Fractional Futures

Why Marketing Expertise is Crucial for Portfolio Companies

• Paul Mills • Season 3 • Episode 1

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Fractional Futures is the essential podcast for CEOs, investors, and senior marketing executives looking to unlock the power of fractional marketing leadership.
 
Hosted by Paul Mills, Founder at VCMO, and with special guests, we'll share expert insights, provide actionable strategies and explore real-world success stories to help you leverage fractional marketing leadership for maximum impact.

In this episode

In this episode, Paul Mills and Rob Nicholls discuss the role of fractional CMOs in helping SMEs and portfolio companies scale and maximize enterprise value. They explore the evolving landscape of marketing, the challenges faced by marketing professionals, and the importance of strategic marketing in driving growth. The conversation highlights the gaps in marketing expertise within portfolio companies and the value of fractional leadership models in addressing these challenges. They also compare the adoption of fractional models in the US and UK, emphasizing the benefits of this approach for businesses.

Special Guest

Rob Nicholls, Founder Rob Nicholls Consulting, CFO, Board Advisor and Angel Investor.

Key Takeaways

  • Fractional CMOs can significantly impact SMEs and portfolio companies.
  • Marketing has lost its influence in the C-suite over the years.
  • There is a pressing need for better marketing education and standards.
  • Strategic marketing is crucial for long-term business success.
  • Many companies view marketing as a cost rather than an investment.
  • The fractional leadership model offers flexibility and expertise.
  • Gaps in marketing expertise can hinder growth in portfolio companies.
  • Pricing is a critical aspect of marketing strategy.
  • The US market is more advanced in adopting fractional leadership.
  • Building relationships is key in both business and marketing.

 Sound Bites

"Marketing has withdrawn from the C-suite."

"The most important P to my mind is pricing."

"Investors often scrutinize marketing as a cost center."


Contact VCMO

Thanks for listening & keep podcasting!

Fractional Marketing Leadership | Marketing Transformed.

Paul Mills (00:00.477)

Hello and welcome to season three of Fractional Futures. In this season, we're diving into how fractional CMOs can help SMEs and portfolio companies scale and maximize enterprise value. Joining me in every episode is Rob Nicholls, a seasoned CFO, a non-exec director and a board advisor with over 35 years of global finance expertise.

 

Rob specialises in profit maximisation and value creation and I'm absolutely delighted to welcome him to the show. Hi Rob, for people who haven't seen your content on LinkedIn or not bumped into you on the golf course, do want to introduce yourself to the listeners?

 

Rob Nicholls (00:41.506)

Thanks, Paul. No, really good to join you. We've known each other a couple of years now. I've been back in the UK about five years now. I work with SMEs from startups to mature companies, really focusing on the financial and strategic financial positioning of the company and basically profit maximization, margin expansion and sales as well, but all about leading to value creation.

 

So I've been doing it a number of years. used to do it in the U S I lived in the U S for 22, 23 years. Um, so lots of experience, did a lot of international work. ran the middle East and Africa for a number of years, spent an awful number of years traveling the world, if you will. But again, always working from a finance and a value creations perspective. So lots of experience, lots of knowledge around marketing, what does work, what doesn't work sales, what works, what doesn't work. And, and

 

very close to it with SMEs now in the UK, primarily, as you know, in the South West.

 

Paul Mills (01:46.173)

Great stuff and I managed to get you off the golf course as well. I know you're a keen golfer, aren't you? What handicap do you play off?

 

Rob Nicholls (01:48.524)

Okay.

 

Rob Nicholls (01:52.366)

I play off a mid-teens handicap but for me it's all about relationships Paul, it's not about the golf it's about relationships and building relationships which you know that's what it's all about in business particularly here in the southwest so I meet a lot of people on the golf course I play a lot of golf with people on the golf course but again it's about the relationships and whatever it is for you I'm a big believer and you've got to have something that gets you out there a little bit of physical activity but

 

engaging, engaging. If you're not known, the biggest crime I think in marketing or for a business is not being known. So you've got to be known.

 

Paul Mills (02:30.083)

Absolutely. I think that's probably a good point to jump straight in. think CMOs and CFOs are often seen at being at loggerheads with each other, aren't they? But in reality, I think the strongest companies have a marketing function that works in tandem with the finance and investment teams.

 

But the problem I observe in many businesses, a lot of companies still see marketing as an expense, a cost center, rather than a growth driver. But when done right, marketing can be a powerful engine for building predictable revenue, increasing valuation, and building long-term success. So I want to unpack that a little bit, Rob. In your experience, how can marketing unlock growth potential?

