What you'll learn:
- Gain a better understanding of the role of a Virtual CFO and the value it provides clients
- Get clarity around how and why you should define your niche
- Learn the proven approach to successful VCFO client meetings - agenda and cadence
Jody Grunden (00:11):
Yeah, let's go ahead and let's go ahead and get started. So Randy started off by asking how many people saw Amy's presentation today? Awesome. Pretty awesome, wasn't it? Yeah, pretty awesome. So Amy talked about basically what we can do here and what I'm going to do today is kind of talk about the how. And so we're kind of going from the what to the how, and there's a lot of different areas I can talk about. And as things become more important to you with the virtual CFO concept, raise your hand and we'll get a mic to you right away. We'll continue on in that area because a lot of different areas here. But I want to give you a brief understanding of what my journey through this whole process to give you an idea here and to give you the background because going to use this presentation kind of as a case study. And so with that, in 2002 is when I started Summit group, traditional CPA firm, 2004, we started offering virtual CFO services and with virtual CFO services, how I define it is how the AI CPA defines it right now as CAST 2.0. So we started with strategy first and then later added cast 1.0, the back office accounting and bookkeeping stuff. And with that today encompasses about 30% of what we do is the back office accounting stuff. The majority of it's leading was strategy. And I'll talk a little bit about what that means here in a second. In 2013, we went fully remote. So we got rid of the office in 2013. We had about 18 folks that on the team at that point got rid of the office completely and went fully remote. With that.
(01:54)
Our team is now spread all across the United States and in 2022 we grew it to about 55 employees. And then we had another 15 folks that we outsourced over basically outsourced near source. So we had roughly 70 folks and we were at about 10 million in revenue when we merged with Andrer's CPA and advisors out of St. Louis. And so we were fully remote. We provided primarily virtual CFO services. And then the one thing I didn't mention there is that we niched not only in the service level but we niched in the industry level as well. So we had a double niche providing CFO services and then we work with about 60% of our client base work with creative agencies, web design, web development, SEO companies and that sort of thing. So we really focused in on that niche and in 2022 we merged with Anders. The idea was that hey, we've doubled our size every three years with the vertical and the niche in both areas there. And we were going to be about 20 million in probably 2014. And we thought, what can we get to that $50 million mark? How can we do 50 million in that process versus the 20 million that we did? And that's where the benefit of merging in with a bigger firm it was going to be. And so with that, so far this year we're trending about $14 million. So we almost about a 50% growth just within the first year. One thing also didn't mention is that in 2007 we went subscription based. So with that we don't have an AR we never had had an AR. So a $10 million firm with no AR negative accounts receivable is kind of cool. Would you guys agree with that? Kind of cool with that.
(03:31)
We don't do it on a monthly basis though. We do it on a weekly basis. We've been doing it on a weekly basis since 2007. So what does that mean? It means Monday is my favorite day of the week. We zap everybody's accounts on Monday. We don't send invoices out, they're under contract. They send it through it. Now with what subscription based does allow us to do, and I'll talk about a little bit later here, is that it allows us to actually perform at our best because the client has the option of canceling anytime they want. They can cancel next week, they can cancel the week after. We don't hold them to a year contract to year contract. We define the scope and as the scope changes, we have modified the agreement, but they can, it's basically a week to week type of contract. And when you think about it, the risk is what we might put all this work in the client leaves. Well, our average client stayed with us for about four and a half years. So I think that's pretty decent and especially as we continue growing, that distance gets further and further every year. We added probably another year that the client stays with us just because we add so many clients. Right now we're averaging about four and a half clients a month that we're bringing on as new clients. And our average client right now is about $89,000 a client. So it kind of gives you that general idea. Overall net margin on a client would be about 75%. So our contribution margin, 75% per client and our overall gross profit of our department now service line versus a company is right at about 50. It's about 45% right now. So about a little below the 50% mark. Bottom line, about 20%. So it kind of gives you the I just some ideas on what we do so that when you're thinking about this, this is definitely the way of the future. One caveat we did do is now that we're merged with Anders, Anders is based out of St. Louis, now we're kind of moved back into the hybrid environment. So we went fully remote in 2013. Now we're coming back into an office environment where our service line is still fully remote and it will continue to be that way. Whereas Anders has a traditional model in which the people come in the office now, do they come into the office? I'd say probably 50% of those folks even come to the office nowadays and they're working in kind of a hybrid type of environment themselves. But it creates just another layer of discussion. And really any of these points that I talk about are up. We can talk about any length throughout at the presentation today, but what I want do is I want to cover the role of the CFO, how we define it, how to get started, and then how to deliver the service. I want to teach again that how is the important part of that, how we always talk about tools, people and processes. And you really need all three of these to really work in harmony in order to scale a business. And so as we developed each one of these things, we look to try to figure out how can we make ourselves useless. And when you think about it, that's the way that you actually grow and scale as if you can delegate, learn to delegate and really kind of take that off your shoulders here. And as we go through, I'm going to at the bottom here, you'll notice here are the tools that we use. So the tools will be kind of included throughout the whole thing. So people ask, Hey, what's our tech sec? Well, it's right here. We're very vanilla with that one. We let everybody know what it is.
(06:33)
But when we look at people, the one thing mistake that we had initially is that we thought that all accountants could be advisors. And that's not true. Your best accountant might be your worst advisor, your worst advisor might be your best accountant. So it goes harm in hand in hand. So you have to find the right people and you have to develop a really solid hiring process to make sure you're identifying who fits into that role and who doesn't. Your onboarding process has to be great, and these are just general things that everybody knows, but when you're in a remote environment, you have to be very, very particular and intentional with everything that you do with your clients. Retention rates, our retention rates. How was our retention rates pre pandemic? Well, we were below 10%, so we had 90, 90% retention of our team, which is pretty solid 90, 95%, somewhere in that ballpark.
