Hiring In-House vs. Fractional: A Decision Framework for Growing Companies
As your business grows, you need experienced leadership. But here's the problem: full-time C-suite executives are expensive. A full-time CTO costs $120,000-$200,000+ annually plus benefits. A CFO or CMO can cost even more. For a growing SMB with limited budget, that's often prohibitive.
This is where fractional leadership comes in. But fractional isn't a universal solution—it's right for some situations and the wrong choice for others. In this guide, we'll help you think through when full-time hiring makes sense, when fractional is the better move, and how to avoid mistakes in either direction.
Understanding the Fractional Model
Before comparing, let's clarify what "fractional" means. Fractional executives (CTO, CFO, CMO, COO, etc.) work part-time for your business—typically 10-20 hours weekly—while maintaining other engagements. They bring C-suite expertise without the full-time cost.
Why businesses turn to fractional leadership:
- Need sophisticated expertise for part-time needs
- Can't afford full-time salaries
- Want external perspective unburdened by day-to-day operations
- Need flexibility as needs change
- Want to test whether a role needs to become full-time
This is different from outsourcing or hiring consultants. Fractional executives are integrated into your leadership team, not external advisors. They attend board meetings, make strategic decisions, and bear responsibility for their domain.
Fractional vs. Full-Time: The Economics
Let's compare realistic numbers for a CTO role.
Full-Time CTO Costs
Base salary: $120,000-$180,000 (varies by location, experience, company stage) Benefits (health, payroll tax, etc.): 25-30% of salary = $30,000-$54,000 Equipment and tools: $2,000-$3,000 Professional development: $2,000-$3,000 Recruiting and onboarding: $5,000-$10,000 Annual total: $159,000-$250,000
Multi-year reality: Your first-year costs are higher due to onboarding and opportunity cost (won't be fully productive for 6-12 months). By year 3-4, full-time executives typically become more economical as you leverage their time more fully.
Fractional CTO Costs
Monthly retainer: $3,000-$7,000 depending on experience and engagement level (let's say $5,000) **Annual: $60,000 Plus benefits to your business: No payroll tax burden, no benefits, no equipment costs, minimal onboarding Effective cost: ~$60,000-$65,000 annually
Multi-year reality: Costs remain stable regardless of your company's growth. If you transition to full-time, you're adding cost, not replacing it.
The Math
A fractional CTO costs roughly one-third the price of a full-time CTO. That's substantial. Over five years:
- Full-time CTO: ~$850,000-$1,250,000 (including growth and benefits inflation)
- Fractional CTO: ~$325,000-$400,000
- Difference: $450,000-$850,000 in cumulative savings
These aren't abstract savings—that's cash in your business for hiring, product development, or marketing.
When Fractional Executives Make Sense
Fractional works well in these scenarios:
1. You Need Expertise But Not Full-Time Volume
Many growing companies have technology needs that don't fill 40 hours weekly. You might need:
- Strategic architecture and system design (occasional)
- Technical hiring and team leadership (10-15 hours weekly)
- Vendor evaluation and system selection (episodic)
- Security and compliance guidance (10-20 hours weekly)
- Technology roadmap alignment with business (5-10 hours weekly)
A full-time CTO would spend much of their time waiting for the next problem. A fractional CTO focuses exactly on what you need.
Example: A B2B SaaS company with 5-person engineering team needs strategic direction, hiring support, and technology decisions—maybe 15 hours weekly. Fractional CTO is perfect; full-time would be underutilized.
2. You're Pre-Product-Market Fit or Early-Stage
Early-stage companies don't know what they'll need. Technology needs shift. Market needs shift. Hiring full-time leadership before direction is clear is risky.
Fractional leadership provides:
- Experienced guidance without the long-term cost
- Flexibility to change as strategy evolves
- External perspective unclouded by existing relationships
- Option to transition to full-time once direction is clear
Example: A seed-stage startup needs a CTO's strategic input on technology choices and architecture, but doesn't have the revenue to justify $150,000+ salary. Fractional provides the expertise for $60,000.
