ensure and evaluate efficiency within the company. Consider sales forecasting, website, and social media traffic, data, client retention, and other vital metrics.
When should a Business Hire a Fractional COO?
Most business owners or CEOs wear many hats. They are responsible for the growth and profitability of the company, managing people and teams, developing new products or services, and ensuring smooth operations. But there comes a time when a business reaches a certain level of success that it becomes difficult for one person to manage everything effectively. This is when a fractional COO can be extremely valuable.
This is precisely why fractional COOs exist – to provide an extra set of experienced hands-on-deck without the full-time commitment or cost. Fractional COOs can be brought in for as little as a few hours a week or month, and they can help with anything from developing growth strategies to streamlining processes to hiring and firing employees.
This is true with Rachel. Her business had grown from having one room to nine rooms and more massage therapists, followed by exponential growth to open another branch in a different location with eight rooms. She was excited to take on new challenges; however, she quickly realized that managing two spaces was more than she could handle. She was handling everything herself, from hiring staff to training staff to managing the books. She quickly realized she needed help and brought on a fractional COO to take on some of the operational tasks, freeing her up to focus on what she does best – expanding the business.
The following are some signs that a small business might require a fractional COO. If you can relate to any of these, it might be time to start looking for a Fractional COO for your business:
You’re spending more time managing than improving
When you’re spending all of your time ensuring everything is running efficiently, you’ll have less time to develop new methods for pushing your company forward. If you’re so busy keeping your company afloat that you don’t have time to think about where it’s going or how you can help it get there, consider hiring a COO. A Fractional COO can take charge of the day-to-day operations of your business, giving you more time to focus on the big picture.
You’re expanding rapidly
If your business is growing quickly, it can be challenging to keep up with the demand. A Fractional COO can help you manage this growth by developing systems and processes that can scale with your business. They can also help you manage your finances and human resources, so you can focus on other aspects of running your business.
You don’t have time to plan for the future
When you’re too busy putting out fires, it’s hard to find time to think about where you want your business to be in five years. A Fractional COO can help you develop a long-term plan for your business, so you can focus on the present without sacrificing your future.
Your CEO is overwhelmed
If your CEO is trying to do too many things, it can be difficult for them to focus on the most critical aspects of running your business. A Fractional COO can help take some of the pressure off by handling day-to-day operations, so your CEO can focus on more strategic tasks.
You want to strengthen your company’s leadership
If you want to build a strong leadership team, a Fractional COO can help you identify the most qualified candidates and develop a succession plan. They can also help you implement training and development programs to prepare your leaders for the future. For instance, how Rachel was assisted by her COO in implementing Homebase, a small business tool for managing employee scheduling, time tracking, and communication.
You need someone to execute ideas
If you have a lot of great ideas but don’t have the time or resources to execute them, a Fractional COO can help. They can develop and implement systems and processes to help you get the most out of your ideas.
The Good News
So what’s the good news? Fractional COOs can be an incredible asset to a business. They can provide much-needed structure and support, freeing the CEO to focus on strategic initiatives and long-term growth.
In addition, a Fractional COO can bring a fresh perspective to the table, providing outside insights and ideas that can help take your business to the next level.
If you’re feeling overwhelmed by the day-to-day operations of your business, or if you’re simply looking for ways to take your company to the next level, a Fractional COO may be just what you need.
If you’re a business owner, then you know that there are a lot of moving parts that go into making your company successful. From sales and marketing to operations and finance, keeping track of everything can be challenging, especially if you’re unfamiliar with all aspects of running a business.
That’s where a fractional CFO comes in. Fractional CFOs are experts in financial management, and they can help your business make the most of its money. From my interview with Nelson Tepfer, the managing partner at ProCFO Partners, which provides fractional CFOs across New York state and Chicago, I have compiled the following on what fractional CFOs are and how they can help your business grow. I’ll also give you tips on deciding if hiring a fractional CFO is the right move for you.
What is a Fractional CFO?