(07:27)
But what happened was that we didn't take into effect is when the pandemic hit, we were going normal. We'd been doing it for six, seven years beforehand. So it wasn't a big huge hit there. But what happened was, and we will talk about this, is that we got to a stage where the employees were, we actually have team retreats. So we had team retreats every six months and during that pandemic time, there was probably a period of18 employees that we hired within about an 18 month period. All those folks left when the pandemic was over. So we had a huge turnover at that point. And I say pandemic over I'd say at the end stage of that pandemic and we won't think, well, why did they happen? There's a couple different things. One is that people found out west coast, east coast, hey, we can get these folks from Summit at the time for a pretty cheap rate.
(08:17)
Let's give them a $30,000 bonus and boom, off they went. Another thing was is that they didn't have chance to bond with the remote environment. The bonding part is so important and I can't stress it more. We have a team retreat every six months. We spend a lot of money on those team retreats, about $3,000 a person. So you can count the number of people you have. We just got back from retreat in Scottsdale with the entire team and spent about a quarter of a million dollars for that retreat. A lot of money well worth it because what it does keeps that retention high. And once we found out that we started going back to the retreats, boy our retention rates jumped way high comparative to what it was. Churn rate was really low and we're back down below that 10% mark. So again, it was huge. Part of the deal is was the retention rate. And so team retreat's super important. You have to retain those people once you get it and it's super important with that because you have the advisory, you're looking for great advisory, you're looking for great teammates. And then the last thing I'd like to point out here is the people ops strategist. What is a people ops strategist? Well, it's a coach. We talk about coaches. Our team needs those coaches. So we actually have a coach that talks to our team, not on technical stuff, they don't know anything about accounting, but they're talking on the soft skills, how to deal with hard, difficult conversations with clients, difficult conversations with people. They're meeting with our team on a one basically once a month basis and continually trying to improve team, team morale. And it's just kind of an added benefit, but it was a huge thing we did about six years ago.
(09:48)
And I'd say probably one of the best things that we did over that learning process is having that strategic coach there, that people ops person delivering the strategy. So we go through the processes. Again, processes are super important. We use a click up as our process tool, procedure flow. We are Microsoft teams shops. We use all of that reach reporting, I'll talk about here in a little bit on the reporting side, but with the processes, we had to actually come up with a systematic process, something that can be repeatable. If you've got five CFOs delivering five different messages in five different ways with five different accounting people underneath them, it's super tough. Super tough to keep that and actually have that repeatable. So you've got to come up with the processes, you've got to document the processes, you got to create small videos of the processes, embed it into whatever software you decide to use, but it's got to be something that's repeatable.
(10:42)
Otherwise it'll be a really chaotic for your team. They'll be back and forth, not really not knowing what to do. And so processes are super important. But kind of getting to the role I mentioned the three different things. These buzzwords come out all the time. Consultant, coach, advisor, which one are the coach is the one I mentioned before. They're coaching the team up. They're coach is usually more on a personal level. They're the coach. The consultant is the person that comes in and talks like I'm talking with you, we don't have a relationship, I'm not helping you out. I'm just giving you broad general ideas. And the consultant, a lot of times tax people can be consultants when they don't truly advise if they're just simply doing the tax return. But then the advisor comes into play like Randy had mentioned, that's when the advisor comes in, helps with that with ERC credits, puts them on constant advice with it's whether it's tax strategies and so forth. The advisor when it comes to CFO practice, they're meeting with the client on a regular basis. They're that trusted advisor, they're the confidant that person's reaching out to at whatever time and say, Hey, I got this question for you. And it can be, and they're looking for that advice. And so usually the advisor has the power to make decisions for the client and that's where the VCFO comes into place is that advisor. When we talk about how to get started, there's three different things. We just didn't create the model to create the model. The first thing you've got to do when you're creating a virtual CFO practice or a cast practice or whatever that might be is identify the client that you want to work with and that client, you should know what the size of the client is For our clients, we don't work with anybody under a million dollars, so that's a bare minimum there. We don't work with anybody that's over like $50 million unless there's a real huge reason why we need to help that client or that client can't afford it or there's got to be an exception to that rule there in order to do it. We work with primarily service-based clients, what we like. It doesn't mean that that's what we have to do. We work with a lot of creative agencies, so our niche is creative agencies. So again, that's the focus. That's our marketing effort. We work towards that niche, but we'll take other service-based companies like architecture, construction, so forth, but they've got to be a great fit for it. So we've identified that niche and you've got to identify the niche that you would really want to identify as that client. The other thing is frequency. So frequency is, so when you're designing your idea, you want to figure out how often do I want to meet with my clients? We meet with our clients weekly. So we have a weekly meeting with our clients with that. That's about half of our clients. Half the other half we meet with monthly. We don't meet with anything outside of monthly, so we don't do quarterly or annually or anything like that. It's always either monthly or weekly. It's about a 50 50 split. So 50% of our clients like the weekly model, 50% like the monthly model, and then we price it accordingly. But you've got to know the frequency that you want to actually meet with those folks. And then you've got to define the scope. So how we define scope is it's simple. We've got three different buckets. So we've got what we call our transactional bucket and the names can be whatever. It could be red, green, yellow, whatever we call it transactional. And what that is, that's historically looking, so we're looking always in the past and the transactional bucket. So the financial statements we're looking at forecast, maybe some job costing, the traditional accounting stuff, we're looking in that bucket there. People don't come to us for that bucket. I'd say maybe 10% of the time we actually stick somebody in that bucket a year when they come to us. The next bucket is what we call controllership, and that's where we start looking forward. So we're still doing the compliance stuff a lot of times when we're doing the financial statements, but we take it one step further. We create a forecast, a dynamic forecast for the client, and we're actually looking forward there. So we're looking at, on a balance sheet forecast, we're looking at an income statement forecast. We're actually projecting out what's going to happen over the next three months, six months, nine months, two years, three years, 10 years, however long the client wants.
