Moving to a focus on advisory doesn't mean abandoning your compliance work – far from it. This panel will discuss how compliance work can form the foundation of the value you deliver in your advisory services, and how to leverage data-driven and other insights from tax returns, bookkeeping and more to move your clients forward.
Transcription:
Dan Hood (00:11):
All right. Welcome everybody. Thanks for coming. I'm excited about this topic. I think it's an important point for a lot of firms, particularly as they move into CAS, but as they move into advisory services in general, there's a lot of feeling that people will say, oh, well, who's going to do the compliance work or compliance work is all we know. It's what we're good at, it's what we're based on. And there's a sort of false sense that the move to advisory services means giving up compliance work or getting rid of compliance work. But in fact, sort of what I think we're going to discover today is that compliance is really the groundwork of advisory services. If you're not doing the compliance work, you don't have the insights, you don't have the data to support the advisory work that you're doing. Obviously there's some advisory work that doesn't require that support, but a lot of it, why it makes a lot of sense for accounting firms to move up to it is because they have that grounding in the compliance work.
(00:59)
They have that grounding in the inner workings of their clients' businesses and so on. So that's what we're going to be talking about today, hopefully, is the sense of how these two things work together and why they support each other. And they put accountants in a position that no other advisor is in because they have both of those aspects of their clients' lives. And we've got two great practitioners with us to talk about it. You may have seen them in earlier sessions. We are getting a lot out of, they have a lot to share, but I want to start this one a little differently. Maybe by having them talk about themselves and their practices so that you get a sense of where they're coming from and what they're doing. I think it's slightly different, more than slightly different. And it will give a sense of where they're coming from. So Randy, do you want to kick us off? Yeah,
Randy Crabtree (01:36):
But you said great presenters, so I think I might be in the wrong spot. So I, my god.
Dan Hood (01:42):
Wait, so I take this imposter out of here.
Randy Crabtree (01:45):
Alright, so what was the question? A little background.
Dan Hood (01:48):
Who are you and what do you do?
Randy Crabtree (01:50):
All right. So we might laugh a little bit up here, so hopefully that's okay. So Randy Crabtree, I am think people call me Co-founder and Partner at Tri-Merit Specialty Tax Services or Professionals I think is her name. Little background. Can I give a little background? Yeah, little background. I came, I've been a CPA for many years. I'm old. I started 35 years ago. This is actually my third career, so I'm older than even the 35 years in the profession, but for the longest time I was a generalist and I was probably a reporter of what was happening. And so talking about the advisory part of things today is great. 16 years ago I left the generalist side of things and started a specialty firm where what we do in my mind is advisory. We're saving clients tax money through you. We bring our services to tax preparers and help you to reduce the tax burden for your clients. So that's what I've been doing the last 16 years and in reality, what I do most of the time is sit up here and talk, which I enjoy a lot.
Dan Hood (02:56):
He's highly qualified for, Jody.
Jody Grunden (02:58):
Yes, I'm Jody Grunden. I am a part am a Partner at Ander, CPA advisors out of St. Louis. I started a virtual CFO practice back in 2002, wanted to kind of change the way that people thought about accounting. So that was my mission statement or my purpose from the very beginning. And so the first thing I want to do is just dress differently. I think I mastered that from what I'm seeing in the room, but the other one is getting rid of the hourly billable rate or billable hours. I want to get rid of that. I wanted to create a value-based type billing structure. I wanted to not have an accounts receivable, so I created a subscription billing process where they zapped their bank account every Monday. So I don't have any accounts receivable. I wanted to do things again differently in all aspects.
(03:45)
I wanted to create a forward-looking virtual CFO forecasting model where it, it's like I mentioned CAS 1.0 and CAS 2.0 are the two buzzwords right now. CAS 1.0 is more of the accounting bookkeeping CAS 2.0 is more of the strategy. Well, we started with strategy. So we started delivering CAS 2.0 back in about 2004 and we just found the client's needs, they want, needs and wants, they needed, a lot of them needed us help out with the cast 1.0 stuff. And so about a third of our clients we will actually do that for too. So we do a combination of both. We've been doing it from since 2007 and it wasn't until we niched in about 2011 12 that we really saw things spike. And what I mean by niching, we already niched the service level. So we were providing only virtual CFO services.
(04:30)
And then when it came to niching the industry level, the hockey spike went, hockey stick, spike went up and that's where we really started gaining ground and picking up not four to six clients a year, but four to six clients a month. And that's what we do now pricing wise, we've, we've really screwed up a lot at the very beginning. We pricing things lower than normal then we never valued our service like everybody here probably is. And then it wasn't until we actually started pricing it to where we were our average client's around 89, 80 to 80 $90,000 a client did we see our closing ratios actually start dropping to, we're actually closing about 35 to 40% of the clients that come in. We've already closed about $2 million this year alone and we're targeting about 4 million overall for new client pickups this year through that whole process in 2000 and it was 2022 kind of fasting forward.
(05:21)
We doubled our size every three years in growth. And then 2022 is when we, well actually 2013 is when we went fully remote, so I forgot about that. We did something that was kind of out out of the ordinary, went a hundred percent remote with our team and then 2022 is when we decided to merge with or CP advisors and became their virtual CFO service line or division with the idea that instead of doubling our size every two to three years, we were going to grow to be a 50 million service line. And that's what our goal is right now. So far, everything's going great. We've already increased our revenue by about 50% from 10 million to we'll do about 14 to 15 million this year in 2023. And on targeted doing that. And so that's kind of where the whole thing was. We went from advisory and then from the very beginning and then added compliance as part of what we do.
Dan Hood (06:13):
Excellent. Alright, well listen, I mean this is all we, I've sort of stolen thunder by saying we don't think compliance is going away, but Alan Colton was talking about a CLI compliance work, evaporating. Is that sort of the viewpoint you have now that I think we've answered that question, but let's talk a little bit more about in terms of where is compliance going compared to advisory? Where do you see those two working together?
Jody Grunden (06:34):
Compliance advisory compliance is always going to be, in my opinion, will always be there in some manner, whether it's reviewers or doers, it's it's going to be there. And what I mean by that is in order to give good advisory services, you've got to be able to rely on the information that you're getting. And that's where compliance comes in. Providing that, providing that. Now will compliance be different to tomorrow than what it is today and say tomorrow, maybe next two or three years it'll be completely different but it will still be there and be a big part of what we do. So I truly don't think it's going to go away to the point where we won't use it, we need it. And as advisors, we have to rely on that information. Try doing, advising a client not having good financials to look at is impossible and it's basically unethical in my opinion.
Dan Hood (07:18):
Randy?
Randy Crabtree (07:18):
Yeah, so I agree. We come at it a little bit different. I'm tax, I love tax, tax is what I do and you you're advising and what you do at the CFO level or not. That was just, that's amazing stuff. But from a tax standpoint, I think it's really easy to look at this from compliance is always going to be there unless tax laws change and we don't file tax returns anymore or whatever happens, but well as long as I'm retired, we're fine with that.
(07:50)
That's what we'll, but what's going to happen and we're seeing it already and it, there's been automation for a long time. Automation's been there, we all haven't taken advantage of it. That automation's going to be going through the roof. So you're going to see more compliance be done through automation through, there's programs out there that are just going to go in and go to your financial statement, a financial services firm and bring in statements. Your W two is going to come in your bank interest statement, all this stuff. And it can be done already. So from a compliance standpoint that that'll be more automated, that'll get easier. But the benefit of that is as long as there's a tax code, we are still, the advisory is going to become that much more important because now all this stuff that we're spending time on, maybe let's just say compliance is important but maybe not as looked at as a higher value service that you're providing now. It's going to free you up for this higher value advisory services and you're going to be able to show I just saved you $22,000 on taxes and you're going to be able to show that there's a value to that. And that's where I see this going as automation comes in. And don't ignore automation, don't ignore technology because you will be far behind really, really quick starting this second.
Dan Hood (09:12):
Well every second you wait, you get further behind. It sounds like the way you're describing it that the balance of, and there's a couple of different ways to balance this, but let's start by talking in terms of workload that the balance of right now it's a lot of compliance and maybe less advisory depending on the firm obviously, but it sounds like that balance is going to shift significantly that the compliance will actually be easier and easier and easier. And then it's the results you take from it will take up more of your time as you use them as insight. Is that Randy? Does that make sense.
Randy Crabtree (09:41):
That's the way I look at it and honestly I think it just helps us from a profitability standpoint because we can offer these higher value. If anybody's wondering, my son's calling, so I should put this on do not disturb, I should do this. He's calling to talk about the Black Hawks getting the number one draft pick last night. So that's an important.
Dan Hood (10:01):
I was going to say if we need to pause for that conversation
Randy Crabtree (10:04):
Exactly, but what was I saying.
Dan Hood (10:07):
Something about the black hawks? I don't remember attitude. No, we're talking about the balance between.
Randy Crabtree (10:12):
It's that it's free us up for this higher value service that I just see, and you and I have talked about this before, things that we could do to stretch out seasonality of our business. I think that'll help that ways that we can work less and make more and be avoid burnout, that's all things going to happen. I just see so many positive things happening as compliance becomes more automated and frees up to do this higher value, higher billing rate, well not billing rate, we are not going to bill by the hour and I completely agree with that, but we are going to have a higher monthly, weekly in your case invoice, go out to that client.
Dan Hood (10:51):
Excellent. Jody, similar thoughts.
Jody Grunden (10:53):
Yeah, I guess I got very, very similar thoughts with that. Thinking back when the copier came into play way back when we thought everything was going, oh no, what's going to happen? We actually had auditors auditing copies, which was kind of funny, making sure that they're accurate. When we got away from doing the tax turns by hand, we thought, oh no, this is going to be disaster. And we had this new software and again, we're analyzing everything, making sure it flows through correctly and obviously it did and it was just one more thing. And accountants love change as we all know. And so with that, it's just a difference in change with AI. As AI has been coming through, I think I truly think that's the next stage of change. How can we adapt and how can we be the front runners and take advantage of what AI's going to come out and do because it could be great things for us as an industry.
(11:48)
So I'm always looking at and saying, Hey, how can we, technology, everything's changing anyway, so we can't run away from it. We've got to figure out how we can actually embrace it and make it our claim, it our own type of thing. And I think that's the big part about it. So yes, it's going to go away and it's exact state right now, but I think there's going to be a new state coming out there. And let's be honest with our ourselves, when we hire people out of college, they don't want to do the stuff we're doing anyways. They're coming out with the idea that they want be the boss, they want to be the consultant, they want to be everything. They don't know anything but they think they do. And with that let's them be the reviewers. And so the doers, let's let them figure out their roles change, their role will be changing completely.