A Fractional CFO is a Chief Financial Officer who works part-time, usually for small to mid-sized businesses. This type of CFO can be an excellent option for companies that can’t afford a full-time CFO or only need someone to handle financial matters part-time.
The CFO is the strategic and managerial head of finance, and they can be critical allies for founders without a financial background. The CFO can set and review financial key performance indicators (KPIs), implement best practices, create budgets and forecasts, and assist the board and potential investors in understanding the company’s financial status.
Many startups are unable to afford a full-time CFO. An outsourced CFO service might assist you in understanding your company’s finances, producing customized forecasts, or formulating a fundraising approach for a short or one-time engagement.
What is the Difference Between a Fractional CFO and an Interim CFO?
According to Nelson Tepfer, a temporary CFO differs from a fractional CFO (part-time CFO) because the interim job is short-term. An interim CFO fulfills an area between a company losing its full-time CFO and filling the vacant position. A fractional CFOs’ services are continual, but their weekly hours are limited to part-time.
Fractional CFOs are often considered more strategic, while Interim CFOs are more operational. Fractional CFOs work with a company to help them grow and scale, whereas Interim CFOs help to keep the company running smoothly on a day-to-day basis.
Another key difference is that Fractional CFOs are usually brought in when a company is doing well and looking to take things to the next level. In contrast, Interim CFOs are typically brought in during times of crisis or transition.
What does a fractional CFO do for Growing Businesses?
A fractional CFO is a crucial functionary who serves many responsibilities in a business, including:
Ensure a Proper Financial Foundation is in Place
As a company grows, its financial processes grow increasingly complicated for the founders to manage. They need someone who can see the whole picture through the nuts and bolts of financial reporting and accounting to maintain their economic health.
This is where a fractional CFO comes in to clear a path through the web of numbers and statistics.
Nelson shares that “as the lifeblood of every small business, cash flow can be a big issue. Small businesses may struggle with getting funding, building their company strategy, and figuring out why their profit margins are shrinking. These are all symptoms of bigger problems that a fractional CFO can help with. A fractional CFO brings experience and expertise to recognize symptoms and build a financial function that will support the business’s goals. This can help small businesses get back on track and be successful.”
A fractional CFO is vital for small businesses, as they provide the financial stability and foresight required to maintain a company’s health and growth.
Help Manage Growth
One of the main benefits of having a fractional CFO on your team is that they can help manage growth. If you’re seeing consistent growth in your business, it’s essential to have someone on your team who knows how to handle that growth and ensure it’s sustainable. A fractional CFO can help you do just that.
For instance, when looking at a potential acquisition, it’s essential to look at more than just the numbers on paper. It would be best to consider how the company would fit with your existing business. Would the acquisition help you to achieve economies of scale? Would it give you access to new markets or technology? What would be the impact on your existing employees? These are all important factors to consider before making an offer. Of course, you also need to ensure that the company is a good financial fit for your business. But by taking a holistic view of the acquisition, you can avoid making a mistake that could cost your business dearly in the long run.
These are the considerations a Fractional CFO can bring to the table to ensure that you make the best decision for your business.
Implement Systems and Controls
When businesses grow, they must create more effective procedures to address their fluctuating needs. This necessitates the oversight and direction of someone who has implemented numerous systems in various situations. Someone who’s seen it all can anticipate what might go wrong and how to address it before it happens. A fractional CFO may draw on their experience to guarantee that the business is always moving forward, even when changes occur.
For example, there was a company whose invoicing process was inefficient. It would often take them four to six weeks to send out an invoice after completing a project. Nelson recognized this was a legacy issue from when the company was much smaller. At that time, a single person was responsible for a checklist of six items that needed to be completed before an invoice could be sent out. As the company grew, those six items became the responsibility of six different people or teams. However, no one took the time to reassess whether this was still the most efficient way to do things. As a result, being a fractional CFO, Nelson helped them implement systems to streamline their process so that invoices could be sent out within five days. This helped improve their efficiency and better meet the needs of their clients.
