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What is a Fractional COO? And do you need one for your agency?

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Marcel Petitpas

Marcel Petitpas

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Last updated Sep 5, 2023

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What is a Fractional COO? And do you need one for your agency?

Last updated Sep 5, 2023 | 1 comment

Marcel Petitpas

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A fractional chief operating officer is a great way to get senior operations leadership for your agency before you can afford a full-time senior executive. For agencies with fewer than 40 or 50 employees, a legitimate COO is often out of reach. A fractional COO can help smaller agencies get the strategic operations leadership they need and delay the need for expensive executive hiring until they reach a larger scale. Let’s dig into the benefits of leveraging part-time COO services or a full fractional COO.

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What is a fractional chief operating officer (COO)?

A Fractional Chief Operating Officer (COO) can be an ideal solution for small to mid-sized businesses that need strategic and operational leadership but do not have the budget for a full-time COO. These executives are experienced operations professionals who can provide part-time leadership to help businesses achieve their goals.

Depending on the specific needs of the company, a Fractional COO can take on responsibilities such as strategic planning, data operations & reporting, process improvement, project management, and team development. Additionally, they can alleviate some of the daily operational burdens from the CEO, allowing them to focus on higher-level tasks.

Hiring a Fractional COO as a service is a cost-effective way to access senior-level operations leadership. Instead of incurring the expense of a full-time executive, businesses can contract for the services of a Fractional COO on an as-needed basis. As companies continue to look for ways to maximize their resources, Fractional COO services are likely to become an increasingly popular option.

Benefits of an outsourced COO for agencies

Firstly, we should talk about what benefits you can expect when bringing on a fractional COO for your agency – after all, it must be a big deal if everyone in the industry is buzzing about it.

It comes down to four main drivers: growth opportunities, direction for your team, flexibility, and low risk.

Let’s go deeper on these.

Growth-enabling

With a fractional COO, your agency leaders and CEO can focus on the long-term vision for your company and how best to achieve that.

For instance, if your agency is in transition or trying to scale then a fractional hire will help accelerate that growth in a manageable way. Choosing a fractional COO is a way to hire an executive without the commitment and the price tag. The COO should help translate that vision into an actionable plan, and bring a pragmatic point of view to decision-making around prioritization and allocation of resources.

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Clear Direction for Your Team

We’ve seen it time and time again – your agency isn’t big enough to hire on a full-time lead, and so the operational decision-making falls upon your senior (or sometimes, junior) Project Manager.

Big decisions are being made off the side of their desk, using bandwidth that they can’t really spare to think strategically. It is unfair and unrealistic to them, and ultimately isn’t benefiting your agency either.

By bringing on a COO, your project management team and more-junior operations folks can focus more on the execution of their role and less on the strategy behind it.

Picture this:

You’re the CEO, and we’re going to change the way that we price our services – changing from time & materials to a flat rate. There are a lot of strategic questions behind that move.

  • Does that change the way that we scope?
  • Change the way that we write contract language/terms into our SOWs?
  • Does that change the definition of a billable hour for our agency?
  • If yes, then how does it impact utilization?
  • How about the modeling we’re doing for the capacity of our team?
  • Does that change the way we’re setting up our time-tracking tool?
  • What about how we look at our Average Billable Rate?

You get the picture. On the surface, it seems like this is a basic question. But from an operations standpoint, there is a huge chunk of the iceberg that lies beneath sea level.

Having a fractional COO in a situation like this can give clarity to the team on the road ahead. An experienced COO knows how to ask the questions the rest of the team may not know to ask in order to make sure the plan is well designed on how to navigate the changes being made on the way to the bigger vision. This allows your team to focus on doing what they do best – execution of that plan.

What does that mean for a small business or agency?

It means you can grow faster, have smoother operations, more profitability, better systems and fewer headaches. It also means that when you set out to find your next project manager, you’re not looking for someone with an unrealistic set of skills, allowing you to hire more efficiently.

woman at a desk doing fractional coo work

Flexible

Each agency is growing and scaling at its own pace, on its own time. Therefore, not every agency needs a full-on COO. Bringing on a fractional COO allows you to choose exactly how much of their time you want. You want 30% of a COO? That’s totally possible. 70%? You bet. You’re bringing on a flexible decision-maker with 10+ years of experience without paying the COO’s salary. (and all of their counterparts, such as Account & Project Managers).

