A lot of businesses today are moving from a Brick & Mortar headquarters to a completely virtual office with remote employees.
Tosha Anderson, one of our expert instructors, works 100% from home and wouldn’t have it any other way. She finds that she works a lot better from home and can be very productive when not having to worry about an office.
However, Tosha had an interesting situation where she actually grew her business at an EXTREMELY fast pace. Thus, she had to hire a lot of people very quickly.
And once you start hiring on a team, you have a much larger workload because of all of the onboarding, training, and retention efforts. Tosha at one point had to hire 3 accountants at one time and she found it very hard to train all of these accountants virtually.
So recently she moved to a hybrid model where some people work from home on various days and some prefer to work in the office full time.
And even though Tosha personally prefers to work virtually, she still struggles with the idea that a virtual office is better than a physical one.
In 2018, CNBC reported, “70% of people globally work remotely at least once a week.”
And we can’t ignore the fact that remote work is where the world is headed. It’s no longer considered mandatory for many companies to have an employee in the office from 9 am – 5 pm every single day.
But the question is, will this remote working model be good for client & staff retention?
It’s much easier to keep a current employee happy than to try to replace disgruntled employees.
But Tosha does still feel that having been in the industry for 15 years and being a seasoned CPA, her staff could learn a lot from her if they were all working together in an office. Even though her personal preference is to work from home, as her business continues to grow, she really feels like an office space environment is going to be the best fit for her company overall.
Tosha believes that there can be a lot lost by being virtual. Especially if you’re hiring people that are less experienced. Some people choose to hire contractors at a slightly higher rate because they tend to have more experience and they don’t need so much training or coaching.
So here’s what you have to look at…
Do you want to pay more for people that presumably are more experienced and independent, or do you want to pay less and know that you have a level of supervision that needs to be maintained on a daily basis?
With all of that being said, Tosha has a few guidelines that she believes virtual staff should abide by when working remotely:
1. Be very specific about the start and stop times so that there are clear expectations in place for daily tasks.
2. Reiterate that working from home does not mean electing whether or not you’d want to work at all. The absence of a physical space means that there is a greater need for communication and transparency in what staff members are doing. No babies crying, dogs barking, or other background noise that prevents you from taking a client call.
3. Have a workflow manager of some sort.
4. Have staff members log their hours per task.
5. Review files even haphazardly on a daily basis.
6. Review the audit log to make sure employees are logging in.
7. Call staff members randomly on Slack (or whatever internal communication software you use i.e. Skype) to make sure they are online and working. It’s important to create the element of accountability even if it seems like you’re micromanaging.
8. Staff needs to be camera-ready and their background needs to be professional. Don’t show up on our zoom call with wet shower hair, a soaking wet t-shirt, or your laundry piled up in the background. If a client needs to get on the phone with you and you look like that, what does that look like for the business?
What are your thoughts? Does having a physical office make it easier to manage a team? Or does allowing your staff to have the flexibility to work remote give them a greater sense of accountability and the ability to be more productive and get more work done?
If you’re interested in learning more about the training we offer here at AccountingTax.com, go ahead and get your FREE resource now: AccountingTax.com/brick&mortar
Once you reach $100,000 per year in sales, it is important to shift your focus to getting the right clients.
Nowhere is this truer than with a CFO business because of the ongoing relationships you will have with your clients. You are going to have to work with these people on a regular basis, and if they don’t know how to treat you and work on your terms, and if they can’t respect the scope and the boundaries you set, it will not make for a very pleasant engagement.
Your clients have to see the value and respect your pricing.
If your clients are texting you every 15 minutes because they think they are paying a lot of money and therefore should have an on-call CFO, you will not be able to grow a multimillion-dollar company with those kinds of clients.
Therefore, once you have grown to $100,000 per year in sales and are on steady ground, covering basic expenses, and are able to focus on the business full-time, you need to make your next priority working with the right clients.
This is where the importance of a niche comes in where you are offering one particular service and providing deep value.
You want to offer CFO services to a prospective client, and they have revenue but NO PROFIT.
The first thing we have to ask ourselves is WHY do they have $0 profit.
There are most likely multiple reasons why and that’s your role as their CFO…
TO FIGURE OUT “WHY”.
The most important thing you can offer them today in order to get them to sign up with you and work for you is answering the question WHY.
“Why is this happening? What is the reason?”
It’s your job as the CFO to understand this better than them.
And you might not be an expert in their specific niche, but here’s the good news…
There are very few reasons why this could be a problem and they’re limited to specific issues on the P&L statement.
And so we can ask very similar questions:
“Is it a problem with revenue?”
“Is it a problem with pricing?”
“Is it a problem with the volume?”
For example, if a company has $1.5 million in sales, it’s clearly not a massive volume issue.
But based on the company’s pricing, should they have higher pricing?
Are their pricing problems relative to competitors?
Have they made the decision that they’re just going to price as low as possible so they make it up on volume?