To Sum Up
A fractional CFO is a financial expert with an extensive background in many areas who works part-time and relieves startups of high expenses. Hiring a fractional CFO is the only way for a young business to gain access to best-in-industry knowledge without having to pay through the nose for it.
It’s a win-win situation like all great business models.
Of course, once startups grow large enough, they may find that having a full-time CFO makes good business sense. Those who are still learning the ropes, on the other hand, should think about employing a fractional CFO at any time.
Cognitive bias is a term used in psychology to describe how our personal biases influence our thoughts, feelings, and behaviors. These biases can harm business when they lead us to make decisions based on inaccurate information or assumptions. From my podcast interview with Dr. Gleb Tsipursky, a cognitive neuroscientist and a behavioral economist, author of best-selling books, amongst them is Never Go With Your Gut and the founder and CEO of Disaster Avoidance Experts. I want to explore three cognitive biases in more depth and share some tips on overcoming them.
What is Cognitive Bias?
The idea of cognitive bias was formed in the 1970s by Amos Tversky and Daniel Kahneman, psychologists who studied why people have trouble reasoning and judging fairly in particular circumstances. Paul Slovic, a psychologist, collaborated with them on their early findings, which they published in “Judgment Under Uncertainty.”
Cognitive bias is a term used to describe certain mental mistakes caused by our limited capacity to analyze information objectively. It can result in illogical and baseless judgments and an inability to assess risks and threats.
The researchers explained that cognitive bias is the inclination to make judgments or take action illogically due to our attitudes, memory, socialization, and other personal traits. There are several biases that have an impact on a wide range of activities, including decision-making, evaluation, beliefs, and social interactions.
According to Dr. Gleb Tsipursky, cognitive biases are “mental errors humans make in processing information because of how our brains are wired. These lead to judgments that deviate from a rational and unbiased perspective.”
Cognitive biases can be subtle and hard to detect, which is why it’s essential to be aware of them. Here are some common cognitive biases that Dr. Gleb discussed:
3 Cognitive Biases Hurting Your Business
There are many different cognitive biases, but here are four of the most common ones that can hurt your business:
The planning fallacy is a cognitive bias that leads people to underestimate the time, costs, and risks associated with future actions. Kahneman and Tversky first proposed the planning fallacy in 1979. They explained the phenomenon by suggesting that people focus on the most optimistic scenario for a task rather than using their experience of how long it actually takes.
The planning fallacy occurs regardless of our experience with similar tasks in the past. Even though we know the task has always taken longer to complete, we still underestimate the time it will take in the future. This bias can lead to problems because it can cause people to Undertake projects without realistic expectations about the time and resources required.
As a result, the project is more likely to be delayed, over budget, and less effective than initially predicted. The planning fallacy is a common source of error in personal and organizational decision-making, and it’s important to be aware of it to avoid its effects.
This is evident in Dr. Gleb’s example of an entrepreneurial company that opened to address the issue of the planning fallacy. They were making overly optimistic estimates on how much something would cost when bidding for a heavy manufacturing project. This often led to underbidding by millions forcing them to make fewer profits than anticipated. The reason why this happened is that they didn’t take into account their previous experiences with similar projects. In other words, they didn’t have a reference point to go off of and cognitively biased themselves.
One way to overcome the planning fallacy is by using reference class forecasting. This is a method of estimating the probability of future events by looking at similar events in the past. Using this method, we can avoid cognitive biases and make more accurate predictions.
Sunken Cost Fallacy
The sunken cost fallacy is a cognitive bias that dictates our decision-making. It tells us that we should continue investing in something as long as we have already invested so much, regardless of whether or not it is actually worth our time or money. This bias can lead us to make suboptimal decisions in our personal and professional lives.
For example, we may stay in a dead-end job because we have already put so much time into it, or we may continue investing in a failing business because we can’t bear to see our initial investment go to waste.