3. You're Scaling a Functional Area Without Scaling Team
Some companies need deep expertise in specific domains without full expansion.
- Growing marketing budget from $50K to $500K/year: Need sophisticated strategy; full-time CMO might be overkill
- Improving financial operations and planning: Need CFO expertise; full-time CFO might be premature
- Launching new product line: Need COO perspective; probably don't need full-time COO yet
Fractional executives help you scale capabilities without scaling headcount proportionally.
Example: A manufacturing company grows revenue 40% and needs better operations planning and financial forecasting. A fractional CFO (15 hours weekly) provides guidance at $60K/year versus a full-time CFO at $150K+.
4. You Want External Perspective
Fractional executives aren't embedded in your day-to-day politics and culture. They can see patterns and problems your full-time team misses. They bring perspective from other industries and companies. This outside view is valuable.
Conversely, they're not invested in "the way we've always done it" and can recommend change without personal attachment.
Example: A fractional growth officer evaluates your sales process with fresh eyes and identifies that your sales cycle could be shortened 40% by changing qualification criteria and nurturing approach. An internal team might miss this because they're used to the status quo.
5. You Want to Test-Drive a Role
Not sure if you need a full-time marketing person? Hire a fractional CMO for 6 months. They'll help you build marketing systems, hire team members, and establish processes. Then, transition to a full-time employee who executes within those frameworks.
This saves money by using expensive leadership to build, then full-time team members to execute.
Example: Company hires fractional CMO (6 months, $30K). Fractional builds marketing strategy, creates content systems, establishes metrics. Company then hires full-time marketing manager ($65K/year) to execute within that framework. Total year-one cost: $95K versus $150K+ for a full-time CMO from day one.
When Full-Time Hiring Makes More Sense
Full-time executives are the right choice in these scenarios:
1. You Have 40+ Hours of Weekly Work
If the role genuinely requires full-time focus—the person works 35-40+ hours weekly—full-time makes sense. Fractional isn't meant to fill 40-hour roles.
Example: A 50-person SaaS company with complex technology needs, multiple product lines, and significant hiring requires a full-time VP Engineering. There's genuinely 40+ hours of work.
2. You're in High-Growth Mode
Scaling rapidly (50%+ annual growth) creates chaotic volume. You need someone embedded in the chaos, making daily decisions.
Fractional works for 10-20 hour/week roles. If you need someone available for urgent decisions and ongoing management daily, full-time is necessary.
Example: A company growing from $2M to $5M revenue in a year needs a full-time CFO managing cash flow, financial planning, and investor relations. Part-time won't cut it.
3. The Role Requires Cultural Immersion
Some roles require deep integration into your culture and team. These are hard to do fractionally:
- Chief Operating Officer managing daily operations
- VP of Engineering leading a team that needs constant management
- VP of Sales running complex sales operations
- Chief People Officer building culture and team
These roles benefit from being in the office, in the meetings, understanding the details, and building relationships.
Example: A VP of Sales leading a team of 8 needs to coach reps, celebrate wins, diagnose deals, and build culture. That's difficult fractionally. Full-time is necessary.
4. The Role is Strategic and Visible
Some roles require visible, full-time commitment. If this is your Chief Product Officer or Chief Financial Officer, customers, investors, and employees expect that person to be fully dedicated.
Example: Your CFO interacts with investors, lenders, and auditors. Fractional CFOs can work technically, but investors often want to see full-time commitment to financial leadership.
5. You Can't Find the Right Fractional
Honestly, sometimes the fractional market doesn't have what you need. Maybe you need an executive with very specific industry experience, or the timing doesn't work, or fractional candidates in your area aren't available. Then full-time becomes necessary.