Those are some questions, but I always start with the top of the P&L statement.
So if I’m going to be work as a CFO with them and I’m going to help them increase profitability (which is really the main outcome of why they’re going to work with a CFO)…
Revenue is the very first thing we have to focus on.
And I’m really thinking about price and volume.
Then I’m thinking about the cost of sales.
Is it higher than it should be? Is it in line? Is it structurally high?
Is this something that we cannot change because it is based on negotiation with vendors, spoilage, etc.
Which then leads me to GROSS PROFIT.
And I’m going to compare this with the industry average in mind.
And I’m also going to compare this with industry potential, which is way more important.
If you’ve met one company that you know has been selling a similar product or the same competitive product that has a higher gross profit margin than them, instantly you know it’s possible to do better.
And you have to understand WHY.
And the good news is there are very few reasons related to revenue and cost of sales.
And then we’re also going to look at opex (operating expense).
And with opex we’re going to look at salaries, headcount, personal expenses, etc.
We’re also going to look at tax, post-tax, & net profit.
So the main value you can figure out for them is…
“Hey, this is your current situation. And right now, this is where you’re at. WHY IS THAT THE CASE & HOW CAN WE CHANGE IT?”
And once you understand why that’s the case, the people you’re going to be able to help the most are the ones that have a CURRENT SITUATION, and then they have a DESIRED SITUATION.
And it has to be a desired situation that is also POSSIBLE.
So it’s got to be a desired situation that’s within their realm of belief.
But you want to stretch their belief a little bit so that they feel challenged while still being able to see it happen.
You want to be on the borderline of something that’s actually possible in your mind and that you can transfer into their mind.
Now we have to ask…
Can we increase revenue? Is there something we can do?
And here’s the key thing…This is where a lot of people get hung up on the CFO services.
Note: You are not responsible for increasing revenue, increasing volume, or increasing price.
Cost to sales. Can we decrease that? Is there a way to do it?
Gross profit. Are we going to be able to increase that?
It is possible to decrease opex?
And we’re going to look at each of these and hopefully, we’ll have multiple on the tax side. Especially as the company grows because they don’t have a lot of profit right now.
But obviously this is A LOT of work and this is their business, so they have to take responsibility for this part.
But what exactly are they paying you for then?
They’re paying you to MAKE THE PLAN.
And then they’re also going to be paying you to go through and HOLD THEM ACCOUNTABLE.
So for example, that feeling that a lot of these business owners get when they think about going to talk to their CFO is like when you have to visit the dentist…
You don’t want to do it, but you don’t want to look like the Grim Reaper either.
And so you’re helping them make the plan on this call and then you’re going to help hold them accountable every single month.
You’re also going to give them the information they need so that they can UNDERSTAND RESULTS, INTERPRET THEM, & MAKE A PLAN OF ACTION TO GET IT DONE.
But guess what…
None of this is going to sell them.
The only thing that is going to sell them, and the reason I’m telling you all this is because you have to have CONVICTION IN YOURSELF that this is what you’re going to do and that you can honestly pull it off.
Because the only thing that is going to sell them and get them to pay you is talking about their CURRENT SITUATION and how you can solve their current problems.
You have to say to them, “You’re running a business that SHOULD be doing $XXX,XXX in profit, but you’re only doing $XX,XXX.”
This is the work you do as the CFO.
And the greater the gap in what they are currently profiting versus what they should be profiting, the greater your fee should be.
This is how your mind should be thinking because, to be honest, you are not going to be able to charge your client to send out some reports from Futrli if you’re not going to help them make more money.
And so you might not be at the stage where you know how to do this for somebody.
And that’s totally okay!
The thing you’ve got to understand is that this whole method here is probably 80% behavior and 20% accounting.
Most of it is about BEHAVIOR that is leading them to these margins.
Now there may be some structural things with some businesses or maybe they are just selling a bad product.
But you want to ask them about the things that they need to get more information on and the things they need to know in order to make better decisions so that their business will grow and become more profitable.
And after you go through all of the things that make people insecure on the call…
You end with…
“Based on everything we’ve talked about today, when we went through and talked about the pricing that you guys are doing relative to competitors, how you organize the cost of sales, and about hiring your broke brother-in-law…all of these things we would have fixed if we were working together…
Do you believe you can go from $XX,XXX to $XXX,XXX? If not, we shouldn’t work together.
So if you don’t think it’s possible, no need to work with me as a CFO.
But if you think it’s possible based on what we’ve talked about today and you want to partner with me to go through that process, I’d love to be there to support you.”
Understand that when you’re focusing on what value you are providing for the client, it is not necessarily tied to the fees you are charging and the time you’re going to invest.
It is absolutely possible that a service can take you a lot of time and provide little to no value to the client.
Some examples of this might be handling Accounts Payable and bill payment where a manual process might be in place or the client may want you to move them into an automated process.