Another benefit seen by bringing on a COO is that they’re coming in and only spending a portion of their time at your agency. What about their other time? They are able to come to your front door, ready with a playbook and concrete, front-line experience. They’ve dealt with agencies just like yours before, and they know what has been working (and what has not been!) for other agencies. They will save you the time of having to learn these lessons yourself because they’ve likely already been through it on their own.

Low risk

Of course, what does all of this mean?

Well, it means you’re taking on significantly less risk. You’re not placing a bet – the fractional COO has a proven track record, with experience doing the exact same thing for other agencies (don’t be jealous).

Fractional COO contracts come with much more flexibility than adding a full-time COO to your payroll, with an off switch on a shorter time basis. Not to mention, the cost tends to be appropriately “fractional” as well. It’s important to note that just like hiring freelancers, their hourly rate will be higher on a fractional basis compared to hiring them full-time.

What are the focus areas of a fractional COO in an agency?

A fractional COO focuses on all agency operational matters to make your workload lighter so you can concentrate on your long-term business goals. However, we’re able to slice that into two broad categories:

Operations Strategy & Measurement/Data Systems

First, your strategic layer of operations will take a look at your business’s goals, services, all of the things the agency is setting out to do as a business, and decide how that impacts your operations. That means contract structure, pricing strategy, operational systems, scoping work, hiring people, measuring performance on projects, utilization, forecasting…you get the point. That is the spectrum of the COO.

At the end of the day, their focus should be on maximizing the efficiency of the business and the people inside it.

And second, your COO is there to provide clarity on the data and if it’s set up to measure your success.

They are there to answer questions from a lense such as:

  • Are our systems set up to support and properly measure what the agency is doing?
  • Are our objectives being achieved?
  • Do we have feedback loops in place to ensure that is happening?
photo of woman at desk doing digital agency COO work

Example fractional COO services for agencies

A fractional COO can provide many of the following services for your agency:

  • Auditing the agency’s financial and operational performance
  • Their systems for tracking projects
  • Measuring data
  • Reporting on KPIs
  • Identifying gaps & opportunities to improve performance
  • Strategic Guidance
  • Pricing strategy
  • Delivery strategy
  • Resourcing strategy
  • Forecasting
  • Operational tools & systems
  • Metrics & Benchmarking
  • Reporting
  • Project Management
  • Organization
  • SOPs

What does a fractional COO cost?

If you’re a small business or agency owner thinking about bringing on a COO, you’re obviously interested in the cost of fractional coo services.

There are a lot of different forms a COO can take, and these different forms and ratios can impact price significantly. It can be a super fractional role to more of a productized service.

As a general rule of thumb, fractional COO services will be priced similarly to expert-level accounting or legal advisory services. You’re generally looking at $200/h or more for an experienced fractional COO to advise your company.

There aren’t many firms offering this kind of support, but our experience has been that retained services can range from 2-10k+ per month (depending on the level of service you require. Most agencies should budget for around $5k/mo (or roughly 1/3 of the full-time cost of a COO) at the onset.

How to find a fractional COO

Finding and retaining top talent deserves a post on it’s own, but to keep it short, finding your fractional COO can happen in a couple of short steps.

  1. Start with defining your needs – get an idea of the niche they’ll need to be well versed in, how much you can afford in terms of Average Cost Per Hour, and the responsbilities they’ll need to be able to handle as outlined above.
  2. Research – by sifting through resources such as LinkedIn, FractionalLeaders.com, or FractionalLeadership.io. You can also seek referrals from other business owners or industry experts who may have hired a fractional resource themselves.

From there, do your due diligence with an extensive interview process to ensure the fit is right before committing, and ensure you’re not taking on too much risk in the engagement regarding the time committment (hours/wk) and contract length.

What types of agencies should hire a fractional Chief Operating Officer?

Finally – a simple answer. Let’s dive into who should hire a fractional COO.

If you’re a business owner with less than 70 employees and nobody on your team has deep expertise and background in operations (and therefore you’re likely relying on your PM to fill that role) then a fractional COO is something you should look into.

Another thing to consider is the need for a fractional data operations team, like the services we offer at Parakeeto.

It will bring the expertise and talent into your organization for making sure systems, data and reporting are all thoughtfully designed, accurate and working smoothly as you scale. Fractional help in this area is a more affordable way to take that pressure off of your team (that is likely impacting their performance already)

Want to learn more about how Parakeeto helps agencies improve their profitability and operations? Schedule a call with one of our consultants below.

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  1. Ashford J

    Thanks for the insightful article!

    Reply

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