Cost Calculator: How Cost Efficient Is a Fractional CMO?

Fractional leadership gives fast-growing companies a high range of cost and expense flexibility just when they need it most. These organizations can get more cost efficiency while still having the benefit of C-level expertise in their ongoing growth.

Investors always ask for costs to be contained or reduced. At the same time, they demand rapid growth. A company is only going to survive if it grows really fast and keeps acquisition costs under control.

Finding ways to do more with less is even more critical when business conditions are uncertain, customers are scarce and funding is dear. Many companies revert to what is known as the “Dolphin strategy” – to immediately pivot and drive (dive?) towards profitability across staffing, media, vendors, leases and more. 

One top path to delivering on a dolphin strategy is to delay full time hires of key C-level talent until they are absolutely needed – and the roles they will inhabit are fully explored and defined. The CMO is one of the most natural examples.

How Much CMO is Needed, Anyway?

A CMO’s role is to lead the marketing function and safely spin up new channels of growth, bootstrapping them as necessary.

The core elements are to: 

  • Create strategy and own the execution for growth marketing
  • Report results and integrate feedback from C-suite and investors
  • Recruit, motivate and mentor the team that executes

This is powerful work. However, full time CMO work requires a very large budget to be deployed to justify the full time expense.

Growth marketing work is best done in 90-day sprints, with each period marked by lots of testing and optimization. After a few of these cycles, your business will have grown to the size where having a full time CMO might make sense. 

In the meantime, there’s another way. Depending on the composition of your team, your vendors and your aspirations for growth, there’s often substantial extra savings and potential growth to be unlocked with the use of a fractional CMO.

A fractional CMO works 1-2 days per week, runs the marketing meetings, drives the execution that leads to the right OKRs, and generally makes the life of running a high performance company much easier. Not a project manager that clocks in and out, but a full-fledged member of leadership that brings the energy a business needs to move fast and deliver more customers and revenue.

Unlock $3M in Extra Revenue with a Fractional CMO

The best reason to hire a fractional CMO is to get more revenue.

They deliver in more way than one, such as: 

  1. Making your existing media spend and marketing campaigns deliver more leads
  2. Getting those leads more efficiently over time
  3. Helping your existing customers spend more and stay longer
  4. Freeing up precious marketing capital to spend on high ROI campaigns
  5. Reducing opportunity cost without a lengthy hiring process for the “perfect” full time hire

According to industry research, the average CMO in 2024 is making $240,000 per year. There are plenty of examples of higher-cost people located in hot cities like Los Angeles, Austin and Atlanta too.

That’s ¼ of a million just for that salary alone, not counting benefits and the rest.

The first calculation looks like this:

Full Time CMO Annual Salary$240,000
Fractional CMO Annual Retainer$60,000
Savings$180,000

$180,000 will buy a lot of paid media ads, content marketing, emails and event sponsorships!

Most businesses aim for at least a 3-4x return on ad spend (ROAS or ROI) when calculating their expected revenue. Every industry varies in this calculation depending on how expensive their products and services are.

Here’s a sample calculation of how much $180,000 could be worth in terms of excess paid media revenue.  

ROAS3
Additional Revenue$540,000

If you measure performance in terms of Cost to Acquire a Customer (CAC) and Customer Lifetime Value (CLTV), the calculation could look like this:

Cost to Acquire a Customer (CAC)$1,000
Customer Lifetime Value (CLTV)$20,000
Additional Customers Gained180
Additional Lifetime Revenue$3,600,000

While these numbers are just provisional, you can use your own values to compute your own savings expectations.

Cost Efficiency is Critical to Rapid Growth

It is fair to expect that adding a fractional CMO will result in excess revenue performance. They have superior, hard-won knowledge across a lot of engagements to share. 

However, the potential for additional revenue growth based on people cost savings alone is substantial.

Try using the calculator above and your own estimates to calculate the benefits for your business.

Saving time and money while still getting rapid growth is a stellar combination that fractional CMOs make possible.

https://snohat.com

Founder, Fractional CMO