 

Particularly in portfolio companies.

 

Rob Nicholls (03:24.952)

So I think we do, to set this up, I think we do have a problem. I think we have a problem within the marketing function, the marketing profession, and more broadly within the business world. If you go back, you know, a little bit of history, go back two or three decades, if you will, marketing was a big player, was a big part of the value creation within most businesses. And certainly in the last two decades, and really since the pandemic and the last five years, if you will, marketing...

 

has effectively withdrawn from the C-suite to a large extent. I think there's a lack of credibility from many marketing managers in the C-suite. Boards aren't taking it seriously. The CEO and the CFO really aren't valuing it like we used to do. It's almost like the boardroom table has been pulled away and the CFO and the CEO and the board has gone with it.

 

and the marketing person has been left at the bottom of the table with no table in front of them. And other functional areas have become much more influential than marketing is today. So I do think we have to approach this from a point that there's a problem and really understand why we've got a problem. Is it the broader, is it the function, is it the profession itself, is it the accreditation or is it the individuals themselves doing the marketing role?

 

And a lot of it, goes down to the partnerships that we used to have within businesses, know, sales and product used to be like this. It's now sales and marketing are like this. They're just not working together as they used to for the benefit of the company. So I do think we have to recognize there is a problem. And then you've also got the problem of the digitization of business. You've got marketing, tactical marketing going down one avenue, short term.

 

tactical operations, which is at the behest of the CFO and the CEO. That's what they want. They want immediate results. They want revenue. And then you've got people like myself and perhaps yourself and many others that come at it from a much more perspective of strategic marketing, partnerships, pricing, the four Ps, you will, understanding the value of positioning. A lot of

 

Rob Nicholls (05:48.822)

the boards and companies that I work with, they don't have the fundamental capacity to bring on board a finance, sorry, a marketing leader. They just don't have the budget to do it. So they've got 25 to 30 K, they want to deploy some money around marketing. And they can get a digital marketing executive for that sort of money. You can't get an experienced, knowledgeable marketing director, CMO for that sort of money. So they are

 

orienting themselves towards a tactical operational perspective. It's cheap. You've got 25,000, you want to spend it on marketing, that's the way you're going to go. You're to get a relatively inexpensive person fresh out of college, doesn't really know as much about marketing or the business world as they should. That's all they get. And they get social media, they get some blogs, they maybe get a little bit of positioning.

 

they really don't get an understanding of the customer journey, where the industry is going, what the TAM is, what the SAM is, what pricing they need to work on. All the things that we used to do, they're just not being done anymore. So it's unfortunate, but I think marketing has been dumbed down to some extent. And yes, the CFO has played a part in that, the CEO and the board has as well. But the Accreditation Institute and the players within marketing.

 

have something to answer to there as well. So I think there is an issue. I think there is an issue.

 

Paul Mills (07:21.957)

And I totally concur with everything you said there. And it really pains me to say that, I would take as a, as a marketer of, over 20 years, I've, I've seen a big decline in the standards of marketing. It's one of the reasons why I set up VCMO is to kind of improve standards in marketing and particularly, what I see is a lot of business leaders, they don't understand the basic principles of marketing. Very few of them are actually had any.

 

academic grounding in the marketing discipline. And whilst many people have heard of the four P's, I think a lot of business leaders only think of marketing as one of the P's, which is the promotional bit, which is all of the tactical activities around advertising and creating awareness. And I think that's a very dangerous position if you're a business leader and that's what you, if that's how you view marketing, it's not a good place to start. And I think you're right. You touched on

 

Rob Nicholls (08:03.576)

Mm-hmm.

 

Paul Mills (08:19.453)

the marketing institutions, the Chartered Institute. And I have a lot of good things to say about the CIM. However, I think they're making it easier for people, marketers to become Chartered, to become fellows. And I think they probably need to put a mirror in front of themselves and say, are we really...

 

setting the right standards for marketers in the UK and further afield. I certainly know when I look at other, the other functional disciplines, the finance, maintaining chartership if you're a finance expert is a damn sight harder than perhaps maintaining it for a marketer. So I think there's a disconnect there between the functions. I certainly think CIM needs to be doing more to

 

help marketers win back that influence to give them the strategic toolkit to really add value into businesses.

