A Tale of Two Markets

External Factors Influencing Your Pricing as a Fractional Sales Leader

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, ...”

From A Tale of Two Cities by Charles Dickens

In the landscape of fractional sales leadership, where adaptability is the cornerstone of success, the challenge of establishing a precise pricing strategy for a freelance sales leader is nuanced and layered. Several external factors have to be considered:

Industry and Location

These two are important because of the equivalent full-time salary which is the benchmark for any company. Consider the difference between the construction industry in the Midwest and tech or SAAS in Silicon Valley. The same function is compensated in tech 2x or 3x over a more traditional industry.

And in the world of remote work, the more important factor is the location of the client, not that of the executive. And that makes it a little harder if you live in NYC or LA and seek gigs nationwide. Unless you position yourself as "I live in SF, am a Tech CRO, FT equivalent here is $600k OTE, I need that to sustain my lifestyle, and I am basing my rate on that, and do not care that I am not competitive when my client is Midwest-based.” It is a choice and a decision to make.

Requirements of the Assignment

Diving deeper, the particulars of the assignment like the role's intricacy, team size, or the level of seniority required undeniably influence pricing. The dynamic nature of these aspects means that pricing cannot be a static figure. It's critical to assess the unique circumstances of each client. A versatile approach in the pricing matrix may involve conceptualizing a spectrum of potential rates rather than a single fixed figure. Alternatively, guidance from the Ideal Customer Profile (ICP) might lead the way, offering insights into the level of complexity and scale associated with the client. For instance, an ICP targeting "$5-10m AR in manufacturing" typically signifies a less complex, less international scope with a smaller team compared to an ICP of "$20-100m ARR in SAAS."

The Value Factor

The Value Factor further complicates the pricing structure, manifesting in two distinct dimensions. The first dimension is the tangible impact on the client's enterprise. What is the expected benefit from a fractional sales leader engagement? Conversely, what is the maximum potential impact the executive can deliver? For instance, if the retainer for the engagement is $10k/month for dedicating one day per week, which in turn contributes an additional $100k to the client's monthly revenue, yet the client’s net profit margin is a meager 5%, a discrepancy emerges.

It’s a challenge to quantify such value in advance and incorporate it into a pricing matrix—unless an executive considers another dimension of value: direct value participation through variable success-based fees, commission percentages, bonus payments, profit shares, and other forms of gainsharing.

In shaping the pricing matrix, the decision boils down to two questions: are you amenable to value-based compensation, and if so, what form should it take?

Client Characteristics

Lastly, the client’s characteristics—specifically the founder, owner, or CEO—cast a significant shadow on pricing decisions. Their financial wherewithal, if you’re targeting, for example, "seed-funded, $0-1m AR" startups, indicates that funds are sparse. Furthermore, their perception of the financial worth of the sales leadership role is subjective; if their belief leans towards a commission-only remuneration for sales leaders, it reflects a viewpoint to be dealt with.

While you cannot possibly tailor your pricing to accommodate every perception, possessing a pricing framework allows you to recognize and swiftly act upon any misalignment between a client’s perspective and your established rates. Ultimately, forging a Pricing Matrix for an independent sales leader is an intricate endeavor that necessitates some understanding of benchmarks. By meticulously weighing various factors, sales leaders can devise a pricing strategy that not only mirrors their expertise and the value they offer but also remains pliant to the varying needs of a diverse clientele.

Talk to us about the right rate for your fractional executive.

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