(12:32)
And that just frees everything up for even the advisory work that we're doing now. I think we're doing a pretty solid advisory work, but man, the things we could be doing, I can't even imagine what that might be doing A question came up, we'll be doing operational stuff. Well and the capacity right now, no, because there's a lot that's involved in getting these financials together and it just takes up a lot of bandwidth. But if something's doing that automatically for us, well why not? Couldn't we do operational advisory work along with CFO work, along with maybe HR work or something like that. So yeah, I think things are going to change dramatically.
Dan Hood (13:04):
I want to follow up on that and just pursue it a little bit because interesting, every once in a while someone will say, well, if the computers are doing all the 10 forties, then how are people going to learn how to do a 10 40? How they, they're going to learn the basics of tax. Now there's a degree to which that's just, well really we just want you to do a lot of 10 forties and not pay for a software. But is there a chance there risk of getting too far away from the clients if it comes down to the point where you're literally just pushing a button and then we know it's not that way now, but if it reaches the point where an AI reaches the point where it moves into what they call the black Brock box problem, where you have all these stuff going on inside an AI, but you don't know what it is and you can't judge it, you say you can't audit the copy machine kind of thing. Is there a risk of getting too far away from the compliance work if it's forming the groundwork of your ability to give good advice? Can you get too far away from it? And this wasn't on our original list of questions, but as we were talking about it, I just was thinking, is there a risk of that?
Randy Crabtree (13:58):
So I'm going to go from a tax standpoint. All right. And so from that, we're talking way in the future, I think that is.
Dan Hood (14:08):
It's on November.
Randy Crabtree (14:08):
Based on technology tonight. Today right now we just decided we're changing by the second. I think that can't be a concern. But where we sit and where I see the near future, which is in my lifetime of work, which who knows how much longer that is, we'll say a few years at least I don't see that happening. What I do see doing, and I kind of alluded this already, you're not going to lose touch with that tax return because if you are an advisor, you are talking to that client with what you're doing on a weekly basis or whatnot on a tax basis monthly, Kristen, sorry to call you, do you quarterly, monthly. How often do you meet with quarterly? Quarterly You're meeting with your clients on the tax basis already. And so now you're not the compliance, you may even have the data in your hands already because it's there, because it's automated. And now what you're doing is you're talking to them about, okay, here's what we can do, get the 529 plan set up, increase the 401 K, let's set up a simple plan, let's whatever the advice is that you can give to that client, you are more on top of that. And I think you're more connected to the client rather than less connected because you've got that data more readily available.
Dan Hood (15:18):
Gotcha.
Jody Grunden (15:19):
June. Yeah, I a hundred percent agree with that. It's like with our CFOs, our CFOs, half of them don't even have never done tax during their life. So for those folks, they're already there. It's already a black box, they have no idea how it works and they can advise very well with what they're doing, but if they had that information at their fingertips on a regular basis, it really makes no difference how the tax string's being prepared, if it's prepared accurately, it's the advice that you're getting, you're giving from it. Do I want to pursue, like Randy said, R&D credits, all the different stuff from Randy's presentation, all the different credits that are available. It may or may not be taking that into account, but it's different things that maybe those are different things that an advisor would actually bring up during a conversation. Hey, we can go this route. Here's what it is right now based on where you're at. But man, if you take this route here, you know, could save a lot of money. And that might be what the advisor does down the road. They're just simply taking what's automatically computed on. It would be cool if it was computed on a weekly basis or by knowing what their tax situation was weekly and how can we actually change that and it, that's where the advisor's going to come in to be able to utilize that.
Randy Crabtree (16:30):
And sorry, Dan? Yeah, just to expand on that, and I'll stress this and I've already said it once, probably twice and you'll hear it multiple times. You can show the value of what you're doing then and there's a higher, let me and anybody was in my presentation earlier, you heard this, but clients want this, they want this advisory service. There's studies, and if you were in my presentation earlier, sorry, but 79% of the clients out there, taxpayers want to pay you more for advisory service. 35% of tax preparers, tax planners, tax, whatever are offering these advisory services. Huge disconnect, huge opportunity to one, increase your profitability and probably reduce your client base, which I'm guessing, and you talked about in your presentation, dealing with a hundred clients at a higher billing rate is probably a lot more satisfying and less stressful than dealing with a thousand clients at a lower rate. I think with all these types of services and spreading it out through the year and showing the higher value is just so important to us as a profession.
Dan Hood (17:39):
That makes sense to me. I buy that. But I want to, if we can maybe dive a little deeper into the sort of interactions you talked about an advisor might just look at the tax return and take the information from that and go there to develop advice from it. But in your practice, how do compliance and advice interact in terms of which goes first maybe as a.
Jody Grunden (17:59):
Yeah, so I think, so the compliance obviously goes first because we have to make sure that we have the good information. So the information's got to be solid before the advisor can actually advise on it. And the compliance is not only on the accounting side, but it's taking that information, tying it with what the advisory came with a forecast, because you're not going to be able to predict your tax position unless what's going to happen over the next six months, 12 months, eight months, whatever that might be. And so the combination of that is really going to help the compliance side on the tax situation look. So I guess they're really tied hand in hand. I mean you can't really have one without the other. And so our CFOs right now rely heavily on that soft tax planner knowing what that is every single month.
(18:44)
And we already have that. So we know what the soft tax planner is like, and it's when we get to that hard tax planner, we're bringing in the tax accountant in the third or fourth quarter that we can really dial in to maybe make some adjustments to it. It's off a little bit here and there based on whatever happens to them personally. But that's all tied in to they work hand in hand in going through that. And so when the client at the end of the year, how many people are surprised in the year what their tax bill is? I would say 90% of the people in this room have had clients surprised. And if you're doing it right throughout the year with using compliance and using strategy, we maybe have had one person surprised and maybe we made a mistake, it was a cross border mistake, but out outside of that, they already know and they embrace it. It's a lot easier telling somebody they owe $150,000 throughout the year than it is on April 15th.
Randy Crabtree (19:42):
I'm sorry to expand. I keep cutting you off.
Dan Hood (19:44):
You don't need, if this works right, I can just leave.
Randy Crabtree (19:46):
Okay. You guys can just, I was going to do that.
Dan Hood (19:49):
You bring value.
Randy Crabtree (19:51):
You bring value. So what Jody was just saying there though, knowing that on an ongoing basis we don't have to then get every tax return done by March 15th or April 15th, we already know the answer. And so rather than going crazy and working 80 hours a week to pump out every tax return by some weird deadline that's been placed in front of us for years now you can just, you've taught the clients we're going to extend, we know the answer already. All the answers already, we're not going to work ourselves to death to get this done by this arbitrary deadline, which to me makes no sense. And so therefore you spread out the seasonality of this work as well.
Jody Grunden (20:32):
Oh, a hundred percent. And that's how I developed, that's one of the reasons I created the summit back in 2002 is because I worked for a couple big large accounting firms and neither one of them I were able to see my kids. I wasn't able to do stuff. And being a new father, you had a four year old and a two year old, I was like, man, I'd really love to be part of their life and I'm seeing all these partners that they weren't, were in the office Saturday until noon and then once they left, everybody else left, that type of thing. And I didn't want to be that person. So when I went with summit, the idea was, hey, I was going to figure out a way that we can actually work a 40 hour work week without having everybody burn out during a tax season.
(21:12)
How can we do that? The best way to do that is managing the client every single month, answering their questions, fixing, doing their compliance every single month, giving them advice every single month. Then when it comes down to January, february, March, we're just simply putting a return together, which at that point is not that difficult and not that much time consuming. And we were able to take that, and I truly will tell you that our people don't work more than 45 hours a week during tax season. You know, might get a spike on one week, maybe they work 50 that week, but it's not a normal occurrence that they're work, they're killing themselves during that timeframe. And that's just one way that we as tax professionals can reduce our time is figuring out, hey, how can we scale back our client base a little bit to be able to take on this type of rewarding type of a service and make it a well a life balance type of situation.
Randy Crabtree (22:08):
So you used advisory to reduce compliance time. Perfect.
Dan Hood (22:13):
Well, but now it's interesting because the way you describe it, right? Once you've got the client into the sort of monthly pattern of we're talking to you on a regular basis so that your tax return is just a natural outcome of all the conversations we've had over the course of the year, then that makes sense and they understand it and they're sort of, not to put it this way, but they're sort of trained to understand that these yeah, yeah, there's a deadline, but that's not what's important. And what's important is the conversations we have all the time. But how do you get there, right? Because you talk about if you tell a client, oh no, we're going to put you on extension, that freaks a lot of people out there. I got to get my returns done. And they're not necessarily understanding that. I'm sure you've trained them, they understand it, but how do you make that transition?
Randy Crabtree (22:49):
Yeah, so Jody might actually be better at this because I don't do anything,
(22:56)
But I think one of the biggest things in general, and I talk about this in different presentations I do, is that you can't let the clients dictate how you run your practice. And right now, there are so many clients available out there. If you haven't done that, it's the perfect time to take charge and you dictate how you are going to run your practice. And if they're not going to agree with that, that's just another client you're going to work with. And now, and now I know people get freaked out by that, but in reality, you don't want the client that's going to be, I mean, who I think Amy talked about this morning. You see an email, you start freaking out and get stressed out, you get a phone call and you don't want to answer it. This client, well, that's the client you don't want to deal with. That's the client you let go. If they're not going to say, okay, yeah, it's okay to go on extension, you've been so good with me every quarter when we're sitting here going over this, I understand we can go on extension, we could do this. It's just you take charge. This is I think a huge opportunity for you to do that.
Dan Hood (23:56):
Jody.
Jody Grunden (23:59):
So let's restate the question once more then. So sorry,
Dan Hood (24:02):
Off track.
Dan Hood (24:04):
Here, he got was mentally firing a lot of clients.
Jody Grunden (24:06):
Yeah, I was like, huh, where you going with this?
Dan Hood (24:07):
How do you make the, it's that transition, right? Once you've got them trained that they understand, oh yeah. How do you make the transition to get them? I mean, apart from firing.
Jody Grunden (24:15):
Yeah, yeah, yeah. So
Dan Hood (24:16):
Though we encourage firing.
Jody Grunden (24:18):
So we talk about that in our onboarding process. So we have an onboarding process, we bring a new client on the first eight weeks and we're setting kind of the ground rules, the communication, what's going on, and we tell the client, Hey, throughout the year you're going to understand what your tax situation is. We need to make sure that we set that money aside throughout the year. Then on April 15th is when you'll have that amount due. We may or may not have the tax turned done at that point, but that's what it is. And we kind of set them know why that date is only important for the payment, not the actual tax return. And really kind of conquer all the fallacies about, hey, you're going to get audited more if you passed the deal. All that kind of stuff. That is all BS. We get rid of that right away. So that communication is the important thing from the onset of the engagement is just saying, Hey, here's how we do things. And then guess what allows them to say no versus no later, which they say no, they're great. We'll find somebody else to replace that person.