(14:24)
And that's where the forecast comes along. But we're only meeting with the client twice a month to do that. So we're meet with the client once to make sure that the revenue rec is properly put in place so that our KPIs are good and then we're meeting with the client to actually go through that financial statement, that forecast and meet with them and do some modeling there. The last bucket is the CFO bucket and what the CFO bucket does for us, it's kind of unlimited. We can do forecast, we do forecasting, we do modeling, we do risk management, we do profit sharing plans. Anything the client wants is in that bucket. And so there's no additional upcharges in that bucket. It is what it is. And so the client loves it because again, they can utilize us as they need us. And we find that clients, where do clients fall in the bucket? I'd say between 1 million and 2 million. They're looking at the traditional, not we don't, again, we don't get too many in that bucket. Controller is between one and 3 million. Once the client gets about 3 million in business, then they start flipping over to the CFO bucket. And I'd say anything over 5 million is primarily CFO clients. And so it ranges and you've got to kind of know what the range is, what your clients and how you want to spend that on there. But you want to define that scope. Now how does the cast 1.0 fit into that? So I just explained to the three different bucket levels. Also, I didn't talk about tax return levels. So tax returns is always an option that any one of those three levels can have.
(15:45)
So our transaction can have tax return added to it, our controller can have tax returns added to it, and our CFO can have tax returns added to it. So again, an additional a la carte type type thing, I'd say about 75 to 80% of our clients is through their taxes. The other thing would be cast 1.0, the transactional stuff, the bank reconciliations, the accounts payable, the accounts receivable. 10% of our clients have do have us do receivables, 10% have us do payroll management for them, 30% have us do the, or the payables 50% have we do the cash flow management for. So those are buckets that they can add in one of those three transactions, whether it's transactional control or CFO. So we're giving them the option of picking their own venture. And inside those buckets it's even better because they can then decide, hey, do we want to do payables and not receivables? Do they want us to do cash flow management? Not either the ones, do they just want us to do their bank accounts in there or that just simply put their financial statement together so the client has the control over their bucket. So I'm defining the scope for the client within that sales meeting. We'll talk about that here a little bit too. And with that, as we're defining that scope, everybody's ventures a little differently. There's not many clients that have the same exact venture. We give them a lot of different options. But it's important to understand those options because when the client wants to change or add services to it, they have that ability to do so and they can change that scope. So kind of going into the next part of it here, and as we go through, if you have any questions, feel free to raise your hand.
(17:16)
We'll get the mic over to you there. But we started focusing on the marketing side. As Amy had mentioned, marketing is hugely important because what it does, it just really increases your demand for the service. It eliminates all this, all the noise. And when I talk about the noise there, when clients come to us, it's very common for them to say, Jody, we're paying our accountant $10,000. It's a lot of money, but you know what, I'm going to make that move to you. I know you're a lot more expensive, you're $80,000, but you understand our industry. I I've heard that many, many, many times. Now, every one of you in this room could handle a creative agency, would be no different than an accounting firm, no different than any other service-based company. But again, they make that jump because they know that you understand them, you understand the vernacular, you understand what it takes to be in that market and that's where the important part of it comes into. So you can actually demand a much higher price than what you could with just being a generalist. And it's kind of funny because when we started specializing in an industries there, my business partners like, oh geez, we got to be generalists. People are going to turn so much money away because of that fact. And in reality, when we became niche based, we actually hockey sticked our revenue. We went from picking up about four clients a year, four to six a year thinking this is going to be hard to scale to about. Well, we picked up after we started focusing on the niche, it took about nine months of marketing to really get that niche to go. And then once we did, we picked up 11 clients in one month. It was like seven. It was like, holy shit, what's going on? You got to slow it down here. You can't service these clients. And we thought, what are we going to do to where now we pick up an average of about four to four and a half clients a month on that niche. So again, growing every, and again, it's adding every year. Last year was three to three and a half clients, now it's four to four and a half clients. So again, having that niche is really important and I can't stress that, stress it more. Can you have more than one niche? I think you can. And that's what Andrews thought of when they hired me, when they brought us on, Hey, can you do this in four other industries? I think you can absolutely have a thought leader to the industry. You surely can, if you have thought leaders and you market towards those industries, I think you can actually do the exact same thing. And that's the goal that I've got right now is to do that. And again, here's all the different tools that we use within our marketing. Okay, with the sales process, the sales process also is something that we had to do when we narrowed our niche and we actually worked remote because for the most part, I never actually go and I've never shake, I haven't shaken hands with half the people that more, probably more than half the people that I've we have as clients, even though that we onboard them, we do everything through Zoom, everything is within an hour and they get a quote right there on the call. And so we've got a one hour process. I recommend that streamlining the process, making it easy for the client so they know exactly what you're setting the tone. Here's what you're going to get once you become a client and here's what you're going to get as you go through. So we capture our leads, they everything's as much automated as possible.