 

Rob Nicholls (09:15.712)

You're absolutely right. you know, you mentioned one of the four P's. The most important P to my mind is pricing. And it's something that really isn't practiced to the greatest degree. But it's probably the most levered of the P's. You're going to get more bang for buck on that. And it's just not something that's done effectively today. And you're right. Going back to the academic side of it, most CEOs don't really have any practical

 

training, any academic background. Most of them don't have MBAs. They certainly don't have marketing qualifications. So they really learn by just doing and by experience. they've had a very good marketing person, a strategic, experienced, knowledgeable marketing person, they may appreciate it more. But if they haven't, they just won't. And so we do have a problem again, more broadly, with business education in the UK.

 

There aren't enough MBAs and people with professional academic qualifications that really have the knowledge and the academic prowess to practice what they preach. And marketing is a good example of that.

 

Paul Mills (10:24.645)

I totally agree with you there as well. It sounds like an echo chain, Before I did marketing, I was a chemist. I worked for a large American pharmaceutical company, Eli Lilly. And the passage of right to get a promotion in that organization, you had to have an MBA. That would be the only way you could get into senior management. And in those days, in the nineties, a lot of the large blue chips, they would sponsor high performing candidates, employees.

 

to do an MBA part-time, whether it's in the UK with one of the leading establishments or in the US. I don't see that so much anymore. see certainly in mid-size companies, There's very few opportunities for high performing candidates in any functional area to get sponsorship for MBAs. And I think that is part of the problem. We're seeing boards, leaders at the senior level

 

senior leadership team, they don't have as many MBAs perhaps as before, they don't have that strategic now. They basically focus on tactical deliveries and they look at the business plan from last year's economic success. And the strategy will be we'll do what we did last year plus 10%. But there's no strategy in that. Yeah.

 

Rob Nicholls (11:43.138)

You're just extrapolated on further. Yeah, you're right. That to be honest, I mean, you're actually right. That's how I got my MBA. It was paid for by my global technology company provider. We just don't do that anymore. And so we've got a cadre of business leaders coming through that just don't have marketing, business, finance knowledge. And so you can't criticize them. They just don't have, they haven't had the opportunity that many leaders have had in the past. And a big part of an MBA is marketing.

 

I mean, I would suggest it's almost like a third of an MBA is marketing and perhaps a third is finance and the rest is kind of ancillary areas. But it's a really big issue, MBAs are very common in the US. I spent two decades or more there and it's glass ceiling. You're not going to get promoted above a certain level unless you have an MBA. We don't have that glass ceiling here in the UK. And that is a hurdle that people don't have to get over to become a CEO.

 

in many instances. That is an issue and I think it leads to some of the concerns we've got around the profession today and marketing marketing accreditation. is a fact? An MBA is a marketing degree to a large extent.

 

Paul Mills (12:57.945)

Absolutely. And we've touched on a few themes there, Rob, and I want to sort of into recognizing gaps in internal expertise, particularly in portfolio companies. These organizations may not have the right expertise at the different functional levels. So certainly when it comes to marketing, when investors go into portfolio company, marketing is often one of the things that is scrutinized first.

 

often a large cost center and investors will look at, know, is marketing delivering value? Are we getting strong return on marketing investment? But sometimes they may not look at the marketing capability of that organization. They might just look at it on, they might look at marketing performance on a piece of paper rather than the capability gaps. So when

 

companies lack the depth of marketing expertise needed to scale. What sort of things can companies do to close those gaps?

 

Rob Nicholls (14:06.286)

So I think this is again, a really important area. mean, costs is gonna be a big part of it here. You don't have 50 to 100,000 perhaps to spend on marketing if you're a startup company or a portfolio company in a venture or private backed private equity backed business. They're gonna be looking for returns quickly as well. So, you know, it's a three to five year timeline, five to seven at most.

 

And so there is scope to invest in brand in that timeline, but the likely thing is they're gonna be desperate for sales. And so whatever tactical things you need to do, whether that's social media, blogs, whatever that may be, that is what's gonna get prioritized in a venture-backed company. They're gonna want revenue quickly. And so...

