Latest / The Side Hustle Career Podcast with Fexingo: Second Income, Freelancing While Employed / How Consultants Build Six Figures in Fractional HR
Transcript
- Lucas: If we've helped you think through a career move or decision, remember that listener support is what keeps these shows running. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo. It makes a real difference. Luna: Yeah, and if you're finding value in the deep dives, that support helps us keep bringing you these practical case studies every single day. Lucas: Thank you. Now, let's get back to the work. Today we are looking at a sector that most professionals completely overlook because they assume it requires a massive enterprise infrastructure. I am talking about fractional human resources consulting for small businesses. Specifically, we are looking at how a former corporate HR director named Sarah built a forty thousand dollar monthly practice by serving startups that cannot afford a full-time chief people officer. Luna: Forty thousand a month is serious money for a part-time gig. How does she actually find clients who are scared of employment law? Lucas: She doesn't sell 'HR'. She sells risk mitigation and culture design. The key insight here is that most tech startups and creative agencies have grown from ten employees to fifty very quickly, and their founder is still handling all the hiring and firing personally. They are sitting on a ticking time bomb of non-compliant contracts and messy handbooks. Sarah positions herself as the person who fixes those bombs before they go off. Luna: So she is basically selling peace of mind? That sounds like a much easier pitch than trying to explain benefits administration to a founder who just wants to code. Lucas: Exactly. And the pricing model is where it gets really interesting. She does not charge hourly. Hourly billing punishes efficiency, and founders hate surprises. Instead, she uses a tiered retainer model. There is a basic tier for twenty-five hundred dollars a month which covers contract reviews and quarterly audits. Then there is a premium tier at five thousand dollars a month that includes ongoing coaching for the founder on how to handle difficult conversations. Luna: That is smart because it creates predictable revenue for her and predictable costs for the client. But isn't the liability huge? If she gives bad advice, the startup could get sued. Lucas: It is a valid concern, which is why she structures her engagements carefully. She never acts as legal counsel. She explicitly states in her service agreement that she provides strategic HR guidance based on best practices, but she always refers complex legal questions to outside employment attorneys. This distinction protects her from malpractice claims while still allowing her to do the heavy lifting on policy and procedure. She becomes the translator between the legal team and the operational reality of the company. Luna: I see. So she builds the framework, but leaves the final legal sign-off to the lawyers. That seems like a very defensible position. Lucas: Precisely. And she leverages her past corporate experience to build trust. She spent twelve years at a mid-sized software company managing a team of thirty people. When she pitches to a startup founder, she says, 'I know exactly what happened when we grew from fifteen to fifty employees, and I can help you avoid those same mistakes.' That specific anecdote converts far better than any generic brochure ever could. Luna: Right, because it shows she has been in the trenches. It is not theoretical for her. Do most of her clients come from referrals or does she actively hunt them? Lucas: Initially, she had to hunt aggressively. She targeted venture capital firms and angel investor groups. She offered free sixty-minute workshops on 'The Five Legal Mistakes New Startups Make'. These events were essentially lead generation machines. Founders would show up worried about getting sued, and she would demonstrate her expertise in real time. Now, eighty percent of her clients come from warm introductions by the VCs who hosted those initial workshops. Luna: That is a brilliant channel strategy. Using the investors as distributors for her services instead of trying to cold call founders one by one. Lucas: It is efficient because the VC firm already vetted the founder. If the startup is funded enough to take the workshop, they are likely in the growth phase where they need external HR help. It is a perfect market fit. Once she signs a client, she spends about ten to fifteen hours a month per client. With eight clients at the average retainer, she hits that forty thousand mark comfortably. Luna: Ten to fifteen hours is manageable alongside a full-time job if you are disciplined. What are the actual deliverables she produces for them? Is it mostly advisory or does she write documents? Lucas: She does both. Her core product is the Employee Handbook. Every new client pays a one-time fee of three thousand dollars to have a customized handbook drafted. This includes sections on remote work policies, harassment prevention, and intellectual property rights. After that, her monthly retainer covers reviewing new hire offer letters, updating policies as laws change, and coaching the founder on performance reviews. Luna: Writing the handbook once is great upfront cash, but the monthly retainer is what sustains the business. Does she use templates or does she customize everything from scratch? Lucas: She uses a robust base template that she adapts. She argues that starting from zero is inefficient and expensive. By using a proven framework, she can deliver high quality work faster. However, she insists on customizing the cultural sections. If a client is a casual gaming studio, their handbook should sound different than a fintech company. That nuance is where she adds value beyond what a cheap online generator can provide. Luna: I like that. It balances scale with personalization. But what happens when a crisis hits? Like someone gets fired and