Dan Hood (25:12):
If they say yes and they get freaked out, you can remind them, listen, this is how we talked about the way we work. I want to switch a little bit to focus on another aspect of it, which is staffing and the people you've got in your firm for a lot of firms that haven't been created from the ground up with this mindset of compliance and advisory working together, there'll be a lot of firms out there that have heavy compliance focused staff who are used to this is what we do. We work 80 hours a week at tax season and then we take some time off in the summer and then we come back and do it all again in October. And we're just pumping out returns and our workflow is what our workflow is and it's, the advisory isn't as important when firms are going to switch that way. How do they need to switch their staff? Are those staff, those compliance staff, can we retrain them and them make them advisors? Or is it really, we're going to have some compliance people and then we're going to have some advisory people and they'll communicate. Obviously we, we've talked about how they need to and how those two areas need to overlap.
Jody Grunden (26:08):
I'll tell you I do it Dan. So we actually had this situation, so we were fully remote. Our separate company, our separate department, our senior advisor, which was underneath our CFO, did a lot of the accounting stuff too. And so then they were also, they oversaw accountants and so forth. And so what we've done is since the mergers, we've actually have two separate distinct departments. We've got an accounting department and then we've got an advisory department. And the advisory department is, they're designed just to be forecasting analysis KPIs that they're working on the future stuff. The accounting department on the other hand is working on making sure that those financials are buttoned up and dialed in. And the accounting department's also overseeing our offshore staff. They're overseeing the bill payment, they're overseeing AR, they're overseeing pay up payroll, all the different stuff that's belongs into the accounting, accounting function. And then that bubbles up to the accounting manager, kind of like the hierarchy you'd normally see in the accounting firm. And the accounting manager and the CFO are hand in hand with the clients a lot of times. And often they'll be maybe in the same meeting if it's more of a financial statement type meeting where they can help with financial statement question type scenarios. But they, they're working hand in hand with each other. And we find that because we've got two separate departments working together as one it, it's working out extremely well.
(27:33)
It surprisingly well, which was great.
Dan Hood (27:36):
And does that make sense because they're different skillset sets and they're different focusing? Or are there anybody who'd be like, I really want to work in both or.
Jody Grunden (27:44):
It's a different skillset completely. Most accountants suck advising just they do their heads, heads down. Yeah, sorry, everyone out here, their head heads are down. The folks in this room don't because that's why you are where you're at. You know, are the advisors really, I mean you've developed it, but for a lot of folks, their head, their head is down. So we use a lot of different kolby and a bunch of different things to figure out really what truly does somebody really strive to be. And the way that we've set it up is that it's not an out or up and out situation. It's like, hey, if you're great in accounting and you love it, you might top out as a senior manager or partner, whatever, in accounting. Same thing with the advisory. Not everybody's going to build crossover. Not everybody wants to crossover. We, we've got senior advisors that, man, they're great with analytics forecasting and all that kind of stuff, but man, they're afraid to be that person that's in charge of the account. They don't want that responsibility at all. And which is great, you need that person at the senior advisor level, but you have accountants that are equal in experience, awesome. But I would never stick them in front of a client. That would be horrible, horrible experience. That'd be horrible for them. It'd be horrible for the client.
Dan Hood (28:52):
Add all around.
Jody Grunden (28:53):
So you've got to be able to recognize that just because they're a great accountant doesn't mean they're a great advisor and never push them to be that great advisor or you'll actually push them out of the company not realizing it.
Dan Hood (29:05):
Randy, you work with accounting firms or you provide services to accounting firms? Yep. Are you finding a similar thing? There's people they're in, this is what they're good at, let's keep them doing that. We're bringing in the advisory services. Yeah,
Randy Crabtree (29:16):
I think so. But I'm going to go to, based on our firm, because I think it's, to me, it's an interesting story and I'd like to amuse myself, so hopefully you all are amused as well. But Troy Merrit, we, like you just said, we service the accounting firms, they bring us to their clients. But when we were growing and just as, I mean we've gotten fairly large. I mean we've got all these different departments. We have an HR department, we've got the accounting department, we've got the project management team, we've got the business development team. I don't know what I am, but we got marketing team too. And so all these teams are working but working together. But what happened as we were growing, I was probably, if you look at what we do, we advise the CPA, we advise the tax preparer on things that they need to know to bring to their clients.
(30:08)
Well, I was the one doing all that. And when we were two and a half million, when we were 5 million, when we were 6 million, that was okay, we build $30 million last year. We worked with a lot of clients. I couldn't be in all that spot. So what we did is we found project managers who we had internally already, and all of our project managers are client facing too because they have to be out there analyzing what the clients are doing for tax credits, incentives. But we found the leads could start to be the advisor now too. So they could change that role. They were kind of advising already just with the client, but more it was answering questions and all that. So now we have regional leads that have taken and allowed me to not have to be in every sales meeting. Well, salespeople should be able to do that. Business development people, we don't sell anything. We advise, we educate, but the business development people would still want me to come with. And so as we've grown now, we've been able to take somebody that maybe wasn't the advisory role, but has the knowledge and now they can go out and communicate this. And it's really allowed me to do a lot more of this. So selfishly, I am thrilled that we were able to make this change.
Dan Hood (31:25):
Excellent. Well I'm curious because it sounds like you found some people internally who were you able to give them a switch a little bit to develop that sort of advisory skills, Jody? And did you find that there were people when you first started, because it's your example is in some ways you started it with the idea in mind of this is what we'll do. Did you find that there were people you had to shuffle into? Actually the more I know you, the more I'm like, you really should be on the advisory side. Or the more more we try you on the advisory side, the more we realize you should be more of an accounting kind of person.
Jody Grunden (31:58):
It happens all the time. It happens all the time when you get into it, just like any other job, we don't know what we don't know until we find out we don't know it. And with that, we just had a person that came in with a lot of finance advisory background already. We thought, oh, this person's going to be perfect for the job, found out that they're probably not. And we moved them through the accounting and they're flourishing really well there. And so, and that goes vice versa all the time. And I would also say not only the people, but the tenure within the company, just because don't have, when we push somebody to a senior advisor role or even a CFO role, it doesn't mean they've got to have 12 years of experience. They've got to look a different certain way.
(32:40)
We've got folks that are perfect advisors, trusted by the clients at six years of experience, seven years of experience. It's like, yeah, if you want to do that, great, here's your path. So I think it's important to create the path, but understand that there's a lot of different roads in that path. If they want to come up the advisory side and they say they don't want it, I'd rather them go to the accounting side than find a job working for you folks. Again, that's not that you guys are bad, but you know that you, you know what I mean? So it it's creating that path and allowing them to pick their venture as they're going through. Now will someone go to the accounting and decide I'd rather be advisory? That's never happened yet, but it might and I'd be open to it.
Dan Hood (33:20):
Cool. Randy?
Randy Crabtree (33:20):
Yeah, I was going to tell, because you were saying, can you train somebody or can they be converted from this role as the, well, they may be a compliance or whatever into the advisory. Honestly, if I look at myself, that's what I was mean for 16 years, I started my firm in 1991, my traditionalist a generalist firm in 1991, I merged in with someone else in 2006. In reality, I don't really think I did much advising. When I look back now and I was a reporter, that's what I was, and I thought that's what my role was. Looking back, I probably was doing a disservice to my clients because I wasn't bringing these opportunities. But you take me that that's all I was in 2006 to, it wasn't a 180 immediately, but all I do now is this on the advisory side. So yes, you can come from one and go to the other. And I guess I'm trying to say I'm an example of that.
Dan Hood (34:14):
Dang. Well, and to make you feel better, traditionally that's what firms were doing was mostly reporting, right? It was less, the advisory thing is really only discovered recently or in its current incarnation. I do want to talk because one of the things I'm hearing from both of you is that right, capacity issues on either side, you wanted to be able to do more advising, but there's only one of you. And so you wanted to get your project managers up on that skill. You talk about having the accounting team and the advisory team, and I'm curious about how you match up, put it this way, I'm imagining advisory work is spending a lot more time with the client. It's more time intensive in its way than particularly as the technology develops, the compliance work is going to get faster and faster and faster. So you know, may be getting more and more and more accounting firms come to you and saying, listen, we need your advice, but there's only one of you plus your project management you may have, your accounting department is able to handle a gazillion more clients than your advisory side. How do you match those two different disparities in terms of ca capacity? Give a second. This wasn't a question on the original thing, it just came out of the conversation. And I'm sorry to put you both.
Randy Crabtree (35:19):
Do you want me to try to jump in or Unless you got one.
Jody Grunden (35:21):
Yeah. Oh, I've got it. So we go ahead. Yeah, I'll take this one. So when we do our own forecasting, we do exactly what we preach. We have a forecasting meeting, we're diving into it. We know what the algorithm is and how many accountants that we need to be able to service X, Y, Z clients. We know that 30%, and there's a lot of math involved in here, but we know 30% of our clients that we bring in are going to need the accounting side. And then the other a hundred, well percent of them are going to always need the advisory side. Why they come to us in the first place for the advisory. So we've got a pretty good idea on how we need to hire people as we go throughout that process. And it took a long time to figure that out. Believe me, we had a lot of capacity at certain times and other times we had no capacity. And how do you deal with that? And so it's important to understand your client mix. That's important to understand, really dive in to figure out exactly what your needs are based on what you're trying to sell and market, and then develop your formulas and your forecast based around that.
Dan Hood (36:23):
Gotcha. So it's a lot about knowing your client base but also a lot about knowing you. And I'd imagine does that must get easier as you get a better sense of, oh yeah, this kind of client's going to want X and Y and so we need to Gotcha, Randy?
Randy Crabtree (36:34):
So for us being specialty, I mean there's new things that pop up all the time. So we have to be very nimble. I mean, just looking in August of last year, the inflation reduction act came out and there was credits in there that we're still digging into and trying and there, but there's huge opportunity. And so what we have to do is staff overall for credits and incentives, but then have people with enough knowledge or enough flexibility that they can go into this next thing. When ERC came out, I mean obviously we didn't know anything about ERC three years ago and anybody that wasn't in my presentation, we are not the scumbag, sorry can I said that earlier. We are not telling everybody they qualify for ERC, but when that came out, that was just another opportunity that we were able to go out and support the community with.
(37:28)
And so the people we hire, and honestly I do not get involved in hiring at all, but about five years ago I decided I'm staying in my lane. So I don't even know what we do anymore as a business, but I know we're following EOS. All that kind of stuff probably comes into play, but it's just a matter of every, everybody we hire understands that the role that they're working on may change tomorrow. And we're very fortunate we find that, and I shouldn't say that because I know there's such a understaffing issue in accounting in general, we're just very fortunate that way.