Therefore, conducting a full IT implementation to make that transition can take a substantial amount of time and provide little value to the client.
Similarly, it is absolutely possible to provide a service that is high value to the client, but demands a relatively low time input.
When you think about CFO engagements, perhaps the most valuable thing you can give your client is the knowledge, advice, and analysis that you provide at the end of every month, quarter, or year.
Of course, it is critical that the financials are accurate.
Likewise, it is essential that the client actually understands the financials and they know how to read them.
However, the most important thing you can ever provide your client is a list of actions they need to take to achieve a transformation.
Here are some questions to ask yourself when evaluating your client’s engagement:
1. How do they increase their estimates to get better fees?
2. How do they re-negotiate pricing with existing clients to get more out of the deal?
3. How do they restructure their staffing and payroll to pay more reasonable rates?
4. How can they move people from contractor to W-2 without losing money on payroll tax and other benefits?
5. How do they restructure their sales incentives to be able to make better margins and encourage their salespeople to sell products that don’t just have a high price but have a high profit margin?
In a matter of minutes, all of these questions can be explored simply from seeing the financials.
That is really where some of the most valuable advice comes from — not in reconciling every transaction, processing bills, or invoicing clients, but rather in providing the analysis and knowing what to do.
“The most value lies not in doing things, but rather in knowing what to do.”
There are services all across the spectrum that you will choose from as a CFO and it is important to be intentional about your choice.
You may want to provide some substantive accounting because you want the relationship to have a strong foundation and you don’t want to be judged or evaluated simply based on your advice.
You are actually doing technical work as well, which is expected.
However, you want to make sure that you are constantly trying to move into services that provide more value to the client, but require less economic input from you.
Definition: Economic input is the time and money that it costs you to get the value for the client.
You always want to consider how much time and money it takes you personally as the business owner to get results for your client, be it the time it takes to acquire the information, get the reporting from the client, or give advice to the client.
To learn more about becoming a CFO, check out our CFO Templates below!
Want to know the biggest killer of any monthly accounting or CFO work?
After speaking with over 7,000 accountants, I’ve seen the area where these engagements go south and it all boils down to 1 word…
Resentment for the client starts to build when the accountant begins to realize the amount of work and effort that goes into the engagement that is eating away at the profits…
And even worse…
When they start to lose money.
So how do we fix this mess?
A couple of options I’ve seen successfully work for firm owners includes either:
1. Restructuring the Old Engagements…
2. Sell in New Clients with the Correct Pricing & Scope
If you move forward with option 2, you are able to get an understanding of how the engagement is progressing in order to determine if you can go back to your old engagements and restructure the pricing/scope.
But how do you go about identifying the right pricing structure for these types of engagements?
I define the scope of accounting & CFO services into 4 different tiers:
Unfortunately, when talking to most accountants, all 4 tiers are LUMPED together into 1 low price ranging from $100-$300/mo.
When the LOW & LUMPY priced clients start reaching out to those accountants, the resentment continues to build. And the longer you engage with questions and move out of scope, the expenses associated with the engagement continue to rise.
So I want to know…
What’s the bare minimum you could offer to get the client to pay xxx?
What are the 20% of activities that make up 80% of the value you offer to your clients?
And the problem is your tax prep fees are what we call LOW & LUMPY.
Low price and lots of difference services LUMPED together like these:
-Free Tax Assessment -Preparation -Planning -Implementation of Planning Strategies -Quarterly Estimates -All tax support questions for 12 months
And the truth is, most preparers are doing those (and not well) because their prices are so low, that they simply can’t get to it.That stops TODAY.
And here’s how we do it…
1. Make a list -Business Returns -Schedule Cs -Monthly Accounting Clients (not currently on tax prep) -Sort by revenue / income
2. Reach out to them (via text, email, Facebook message, or a phone call) -At least the top 25% by income
3. Provide more VALUE (tax planning, new return, accounting side..) -Mid year check-in -Update on the business this year and get…2019 & 2020 projections, 2019 estimated savings, 2020 estimated savings + every year going forward -Make them an offer using a tax planning sales script (if possible) -Price each of the services separately <– no more lumpy pricing!
That’s how Christina charged $9,000 for tax planning, then $3,000 for tax prep for a client that paid $650 the year before! And that didn’t even include implementation….
4. If no offer, let them know requests lists and updates will come out in January
5. Send those that didn’t take planning a price increase letter -If it’s a <$700 business… Double the fees -If it’s a <$400 individual… Double the fees
6. Selling the stand alone 1040 returns (NOT Schedule C) before tax season (if it’s over $50k revenue)
And if you do that, you’ll be like Melanie:
“This year we double fees on tax prep because I finally got it, thanks to Andrew. We lost 30% of our clients, but we increased our revenue by 40%. Thanks for giving me the courage to finally see my value.”
If you want the EXACT email script + tax planning script to upsell prep clients into $50,000-$30,000 engagements…