The Clause Most Buyers Don't Read
Every fractional marketplace contract includes a conversion clause. Most buyers don't read it until they want to hire the operator direct, and then the math becomes painful. Standard conversion fees equal 2 to 4 months of marketplace margin, which can run $20,000 to $40,000 on a typical engagement. Here's how each major marketplace structures conversion and what to negotiate.
Standard Structure
The conversion clause typically reads: "If the Client engages the Talent directly within X months after the engagement ends, Client owes a conversion fee equal to Y times the marketplace margin."
- X (cooling-off period): typically 6-12 months.
- Y (multiple): typically 2-4 months of marketplace margin.
The "marketplace margin" is the platform's fee, not the executive's rate. So if the marketplace marks up the executive's $200/hr rate to $300/hr, the marketplace margin is $100/hr.
Conversion Fees by Major Marketplace
| Marketplace | Cooling-off period | Conversion multiple | Typical fee on 12-mo engagement |
|---|---|---|---|
| Toptal | 12 months | 3-4 months margin | $30K-$60K |
| Catalant | 12 months | 3-4 months margin | $40K-$80K |
| Bolster | 6-12 months | 2-3 months margin | $15K-$35K |
| MarketerHire | 6 months | 2-3 months margin | $15K-$30K |
| A.Team | 12 months | 3 months margin | $30K-$60K |
| Continuum | 12 months | 3 months margin | $25K-$50K |
| Go Fractional | 6-9 months | 1-2 months margin | $8K-$20K |
Numbers above are typical ranges. Specific contracts vary. Always read the actual clause.
What's Negotiable
Most marketplaces will negotiate conversion terms upfront, especially for high-value engagements or if you signal upfront that you might want to convert. Three levers to push:
1. Shorter cooling-off period. Default 12 months. Negotiable to 6 months for most marketplaces. Saves you flexibility if the engagement runs longer than expected.
2. Lower multiple. Default 3-4 months. Negotiable to 2-3 months. Direct savings of $10K-$30K depending on engagement size.
3. Conversion at end of contract. Some marketplaces will waive conversion fees entirely if you complete a minimum engagement length (typically 6-12 months). This is the strongest term to negotiate if you anticipate wanting to convert.
When Conversion Makes Sense
You should consider converting a marketplace fractional executive to direct hire when:
- The engagement is going well and you want to extend it long-term.
- You expect 12+ more months of work with this operator.
- The operator wants to convert (some prefer to be direct because they take home more).
- The math works out: conversion fee less than the equivalent marketplace markup over the projected engagement length.
The Conversion Math Example
Say you have a fractional CFO through Catalant at $25K monthly with a 35 percent markup. The executive receives $16,250. Catalant gets $8,750 monthly.
- If you convert at 12 months: pay 3 months of marketplace margin = $26,250 conversion fee.
- Direct rate going forward: ~$16,250 monthly versus $25,000 (the marketplace was charging).
- Monthly savings after conversion: $8,750.
- Conversion payback: 3 months.
If the engagement continues 12+ months after conversion, you save $80K+ over staying on the marketplace. If it ends sooner, you've overpaid.
How to Avoid the Conversion Trap
Define the conversion intent upfront. If you might want to convert, negotiate favorable terms before signing the original MSA. Once the relationship is established, marketplace leverage is higher.
Track the conversion math monthly. Know what you're paying in marketplace margin each month. When the cumulative margin exceeds 12 months of post-conversion direct payments, conversion typically becomes a clear win.
Read the exclusivity clause. Some marketplaces include exclusivity terms that prevent the operator from doing direct work for you for 12+ months even after the engagement ends. This is more restrictive than a conversion fee. Negotiate this out if possible.
For more context, see true cost of fractional marketplace hires and negotiating fractional marketplace contracts.
FAQs
What's a typical conversion fee?
Most marketplace conversion fees equal 2 to 4 months of marketplace margin. On a typical $25,000 monthly engagement with 35 percent markup, that's $17,500 to $35,000.
Can conversion fees be negotiated?
Yes, especially upfront before signing the MSA. Most marketplaces will negotiate cooling-off period, multiple, or even waive the fee entirely if you complete a minimum engagement length.
Which marketplace has the lowest conversion fees?
Go Fractional has the lowest typical conversion fees (1-2 months margin, 6-9 month cooling-off). Bolster and MarketerHire are mid-range. Catalant and Toptal are highest.
Are conversion fees a reason to avoid marketplaces?
Only if you know upfront you'll want to convert. For most first-time engagements, the vetting and contracting value of the marketplace outweighs the eventual conversion cost. Plan for the worst case but expect not to need conversion.
What if the operator wants to convert before I do?
Some operators prefer direct relationships because they take home more without the marketplace cut. Many marketplaces have language preventing the operator from initiating conversion, but some allow it. Read the operator's side of the contract too.