Jody Grunden (38:03):
So, I'd say Dan, that kind of add to that with advisory, we've niched into the creative agency space. So 60% of our clients out of the 150 are creative agencies, web design, web development, SEO companies, that sort of thing. But we're actually looking to expand in four other niches. We're want to go into the cannabis niche, the transportation niche, law niche, and then healthcare niche. And the question comes on, how do you hire people in those niches and then wait for them to get filled up because that costs a lot of money. Okay. Yeah, because just kind of on the sidelines. And so what we have to do there is we, again, no different than the accounting side, we've got to have them cross basically crossing in the different niches until we can build that book up. Meaning that you might have a cannabis person that's the thought leader of cannabis that's really knows their stuff there, but they may be working on some law clients, they be working on some construction clients, they be working with other clients until they build that book of business up. So you've got to be nimble in the respect and those folks have got to be able to fill the gap in until we've created that niche. And it's really no different than the accounting and consultants.
Dan Hood (39:07):
I just say a similar thing on the accounting side, you may be the best cannabis accountant, but we need you to work on some other things until we get more cannabis clients.
Jody Grunden (39:13):
Exactly. Exactly.
Dan Hood (39:13):
Excellent. Alright, well we've got about 10 minutes left, so I want to throw it out to questions from the audience. I have a couple more questions for you guys, but want to make sure anybody had a question out here. If you do just raise your hand. There you go.
Audience Member 1 (39:24):
I'm trying to build a better picture of the typical client journey. So I see you have compliance advisory and you also have tax and financial. Do they start tax compliance and work their way up to their financial advisory? Then you also said they come in for financial advisory and then eventually work their way down to asking for a tax compliance. So what's the typical journey that you're seeing today?
Jody Grunden (39:48):
Yeah, it's kind of funny because when we started the practice, it was taxed to advisory. It was tax advisory, tax advisory. Nobody knew what virtual CFO services meant. And so we had to educate them. Here's what we actually do now that we've actually done our marketing. So our marketing, we thousands every year, thousands of content marketing things go out, YouTube, you name it. Now people are coming in because they want the financial forecasting side and they may already have a great tax accountant, which is great if they do and they want to keep it wonderful, we don't care. We work all the others, that type of thing. And so it's switched. So when we first started off it was tax to advisory. Now it's the opposite because of the way that we market. So we don't go out and get clients. Clients actually come to us through the marketing program and it's really what we spend a lot of. We spend 7% of our budget annualized revenue and marketing expense. So we got a lot of expense going into that marketing cost to generate that want and that need. And we could pick up many, many more clients if we wanted to lower our prices, but we don't want to make sure that we're servicing a smaller, bigger client than a lot of, Randy had said a lot of smaller clients.
Randy Crabtree (41:06):
And what you just said on this is a little off topic, but what you said about marketing, I think it's so important. Not sure how many firms are marketing as much as you. We have, we're currently 60 people. I think we have, well if you count me as marketing, which I think that might be where I am, there's six full-time people in marketing. So it's extremely important. But as you said, the business comes to you then. Yeah, to your question, ditto what he said.
Dan Hood (41:37):
Hi anybody.
Audience Member 1 (41:38):
When you guys speak about marketing strategy, how were you able to build a relationship with potential clients online to get them to understand what a virtual CFO is?
Jody Grunden (41:47):
So with the marketing strategy, if you're to pop on our YouTube channel, you'd figure it out pretty quickly because talking about exactly how we're doing things, we're giving away the secret sauce. So nothing that we super transparent. So nothing that we do is a secret. We talk about clients on, hey, here's, here are the four different metrics you need to look at. You need to have a solid 10% of your revenue and cash, you need to have your production metrics. Here's how you create that forecast. We teach them how to do that. And so we're showing them what we would do if they can't do that themselves. And so we're showing them what we would do as a virtual CFO. So when they do contact us, they've read a book. I've read a couple books on it. I've a lot of brochures on it, a lot of white PA pages that I've had, my marketing teams help me write.
(42:35)
I didn't write them all right. Market teams helped me write and I blessed them, make sure, make corrections and so forth. But with that, we've got the concept out there so much that when they're calling and then the first part of the sales call, it's an hour sales call, we're asking them, Hey, what's your issues? We've got this person, we have no visibility in what's going on in the future. And so they're telling us all their issues in that sales call. So then when we prescribe to them, then we come back and explain to them, well, we can solve that by creating this dynamic forecast. Here's how we would do it. We kind of explain it to them right on the call. We can help you with your cash flow issues because we meet with you on a regular weekly basis. We're going to cover the next 13 weeks for you so you can kind of see what your cash burden is all the time. So we can manage that a little bit better until you can build that cash position of 10%. So what we're actually explaining to them, what we're going to do on the call, and that's kind of what the virtual CFO program is it. It's really taking control of their financial position, helping them, helping them throughout.
Audience Member 1 (43:33):
So you're spending 7% with the marketing objective to get them on call and you go from there.
Jody Grunden (43:37):
So 70% of our revenue, 7% of our revenue in that 70, thank God, 7% of our revenue goes towards spending that money. So I've got, so a 10 million firm, we have, let's say it's a $15 million division. We've got a marketing person that's designed, actually I got a team of four marketing people, content writers, they're doing all that kind of stuff, producing. We, we've got people producing, we have two different YouTube channels that we're producing, one towards our niche, one towards maybe the accounting industry. So we're kind of being an evangelist for the accounting industry. So we, we've got spiff specific targeted markets that we're focusing on and it costs a lot of money to generate all that. And because we're doing that, it generates that awareness that when you type in virtual CFO, we're going to come up on that first page. We do so much. Google recognizes so much in that if it's an industry and you're looking for a specific industry, maybe that's the dentistry industry and you've done a lot of marketing towards it, you're going to be pop up as the expert that they're going to see when they do their Google searches and that sort of thing. And I think that's really important.
Dan Hood (44:45):
I just, Randy, I want to little bit about your, because I think that's a fascinating question conversation and it makes a lot of sense for a lot of firms, but there are also firms we're seeing get more into to niches where they're supplying other accounting firms with services for their clients. They're so specific in a very specific area. And you talk a little bit about that and how you reach out to other firms.
Randy Crabtree (45:05):
Yeah, so our marketing, I said we have a team of six in marketing and we're doing all kinds of things that you said. We've got the YouTube channel, we've got the TikTok channel, we've got the Facebook page, we've got the all of this. But a mantra, and you kind of said this little different than I do, but my mantra is share your knowledge and I'm going to educate anybody that wants to hear me talk on tax credits and incentives. If I could educate you to the point where you could do it yourself, I have no problem with that because for the most part, it's just not going to happen. Because complex, you all know tax law is complex and you can't be an x-ray at everything. So what I try to do is just go out and educate, share my knowledge, variety of things. Webinars what you said, like SEO, you said that?
(45:53)
Yeah. Didn't you all? I said that. Alright. Yeah, we did a webinar last week, our market, or two weeks ago, our marketing department put that out there. They know the whatever, the correct things, we had like 7,000 views on YouTube in 20 hours or something like that. And so you can create it, but it's most important. You are a niche practice. We are niche. Our niche is servicing you. But a man, if we want to talk niche, we could do this for two hours right now. But if you have that expertise in a certain area, marketing's simple because you're out sharing your knowledge and people understand that you are the expert and then they come to you.
Jody Grunden (46:32):
Yeah, I keep my thought leadership is sharing knowledge, not trying to sell somebody. Yes. So the more you share, the more you educate man, the more people will drive towards you. Thanks.
Audience Member 2 (46:41):
Can I ask about the extent that you do data integrity, compliance, and if that's something that you directly do, is there another third party that also wants to provide that service?
Jody Grunden (46:54):
What do you mean by data integrity, compliance?
Audience Member 2 (46:58):
So my former job before now working in product was writing SOX controls for companies that didn't get at or renew. And SOX was a piece of it that definitely is going to be account, but I often worked closely with IT. Auditors as well. And I know you mentioned always going to be, it's just matter in what form. And I see more and more security risks being like, well, the data has to be audited, but it's not quite like fraud in a different way. So I want to know, just speak to that area. If it's not what you do, then
Randy Crabtree (47:36):
I personally have nothing to do with that, with our firm. So I couldn't answer. Sorry, but I don't know if you have it.
Jody Grunden (47:41):
Yeah, I don't either. I, yeah, I have to apologize. I don't know. Okay. Sorry about that.
Randy Crabtree (47:45):
It's a great question.
Jody Grunden (47:47):
A question. I don't know.
Dan Hood (47:49):
That's for next year panelist. That's a, you'll be on it. Actually, you're going to be leading that session because a really interesting area. But we're almost at the end unfortunately. Any other questions? I have one last question. I was sort of wondering, a final thought on, in part, I know the way you guys have set up your firms, you probably had a different approach to it. But if you're looking at firms that don't have the structures that you've already built in place and they need to start moving from a more traditional accounting firm set up to building this sort of compliance and advisory thing, any sort of advice from your journeys or that you would recommend them to do is they try to make that switch.
Randy Crabtree (48:27):
So real quick, the thing is, when you talk about advisory, the definition there is, I mean, everybody has their own definition of what advisory is. And so that's part of the problem. You need to come up with your own definition. What is it for you? And if you think advisory is this, you're not going to jump into it. If you think advisory is this, you're going to start. And so start small, start with maybe you start with 10 40 clients and you start with, you see their W two and realize they're not putting enough into their 401 k boom. You just became an advisor in that you start with something small. I know that's very basic, but something small or there's a specific niche that you want to start. You have deal with craft breweries. That's your niche practice. And now from an advisory standpoint, you want to start being the expert on figuring out job costing for them. And so now boom, that's something you already have a knowledge on and you just start to do that. So start with one thing, and as you do that, you'll find more areas you can jump into.
Dan Hood (49:29):
Gotcha. Jody?
Jody Grunden (49:30):
Yeah, so when we started it back in 2004, the advisory service, we had no idea what we're even doing. We didn't know what that even meant really. And so what we did is we took four or four or five of our number one clients, our tax tax clients that we had, and we said, you know what? Let's do this. Let, let's go ahead and you can pay the exact same dollar amount and I'm going to go ahead and take and spread around. So you're meeting with me on a monthly basis, just once a month and we're going to go through some stuff. And they thought that was a great idea and we did that. And then eventually it's like, now what do we talk about? It was one of those things we had to try to, now we started mentally figuring out what we wanted to talk to the client about.
(50:09)
And so with that, it was like, well, the client didn't really care much about the past a lot of times, and that's when we said, Hey, forecasting something that they really want to dial into. So we started doing modeling for those folks. And so what we tried to do is we are testing our clients that we had the best relationships with that are going to give us Slack. If we don't do well, they're going to be on our side. They're going to help us craft that. Right? And that's what we did. And basically that helped us design that basically helped us design our platform. How are we going to do it? And then eventually you can, once that's six months or that, whatever the timeframe is, you're telling them you're going to do this for free or lower rate or whatever. Then at the end of it, then let them decide if they want to continue on. I guarantee them all. Continue on.