(20:31)
We use Calendly so they can go hop directly on our calendars there. We've got different spots that they can move on to. We've got a rotation of who actually takes the call. So everything is done automatically on a lead capture basis there. If they send us an email, we get sent them a link with our Calendly and we put it on the calendar. So we never talk to somebody right off the cuff. So if they're calling in the office, we have them schedule an appointment with them and they pop right on. We want them again, show them busy, but also show them, hey, here's how we actually do business. And so they're going to pop on a Zoom call, not a telephone call, and we're kind of going through it. Consultation Is always one hour and a hundred percent, one hour. And then we walk through the client and we ask the client, all we're asking the probing questions, why are you here?
(21:15)
What's going on? What are you replacing? So we're asking a bunch of questions, letting them talk first and then we prescribe once we've understood the conversation there. So once we do that, we pull up what we have a calculator and everybody can have some sort of pricing calculator or something that they can actually pop right on screen and show the client exactly how you calculate their fees. They love it when you show a client how you can calculate their fees. It just shows transparency and again, it shows them what they're going to get when you become their virtual CFO provide services for them. And so at the end of the conversation, the client picks it kind of like Carvana, here's what I want. We talked about the different levels, we talked about all everything within there. And then once they do that, I'd say 10% of the clients say yes or no right there. Question
Audience Member 1 (22:01):
What do you use (Inaudible)
Jody Grunden (22:03):
Yeah, great question. So we use Excel. So we developed a pricing calculator on Excel to where all of our algorithms are built into it so that the client can actually say yes or no and boom, the prices shows up at the bottom there. So if they want tax services, boom, the price shows up. How many bank recs are we doing? Five, boom, it shows up. So we designed it so that anybody on that call can answer the questions there. We don't want them to have to go back and count how many transactions they've got or how many whatever. I know I've got three bank accounts and I know that one of them is operating accounts, so I know that there's one thing there. And so I'm marking a one in that column, whether they're paying bills, we let them decide the complexity of their bill payment system is, and we just ask them probing questions. Do you have a lot, lot of bills you pay? No, hardly any at all. Everything's done through credit cards. Oh, that's probably a low medium or highs. It's probably a low. So we let them actually dictate a little bit on the quoting software, what we do. I'd be happy to share that software with anybody here if you want it. Just go ahead and drop me a LinkedIn note and I'll be happy to forward you a copy of it. But it's pretty cool.
Audience Member 2 (23:08):
These conversations usually with the business owner or anyone?
Jody Grunden (23:10):
A hundred percent with the business owner, the person that can make the decision, we meet with the business owner with those conversations.
Audience Member 3 (23:17):
So how does the pricing break out between the three levels and then do you ever price the customer based on their size of 1 million?
Jody Grunden (23:24):
Yeah, So there's two things that we scale companies. So we look at one employee count, so they'll tell us, Hey, we've got 50 employees and the range are big. So like 40 to 50, 50 to 60, a hundred, so forth. Something that they're going to, again, no. So employee counts one thing. And then revenue size is the other thing. So we're going to provide different level of service for a million dollar company than we a $30 million company. So it scales based on revenue size, correct? Great question. We had another one over here. Okay, so once you see the pricing calculator, I think you'll like it there. And like I said, feel free to LinkedIn, me and J Grunden is my LinkedIn. It should be pretty easy to find what, so the engagement gets accepted. We find that our closing ratio is about 40% right now, between 35 to 40%. And it was at one point a lot higher and we had to get our prices high enough to where we brought it back down. And so that's important to understand too. We have a 10 million firm with 150 clients. That's not a bad ratio for clients to dollars. And I would highly recommend, I'd rather work with fewer clients, bigger dollars than a lot of clients with smaller dollars. So that was the methodology of the thought process that we took when we brought the clients in. And like I said, 35% to 40% our closing ratio average clients right around between 80, 85, somewhere in there. I don't know the exact dollar amount right now. And we've already closed this year, almost 2 million worth of client, 2 million worth of new business this year, just in the first few months is so how do we deliver our service? Any questions on the marketing or sales before we go delivery? Okay, so how do we deliver our clients? The onboarding is the really a crucial part and we actually have a separate team for onboarding. Question.
Audience Member 4 (25:16):
What did we found to be the most effective marketing?
Jody Grunden (25:19):
Content marketing. Okay, great question. So we do a ton and ton and ton of content marketing. So what does that mean? We write articles all the time. So we, we've blogged every day since 2007. Think about that, five days a week since 2007. We've also written many articles. I've written a few books. We do podcasts. Podcasts are great, pop on our YouTube channel. We've got tons of podcasts and we're super transparent. You can probably tell, we tell our story and talk about all this stuff on different podcasts. If you want to get bored and listen to me talk or whatever, feel free to pop on a YouTube channel for that. But a lot of content marketing over and over and over again. We continue to talk our message and we do it not only within the accounting industry. We want to basically be an evangelist for the accounting industry, but we do it in our verticals too. So we're got a podcast design just specifically for our verticals and then one for the accounting industry, industry in general. Great question.
(26:17)
Okay, so with the onboarding of new clients, one thing that we found and we over and over and over again is that accountants really suck at project management. So we have a project manager that actually does that now. So it took us a long time to figure it out. We have a project manager that actually comes in and we have actually three project managers now as many clients we onboard, but they're actually in charge of the process and making sure the onboarding goes through on a smooth basis. And so we tell our clients our onboarding is going to be about six to eight weeks, depending upon the complexity of the agreement once they, or whether it's virtual CFO or whether it's a controller. And then once they get in there, they talk to the client and they go through what the client's issues are, and they may find out what this is a little bit easier, your onboarding is probably going to take five weeks, or they may say that your books are a disaster. It's going to be about 12 weeks for onboarding. No matter what it is. We price the onboarding up front and we actually double that weekly fee that we're charging. So our weekly fee might be 1500 bucks a week. Throughout that onboarding process, whether it's six or eight weeks, we're going to double the fee for them. But we always cap it and say, no matter if it does take 12 weeks, we're only going to charge you for eight weeks. Want again, we're closing the deal. At the very beginning there, we set that double fee. So we have enough in the doubler there to cover, cover this onboarding team. So we actually have that project manager, then we have a CFO that's in charge of architecting the entire engagement. So they're setting up a forecast for them, they're helping out with payables, they're helping out with the strategy.