The Hybrid Approach: Combining Fractional and Full-Time
Many sophisticated companies use both models:
- Fractional CTO + Full-time VP Engineering: CTO handles long-term strategy and senior hiring; VP Engineering runs day-to-day engineering operations
- Fractional CFO + Full-time Controller: CFO builds financial strategy and investor relationships; Controller manages operations, accounting, and reports
- Fractional CMO + Full-time Marketing Manager: CMO sets strategy; Manager executes and manages the marketing team
This model optimizes cost while ensuring expertise and operational execution.
Questions to Ask When Deciding
How many hours weekly does this role actually need? Be honest. Many companies think roles need 40 hours when they actually need 20.
How much is urgent versus planned? If most work is episodic (strategy projects, quarterly planning, hiring cycles), fractional works. If most is urgent and daily, full-time is better.
How much cultural immersion does this role need? If cultural integration is critical (Chief People Officer, VP Sales), full-time is better. If the role is more specialized and independent, fractional works.
What's our financial runway? If budget is tight, fractional extends runway significantly. If you have ample capital, full-time might be acceptable.
What's our trajectory? If you're scaling rapidly, know you'll need full-time eventually. If you're stable or slow-growth, fractional might be permanent.
Can we find the right fractional candidate? Not all executives want fractional roles. If the candidates available fractionally aren't right, full-time might be necessary.
Is this role something we can grow into? Can we start fractional and transition to full-time as needs grow? That's often the optimal path.
Common Mistakes in Fractional Hiring
Mistake 1: Hiring Fractional for a Full-Time Role
Trying to squeeze 40 hours of work into a 15-hour-per-week fractional engagement creates frustration for everyone. If the role genuinely needs 40 hours, hire full-time.
Mistake 2: Hiring Full-Time for a Fractional Role
Conversely, hiring a full-time executive for 10-15 hours of work is expensive and the executive becomes disengaged. If the role is truly part-time, hire fractional.
Mistake 3: Not Defining Scope Clearly
Fractional relationships work when scope is clear. If expectations drift, conflicts happen. Define what "15 hours weekly" actually means in terms of deliverables.
Mistake 4: Choosing Cost Over Fit
Sometimes companies hire fractional because they can't afford full-time, then hire the wrong person. Better to wait and hire the right full-time person than hire the wrong fractional person now.
Mistake 5: Assuming Fractional is Lower Quality
Some see fractional as "second-tier" versus full-time. Actually, many fractional executives are highly experienced leaders who chose to work fractionally. Don't assume fractional means less capable.
What We Recommend for Growing Companies
Here's how we think about it at Sandbar Systems (and what we recommend to clients):
For companies under $2M revenue: Fractional leadership in specialized areas (CTO, CFO, CMO) makes sense. Most other functions should be full-time or founder-led.
For companies $2M-$10M revenue: Mix of fractional (strategic roles) and full-time (operational roles). A fractional CTO and full-time VP Engineering might be optimal.
For companies $10M-$50M revenue: Most roles can be full-time, but fractional still works for specialized areas and new initiatives.
For companies $50M+ revenue: Mostly full-time, but fractional still works for specific expertise (turnaround situations, new market entry, specialized advisory).
The key insight: It's not about company size. It's about how many hours of work the role actually requires. Be honest about that, then choose the hiring model accordingly.
Ready to Evaluate Your Leadership Needs?
Whether you're growing fast, launching new initiatives, or trying to optimize your leadership structure, having the right people in the right roles—full-time or fractional—is critical.
At Sandbar Systems, we provide fractional CTO and growth officer services because we believe executive expertise shouldn't be available only to large companies. We've helped hundreds of SMBs scale their technology and growth with strategic leadership that's cost-effective and results-driven.
If you're wondering whether fractional leadership makes sense for your business, or if you need help evaluating your current structure, we'd love to discuss it.
Schedule a free consultation to explore your leadership options. We'll discuss your specific needs, whether fractional or full-time makes sense, and how to structure your team for optimal results.
Call us at (804) 510-9224 or email info@sandbarsys.com.
Sandbar Systems provides fractional CTO and growth officer services to SMBs across the country. We're leadership partners, not vendors, focused on helping you build sustainable, scalable businesses.