Should I Charge an Hourly Rate, a Monthly Retainer, or Something Else?

Hourly Rates

Hourly rates are a common and simple compensation method for fractional work, especially when first starting out.

Pros:

• Super simple for both parties to understand
• Easy to sell into the client (because of its simplicity)
• A great way to see how long work actually takes, test pricing assumptions, and ease into fractional work

Cons:

• If a client doesn’t use your hours, they’re “lost”
• The more strategic you are, the less your value is correlated with hours worked

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Monthly Retainers

Monthly retainers are the most common and widely recommended pricing model for fractional work. A retainer typically covers a defined scope and an expected time commitment per month, without tying compensation to exact hours worked.

The gold standard for a fractional executive is a retainer for $10,000 per month for approximately 10 hours per week of work.

Pros:

• You “lock in” compensation for the month, and combined with other retainers it can feel similar to a salary
• Natural ebbs and flows in workload for a client don’t immediately impact your bottom line
• There’s a certain maturity to retainers, that feels less like being “on the clock”

Cons:

• There’s a natural incentive for scope creep, which means you’re working for less than you expected
• Some clients may feel nervous to commit to a monthly amount when the work might be highly variable

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Why Fixed-Price Projects Are Uncommon

Fixed-price or project-based compensation is not common in fractional work. This is because fractional roles are meant to be ongoing leadership positions rather than one-time deliverables. There is often no clear end date, and priorities tend to evolve over time.

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Common Exceptions And Unique Compensation Setups

While retainers and hourly rates cover most situations, there are a few notable exceptions.

• Commission - this is common for fractional sales roles, and is usually on top of a base retainer. Read more about this here.
• Equity - This is attractive for fractional execs when they’re successful enough in their career that standard cash compensation isn’t motivating enough. It’s also attractive when you’re genuinely a huge believer in the company and want the upside of an angel investor.
• Milestone-based compensation - examples include fundraises, M&A, or major launches. This is a very advanced move, and generally we’ve only seen Fractional CFOs do it successfully so far.

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In Summary

Hourly rates are a good place to start. Monthly retainers tend to become the most common structure as engagements mature. More complex models like commission, equity, or milestone based pay are best reserved for specific roles and experienced fractionals.

If you want to know how much money you can make doing fractional work, check out our article here.

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