(27:47)
They're really kind of getting the tone of what's going on. We also have that CFO that's actually going to be assigned to the accounts also on the engagement. So we've got a three or four different individuals on the engagement of the tax person, the taxes involved, all the different folks that are on there. So it's important to be able to have that group there to show the client, Hey, here's again, here's all the folks that we're putting on this account. It's not a one person show, and we're actually going at it in a process that can actually be scalable. So when we host that kickoff process, it's important to kind of go through the entire thing. Again, we're establishing the communication methods. That's probably one of the most important things. How do we talk to each other? Do we talk through teams? Do we talk through Slack? Do they have a Slack account? Do we do email? Hopefully not because emails, email sucks. But so we go through and we try to get the communication platforms that we feel that everybody's on the same page with. We go through what we call our best practices, what we see other firms do, kind firms, whether it's construction or whatever that might be. And we don't make the client convert to that, but we talk about it and say, Hey, and get there. Okay, hey, would you be okay if we changed this billing platform from X to Z because we find it's a little bit easier and less errors or whatever that might be. But we're actually setting that tone within that onboarding process. The two tools that we, or actually the main tool we use in there is Smartsheet's, is what we use for onboarding. Again, we can go back and forth with clients with that one.
(29:13)
So once we get to the engagement here, then it's important to break out what we're actually going to talk about. You can't really kind of go into an engagement and saying, Hey, what's the weather today? We don't know what, what's on your mind? Let's talk about this. You've got to have a plan and going into it. And so we've been using what we call profit focused accounting for, oh geez, a long time since 2000, probably four in which we talk about these five areas. One's always cash. We talk about forecasting financial, which is basically your financial statements, your pipeline. So we actually get into the pipeline, especially for service-based companies. And then we actually talk about revenue rec and revenue rec kind of ties it all back together, making sure that our KPIs are in line because push pushing up dashboards for the clients so they can see their information on a regular basis here. So with cash, it's important to understand what do we mean by cash? We use a short-term cash flow as well as a long-term cash flow. Short-term cash flows over the next 13 weeks. So we're breaking down on a weekly basis, monthly basis or whatever that basis is, depending upon the engagement. We're talking about cash flow and kind of showing what their 13 week cashflow burn is. A great tool for that we found is cashflow tools by graph, it connects right with QBO, pretty nice, zero as well. And it's a really nice tool to be able to actually communicate that information. On the long-term basis. We're talking about more on forecasting. So we're talking about balance sheet and income forecasting over the next a longer period of time, whether that's a year, whether that's six months, and whether that's two or three years. The benefit of the long-term forecasting is that I can tell a client at any point during the year how much they're going to pay in tax based on where they're at today, as well as based with their forecast to do. And that's one of the huge benefits of having this is because at the end of the year, the client is never surprised at what their tax situations going to be like because talking about it every single month as we're going through this forecast, we're showing them what that soft tax planner is. We make it a more stronger tax planner in the third and fourth quarter by bringing all the rest of their stuff in outside of their business. But again, we're showing them, Hey, on a short term basis, here's what cash flow looks like on a long term basis. Here's what you're going to look like net income wise and balance sheet cash wise at the end of the year. Couple of the forecasting softwares that we use Plan Guru and Giraffe down for that.
Audience Member 5 (31:30):
You use Cashflow?
Jody Grunden (31:32):
Yeah. Cashflow Tools is designed for short term. So it's a 13 week. 13 week. Look, it's a really nice little tool. Breaks out a spreadsheet with inflows, outflows. We used to do it on Excel for the longest time. We had cash beginning inflows, outflows, cash ending, then it carried over the next time problem with Excel, it kept breaking on us or it just wasn't intuitive enough. And so Cashflow Tools allowed us to just bring everything in and actually put it in that similar type of format, but on a 13 week look, which makes it super nice. Now, I don't think they designed yet for any further than that, but with playing Guru and Giraffe, we're taking non-financial indicators. It's important to understand how to use a giraffe or a plan guru is that when we put this forecast together, it's never, Hey, we're going to increase things by 10% next year.
(32:23)
We never talk about that. We always talk about, Hey, you are a car repair shop. How many cars, repairs? How many cars did you have come in this month? Oh, 30. Okay, what are you expecting next month? 40. Okay, so 40 means that this is what the revenue's going to be like. What do you expect in the month after 30? Oh, because it's really icy. We're expecting 60 this month. So that's what we're talking about with clients because we're on their level, we're talking to them about what they actually can control. They can't control percentages, but they can control what they can control, the vehicles, labor hours, whatever that might be. So it's important to understand when you're breaking out the forecast and long-term basis, you actually are talking about stuff that they actually have control order.
Audience Member 7 (33:02):
So for the tax, are you just getting very granular with the tax planning, you just kind of putting your tax?