they claim wrongful termination? Lucas: This is where her retainer structure shines. She has a clause that covers emergency consultation calls. If a founder calls her at midnight because an employee is threatening a lawsuit, she talks them through the immediate steps: do not respond via email, preserve documentation, and contact the recommended attorney. She does not represent them in court, but she prevents them from making the situation worse by panicking. That reassurance alone is worth the monthly fee to many anxious founders. Luna: So she is acting as a stabilizer. That is a huge psychological benefit for the business owner who is used to doing everything themselves. Lucas: Exactly. And she markets that heavily. Her website headline is 'Sleep Better Knowing Your Team is Compliant.' It taps directly into the founder's anxiety. She knows that while they care about revenue, they lose sleep over legal risks. By addressing that emotional pain point, she becomes indispensable. Luna: It is interesting how she pivoted from corporate HR to consulting. Did she face any resistance from traditional HR circles? Lucas: Actually, some traditional HR directors criticized her for 'dumbing down' the profession. They thought consultants shouldn't be giving direct advice to small businesses. But Sarah counters that by pointing out that small businesses are underserved. Big corporations get top-tier HR teams; small ones get nothing until it is too late. She sees herself as democratizing access to professional standards. Luna: That is a strong narrative. It frames her side hustle as a mission rather than just a cash grab. Does she have plans to scale this beyond just her own time? Lucas: Yes, she is currently building a library of video courses and automated audit tools. The idea is that junior consultants can use her frameworks to serve more clients under her brand. She is moving from a solo practitioner model to an agency model, but she is taking it slow. She wants to maintain the quality of service before adding headcount. Luna: Slow growth is wise. One bad hire in consulting can destroy your reputation overnight. What is the biggest mistake you see other HR consultants make when they start? Lucas: They try to do everything. They offer recruiting, payroll, benefits administration, and training all at once. It dilutes their focus and exhausts them. Sarah sticks to compliance and culture. She refuses to touch payroll processing because it is low-margin and high-volume. She stays in the strategic lane where her hourly equivalent is highest. Luna: Staying in the strategic lane is key. Payroll is a commodity. Strategy is a specialty. That distinction allows her to charge premium rates. Lucas: Right. And she constantly updates her knowledge base. Employment law changes frequently, especially around remote work and classification of independent contractors. She subscribes to multiple legal databases and attends quarterly webinars. Her credibility depends on staying current, so she treats her own education as a billable expense. Luna: That is a good reminder that in consulting, your own competence is your inventory. You have to keep restocking it. Are there any specific industries she avoids? Lucas: She avoids highly regulated industries like healthcare and finance initially. Those sectors have specialized compliance requirements that require deeper expertise. She focuses on tech, media, and creative agencies where the rules are somewhat standardized but the pace of change is fast. It is a niche she understands well from her previous corporate role. Luna: Playing to existing strengths is always the safest route for a side hustle. It reduces the learning curve. How long did it take her to reach that forty thousand dollar run rate? Lucas: It took eighteen months. The first six months were slow, building her portfolio and getting testimonials. The next six months saw steady growth as referrals kicked in. The last six months were about raising prices and being selective about clients. She turned down two large clients who wanted too much scope because she knew it would break her capacity. Luna: Discipline in saying no is probably more important than saying yes. It protects her margins and her sanity. Do you think this model works for other functional areas besides HR? Lucas: Absolutely. We have seen similar trends in fractional marketing, fractional finance, and even fractional IT security. Small businesses need senior-level expertise but cannot justify the salary. The fractional model bridges that gap perfectly. HR is just one piece of a larger puzzle. Luna: It seems like any specialized skill set can be packaged this way if you find the right angle. The key is identifying the pain points that small business owners are desperate to solve. Lucas: Spot on. And for anyone listening who has HR experience, this might be a viable path. You do not need to quit your job tomorrow. You can start by offering your services to one or two local startups on a trial basis. Get the testimonials, refine your package, and then scale up gradually. Luna: Starting small and iterating is always the best advice. It lowers the risk while you validate the demand. Lucas: Sarah’s story is a great example of how corporate skills translate directly into entrepreneurial success. It is not about reinventing the wheel; it is about applying what you know to a new market segment that desperately needs it. Luna: It really highlights the value of having a diverse skill set. The more specialized your background, the more unique your consulting offering can be. Lucas: Definitely. As we wrap up, I want to leave you with a question to ponder. What is one area of expertise you have developed in your career that small businesses might not know they need until it is too late? Luna: That is a great prompt. Think about the problems you solved at your old job that others struggled with. That might be your next side hustle. Lucas: Thanks for listening. Let us know which skills you are thinking about monetizing.