The sunken cost fallacy dictates that the more we have invested in something, the more reluctant we are to give it up. However, sometimes the best course of action is to cut our losses and move on. By acknowledging the sunken cost fallacy, we can be more mindful of its influence on our decision-making and avoid making choices that are not in our best interests.
The Optimism Bias is the cognitive bias that causes people to believe that they are more likely to experience positive events and less likely to experience negative events. The optimism bias is often seen as a positive thing, as it can help people remain hopeful under challenging situations and persist in the face of setbacks. However, the optimism bias can also lead people to make irrational decisions, as they underestimate the likelihood of negative outcomes.
For example, Dr. Gleb shares about a tech startup founder who was to get coaching from him once his company’s equity reached $10 million. However, during the SWOT analysis that Dr. Gleb conducted, the entrepreneur failed to list delegating tasks effectively as an area of weakness. Though it was clear that this was a point of concern for many investors, he was very defensive when confronted with the issue. It wasn’t until Dr. Gleb showed him how his optimism bias was harming his company that he was able to let go of control and allow other people to do their jobs. Without this guidance, many entrepreneurs make the same mistake, and their businesses suffer as a result.
Overcoming Cognitive Biases
Cognitive bias is a powerful force that can majorly impact your business. This type of bias occurs when our brains make judgments and decisions based on emotions or past experiences rather than logic or reason.
To overcome these biases and make more informed decisions, it’s essential to be aware of them and understand how they work. We’ve outlined three cognitive biases that are particularly harmful to businesses and provided tips for overcoming them. Are you ready to start making better decisions for your company?
Making a career change can be daunting, but it can also be very rewarding. If you are looking to switch to becoming a fractional executive, there are specific steps you need to take to make the transition as smooth as possible. Based on my interview with John Arms, the co-founder of Voyager U, a learning platform for executives who want to chart their career paths, I’ve weaved together the tips below for moving into this new career role. Follow these tips, and you will be on your way to success!
What is a Fractional Executive?
A fractional executive is a business professional who provides expertise on a part-time or project basis. This type of arrangement is often used by small businesses or startups that can’t afford to hire a full-time executive but still need access to high-level talent. Startups may benefit from hiring a fractional executive since they can now access the talent they couldn’t previously afford. A fractional executive is just the right leadership level to lead the firm through this critical early phase.
A Fractional executive, unlike a consultant, does more than just offer suggestions. They stay around to ensure that their plans are implemented and that their clients’ businesses develop over time.
Fractional executives fulfill essential C-suite management responsibilities, including Chief Product Officer (CPO), Chief Marketing Officer (CMO), Chief Financial Officer (CFO), Chief Information Officer (CIO), and more.
Individuals come loaded with prior experience and have typically held one of these jobs in a full-time position during their careers.
Is the Fractional Executive Role for You?
The Fractional Executive role is perfect for those who desire to lead and are looking for an opportunity to take on more responsibility without a full-time commitment. If you’re feeling unfulfilled in your current position or are interested in exploring a new career path, becoming a Fractional Executive may be the right move for you.
Not everyone is suited for fractional work. If you want the stability of a consistent team and job for an extended time, a full-time position may be preferable. However, fractional employment comes with its own set of advantages. Here are some questions to ask yourself to see if this is the right fit.
- Do you wish to have more control over your time and scope of work?
- Do you want to work with a variety of teams and organizations?
- Do you like the idea of being paid for performance rather than time spent working?
- Do you want to work with early-stage companies and entrepreneurs?
- Do you like having a variety of projects going at once? Do you enjoy working on several ideas at the same time?
If you answered yes to any of these questions, fractional executive work might be a good fit for you. As a fractional executive, you’ll have the opportunity to control your work schedule, take on more responsibility, and be paid for your results. If you’re interested in transitioning to this type of work, here are a few tips to get started.