Dan Hood (50:51):
Alright. Awesome. Jody and Randy, thank you so much.
Dan Hood (00:11):
All right. Welcome everybody. Thanks for coming. I'm excited about this topic. I think it's an important point for a lot of firms, particularly as they move into CAS, but as they move into advisory services in general, there's a lot of feeling that people will say, oh, well, who's going to do the compliance work or compliance work is all we know. It's what we're good at, it's what we're based on. And there's a sort of false sense that the move to advisory services means giving up compliance work or getting rid of compliance work. But in fact, sort of what I think we're going to discover today is that compliance is really the groundwork of advisory services. If you're not doing the compliance work, you don't have the insights, you don't have the data to support the advisory work that you're doing. Obviously there's some advisory work that doesn't require that support, but a lot of it, why it makes a lot of sense for accounting firms to move up to it is because they have that grounding in the compliance work.
(00:59)
They have that grounding in the inner workings of their clients' businesses and so on. So that's what we're going to be talking about today, hopefully, is the sense of how these two things work together and why they support each other. And they put accountants in a position that no other advisor is in because they have both of those aspects of their clients' lives. And we've got two great practitioners with us to talk about it. You may have seen them in earlier sessions. We are getting a lot out of, they have a lot to share, but I want to start this one a little differently. Maybe by having them talk about themselves and their practices so that you get a sense of where they're coming from and what they're doing. I think it's slightly different, more than slightly different. And it will give a sense of where they're coming from. So Randy, do you want to kick us off? Yeah,
Randy Crabtree (01:36):
But you said great presenters, so I think I might be in the wrong spot. So I, my god.
Dan Hood (01:42):
Wait, so I take this imposter out of here.
Randy Crabtree (01:45):
Alright, so what was the question? A little background.
Dan Hood (01:48):
Who are you and what do you do?
Randy Crabtree (01:50):
All right. So we might laugh a little bit up here, so hopefully that's okay. So Randy Crabtree, I am think people call me Co-founder and Partner at Tri-Merit Specialty Tax Services or Professionals I think is her name. Little background. Can I give a little background? Yeah, little background. I came, I've been a CPA for many years. I'm old. I started 35 years ago. This is actually my third career, so I'm older than even the 35 years in the profession, but for the longest time I was a generalist and I was probably a reporter of what was happening. And so talking about the advisory part of things today is great. 16 years ago I left the generalist side of things and started a specialty firm where what we do in my mind is advisory. We're saving clients tax money through you. We bring our services to tax preparers and help you to reduce the tax burden for your clients. So that's what I've been doing the last 16 years and in reality, what I do most of the time is sit up here and talk, which I enjoy a lot.
Dan Hood (02:56):
He's highly qualified for, Jody.
Jody Grunden (02:58):
Yes, I'm Jody Grunden. I am a part am a Partner at Ander, CPA advisors out of St. Louis. I started a virtual CFO practice back in 2002, wanted to kind of change the way that people thought about accounting. So that was my mission statement or my purpose from the very beginning. And so the first thing I want to do is just dress differently. I think I mastered that from what I'm seeing in the room, but the other one is getting rid of the hourly billable rate or billable hours. I want to get rid of that. I wanted to create a value-based type billing structure. I wanted to not have an accounts receivable, so I created a subscription billing process where they zapped their bank account every Monday. So I don't have any accounts receivable. I wanted to do things again differently in all aspects.
(03:45)
I wanted to create a forward-looking virtual CFO forecasting model where it, it's like I mentioned CAS 1.0 and CAS 2.0 are the two buzzwords right now. CAS 1.0 is more of the accounting bookkeeping CAS 2.0 is more of the strategy. Well, we started with strategy. So we started delivering CAS 2.0 back in about 2004 and we just found the client's needs, they want, needs and wants, they needed, a lot of them needed us help out with the cast 1.0 stuff. And so about a third of our clients we will actually do that for too. So we do a combination of both. We've been doing it from since 2007 and it wasn't until we niched in about 2011 12 that we really saw things spike. And what I mean by niching, we already niched the service level. So we were providing only virtual CFO services.
(04:30)
And then when it came to niching the industry level, the hockey spike went, hockey stick, spike went up and that's where we really started gaining ground and picking up not four to six clients a year, but four to six clients a month. And that's what we do now pricing wise, we've, we've really screwed up a lot at the very beginning. We pricing things lower than normal then we never valued our service like everybody here probably is. And then it wasn't until we actually started pricing it to where we were our average client's around 89, 80 to 80 $90,000 a client did we see our closing ratios actually start dropping to, we're actually closing about 35 to 40% of the clients that come in. We've already closed about $2 million this year alone and we're targeting about 4 million overall for new client pickups this year through that whole process in 2000 and it was 2022 kind of fasting forward.
(05:21)
We doubled our size every three years in growth. And then 2022 is when we, well actually 2013 is when we went fully remote, so I forgot about that. We did something that was kind of out out of the ordinary, went a hundred percent remote with our team and then 2022 is when we decided to merge with or CP advisors and became their virtual CFO service line or division with the idea that instead of doubling our size every two to three years, we were going to grow to be a 50 million service line. And that's what our goal is right now. So far, everything's going great. We've already increased our revenue by about 50% from 10 million to we'll do about 14 to 15 million this year in 2023. And on targeted doing that. And so that's kind of where the whole thing was. We went from advisory and then from the very beginning and then added compliance as part of what we do.
Dan Hood (06:13):
Excellent. Alright, well listen, I mean this is all we, I've sort of stolen thunder by saying we don't think compliance is going away, but Alan Colton was talking about a CLI compliance work, evaporating. Is that sort of the viewpoint you have now that I think we've answered that question, but let's talk a little bit more about in terms of where is compliance going compared to advisory? Where do you see those two working together?
Jody Grunden (06:34):
Compliance advisory compliance is always going to be, in my opinion, will always be there in some manner, whether it's reviewers or doers, it's it's going to be there. And what I mean by that is in order to give good advisory services, you've got to be able to rely on the information that you're getting. And that's where compliance comes in. Providing that, providing that. Now will compliance be different to tomorrow than what it is today and say tomorrow, maybe next two or three years it'll be completely different but it will still be there and be a big part of what we do. So I truly don't think it's going to go away to the point where we won't use it, we need it. And as advisors, we have to rely on that information. Try doing, advising a client not having good financials to look at is impossible and it's basically unethical in my opinion.
Dan Hood (07:18):
Randy?
Randy Crabtree (07:18):
Yeah, so I agree. We come at it a little bit different. I'm tax, I love tax, tax is what I do and you you're advising and what you do at the CFO level or not. That was just, that's amazing stuff. But from a tax standpoint, I think it's really easy to look at this from compliance is always going to be there unless tax laws change and we don't file tax returns anymore or whatever happens, but well as long as I'm retired, we're fine with that.
(07:50)
That's what we'll, but what's going to happen and we're seeing it already and it, there's been automation for a long time. Automation's been there, we all haven't taken advantage of it. That automation's going to be going through the roof. So you're going to see more compliance be done through automation through, there's programs out there that are just going to go in and go to your financial statement, a financial services firm and bring in statements. Your W two is going to come in your bank interest statement, all this stuff. And it can be done already. So from a compliance standpoint that that'll be more automated, that'll get easier. But the benefit of that is as long as there's a tax code, we are still, the advisory is going to become that much more important because now all this stuff that we're spending time on, maybe let's just say compliance is important but maybe not as looked at as a higher value service that you're providing now. It's going to free you up for this higher value advisory services and you're going to be able to show I just saved you $22,000 on taxes and you're going to be able to show that there's a value to that. And that's where I see this going as automation comes in. And don't ignore automation, don't ignore technology because you will be far behind really, really quick starting this second.
Dan Hood (09:12):
Well every second you wait, you get further behind. It sounds like the way you're describing it that the balance of, and there's a couple of different ways to balance this, but let's start by talking in terms of workload that the balance of right now it's a lot of compliance and maybe less advisory depending on the firm obviously, but it sounds like that balance is going to shift significantly that the compliance will actually be easier and easier and easier. And then it's the results you take from it will take up more of your time as you use them as insight. Is that Randy? Does that make sense.
Randy Crabtree (09:41):
That's the way I look at it and honestly I think it just helps us from a profitability standpoint because we can offer these higher value. If anybody's wondering, my son's calling, so I should put this on do not disturb, I should do this. He's calling to talk about the Black Hawks getting the number one draft pick last night. So that's an important.
Dan Hood (10:01):
I was going to say if we need to pause for that conversation
Randy Crabtree (10:04):
Exactly, but what was I saying.
Dan Hood (10:07):
Something about the black hawks? I don't remember attitude. No, we're talking about the balance between.
Randy Crabtree (10:12):
It's that it's free us up for this higher value service that I just see, and you and I have talked about this before, things that we could do to stretch out seasonality of our business. I think that'll help that ways that we can work less and make more and be avoid burnout, that's all things going to happen. I just see so many positive things happening as compliance becomes more automated and frees up to do this higher value, higher billing rate, well not billing rate, we are not going to bill by the hour and I completely agree with that, but we are going to have a higher monthly, weekly in your case invoice, go out to that client.
Dan Hood (10:51):
Excellent. Jody, similar thoughts.
Jody Grunden (10:53):
Yeah, I guess I got very, very similar thoughts with that. Thinking back when the copier came into play way back when we thought everything was going, oh no, what's going to happen? We actually had auditors auditing copies, which was kind of funny, making sure that they're accurate. When we got away from doing the tax turns by hand, we thought, oh no, this is going to be disaster. And we had this new software and again, we're analyzing everything, making sure it flows through correctly and obviously it did and it was just one more thing. And accountants love change as we all know. And so with that, it's just a difference in change with AI. As AI has been coming through, I think I truly think that's the next stage of change. How can we adapt and how can we be the front runners and take advantage of what AI's going to come out and do because it could be great things for us as an industry.
(11:48)
So I'm always looking at and saying, Hey, how can we, technology, everything's changing anyway, so we can't run away from it. We've got to figure out how we can actually embrace it and make it our claim, it our own type of thing. And I think that's the big part about it. So yes, it's going to go away and it's exact state right now, but I think there's going to be a new state coming out there. And let's be honest with our ourselves, when we hire people out of college, they don't want to do the stuff we're doing anyways. They're coming out with the idea that they want be the boss, they want to be the consultant, they want to be everything. They don't know anything but they think they do. And with that let's them be the reviewers. And so the doers, let's let them figure out their roles change, their role will be changing completely.
(12:32)
And that just frees everything up for even the advisory work that we're doing now. I think we're doing a pretty solid advisory work, but man, the things we could be doing, I can't even imagine what that might be doing A question came up, we'll be doing operational stuff. Well and the capacity right now, no, because there's a lot that's involved in getting these financials together and it just takes up a lot of bandwidth. But if something's doing that automatically for us, well why not? Couldn't we do operational advisory work along with CFO work, along with maybe HR work or something like that. So yeah, I think things are going to change dramatically.