 

with the greatest intent, you're not gonna build a brand and generate revenue opportunities out of it in six to 12 months. It's just not going to happen. You can put a little bit of money towards brand building over time and putting out a voice for the business, but they're really gonna be much more practically oriented towards generating revenue. Again, the other thing is, most of these companies in venture-backed businesses now, portfolio companies,

 

looking they're still looking for product market fit they're probably still pivoting to where their sweet spot is so you've got to be careful and not shovel too much money into one bottomless pit recognizing that you may well have to pivot in nine months time because otherwise you basically written off you know a couple of hundred thousand pounds in that bucket so you need to be you need to hold on to your dry powder if you will

 

but recognizing that there has to be a product market fit and a go to market strategy that gets revenue quickly, which does drive you towards a more of a revenue generating demand creation aspect that might otherwise be a better approach, a more strategic approach. So you do fall into that trap, if you will, but that is just the case when it's venture backed or private equity. You're in a much

 

Rob Nicholls (16:22.429)

You're building this company for 10 to 15 years time and passing it on to the kids. You're creating a business within a year or so, pivoting once or twice, building a sales. You're going to be focused 100%. In fact, most of the startups that I work on, some of them are pre-revenue. Some of them have got a couple of 10, 20, 30,000 a month of recurring revenue, but it's all about generating revenue on a recurring basis.

 

So whatever you have to do, whether that's pitching, whether that's the CEO going out to meet people, and they are basically the point of reference for the business, you just don't have marketing resources. And what you do have is going to be very tactically oriented towards demand creation. Now, I'm not sure how you feel about marketing creating demand, but there is a sense out there that in theory marketing should be creating demand.

 

I'm not certain about that. But you know, there has to be demand for the product or the service. Marketing's role is to make sure that people are aware of it, that they build a pipeline, if you will, or a flywheel to generate opportunities that then sales can convert. But again, within portfolio companies, you're probably talking 8, 10, 12 people perhaps initially, even if you're turning over one to two to five million.

 

you're still going to be a very small staff and you're likely not going to have someone other than a relatively junior digital marketing specialist, maybe a marketing manager, they may have the title of that, but they're certainly not going to have the four P's experience, the knowledge, the insight, the perspective that they really will need in time. And again, budget is a constraint there.

 

Paul Mills (18:10.149)

Absolutely. I think for a good quality chief marketing officer, which is a luxury very few companies can afford, you're looking at a, you know, a salary cost of between 100 and 200 K, depending on, you know, sector and level of expertise, companies can't afford that it's, it's a big dent on the P and L. And so one of the, I guess, the bad marketing habits a lot of companies fall into is because

 

they can't afford the luxury of that CMO, they will have a junior marketer kind of have the expectation that they'll step up to the plate a little bit. They'll put them on some courses, give them some learning and development and hope that they can feel the boats, sorry, feel the boots of the CMO, but without having that strategic and operational expertise that a seasoned CMO has. And I think the danger you get into there is that, and you picked up on this,

 

that the marketing is basically, it operates without a clear strategic direction. And there's no point rowing hard if you're rowing in the wrong direction. And that's what I certainly see quite often is you've got junior marketers who are trying to do the very best thing in terms of doing the best they can with the marketing, but there's no strategy there. And

 

Creating tactics without a strategy is kind of the fastest route to failure. And I think this is why hiring junior marketers without that leadership, it certainly creates a bottleneck in growth. You end up getting inefficient spends, get disconnected tactics, you get slower progress. So I think this is really where the model, the fractional model.

 

comes in, it's not just on marketing, the Fractional Leadership Model can close those capability gaps, regardless of what functional area we're looking at. But particularly in marketing, Fractional CMOs now can really come in, support those portfolio companies, close those strategic gaps, and share their knowledge and vast experience to help those businesses overcome those bottlenecks.

 

Rob Nicholls (20:24.494)

I'm a huge believer in the fractional model. I'm a fractional CFO myself just definitely taking a step back We talked about the marketing knowledge a lot of that marketing knowledge should or could come from board advisors or non-exec directors so quite often I will find even if a business doesn't have the budget to have a Fracture a CMO or marketing director even a marketing manager in place They will probably have someone with some marketing expertise knowledge

 

industry specific knowledge as an advisor on their advisory board. And that oftentimes will be suffice, but they will often guide the CEO in terms of the tactical spend. And that may be a good thing. But equally, I do think the fractional model is a very good model, particularly for marketing. Because whilst you really do need a chief financial officer,

 

engaged in the business on a longer term basis. And I do one, two, three days in many of my businesses per month. You may need a fractional marketing director one to two days a month, maybe a little bit more. The fractional marketing directors that I meet, the CMOs that work on fractional basis, they're not in businesses more than one to two days a week, but they can make an immeasurable difference for the same cost. We talked a little bit about marketing costs.