Jody Grunden (33:09):
Yeah, so we do a soft tax planner. Great question. So we do a soft tax planner from January. It's kind of funny, January through September. So again, here's what here's going to be paying soft tax planner based on hitting your forecasted numbers because we're looking at that and we're changing it every single month because super dynamic. And then in the fourth quarter, then we start taking in the rest stuff. We do hard tax planner, so we're taking in everything else that they might have plugging it in, and then we're giving them a nice planning tool so they see exactly, hey, if you hit your numbers here exactly, you're going to have based on what we anticipated, what that allows us to do throughout the year, save money up for the tax situation so that if they're having a gangbuster year and they're making their quarterly payments, well, a lot of times clients think, well, they're quarterly payments, all the payments need to make. Well, we know that's not true. So that we can say, Hey, we need to put a little extra in this tax savings account here. Build it up over a period of time to make that last quarter payment. We know your tax situation will be better this year.
Audience Member 7 (34:05):
Do you use the same tax revenue?
Jody Grunden (34:08):
Yeah, I think we use Access is the product that we're using right now. So cashflow, how often we talk about cashflow. We talk about cashflow every single week, every single month. So we're talking about it all the time. Cashflow is something that I would say it's about 60%. 50 to 60% of our clients have us do flow. And that's that 13 week look.
Audience Member 6 (34:33):
Sorry, just back up. Are you exporting, importing after reach for your dashboard?
Jody Grunden (34:38):
Yeah. She asked if we're exporting, if we with reach, are we exporting information into reach through the dashboard to create the dashboard? Yes, we are. So cashflow weekly, These four different things we're talking about on a weekly basis. So we're one week we might be talking about forecast the second week we might be talking about the financials. The third week we're talking about the pipeline, or maybe it's three of the two within a two week period and then a revenue rack at 1.2. So we're talking, we've got to set a set to find agenda for every single meeting. It's important to have that for clients so they understand who needs to be the meeting during the conversation because the owner doesn't have to be at all these meetings. And we might have the business development person there, marketing person. We might have other folks in there for different meetings with the Rev Net rec meeting, just simply making sure that they're not on a cash basis versus accrual. And we're showing some weird things and our KPIs are looking at it differently. So we want to make sure that we're getting good information there. So it's important to define the meetings and you could use whatever meetings you want, but just make sure that you're defining so the client knows exactly who needs to be in that meeting. So with the forecasting, again, as we mentioned, draft plan guru Excel, whatever you want to use, we use a combination of all. Goal setting is important when you're, and that should be defined within the actual onboarding meeting to find out what the actual owner's goals are. Some owner's goals are to sell the company in three years, five years, 10 years, never to sell it, lifestyle, a company, whatever that might be. So it's important to understand that CFO understands exactly what those goals are so that when you're identifying all the different drivers, the CFO's responsibility, the main responsibility is identify what the drivers are that drives the revenue and then the cost directly cost associated with it.
(36:19)
So their main bucket is that cost of sales that grows profit at the very top there. And then we need to examine the financial statements to make sure that everything that they put in the buckets there, whether it's marketing or facility or whatever, the different costs that we're breaking things out are for that the, it's actually in a appropriate manner. And so when we forecast, we don't just simply take an expense, divided it by 12 and every month gets their own thing. We'll break it out for some of those, you have to do that, but for the majority of them, we're actually breaking it out and say, Hey, you've got a conference expense here of a hundred thousand this month. You got nothing this month, nothing that month, 20 this month. So we're breaking it down and really dynamic. And then every month as things happen, we're always adjusting those numbers. So it's never a create it and leave it type scenario. It's adjust every single month. And so what we're going forward, we're adjusting those numbers and it's important that if a number falls off, it didn't get used, but we're going to know we're going to use it later, move it to the month that it needs to not now get reallocated to. And so again, you're creating that dynamic forecast for the client building logic, and then you're delivering the scenarios to them. Now, the important part about this is when you're delivering the scenarios to them, doing it right in front of the client, so they're seeing exactly what you're doing. So you're not doing this in, you're not asking client questions and coming back later with the answers. You're doing it right in front of the client, which is super important because you want them to be involved in this decision making process.
(37:43)
What you are as a CFO, you'd be that way if you were on staff. And that's the important part about as you're there too. So you're actually going through it and actually working with those scenarios. So it's important to understand how to use the software before you jump into a client mistake that some of our newer CFOs have made. And it's not a good experience. So make sure you understand how to use the software. So with the financial statement reporting, as we talked about, we're always constantly talking about metrics and those metrics are money in the bank. How much should a client have in the bank and what the cash conversion process is. I don't want to go through that formula. We just tell our clients between 10 to 30% of their revenue, if they're a service-based company, which equates about two to six months of expenses, production metrics, we identify what those production metrics are, we identify the financial metrics and we identify the pipeline metrics and we take all that information and we roll that up through reach reporting as the tool that we use to do the dashboarding. And so everything goes through direct. Some have direct links, some have we date, we actually data dump and then bring up. But everything gets identified so the client can see the exact metrics that we need to have them show, need to show them. So now what does the CFO talk about? And some of those meetings, well, they talk about the important things. Hey, here's where cash position's at. They'll talk about, they'll look at the metrics and see, hey, here's the metric that looks kind of out of whack. We need to focus on that. And they'll maybe bring that up and have a conversation with a client about that. They're not going to talk about every single line item on a financial statement. That's the most boring thing you could ever do to a client. Don't do that. You'll find out before the call what the important topics are where you see as an advisor that they may have an issue with. And then just ask questions. And questions will definitely spark interest in conversation and it really kind of helps the flow there. But making sure that each one of these are very dynamic and that your reports are not static.
Audience Member 1 (39:34):
So you bring up the dashboard in meeting just go over the metrics that you think.