Dan Hood (13:04):
I want to follow up on that and just pursue it a little bit because interesting, every once in a while someone will say, well, if the computers are doing all the 10 forties, then how are people going to learn how to do a 10 40? How they, they're going to learn the basics of tax. Now there's a degree to which that's just, well really we just want you to do a lot of 10 forties and not pay for a software. But is there a chance there risk of getting too far away from the clients if it comes down to the point where you're literally just pushing a button and then we know it's not that way now, but if it reaches the point where an AI reaches the point where it moves into what they call the black Brock box problem, where you have all these stuff going on inside an AI, but you don't know what it is and you can't judge it, you say you can't audit the copy machine kind of thing. Is there a risk of getting too far away from the compliance work if it's forming the groundwork of your ability to give good advice? Can you get too far away from it? And this wasn't on our original list of questions, but as we were talking about it, I just was thinking, is there a risk of that?
Randy Crabtree (13:58):
So I'm going to go from a tax standpoint. All right. And so from that, we're talking way in the future, I think that is.
Dan Hood (14:08):
It's on November.
Randy Crabtree (14:08):
Based on technology tonight. Today right now we just decided we're changing by the second. I think that can't be a concern. But where we sit and where I see the near future, which is in my lifetime of work, which who knows how much longer that is, we'll say a few years at least I don't see that happening. What I do see doing, and I kind of alluded this already, you're not going to lose touch with that tax return because if you are an advisor, you are talking to that client with what you're doing on a weekly basis or whatnot on a tax basis monthly, Kristen, sorry to call you, do you quarterly, monthly. How often do you meet with quarterly? Quarterly You're meeting with your clients on the tax basis already. And so now you're not the compliance, you may even have the data in your hands already because it's there, because it's automated. And now what you're doing is you're talking to them about, okay, here's what we can do, get the 529 plan set up, increase the 401 K, let's set up a simple plan, let's whatever the advice is that you can give to that client, you are more on top of that. And I think you're more connected to the client rather than less connected because you've got that data more readily available.
Dan Hood (15:18):
Gotcha.
Jody Grunden (15:19):
June. Yeah, I a hundred percent agree with that. It's like with our CFOs, our CFOs, half of them don't even have never done tax during their life. So for those folks, they're already there. It's already a black box, they have no idea how it works and they can advise very well with what they're doing, but if they had that information at their fingertips on a regular basis, it really makes no difference how the tax string's being prepared, if it's prepared accurately, it's the advice that you're getting, you're giving from it. Do I want to pursue, like Randy said, R&D credits, all the different stuff from Randy's presentation, all the different credits that are available. It may or may not be taking that into account, but it's different things that maybe those are different things that an advisor would actually bring up during a conversation. Hey, we can go this route. Here's what it is right now based on where you're at. But man, if you take this route here, you know, could save a lot of money. And that might be what the advisor does down the road. They're just simply taking what's automatically computed on. It would be cool if it was computed on a weekly basis or by knowing what their tax situation was weekly and how can we actually change that and it, that's where the advisor's going to come in to be able to utilize that.
Randy Crabtree (16:30):
And sorry, Dan? Yeah, just to expand on that, and I'll stress this and I've already said it once, probably twice and you'll hear it multiple times. You can show the value of what you're doing then and there's a higher, let me and anybody was in my presentation earlier, you heard this, but clients want this, they want this advisory service. There's studies, and if you were in my presentation earlier, sorry, but 79% of the clients out there, taxpayers want to pay you more for advisory service. 35% of tax preparers, tax planners, tax, whatever are offering these advisory services. Huge disconnect, huge opportunity to one, increase your profitability and probably reduce your client base, which I'm guessing, and you talked about in your presentation, dealing with a hundred clients at a higher billing rate is probably a lot more satisfying and less stressful than dealing with a thousand clients at a lower rate. I think with all these types of services and spreading it out through the year and showing the higher value is just so important to us as a profession.
Dan Hood (17:39):
That makes sense to me. I buy that. But I want to, if we can maybe dive a little deeper into the sort of interactions you talked about an advisor might just look at the tax return and take the information from that and go there to develop advice from it. But in your practice, how do compliance and advice interact in terms of which goes first maybe as a.
Jody Grunden (17:59):
Yeah, so I think, so the compliance obviously goes first because we have to make sure that we have the good information. So the information's got to be solid before the advisor can actually advise on it. And the compliance is not only on the accounting side, but it's taking that information, tying it with what the advisory came with a forecast, because you're not going to be able to predict your tax position unless what's going to happen over the next six months, 12 months, eight months, whatever that might be. And so the combination of that is really going to help the compliance side on the tax situation look. So I guess they're really tied hand in hand. I mean you can't really have one without the other. And so our CFOs right now rely heavily on that soft tax planner knowing what that is every single month.
(18:44)
And we already have that. So we know what the soft tax planner is like, and it's when we get to that hard tax planner, we're bringing in the tax accountant in the third or fourth quarter that we can really dial in to maybe make some adjustments to it. It's off a little bit here and there based on whatever happens to them personally. But that's all tied in to they work hand in hand in going through that. And so when the client at the end of the year, how many people are surprised in the year what their tax bill is? I would say 90% of the people in this room have had clients surprised. And if you're doing it right throughout the year with using compliance and using strategy, we maybe have had one person surprised and maybe we made a mistake, it was a cross border mistake, but out outside of that, they already know and they embrace it. It's a lot easier telling somebody they owe $150,000 throughout the year than it is on April 15th.
Randy Crabtree (19:42):
I'm sorry to expand. I keep cutting you off.
Dan Hood (19:44):
You don't need, if this works right, I can just leave.
Randy Crabtree (19:46):
Okay. You guys can just, I was going to do that.
Dan Hood (19:49):
You bring value.
Randy Crabtree (19:51):
You bring value. So what Jody was just saying there though, knowing that on an ongoing basis we don't have to then get every tax return done by March 15th or April 15th, we already know the answer. And so rather than going crazy and working 80 hours a week to pump out every tax return by some weird deadline that's been placed in front of us for years now you can just, you've taught the clients we're going to extend, we know the answer already. All the answers already, we're not going to work ourselves to death to get this done by this arbitrary deadline, which to me makes no sense. And so therefore you spread out the seasonality of this work as well.
Jody Grunden (20:32):
Oh, a hundred percent. And that's how I developed, that's one of the reasons I created the summit back in 2002 is because I worked for a couple big large accounting firms and neither one of them I were able to see my kids. I wasn't able to do stuff. And being a new father, you had a four year old and a two year old, I was like, man, I'd really love to be part of their life and I'm seeing all these partners that they weren't, were in the office Saturday until noon and then once they left, everybody else left, that type of thing. And I didn't want to be that person. So when I went with summit, the idea was, hey, I was going to figure out a way that we can actually work a 40 hour work week without having everybody burn out during a tax season.
(21:12)
How can we do that? The best way to do that is managing the client every single month, answering their questions, fixing, doing their compliance every single month, giving them advice every single month. Then when it comes down to January, February, March, we're just simply putting a return together, which at that point is not that difficult and not that much time consuming. And we were able to take that, and I truly will tell you that our people don't work more than 45 hours a week during tax season. You know, might get a spike on one week, maybe they work 50 that week, but it's not a normal occurrence that they're work, they're killing themselves during that timeframe. And that's just one way that we as tax professionals can reduce our time is figuring out, hey, how can we scale back our client base a little bit to be able to take on this type of rewarding type of a service and make it a well a life balance type of situation.
Randy Crabtree (22:08):
So you used advisory to reduce compliance time. Perfect.
Dan Hood (22:13):
Well, but now it's interesting because the way you describe it, right? Once you've got the client into the sort of monthly pattern of we're talking to you on a regular basis so that your tax return is just a natural outcome of all the conversations we've had over the course of the year, then that makes sense and they understand it and they're sort of, not to put it this way, but they're sort of trained to understand that these yeah, yeah, there's a deadline, but that's not what's important. And what's important is the conversations we have all the time. But how do you get there, right? Because you talk about if you tell a client, oh no, we're going to put you on extension, that freaks a lot of people out there. I got to get my returns done. And they're not necessarily understanding that. I'm sure you've trained them, they understand it, but how do you make that transition?
Randy Crabtree (22:49):
Yeah, so Jody might actually be better at this because I don't do anything,
(22:56)
But I think one of the biggest things in general, and I talk about this in different presentations I do, is that you can't let the clients dictate how you run your practice. And right now, there are so many clients available out there. If you haven't done that, it's the perfect time to take charge and you dictate how you are going to run your practice. And if they're not going to agree with that, that's just another client you're going to work with. And now, and now I know people get freaked out by that, but in reality, you don't want the client that's going to be, I mean, who I think Amy talked about this morning. You see an email, you start freaking out and get stressed out, you get a phone call and you don't want to answer it. This client, well, that's the client you don't want to deal with. That's the client you let go. If they're not going to say, okay, yeah, it's okay to go on extension, you've been so good with me every quarter when we're sitting here going over this, I understand we can go on extension, we could do this. It's just you take charge. This is I think a huge opportunity for you to do that.
Dan Hood (23:56):
Jody.
Jody Grunden (23:59):
So let's restate the question once more then. So sorry,
Dan Hood (24:02):
Off track.
Dan Hood (24:04):
Here, he got was mentally firing a lot of clients.
Jody Grunden (24:06):
Yeah, I was like, huh, where you going with this?
Dan Hood (24:07):
How do you make the, it's that transition, right? Once you've got them trained that they understand, oh yeah. How do you make the transition to get them? I mean, apart from firing.
Jody Grunden (24:15):
Yeah, yeah, yeah. So
Dan Hood (24:16):
Though we encourage firing.
Jody Grunden (24:18):
So we talk about that in our onboarding process. So we have an onboarding process, we bring a new client on the first eight weeks and we're setting kind of the ground rules, the communication, what's going on, and we tell the client, Hey, throughout the year you're going to understand what your tax situation is. We need to make sure that we set that money aside throughout the year. Then on April 15th is when you'll have that amount due. We may or may not have the tax turned done at that point, but that's what it is. And we kind of set them know why that date is only important for the payment, not the actual tax return. And really kind of conquer all the fallacies about, hey, you're going to get audited more if you passed the deal. All that kind of stuff. That is all BS. We get rid of that right away. So that communication is the important thing from the onset of the engagement is just saying, Hey, here's how we do things. And then guess what allows them to say no versus no later, which they say no, they're great. We'll find somebody else to replace that person.