3 Components of How to Get Started as a Fractional Executive
As a fractional executive, your success is pegged on the clients you bring in and the projects you work on. How do you get started? How do you find clients that are the right match for your skills and services? How do you identify potential projects? Below are three tips to get started as a fractional executive:
John Arms noted in the podcast interview, “every business that succeeds has a pipeline and operates a pipeline and has some discipline about it.“
Great fractional executives are disciplined about their sales pipeline. They know how many deals they need to close every month, and they work backward from there to ensure a consistent stream of new business. If you want to transition into a fractional executive role, start by being laser-focused on your sales pipeline. How many deals do you need to close monthly to hit your targets? How can you ensure a steady stream of new business? By being disciplined about your sales pipeline, you’ll set yourself up for success in this new career role.
One of the best ways to transition into a fractional executive role is through micro networking. This involves connecting with people in similar roles or who have made a similar career transition. You can make these connections through online platforms like LinkedIn or by attending industry events. In fact, according to John Arms, “leads come from smaller communities and more intimate conversations.“
Micro networking allows you to build relationships with people who can provide advice, insights, and connections that can help you make the transition into a fractional executive role. It’s also a great way to learn about open positions or companies that may be hiring fractional executives.
So, if you’re interested in becoming a fractional executive, start by connecting with people already in similar roles. Attend industry events, join LinkedIn groups, and participate in online forums. By building relationships with like-minded individuals, you’ll be one step closer to transitioning into this exciting career role.
Referability is critical for fractional executives. After all, the whole point of having a fractional executive is to have someone who can come into a company and quickly make an impact. How do you become referable? Start by becoming an expert in your field and develop a strong network of contacts. But being referable goes beyond just your technical skills and ability to network it’s about your superpower.
Your superpower is what makes you unique and special. It’s the thing that sets you apart from everyone else. When thinking about your superpower, ask yourself what it is that you do better than anyone else. John gives an example of himself that he is a CMO with a superpower of being a storyteller, which is highly referable. If a customer comes up to your network and says, “Our brand is terrible, we are all over the board, it’s a mess, ” someone will say, ” I know just the person.”
When you become referable, people will want to work with you because they know that you will be able to deliver results. And that’s how you become a fractional executive. You start by becoming an expert in your field and developing a solid micro-network of contacts, but you also need to have a superpower that sets you apart from everyone else.
So, if you’re looking to make a career change and want to become a fractional executive, start by doing your research. Find out what companies are hiring for your skills and reach out to them directly. Use your network of friends, family, and colleagues to find leads on potential jobs or connect with people who may be able to help you in your job search. And finally, don’t be afraid to ask for help! Plenty of resources are available to help you transition into a new career role, so take advantage of them.
There is no one-size-fits-all answer to the question of what matters most in generating entrepreneurial prosperity. However, after my interview with Ali Nasser the founder and CEO of Altru Vista, a wealth management firm based in Houston, Texas, and a talented writer of “The Business Owner’s Dilemma,” I wanted to summarize my takeaways from what Ali shared with me, i.e., the six key elements that are necessary for constructing enduring prosperity. In this blog post, we will explore each component in-depth and examine how you can apply it to your own business. Are you ready to start creating real wealth? Let’s get started!
The exit strategy is the planned disposition of a business by its owner. An exit strategy facilitates the transition of ownership and control of a business from one person to another. It is important to have an exit strategy in place so that you can maximize the value of your business when you sell it.
There are several options for exit strategies, including selling the business to a third party, passing it on to family members, or taking the company public. Each option has its own advantages and disadvantages, so you need to consider which one is right for you carefully.
The most important thing is to have a plan in place so that you can maximize the value of your business when you do sell it. Exit strategies can be complex, so it would be best to seek professional advice to ensure that you get the best possible outcome.
One crucial component of entrepreneurial wealth is a “legacy strategy.” This is the process of creating something that will last beyond your lifetime. It’s about building a business or investing in something that will have value long after you’re gone.
You can do this through several different strategies, but creating a family business is one of the most common. This can be a great way to ensure that your wealth continues to grow and provide for future generations.
Another way to create a legacy is to invest in real estate or other assets that appreciate over time. This can be a great way to build long-term wealth, but it’s essential to ensure that you’re investing in something that will go up in value.
