What Business Are You In?

Selling Time For Money OR Your Brain For Value?

Alejandro, a fractional CFO, was telling me about his struggles building his business.

I asked Alejandro what business he was in. Having read my last article and watched my previous video , he confidently said, “I’m brought in to be the CFO of growing consumer products companies between $10M to $100M. I lead the entire finance function and am a key member of the executive team. I do this by spending somewhere between 1 to 3 days per week on a given client. My goal is to be sure the company has the financial resources to grow and the information and analysis to make the right decisions that will enable them to grow. My last act is to hire and train my full time replacement once the company gets to the right size.”

I told him that’s what you do, not the business you’re in. He didn’t get it at first so I asked him how he marketed and sold his services.

Alejandro told me he focused on his corporate experience which he was justifiably proud of. He felt his experience communicated the wide range of issues and situations that he was capable of handing. When he was able to generate a sales conversation, he felt that they tended to go well and that his prospects reacted well to his credentials. Alejandro already feels that he’s discounting his price but most of his prospects are telling him that he’s a bit expensive compared to what they expect to pay. Despite his confidence in pitching his services, he has few takers.

What, Alejandro wanted to know, should he be doing differently to get more clients, now and into the future?

Let’s take a step back and examine where the value comes from in a business. To keep it simple, every business has two types of assets — tangible and intangible. Tangible assets are typically PPE (property, plant, and equipment) and your time. You can touch them and you can buy and sell them easily. An intangible asset has no physical form. This is primarily intellectual property or IP. IP consists of brand recognition and value, reputation, relationships, goodwill, patents, trademarks, copyrights, and trade secrets (your non-public knowledge and know how that helps you generate revenues or lowers your cost of doing so).

As shown in the digram below, 50 years ago almost all the value in a business came from tangible assets. Your PPE, products, time, and so forth are what drove your revenues and made up most of your costs. Today, over 90% of the value of your business comes from intangible assets or your intellectual property.

How does this trend for the economy at large, consistent with the S&P 500 data, translate to a fractional executive who is selling a professional service?

Every fractional is selling a combination of two things:

• Intellectual property or the intangible part of your offering
• Time or the tangible part of your offering

In talking to large numbers of fractional executives, I find most are like Alejandro. They are communicating to their prospects that they primarily are selling hours for money. They bring experience in doing the job but nothing more. They are an extra pair of hands when needed and can probably do the basics. There are more fractional executives looking for this type of work than there are companies looking to hire. So pricing is discounted, demand is intermittent, and there is no pipeline to speak of.

Let’s contrast this with Barbara, who is also a fractional CFO. Barbara has similar experience as Alejandro but she focuses on impact and value added when talking to prospects. She’s selective about the type of work she takes on and prefers the high degree of difficulty assignments requiring out of the box thinking. She excels at making connections among various aspects of her experience and expertise to come up with creative and innovative solutions that move the needle for her clients. Her business is booming and she has exceeded the income she made in corporate by 30% and is working no more than 40 hours per week rather than the 60+ which was typical as an executive employee.

Most fractional executives don’t consciously think about their “intellectual capital”. When asked, most would say they don’t have any. But 95% have some, 15% have an abundance, and 5% are world class.

The graphic below indicates the components of any fractional executive’s intellectual property.

To all intents and purposes, your experience doesn’t directly contribute to your IP. You focus on experience when you’re selling time for money.

Your expertise, consisting of your skills, knowledge, and know how to solve a particular set of defined problems, counts as intellectual property. The problem with expertise is that while it may not be present in your clients, most fractional executives who do what you do likely have it. So it is much more widely available than most fractional leaders think and while it helps it’s not that valuable.

Insight, which is your ability to diagnose the root cause for critical business issues plaguing your clients and then solve them, is rare. Marketed correctly, you should be able to generate more than enough demand for your services with no price discounting required.

The rarest form of intellectual property for a fractional executive is wisdom. Wisdom is the ability to connect that dots from a variety of experiences across your career that give you unique insight into a critical issue and how best to solve it. Clients need wisdom when they are seeking to transform their business, industry, or marketplace. It is timeless.

Your ability to generate income and make a difference depends on your mix of intellectual property and how you market and sell it to your target market. The chart above lays out how the value of your intellectual property influences the price you can charge, the level of demand for your services, how you will be perceived or the strength of your brand, and the income you can expect to earn as a result.

The tragedy of Alejandro’s situation is that he has insight and expertise as a fractional CFO to bring to his clients. But his marketing and selling focuses on his experience which is why he’s struggling. It’s not what he can bring to the table that is at issue. He needs to package and price it, position it, and communicate it in a compelling fashion. When he does this, he will have a business every bit as powerful as Barbara’s.

If you are a fractional executive with some combination of expertise, insight, and wisdom, you must market and sell your intellectual property not your time.

Sometimes your prospects just need an extra pair of hands with the relevant experience. I tell all our clients to pass on this work and let those who have little to no intellectual property fight over the crumbs. As a fractional executive, you need to embrace that you are in the intellectual property business. Do this and you’ll have the type of business you want.

Here are the 4 steps you need to take to transform your business from a commodity to a highly differentiated, premium priced, in demand service:

1. Take an inventory of your intellectual property.
2. Price and package it so you can realize its full value.
3. Determine who needs what you have to offer and market it in a compelling manner to cut through the noise.
4. Use a trust-based buying process to communicate your empathy and authority with each prospect based on their specific situation.

Let’s have a conversation on how you can build your fractional business by leveraging your intellectual property rather than your time.