Dan Hood (25:12):
If they say yes and they get freaked out, you can remind them, listen, this is how we talked about the way we work. I want to switch a little bit to focus on another aspect of it, which is staffing and the people you've got in your firm for a lot of firms that haven't been created from the ground up with this mindset of compliance and advisory working together, there'll be a lot of firms out there that have heavy compliance focused staff who are used to this is what we do. We work 80 hours a week at tax season and then we take some time off in the summer and then we come back and do it all again in October. And we're just pumping out returns and our workflow is what our workflow is and it's, the advisory isn't as important when firms are going to switch that way. How do they need to switch their staff? Are those staff, those compliance staff, can we retrain them and them make them advisors? Or is it really, we're going to have some compliance people and then we're going to have some advisory people and they'll communicate. Obviously we, we've talked about how they need to and how those two areas need to overlap.
Jody Grunden (26:08):
I'll tell you I do it Dan. So we actually had this situation, so we were fully remote. Our separate company, our separate department, our senior advisor, which was underneath our CFO, did a lot of the accounting stuff too. And so then they were also, they oversaw accountants and so forth. And so what we've done is since the mergers, we've actually have two separate distinct departments. We've got an accounting department and then we've got an advisory department. And the advisory department is, they're designed just to be forecasting analysis KPIs that they're working on the future stuff. The accounting department on the other hand is working on making sure that those financials are buttoned up and dialed in. And the accounting department's also overseeing our offshore staff. They're overseeing the bill payment, they're overseeing AR, they're overseeing pay up payroll, all the different stuff that's belongs into the accounting, accounting function. And then that bubbles up to the accounting manager, kind of like the hierarchy you'd normally see in the accounting firm. And the accounting manager and the CFO are hand in hand with the clients a lot of times. And often they'll be maybe in the same meeting if it's more of a financial statement type meeting where they can help with financial statement question type scenarios. But they, they're working hand in hand with each other. And we find that because we've got two separate departments working together as one it, it's working out extremely well.
(27:33)
It surprisingly well, which was great.
Dan Hood (27:36):
And does that make sense because they're different skillset sets and they're different focusing? Or are there anybody who'd be like, I really want to work in both or.
Jody Grunden (27:44):
It's a different skillset completely. Most accountants suck advising just they do their heads, heads down. Yeah, sorry, everyone out here, their head heads are down. The folks in this room don't because that's why you are where you're at. You know, are the advisors really, I mean you've developed it, but for a lot of folks, their head, their head is down. So we use a lot of different kolby and a bunch of different things to figure out really what truly does somebody really strive to be. And the way that we've set it up is that it's not an out or up and out situation. It's like, hey, if you're great in accounting and you love it, you might top out as a senior manager or partner, whatever, in accounting. Same thing with the advisory. Not everybody's going to build crossover. Not everybody wants to crossover. We, we've got senior advisors that, man, they're great with analytics forecasting and all that kind of stuff, but man, they're afraid to be that person that's in charge of the account. They don't want that responsibility at all. And which is great, you need that person at the senior advisor level, but you have accountants that are equal in experience, awesome. But I would never stick them in front of a client. That would be horrible, horrible experience. That'd be horrible for them. It'd be horrible for the client.
Dan Hood (28:52):
Add all around.
Jody Grunden (28:53):
So you've got to be able to recognize that just because they're a great accountant doesn't mean they're a great advisor and never push them to be that great advisor or you'll actually push them out of the company not realizing it.
Dan Hood (29:05):
Randy, you work with accounting firms or you provide services to accounting firms? Yep. Are you finding a similar thing? There's people they're in, this is what they're good at, let's keep them doing that. We're bringing in the advisory services. Yeah,
Randy Crabtree (29:16):
I think so. But I'm going to go to, based on our firm, because I think it's, to me, it's an interesting story and I'd like to amuse myself, so hopefully you all are amused as well. But Troy Merrit, we, like you just said, we service the accounting firms, they bring us to their clients. But when we were growing and just as, I mean we've gotten fairly large. I mean we've got all these different departments. We have an HR department, we've got the accounting department, we've got the project management team, we've got the business development team. I don't know what I am, but we got marketing team too. And so all these teams are working but working together. But what happened as we were growing, I was probably, if you look at what we do, we advise the CPA, we advise the tax preparer on things that they need to know to bring to their clients.
(30:08)
Well, I was the one doing all that. And when we were two and a half million, when we were 5 million, when we were 6 million, that was okay, we build $30 million last year. We worked with a lot of clients. I couldn't be in all that spot. So what we did is we found project managers who we had internally already, and all of our project managers are client facing too because they have to be out there analyzing what the clients are doing for tax credits, incentives. But we found the leads could start to be the advisor now too. So they could change that role. They were kind of advising already just with the client, but more it was answering questions and all that. So now we have regional leads that have taken and allowed me to not have to be in every sales meeting. Well, salespeople should be able to do that. Business development people, we don't sell anything. We advise, we educate, but the business development people would still want me to come with. And so as we've grown now, we've been able to take somebody that maybe wasn't the advisory role, but has the knowledge and now they can go out and communicate this. And it's really allowed me to do a lot more of this. So selfishly, I am thrilled that we were able to make this change.
Dan Hood (31:25):
Excellent. Well I'm curious because it sounds like you found some people internally who were you able to give them a switch a little bit to develop that sort of advisory skills, Jody? And did you find that there were people when you first started, because it's your example is in some ways you started it with the idea in mind of this is what we'll do. Did you find that there were people you had to shuffle into? Actually the more I know you, the more I'm like, you really should be on the advisory side. Or the more more we try you on the advisory side, the more we realize you should be more of an accounting kind of person.
Jody Grunden (31:58):
It happens all the time. It happens all the time when you get into it, just like any other job, we don't know what we don't know until we find out we don't know it. And with that, we just had a person that came in with a lot of finance advisory background already. We thought, oh, this person's going to be perfect for the job, found out that they're probably not. And we moved them through the accounting and they're flourishing really well there. And so, and that goes vice versa all the time. And I would also say not only the people, but the tenure within the company, just because don't have, when we push somebody to a senior advisor role or even a CFO role, it doesn't mean they've got to have 12 years of experience. They've got to look a different certain way.
(32:40)
We've got folks that are perfect advisors, trusted by the clients at six years of experience, seven years of experience. It's like, yeah, if you want to do that, great, here's your path. So I think it's important to create the path, but understand that there's a lot of different roads in that path. If they want to come up the advisory side and they say they don't want it, I'd rather them go to the accounting side than find a job working for you folks. Again, that's not that you guys are bad, but you know that you, you know what I mean? So it it's creating that path and allowing them to pick their venture as they're going through. Now will someone go to the accounting and decide I'd rather be advisory? That's never happened yet, but it might and I'd be open to it.
Dan Hood (33:20):
Cool. Randy?
Randy Crabtree (33:20):
Yeah, I was going to tell, because you were saying, can you train somebody or can they be converted from this role as the, well, they may be a compliance or whatever into the advisory. Honestly, if I look at myself, that's what I was mean for 16 years, I started my firm in 1991, my traditionalist a generalist firm in 1991, I merged in with someone else in 2006. In reality, I don't really think I did much advising. When I look back now and I was a reporter, that's what I was, and I thought that's what my role was. Looking back, I probably was doing a disservice to my clients because I wasn't bringing these opportunities. But you take me that that's all I was in 2006 to, it wasn't a 180 immediately, but all I do now is this on the advisory side. So yes, you can come from one and go to the other. And I guess I'm trying to say I'm an example of that.
Dan Hood (34:14):
Dang. Well, and to make you feel better, traditionally that's what firms were doing was mostly reporting, right? It was less, the advisory thing is really only discovered recently or in its current incarnation. I do want to talk because one of the things I'm hearing from both of you is that right, capacity issues on either side, you wanted to be able to do more advising, but there's only one of you. And so you wanted to get your project managers up on that skill. You talk about having the accounting team and the advisory team, and I'm curious about how you match up, put it this way, I'm imagining advisory work is spending a lot more time with the client. It's more time intensive in its way than particularly as the technology develops, the compliance work is going to get faster and faster and faster. So you know, may be getting more and more and more accounting firms come to you and saying, listen, we need your advice, but there's only one of you plus your project management you may have, your accounting department is able to handle a gazillion more clients than your advisory side. How do you match those two different disparities in terms of ca capacity? Give a second. This wasn't a question on the original thing, it just came out of the conversation. And I'm sorry to put you both.
Randy Crabtree (35:19):
Do you want me to try to jump in or Unless you got one.
Jody Grunden (35:21):
Yeah. Oh, I've got it. So we go ahead. Yeah, I'll take this one. So when we do our own forecasting, we do exactly what we preach. We have a forecasting meeting, we're diving into it. We know what the algorithm is and how many accountants that we need to be able to service X, Y, Z clients. We know that 30%, and there's a lot of math involved in here, but we know 30% of our clients that we bring in are going to need the accounting side. And then the other a hundred, well percent of them are going to always need the advisory side. Why they come to us in the first place for the advisory. So we've got a pretty good idea on how we need to hire people as we go throughout that process. And it took a long time to figure that out. Believe me, we had a lot of capacity at certain times and other times we had no capacity. And how do you deal with that? And so it's important to understand your client mix. That's important to understand, really dive in to figure out exactly what your needs are based on what you're trying to sell and market, and then develop your formulas and your forecast based around that.
Dan Hood (36:23):
Gotcha. So it's a lot about knowing your client base but also a lot about knowing you. And I'd imagine does that must get easier as you get a better sense of, oh yeah, this kind of client's going to want X and Y and so we need to Gotcha, Randy?
Randy Crabtree (36:34):
So for us being specialty, I mean there's new things that pop up all the time. So we have to be very nimble. I mean, just looking in August of last year, the inflation reduction act came out and there was credits in there that we're still digging into and trying and there, but there's huge opportunity. And so what we have to do is staff overall for credits and incentives, but then have people with enough knowledge or enough flexibility that they can go into this next thing. When ERC came out, I mean obviously we didn't know anything about ERC three years ago and anybody that wasn't in my presentation, we are not the scumbag, sorry can I said that earlier. We are not telling everybody they qualify for ERC, but when that came out, that was just another opportunity that we were able to go out and support the community with.
(37:28)
And so the people we hire, and honestly I do not get involved in hiring at all, but about five years ago I decided I'm staying in my lane. So I don't even know what we do anymore as a business, but I know we're following EOS. All that kind of stuff probably comes into play, but it's just a matter of every, everybody we hire understands that the role that they're working on may change tomorrow. And we're very fortunate we find that, and I shouldn't say that because I know there's such a understaffing issue in accounting in general, we're just very fortunate that way.