No matter what strategy you choose, it would be best if you had a plan for how your wealth will continue to grow after you’re gone. This is one of the key components of entrepreneurial wealth.
Strategic Tax Plan
As an entrepreneur, it’s crucial to have a strategic tax plan. This will ensure that you’re not overpaying in taxes and taking advantage of all the deductions and credits available to you.
A good tax plan will also help you maximize your wealth by minimizing your tax liability. By reducing your taxable income, you’ll be able to keep more of your hard-earned money.
There are a few key components to a good tax plan:
- Know your tax rate and how it applies to your business income.
- Understand which deductions and credits you’re eligible for.
- Stay up to date on changes in the tax code.
- Stay organized and keep good records.
If you can master these four components, you’ll be well on your way to minimizing your taxes and maximizing your wealth.
Balance Sheet Strategy
The strength of your balance sheet directly impacts your ability to weather difficult times and take advantage of opportunities. A strong balance sheet gives you the flexibility to invest in your business, make acquisitions, or pursue other growth initiatives.
Your balance sheet strategy should be focused on two key objectives:
- Minimizing your debt burden
- Maximizing the value of your assets
There are several ways to achieve these objectives, but two essential components of any balance sheet strategy are maintaining a healthy cash reserve and investing in business assets that appreciate value.
One of the first things you need to do when thinking about your wealth strategy is to consider how liquid your assets are. That is, how quickly and easily can you convert them into cash? For example, if you have a lot of money tied up in real estate or other investments, it may take some time to sell them and get the cash you need. On the other hand, if you have a lot of cash in the bank, you can access it immediately when you need it.
Your liquidity strategy is crucial because it will help you weather any unexpected financial challenges that come your way. If you know you can quickly and easily access cash when you need it, you’ll be less likely to panic and make rash decisions when an emergency arises.
Asset Protection Strategy
As a business owner, you need to have an asset protection strategy in place to protect your wealth. This includes having the right insurance coverage, setting up LLCs and trusts, and knowing how to use asset protection strategies to shield your assets from creditors and lawsuits.
An asset protection strategy is not just for the wealthy. Any business owner can benefit from having one in place. If you don’t have a strategy in place, you could be putting your assets at risk.
Asset protection is an integral part of wealth management. It’s not just about protecting your assets from creditors and lawsuits. It’s about preserving your wealth for the future. A well-designed asset protection strategy can help you do both.
Entrepreneurial wealth is not just about making money; it’s also about having a plan to keep that money and make it work for you. By implementing the six components of entrepreneurial wealth, you can create a strategy for building lasting wealth and security. Even if you’re not ready to start your own business, these principles can help you protect your current assets and grow them over time. Have you put together a plan for your entrepreneurial wealth? If not, now is the time to get started!
Many people are hesitant to make the leap to using Fractional Leadership. How can someone understand the business if they’re not there full-time? How can someone drive accountability and results in a team they hardly see? How can someone be part of your leadership team when they’re not physically there? Here are some answers to these questions.
Understanding the Business When They’re Not There Full-Time
How can Fractional Leaders (FLs) understand your business well enough to effectively act as a member of the leadership team when they’re not there full-time? Why are they no better than the “drive-by consultants” who do their best to meet with as many people as they can to understand the company but who, through no fault of their own, rarely get it?
The difference is that FLs embed themselves within your company, whether they’re with you physically or virtually. FLs aren’t drive-by consultants because they become part of your leadership team. They collaborate with the other leadership team members consistently and work week in, week out (or month in, month out) with the team or function they lead. They get to know your business, people, and culture over the months or years you work with them.
They do not simply state their opinion after an investigation. They do not supplant your team’s culture, your knowledge of your market, and your experience. Instead, they use what they know works from their experience to focus and concretely implement the knowledge you and your people already possess through a far more effective execution than you had before.