Jody Grunden (39:43):
Yeah, exactly. So the question is, would I go through the metrics that are important? Bring that up in the dashboard during the meeting of the Yeah, absolutely. So during a typical meeting, our CFOs and financial analysts have already went through everything. They scrubbed the dashboards. The dashboards look great. They also have a financial statement that they put together that they never cover, but it's available if they ever want to present that to somebody else. And so with the dashboards, then we'll go through each of the different areas that we see an issue with and the ones we don't, Hey, cash is great. You have 20% cash reserve. We only thought 10, you're doing great with cash. If you have a distribution coming up shouldn't be a problem. We could probably take some money out of there if you need to. Tax situation right now, we don't have enough in our tax reserve. We need to build that up a little bit more, but here's where we think it's going to be at the end of the year. And then we look at our cash position over the next 12 months based on our forecasted number. It looks like you're going to be shorting cash in November. Do we have a plan for that or do we need to make some adjustments now to impact that November number? It could be, hey, the widgets that we're selling, we didn't have enough widget. We didn't sell as much many widgets last month as we thought. Is that going to be a reoccurring thing or is that just a one-off thing? Oh, it's a one-off thing. Next month happens. It's a one-off thing month after one-off thing. Well, I think it's a reoccurring thing. I think we need to make an adjustment for it. So again, you're the advisor kind of helping the client out. But yeah, so those dashboards are really crucial. Now, do we go through every single dashboard? Absolutely not. That would bore a client to death. We only go through the ones that we want to tell the story with. So it's important that we understand what the story is and that we can tell the story. The story that we come up with might not be the actual story that happens because that's where the interaction with the client is asking probing questions, pointing things out. And it's pretty nice the dynamic if you're doing it, the dynamics works really well with the client interacting. You're not talking 50, a hundred percent of the time. You and the client are talking equal amount of time to make sure that you've got the story and so that they have a deliverable at the end. Great question.
Audience Member 7 (41:40):
So how much time are your spending? So they have a weekly call with the client and they're having an hour. How much prep time goes into each weekly call?
Jody Grunden (41:47):
About an hour. Really? Yeah. So we, well, 15 clients, half of them are weekly, half them are monthly, or maybe it's 20 half are weekly, half are monthly. And there's usually an hour prep time that the CFO and the advisor are consulting back and forth because the one putting together the forecast, not the CFO and the CFO and the advisor are meeting together, Hey, here's what I find here. Why does this look weird? So they're having the conversation before they even meet with a client. So, and it's kind of a nice training ground for the advisor if that's where they want to be a CFO eventually, because the CFO's talking to them an important thing. Oh, direct material's down. Direct labor is way up. Why is that? We hired three more people and so forth, that discussions happening before the meeting so that when they go in there, they look like a tandem. And we always have two people in that meeting, the senior advisor and the advisor, or the CFO question.
Audience Member 3 (42:38):
Have you ever have a customer going on the wrong path?
Jody Grunden (42:43):
Oh, it happens all the time where customers going on the wrong path. And that's where the advisor has to come in and give tough love. And so if you see the client going on the wrong path, you know can't just be the yes person all the time, you've got to let them know, Hey, I think you're going on the wrong path. And it may take five months in a row telling them that before they actually understand that. Just don't tell them at once and think that they remembered five years from now when they come back and say, or five months from now, they come back and say, why didn't you tell me? It's like, well, I told you five months ago. It's like, tell them every single time. So it's important for you to, and that's why they hire you. They don't hire you to be a friend. They hire you to help them out. And so if you feel that they're going the wrong path, you got to let them know that.
Audience Member 1 (43:20):
Are you ever seen that right away, right after you cleaned up the book?
Jody Grunden (43:24):
Yeah. All the time. Yeah, because why their books are a disaster the way it is. So yeah, you're setting the groundwork in that onboarding process and say, Hey, here's where we're going to have to go forward and here's what we're going to have to do in order to do that. And the meetings that clients attend, all the meetings, they're there all the time. They want that feedback. And so a lot of times when they come to you, they're going to be wanting that anyways. And so they're not being forced to come to you to be to they, they're coming to you. They know they've identified an issue.
Audience Member 3 (43:47):
Are you adjusting onboarding for that?