Jody Grunden (38:03):
So, I'd say Dan, that kind of add to that with advisory, we've niched into the creative agency space. So 60% of our clients out of the 150 are creative agencies, web design, web development, SEO companies, that sort of thing. But we're actually looking to expand in four other niches. We're want to go into the cannabis niche, the transportation niche, law niche, and then healthcare niche. And the question comes on, how do you hire people in those niches and then wait for them to get filled up because that costs a lot of money. Okay. Yeah, because just kind of on the sidelines. And so what we have to do there is we, again, no different than the accounting side, we've got to have them cross basically crossing in the different niches until we can build that book up. Meaning that you might have a cannabis person that's the thought leader of cannabis that's really knows their stuff there, but they may be working on some law clients, they be working on some construction clients, they be working with other clients until they build that book of business up. So you've got to be nimble in the respect and those folks have got to be able to fill the gap in until we've created that niche. And it's really no different than the accounting and consultants.
Dan Hood (39:07):
I just say a similar thing on the accounting side, you may be the best cannabis accountant, but we need you to work on some other things until we get more cannabis clients.
Jody Grunden (39:13):
Exactly. Exactly.
Dan Hood (39:13):
Excellent. Alright, well we've got about 10 minutes left, so I want to throw it out to questions from the audience. I have a couple more questions for you guys, but want to make sure anybody had a question out here. If you do just raise your hand. There you go.
Audience Member 1 (39:24):
I'm trying to build a better picture of the typical client journey. So I see you have compliance advisory and you also have tax and financial. Do they start tax compliance and work their way up to their financial advisory? Then you also said they come in for financial advisory and then eventually work their way down to asking for a tax compliance. So what's the typical journey that you're seeing today?
Jody Grunden (39:48):
Yeah, it's kind of funny because when we started the practice, it was taxed to advisory. It was tax advisory, tax advisory. Nobody knew what virtual CFO services meant. And so we had to educate them. Here's what we actually do now that we've actually done our marketing. So our marketing, we thousands every year, thousands of content marketing things go out, YouTube, you name it. Now people are coming in because they want the financial forecasting side and they may already have a great tax accountant, which is great if they do and they want to keep it wonderful, we don't care. We work all the others, that type of thing. And so it's switched. So when we first started off it was tax to advisory. Now it's the opposite because of the way that we market. So we don't go out and get clients. Clients actually come to us through the marketing program and it's really what we spend a lot of. We spend 7% of our budget annualized revenue and marketing expense. So we got a lot of expense going into that marketing cost to generate that want and that need. And we could pick up many, many more clients if we wanted to lower our prices, but we don't want to make sure that we're servicing a smaller, bigger client than a lot of, Randy had said a lot of smaller clients.
Randy Crabtree (41:06):
And what you just said on this is a little off topic, but what you said about marketing, I think it's so important. Not sure how many firms are marketing as much as you. We have, we're currently 60 people. I think we have, well if you count me as marketing, which I think that might be where I am, there's six full-time people in marketing. So it's extremely important. But as you said, the business comes to you then. Yeah, to your question, ditto what he said.
Dan Hood (41:37):
Hi anybody.
Audience Member 1 (41:38):
When you guys speak about marketing strategy, how were you able to build a relationship with potential clients online to get them to understand what a virtual CFO is?
Jody Grunden (41:47):
So with the marketing strategy, if you're to pop on our YouTube channel, you'd figure it out pretty quickly because talking about exactly how we're doing things, we're giving away the secret sauce. So nothing that we super transparent. So nothing that we do is a secret. We talk about clients on, hey, here's, here are the four different metrics you need to look at. You need to have a solid 10% of your revenue and cash, you need to have your production metrics. Here's how you create that forecast. We teach them how to do that. And so we're showing them what we would do if they can't do that themselves. And so we're showing them what we would do as a virtual CFO. So when they do contact us, they've read a book. I've read a couple books on it. I've a lot of brochures on it, a lot of white PA pages that I've had, my marketing teams help me write.
(42:35)
I didn't write them all right. Market teams helped me write and I blessed them, make sure, make corrections and so forth. But with that, we've got the concept out there so much that when they're calling and then the first part of the sales call, it's an hour sales call, we're asking them, Hey, what's your issues? We've got this person, we have no visibility in what's going on in the future. And so they're telling us all their issues in that sales call. So then when we prescribe to them, then we come back and explain to them, well, we can solve that by creating this dynamic forecast. Here's how we would do it. We kind of explain it to them right on the call. We can help you with your cash flow issues because we meet with you on a regular weekly basis. We're going to cover the next 13 weeks for you so you can kind of see what your cash burden is all the time. So we can manage that a little bit better until you can build that cash position of 10%. So what we're actually explaining to them, what we're going to do on the call, and that's kind of what the virtual CFO program is it. It's really taking control of their financial position, helping them, helping them throughout.
Audience Member 1 (43:33):
So you're spending 7% with the marketing objective to get them on call and you go from there.
Jody Grunden (43:37):
So 70% of our revenue, 7% of our revenue in that 70, thank God, 7% of our revenue goes towards spending that money. So I've got, so a 10 million firm, we have, let's say it's a $15 million division. We've got a marketing person that's designed, actually I got a team of four marketing people, content writers, they're doing all that kind of stuff, producing. We, we've got people producing, we have two different YouTube channels that we're producing, one towards our niche, one towards maybe the accounting industry. So we're kind of being an evangelist for the accounting industry. So we, we've got spiff specific targeted markets that we're focusing on and it costs a lot of money to generate all that. And because we're doing that, it generates that awareness that when you type in virtual CFO, we're going to come up on that first page. We do so much. Google recognizes so much in that if it's an industry and you're looking for a specific industry, maybe that's the dentistry industry and you've done a lot of marketing towards it, you're going to be pop up as the expert that they're going to see when they do their Google searches and that sort of thing. And I think that's really important.
Dan Hood (44:45):
I just, Randy, I want to little bit about your, because I think that's a fascinating question conversation and it makes a lot of sense for a lot of firms, but there are also firms we're seeing get more into to niches where they're supplying other accounting firms with services for their clients. They're so specific in a very specific area. And you talk a little bit about that and how you reach out to other firms.
Randy Crabtree (45:05):
Yeah, so our marketing, I said we have a team of six in marketing and we're doing all kinds of things that you said. We've got the YouTube channel, we've got the TikTok channel, we've got the Facebook page, we've got the all of this. But a mantra, and you kind of said this little different than I do, but my mantra is share your knowledge and I'm going to educate anybody that wants to hear me talk on tax credits and incentives. If I could educate you to the point where you could do it yourself, I have no problem with that because for the most part, it's just not going to happen. Because complex, you all know tax law is complex and you can't be an x-ray at everything. So what I try to do is just go out and educate, share my knowledge, variety of things. Webinars what you said, like SEO, you said that?
(45:53)
Yeah. Didn't you all? I said that. Alright. Yeah, we did a webinar last week, our market, or two weeks ago, our marketing department put that out there. They know the whatever, the correct things, we had like 7,000 views on YouTube in 20 hours or something like that. And so you can create it, but it's most important. You are a niche practice. We are niche. Our niche is servicing you. But a man, if we want to talk niche, we could do this for two hours right now. But if you have that expertise in a certain area, marketing's simple because you're out sharing your knowledge and people understand that you are the expert and then they come to you.
Jody Grunden (46:32):
Yeah, I keep my thought leadership is sharing knowledge, not trying to sell somebody. Yes. So the more you share, the more you educate man, the more people will drive towards you. Thanks.
Audience Member 2 (46:41):
Can I ask about the extent that you do data integrity, compliance, and if that's something that you directly do, is there another third party that also wants to provide that service?
Jody Grunden (46:54):
What do you mean by data integrity, compliance?
Audience Member 2 (46:58):
So my former job before now working in product was writing SOX controls for companies that didn't get at or renew. And SOX was a piece of it that definitely is going to be account, but I often worked closely with IT. Auditors as well. And I know you mentioned always going to be, it's just matter in what form. And I see more and more security risks being like, well, the data has to be audited, but it's not quite like fraud in a different way. So I want to know, just speak to that area. If it's not what you do, then
Randy Crabtree (47:36):
I personally have nothing to do with that, with our firm. So I couldn't answer. Sorry, but I don't know if you have it.
Jody Grunden (47:41):
Yeah, I don't either. I, yeah, I have to apologize. I don't know. Okay. Sorry about that.
Randy Crabtree (47:45):
It's a great question.
Jody Grunden (47:47):
A question. I don't know.
Dan Hood (47:49):
That's for next year panelist. That's a, you'll be on it. Actually, you're going to be leading that session because a really interesting area. But we're almost at the end unfortunately. Any other questions? I have one last question. I was sort of wondering, a final thought on, in part, I know the way you guys have set up your firms, you probably had a different approach to it. But if you're looking at firms that don't have the structures that you've already built in place and they need to start moving from a more traditional accounting firm set up to building this sort of compliance and advisory thing, any sort of advice from your journeys or that you would recommend them to do is they try to make that switch.
Randy Crabtree (48:27):
So real quick, the thing is, when you talk about advisory, the definition there is, I mean, everybody has their own definition of what advisory is. And so that's part of the problem. You need to come up with your own definition. What is it for you? And if you think advisory is this, you're not going to jump into it. If you think advisory is this, you're going to start. And so start small, start with maybe you start with 10 40 clients and you start with, you see their W two and realize they're not putting enough into their 401 k boom. You just became an advisor in that you start with something small. I know that's very basic, but something small or there's a specific niche that you want to start. You have deal with craft breweries. That's your niche practice. And now from an advisory standpoint, you want to start being the expert on figuring out job costing for them. And so now boom, that's something you already have a knowledge on and you just start to do that. So start with one thing, and as you do that, you'll find more areas you can jump into.
Dan Hood (49:29):
Gotcha. Jody?
Jody Grunden (49:30):
Yeah, so when we started it back in 2004, the advisory service, we had no idea what we're even doing. We didn't know what that even meant really. And so what we did is we took four or four or five of our number one clients, our tax tax clients that we had, and we said, you know what? Let's do this. Let, let's go ahead and you can pay the exact same dollar amount and I'm going to go ahead and take and spread around. So you're meeting with me on a monthly basis, just once a month and we're going to go through some stuff. And they thought that was a great idea and we did that. And then eventually it's like, now what do we talk about? It was one of those things we had to try to, now we started mentally figuring out what we wanted to talk to the client about.
(50:09)
And so with that, it was like, well, the client didn't really care much about the past a lot of times, and that's when we said, Hey, forecasting something that they really want to dial into. So we started doing modeling for those folks. And so what we tried to do is we are testing our clients that we had the best relationships with that are going to give us Slack. If we don't do well, they're going to be on our side. They're going to help us craft that. Right? And that's what we did. And basically that helped us design that basically helped us design our platform. How are we going to do it? And then eventually you can, once that's six months or that, whatever the timeframe is, you're telling them you're going to do this for free or lower rate or whatever. Then at the end of it, then let them decide if they want to continue on. I guarantee them all. Continue on.
Dan Hood (50:51):
Alright. Awesome. Jody and Randy, thank you so much.
Track 1: Compliance and advisory: It's not either/or, it's plus/and
June 19, 2023 6:25 PM
50:59