 

You know, I can pick up a digital marketing specialist today for 26 to 28K. They'll do blogs, social media and so forth. But equally for, and that's not fully loaded. That's without national insurance, pensions, holiday entitlements, so on and so forth. I can pick up a fractional marketing director for 30 to 35K a year and get everything I get with the digital marketing specialist plus

 

the seniority experience, knowledge, and strategic, but a negligible amount or often a similar amount. So it's a really, really is a win-win situation for the business. You're getting the knowledge and experience and insight for the same cost. And I know which I'd rather have as the CFO in the business. I'd rather have the experienced CMO who can add perspective, who has the gravitas.

 

Rob Nicholls (22:48.436)

experienced knowledge that can outsource even do some stuff themselves, whether it's the SEO, the website, the blogs, the social media, but equally can advise and counsel the CEO and the board. Pricing is a key criteria. Digital marketing people, with all due respect, don't really have a clue on pricing. The CMO absolutely will have a handle on what will work, where the industry is going.

 

has the capacity to research the industry, look at competitors, look at what competitors are doing. It's a really good model for the CMO. I see it, I was reading something the other day that talked to Reid Hoffman, the guy who helped co-found LinkedIn says that marketing and most professions will be portfolio fractional in the next 10 years. And I think marketing is probably one of the big parts of that as well.

 

Paul Mills (23:47.005)

Yeah, I think you're absolutely right. That's one of the reasons why I've set up VCMO because I see this trend myself, both as a marketer, but also with my entrepreneurial hat on, I can see that's where the market's going to go eventually. And I think you're right. think the real value of the fractional leadership model, whether it's marketing, whether it's fractional finance, whether it's fractional HR, is it can de-risk investments

 

for investors, I think you're getting access to the expertise that you need when you need it at the right time, at the right cost. And I think that's certainly valuable. Whether you're in a portfolio company, whether you're an early stage scale up, it's a really great model to experience. you've lived and operated in the US for a long time and...

 

Certainly the fractional model is a very big thing over there. It's probably more established than it is perhaps in the UK where it's still kind of emerging as a new viable option. What's it like in the US in terms of fractional leadership, not just marketing, but generally? How is it being embraced by the business landscape?

 

Rob Nicholls (25:00.654)

So I think it has some similar traits to the UK in that it's embraced by people who embrace it, the people who are aware of it. Equally, you've to remember the US is such a vast geographic area and the business environment is so broad. Certain elements of the agency model was a big thing. I think it's become less of a thing. I do think the fractional model...

 

particularly on the East Coast is growing faster. It's not so much on the West Coast. I think, you know, we've talked a little bit about salaries. Salaries in the US are demonstrably higher, probably 2x what they are in the UK, but equally businesses and revenues generally are scaled accordingly. I think it's probably a year or two ahead, but not that far ahead. There are plenty of fractional executives in the UK. There's

 

a lot in the US, there's also an awful lot of jobs in the US. So it's easier to be a W2 employee in the US because there just are a lot of jobs. And the need for a fractional executives, lot of fractional executives have decided they want to work a little bit less, focus on themselves, build a flexible lifestyle, taking this a little bit easier, but work a little bit less for themselves, generate wealth themselves.

 

Um, but equally, you know, the U S is an interesting model, but I don't think it's one that should stand up to too much scrutiny at the moment in terms of being better than the UK. The UK is a good model. You can earn a good living as a fractional executives in the UK and blend it with a flexible lifestyle that allows you to do what you want to do when you want to do it and work with those people you want to work with. I maintain that I only really work with people that I.

 

really like, really trust and value and businesses that I believe in. So, and in the same way, they've got to like me and want to work with me, if you will. The opportunities are far more in the US to be a full-time, what I call W2 employee. So the need for fractional is a little bit less. So I think there's a greater need in the UK for fractional experience and knowledge more so.

 

Rob Nicholls (27:25.304)

for SMEs and start-up businesses and scale-up businesses here in the UK.

 

Paul Mills (27:31.057)

Fantastic. That's probably a good point to close this show. If you've been listening or watching this episode, I hope you found value from the discussion. In the next episode, I'm joined by Rob again, and we'll be discussing how to assess the marketing health of a business. So stay tuned for that one. Rob, thank you again so much for your time today. I've really enjoyed listening to your insights there, and I very much look forward to hearing your perspectives on the next episode.

 

Rob Nicholls (27:59.599)

Thanks, Paul

 

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Paul Mills

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