Let’s make this more concrete. I began working with a wood flooring installer as their Fractional Integrator. Two of the leadership team members had quarterly goals related to documenting certain core processes that were unclear and inconsistently applied at the time. This caused tremendous frustration. One process related to collecting A/R, and the other had to do with how to install certain types of flooring most effectively.
I’m not a flooring expert. I’ll just put that out there at the outset. It doesn’t matter. I’m good at documenting processes and figuring out the best way to create accountability around executing those processes. I don’t need to understand the nuances of flooring installation to channel the knowledge of the head of operations into a short, two-page process document.
I showed him how to implement a couple of simple metrics to ensure that once the operations team was trained on that process, they were held accountable for executing the process the right way, every time.
When the Cat’s Away…
How do you ensure that the team members don’t fall back into old habits and do things the way they’d become ingrained to during the 80 percent of the time the FL isn’t around?
This is a great question, and it has a simple answer. FLs know from experience that you don’t create effective teams and core functions of the business by hovering over people to ensure they do things right. In startup mode, business owners want to make sure that every part of their new company is working well, so they hover. Many business owners and leadership team members simply assume that’s how it works in larger companies, just on a larger scale with more managers overlooking more people’s work. But that’s not the best way to get results.
FLs create effective teams by creating accountable teams who don’t need a helicopter manager. They do that by first ensuring that the team is made up of the right people who share the work style and core values of the company. Next, they define the team’s process and set weekly metrics and goals which track those processes to create accountability around execution. That’s it.
Let’s say you retain a Fractional Chief Sales Officer (FCSO) who puts in place a new sales process and implements a CRM to create visibility, accountability, and reporting around sales. He or she creates metrics in the company’s chosen CRM for leads entered, outgoing emails sent, demo calls conducted, and sales closed, each with a specific minimum threshold to be considered on track. If someone on the team doesn’t use the CRM to enter leads or send outgoing emails or log demo calls, they won’t make the numbers to which they are held accountable at the weekly sales meeting with the FCSO. It’s that simple.
Fractional Leaders don’t have to be physically with the team all the time as long as they set up a system of accountability and hold people to that system. They train, answer questions, mentor, and perhaps sit in on calls or listen to recordings when they’re with the team, thus driving effective execution without needing to be there full-time.
So, you see, the Fractional Leadership structure, by its objective alone, successfully negates any perceived or potential pitfalls that might come with hiring a typical contract or temporary executive leader to help with your business goals.
Once you’ve reached this point in considering whether or not to engage a Fractional Leader (FL) (see Part 1 and Part 2), it’s critical to identify the type of approach an FL can take and the type of provider that would work best for your company. Here we discuss a strategic vs. tactical FL as well as the categories of FLs, such as organizational, Independent and Licensee.
Strategic vs. Tactical Leadership
Fractional Leaders become part of your leadership team. They typically participate in leadership team meetings and decisions, create metrics for their direct reports, lead departmental meetings, drive accountability of their team’s achievement of their goals, and coach and mentor team members. The high-level, strategic nature of most FL roles is critical because their primary value to you is their experience, leadership, and ability to drive your team’s achievement of your desired results.
But don’t full-time operations leaders, like COOs, drive day-to-day operations, such as ensuring deliveries or service calls happen on time, product deliveries are correct and timely, or that customers are satisfied at all times? How can someone do that on a fractional basis?
To understand the answer to this question, it’s important to distinguish between someone’s role as COO and another operations hat they might wear.
For instance, full-time COOs in smaller organizations often have two roles. The leadership, management, and accountability aspects of the COO role usually consume about 20 percent of their bandwidth. But they also wear one or more other hats, such as director of operations or high-level project manager. This part of their job takes 80 percent of their time.
Business owners who engage an FCOO or FL, by contrast, split the COO role away from the project manager or head of operations role. They take that 20 percent bandwidth needed for the leadership/management/accountability part of the job and assign that to an FCOO or FI. They give the head of operations or project management responsibilities to someone else or several other people.
I hope in my past blogs I’ve convinced you not to undervalue the deeper and more powerful change an FL can make in your business at the leadership when they are not distracted by also having the role of being a higher-level worker bee.