Jody Grunden (43:50):
Yeah, so onboarding's pretty dynamic. So with the onboarding, we're finding out what those issues are and we're actually setting up the game plan to actually take that over. So that's why we put a little bit extra amount of people on it to be able to handle that process. Great question. Okay, we have like 15 more minutes. Five more minutes. Wonderful. Okay. So revenue rec, again, we talk about revenue rec. The one two items we don't want to make sure the client's not using is cash received in invoice. We want to make sure they're using an accrual, accrual based method in some manners that we can actually track when revenue is coming in. So their KPIs are working out well with the leadership team meeting. Again, here's how we do it. So our first month, we're doing the month end close in revenue rec. So we kind of tie that within that first week. The second week we're talking about business development pipeline kind of checking. Say, Hey, where's things going? We may combine that second, second week with also the forecasting and modeling weeks. We usually get the client their financials around the 10th of the month in that area, 10th of the 15th, depending upon when they want them. And each client's a little different. So that's an important question to ask during the onboarding. How quickly do you want your financials? Do you want to look at them on the 15th, the 10th, second or third week and so forth. And so week two and week three might be combined financial performance and then ad hoc projects. So during, these are the set meetings schedules that we have in the according of the week. And obviously if you have a four month or four week month, it's going to be condensed a little bit here. But we always have a week that we don't really have anything scheduled. And so the important part of that is it just brings up other questions and you're part of a leadership meeting. So we try each one of these things. We try to be part of their leadership meeting. We try not to have the meeting only for ourselves. And so what I mean by that is usually every Monday or Tuesday or whatever they're meeting regularly, we're part of that meeting and we're presenting the different areas during our section of the meeting. And so that's the important part. We're not hijacking them, we're actually being part of their discussion. So we're hearing what's going on in the other areas a lot of times. And it's kind of interesting hearing what's going on with the project managers when they're talking and you're like, wow, that's great here, what'd you think about this? And then you can kind of interact on your financial part. No different than if you were with them at a client meeting or actually on site. So ending up with the tips, own the meeting, own the schedule. So you're going to have control of that a hundred percent. So make sure that you create a schedule that works best for you. Meetings should only last 50 minutes. When you leave a meeting, you should never have homework, a meeting that don't tell them something, then come back. You're going to tell them something later. Get it resolved during the meeting. That's going to save a lot of time, especially if you're trying to scale your company there. Reoccurring meetings, we like to have them the same time every day. So if it's Monday at eight o'clock, it's Monday, eight o'clock until someone actually changes that. Clarifying the meeting purpose with titles. That's why we put pipeline meeting on it so they know what's in there. And then who should be in that meeting. And there should be an agenda agenda's, not really detailed agenda, but just an agenda. What you're going to talk about, cap capture the follow ups, if there are any follow ups in that meeting. And keep in mind the audience in that meeting can vary. So like I said, that you may have the owner in half those meetings. You may not have the CEO, whatever that might be. But just keep in mind that not everybody should be attending necessarily every meeting. question?
Audience Member 1 (47:07):
If you have to miss a meeting or whatever you charge week?
Jody Grunden (47:14):
Yeah, charging for that week. Yep. Because just an ongoing thing. It's not a week by week thing, it's week by week payments, but just an ongoing relationship. No difference if you took a week off to go on vacation and were an employee type scenario. Yep. Great question. So yeah, again, super important to make sure that you have all these different areas here. And again, these are, because we screwed up at some point is why they're important on here. Yeah. And it was more than one time we screwed up. Question.
Audience Member 7 (47:42):
May I ask, based on the structure that you have, so right now you've got CFO, you have the advisor, and then you have the support.
Jody Grunden (47:50):
Yeah.
Audience Member 7 (47:51):
Right. So how many, did you know what's your average business is? What is that? Or what is the ratio?
Jody Grunden (47:59):
The ratio, the cost ratio or how many people ratio? Okay, so we have 15 to 20 CFOs or clients to A CFO. And then we have about the same for the advisor. So the advisor and the C F O usually working hand in hand with similar clients. And so that's the advisory side of the equation. Then we've got the accounting side of the equation. So we've got it broken down in two different departments segments. So the accounting side is the traditional intern accountant, senior accountant, all the different ranks and levels you've got in there. And so depending upon what the client's needs are, they're, they're going to be reporting to the client, the accounting manager, and that's going to be the accounting side. So you could have a CFO and accounting manager and advisor all in the same client facing role if they had taxes.
(48:42)
And you might have a tax person as well associated with that. Half our CFOs no taxes, half of them don't. them couldn't even spell tax and it's so easy to spell XAT or something like that. But anyways, with that, the importance of that is that you have a defined role for everybody because what you don't want the CFO to be doing is being that all knowing and then also the all-knowing goes on vacation and that all-knowing is not there anymore or takes whatever off. So you want to be able to, I'm pretty solid. Well, I think I'm solid with tax, but I would never a answer a tax question in a, and if I was the V CFO in a meeting, I would bring the tax person to come in and ask that tax question. Simple reason is the next tax question, guess who they're going to reach out to instead of me, the tax person. The same thing with the accounting side. I would always defer to the accounting manager. How did that revenue rack get recorded there? So again, I'm not taking that up. They're actually asking the accounting manager. So I don't want to be the conduit for every conversation. Otherwise the CFO will go crazy with all the questions the clients might have, especially having 15 to 20 clients, we want to distribute that.
Audience Member 7 (49:47):
So will the meeting go on week?
Jody Grunden (49:50):
Yeah, Oh absolutely. They'll have the meeting without me. Yeah. The senior advisor will step in my place and conduct that meeting without me. The client already knows. The senior advisor, they've got a relationship. They're in the meetings already anyways. And so yeah, they'll hop in and do the meeting without me.
Audience Member 4 (50:04):
You're calling senior advisor, is that A CFO or the accounting CFO?
Jody Grunden (50:07):
No, CFO usually has between probably 10 plus years of experience and they're the person that actually is the relationship manager. They're the one talking to the client. There is where the buck stops. The senior advisors usually some between four to 12 years of experience that wants not to focus on paying bills, debits, credits, all that kind of stuff. They want to focus more on the forecasting and data analysts and all that kind of stuff they're going to be attached to with that CFO. And then the accounting people are just the accounting people, just what they say they're going to be overseeing. Maybe a bookkeeping team, whether that's onshore or offshore. And they're going to actually be the ones that actually are tying the financials up, closing the books out, and then delivering it to the CFO. Great question. Any other questions?
Audience Member 7 (50:57):
Focus on the financial aspect? No. Operational assessment. Operational advisory.
Jody Grunden (51:04):
It depends on the client, but yeah, mostly it's financial side. Yeah. If we can bring in somebody, we'll bring in somebody answering questions like that has operational, breaking it down, Hey, this is the operational side of it, that's more of a COO type role. And so we would actually refer that in or refer that person in if we have a connection with that client. So is this helpful? Okay. Well thank you very much.