With that being said, some smaller companies in particular — those with five to 20 employees — sometimes need their FLs to provide both leadership and another set of hands at a higher level than the other team members can provide. Particularly with respect to FCOOs and FIs, there is a subset of companies and FLs who need and want to play a tactical as well as strategic role. I call these Doer Leaders versus Manager Leaders. I explain more about the Doer versus Manager distinction here.
There are two primary categories of FL providers: Organizational and Independent. There are some differences between them, and no one model is right for everyone. Therefore, you must consider which kind you want or whether you’re open to both.
Organizational Fractional Leadership
Organizational Fractional Leadership (OCFL) organizations assign individual FLs to clients. They either hire these individual FLs directly, make them partners, or enter into independent contractor relationships. In this model, you pay the OFL, and the OFL pays the individual FL. This model has several advantages, each of which are discussed below: (1) accountability, (2) standardization, and (3) peer learning.
The OFL takes responsibility for the services provided by the individual FL. If there are any issues, you can approach the company to help resolve the problem or for a replacement. This saves you from the need to start over at square one, searching for someone else.
Standardization. OFLs usually create a standardized service model, which is some proven process they have found effective. All the FLs on their team use this proven process.
Peer Learning. Finally, FLs serving clients through an OFL are part of a team with a wide variety of backgrounds and experiences. Some OFLs hold weekly virtual meetings where a group of FLs shares the issues they’re facing with clients. Those who have encountered a similar situation offer guidance. This helps clients by leveraging multiple FLs’ knowledge and perspectives to solve their problems.
Independent Fractional Leadership
Some factors mitigate in favor of working with a solo practitioner independent FL rather than an OFL for some business owners: (1) price, (2) independence, and (3) customization.
Price. The first advantage of working with an independent FL is price. OFLs are typically more expensive than their “single shingle” counterparts, sometimes by as much as double. This factor alone is determinative for many business owners because they cannot afford some OFLs’ rates for the time commitment they believe they need.
Independence. Some business owners prefer working with an independent FL because their personal hardwiring makes them more comfortable with independent operators. Such people bristle at anything that feels overly corporate, and some OFLs come across that way to them.
Customization. Finally, some business owners look for a customized engagement and see OFLs’ standardization as a bad fit. They want their FL to custom- services and methods to their business’s unique needs. Although most OFLs custom-tailor each engagement to fit precisely what their clients need, some business owners perceive them as too cookie-cutter for their tastes.
Fully Independent vs. Licensee Fractional Leaders
Among independent FLs, there are two subtypes: those who work entirely on their own and licensees or franchisees of a standardized system. Examples of the latter include FCSOs who use the Sales Xceleration or SalesQB frameworks.
Some people prefer fully independent FLs. They see no need for the “unnecessary complication” of an external system if the FL has experience, knowledge, and strong references.
They do not want to spend time, money, or energy on parts of a system that don’t apply to them simply because they are part of “the package.”
On the other hand, licensed systems provide a proven process. Some business owners want their FL to use a system that works for thousands of organizations and has been implemented by dozens or hundreds of FLs. They need and want results as soon as possible. They’re hiring an FL because they know they themselves are not experts in the field and recognize that their perception that part of a system is unnecessary may be unfounded.
Licensed FLs also bring technological tools engineered specifically for their clients’ goals. This saves the need for custom software or web app development and facilitates faster implementation custom-designed for business owners’ needs.
Regardless of whether you decide that an OFL or an independent FL is a better fit for you and your business, you’ll leverage the benefit of someone with years of experience at multiple companies to guide you to accomplish what you could not on your own.
Deciding whether a strategic or tactical approach is best and then determining whether you want to engage an FL through an OFL or as an independent operator are critical steps in finding an FL who would best suit your business and goals. If you haven’t determined already the C-level executive you need, check out my blogs on each of these FLs. And you can find more detailed information in my book, Fractional Leadership: Landing Executive Talent You Thought Was Out of Reach.