jody grunden: subscription pricing is a game changer

get rid of the noise of hourly billing and create value.

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the disruptors
part 1 of a two-part episode.
with liz farr

for over a decade, jody grunden, cpa, has been doing things that many firms are just now discovering. summit virtual cfo (now part of anders) offers weekly subscription-based pricing as a fully remote firm, and their main offering is virtual cfo services or, in today’s parlance, cas 2.0 services. he’s also the one you might spot at accounting conferences in his signature tommy bahama shirts instead of a suit and tie, not quite what you might expect from the leader of a $10 million firm.

jody grunden, coming in part 2, june 27: be different. make more money
 exclusively for pro members. log in here or 2022世界杯足球排名 today.

grunden, the partner and co-founder of summit virtual cfo, got his start as a thought leader and virtual cfo (as well as his signature wardrobe) when he was invited to speak at a conference in new orleans. at the conference, he used an easel and pad of paper to walk a roomful of successful creative agency owners through the way they made money and how their decisions impacted the bottom line. he is the author of the best-selling building the virtual cfo firm in the cloud.

it dawned on him that “hey, becoming a thought leader is really the key to selling anything.” instead of trying to sell his firm’s services, he earned the audience’s respect by showing them how to be profitable.

grunden learned the importance of sharing best practices and collaborating with other firm owners by working with creative agencies. he says that accountants, more than most professionals, “all think they have their secret sauce in how to hire people, how to train people, and how to onboard clients.” the reality is that “nobody’s got a secret sauce. so let’s just help each other out, share information, and try to figure it out.”

in 2007, grunden’s firm created a subscription-based billing model to accompany the virtual cfo services “because we couldn’t afford to be the bank anymore.” that shift was “a game changer for us.” grunden hated the billing, discounting, and defending the billing process, and they were already meeting with their clients regularly, so “why couldn’t we just simply bill them the same dollar amount every single month?”

that change allowed him to “get rid of all this other noise and really work with the clients.” his clients love it “because they know what the bill is going to be,” and there are no surprises. his team loves it because they never have to talk about bills during their conversations with clients, “which makes for an even better, stronger relationship because we can then service the client better,” grunden says.

their pricing was initially by trial and error, continually increasing until he figured out how to make it “super profitable and beneficial for the client.” today, grunden aims to close about 30-40% of deals and maintain an average profit margin of 75% across all clients. they price their work so clients see the value and want to stay, with client retention around 90%. the average client stays 4.5 years, and many stay much longer.

for more insights, be sure to listen to part 2 of disruptors with jody grunden.

13 more takeaways from jody grunden

1. business owners mainly want to know two things from their monthly financials: what’s my bottom line and how much cash will i have in the future.
2. clients don’t want the suit and tie. business owners want accountants who speak their language and dress the way they dress. accountants need to talk in the language of their clients and not throw around accounting terminology that clients don’t understand and don’t care about.
3. becoming a thought leader is the key to selling anything, but it isn’t about selling your services, but about educating others. show your clients how to be profitable, how to price their services and how to accumulate cash for an emergency fund.
4. coming up with the right price may take experimenting. too low, and you have capacity problems. too high, and too few will accept the offer.
5. price your services so your firm is super profitable, and the clients love what you do. the highest prices should be on the services the clients value the most.
6. figure out your breakeven point on different services and mark up the price based on what clients value. low value services like bank recs get marked up a small amount, while virtual cfo services get marked up several multiples of the cost.
7. develop a relationship as a partner, not a vendor, with your clients.
8. consider giving your tax-only clients a discount if they pay by year-end for that year’s tax return.
9. track time, but don’t judge employees on it. use it as a training tool to see if a different tool or more training or can help them to be more efficient.
10. their weekly pricing is based on complexity and levels of service. if something unusual comes up, they may double the fee for a few months and later bring it back down.
11. some months and some clients will be more work, and some clients and some months will be less. use a running 12-months with clients to ensure clients are receiving the appropriate attention from the team and that they are paying an appropriate amount, so you are getting the target contribution margin across all clients.
12. content marketing has been their key to attracting national talent.
13. having two retreats every year for the entire team has proven essential for developing the relationships that help retain new people.

more about jody grunden

jody grunden, cpa, is an accounting visionary with over 20 years of experience. he has helped pioneer innovative changes within the industry, including introducing the first subscription-based billing method employed by an accounting firm. he is the author of two books, digital dollars and cents and building the virtual cfo firm in the cloud. jody and his partner adam hale co-founded summit cpa group (summit) in 2002, which merged with anders cpas + advisors (anders) in 2022. summit, now summit virtual cfo by anders, was the first fully distributed firm and the leading provider of virtual cfo services in north america. with this merger, summit brings to anders many benefits that will help continue his vision of changing the way people think about accounting, including strengthening the now “hybrid” work environment, building out the advisory side of anders with a virtual cfo service model, and implementing weekly subscription billing rather than hourly billing. his specialties include virtual cfo services, creative agencies, and remote team management.

transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)

liz farr  00:04
welcome to accounting disrupter conversations. i’m your host, liz farr from 卡塔尔世界杯常规比赛时间. and in this little series, i’m talking to owners of firms who are doing things differently than our fathers or grandfathers firms. my guest today is jody grunden, who should be well known to all 卡塔尔世界杯常规比赛时间 readers. he is the co founder and ceo of summit virtual cfo by anders, welcome to the show jody.

jody grunden  00:37
yeah, thanks, liz for having me.

liz farr  00:40
well, you know, i have followed your story for a couple of years. and, and i’m always hear something very interesting whenever you speak. so i think that listeners are gonna get something big out of this. and now in this in this one, we’re doing something a little different from usual, jody had so much to share that we’re going to split this into two conversations. so this is just part one of a two parter series. now, jody, just to start off, can you tell listeners a little bit about your firm, where you’re located? and what services you offer? things like that? yeah, sure.

jody grunden  01:25
i think that i can give you the short or the long version, either one,

liz farr  01:29
or the short one. okay, let’s get into the long one. okay, well,

jody grunden  01:32
we can do that. so basically, i started summit cpa back in 2002, as your traditional cpa firm, we did write up, work up tax work, accounting work, that sort of thing basically bootstrapped it, and realized pretty quickly that that’s not the direction i wanted to go. and so we created a concept called virtual cfo services. and we’ve been focusing on that ever since. so what we kind of abandon going after, you know, individual tax returns, that sort of thing, and really kind of focused on that the cfo service line had been doing that, like i said, since 2004. in 2007, we created a subscription based billing model, to go along with the cfo, the cfo services. and that was a that was basically a game changer for us, because we just couldn’t afford to be the bank anymore. and so it was one of those deals, we had to figure out something. and that worked out really well for us and continued on our on our road to about 2013 ish, or maybe 2011, we started focusing on a vertical versus just simply being a general for everyone. and so was the vertical meaning that we were already in vertical with cfo services for reading a, a line there, but we wanted to try a different one, which was an industry. so we had two different verticals, two different niches that we were focusing on. and when we did that, we went from picking up about four clients, four to six clients a year with the cfo practice, to about four to well, we picked up like 11 clients in one day and or one week, or one month, and then it was like six the next month, it was like it was like a ginormous amount of clients. and we, we’ve actually changed our pricing structure and everything so that we were picking up so many. and now we pick up about four to six clients a month at an average about $90,000 a client and have grown that dramatically. expanding snowball effect, we’ve doubled our size every three years on average. and so you can just kind of think the growth and so forth. and our closing ratio is about 40%. clients come to us really cool marketing technique we can talk about later. but with that we grew to about $10 million in revenue. partway through there, we thought, you know, hey, can we do this with a different type of service line? and, and so we thought, yeah, let’s try the 401k audit once we dabbled in that a little bit. and we went from one audit to 200 audits and within about five, six years, and we grew that equally big. and then and then oh, and in the meantime that we went completely virtual, so forgot to mention that about 10 years ago, we got rid of the office and went fully remote. and i can tell you a little about that later, too. but that worked out really well and allowed us to really recruit nationwide and international and so we really broadened our scope. we did the 401k audits throughout the us obviously, but the cfo service, which was our main main focus, about 80% of our revenue came from pretty much north america, so canada, united states and a little bit in central america, but for the most parts of the united states there. and we eventually then merged with a cpa firm out of st. louis called anders cpa advisors. and that’s a great story i’d love to talk about too. we built a rebuilt the firm to about $10 million, and then we merged into them with the goal that we’re going to do a 5x so five times revenues. that’s our goal for next year. well since the merger, to build up from 10 million to 50 million virtual cfo services only. and that’s what we’re tracking right now. so we’re on our way to doing that. and so that’s kind of the short version of the conversation. but we’ve done a lot of different things along the way, in order to put us in a position to, to sell the firm, a very profitable firm, by the way, and allow it to continue on throughout. you know, throughout my now i’m a partner at anders. so i’m an equity partner there and ahead of the virtual cfo service line. and so that’s what my role is right now kept our company intact. and we market the same way we do everything as part of a bigger anders cpa advisors top 100 firm.

liz farr  05:46
that’s amazing, you know, just listening to that, it’s like, you did all of that. and in only 20 years, it’s just amazing, i’m really impressed with everything that you’ve done, you know, and, and all the different things that you’ve done, that are so different. and so forward thinking. you know, from the beginning, you and your co founder, adam hale been operating in ways that today even seem kind of revolutionary, you know, you’re doing virtual cfo services, which is basically cas under a different name. you’re doing the value based, weekly billing, you’re remote, and you’ve got a big focus on technology. so let’s get let’s look at at the virtual cfo services, because i think that’s pretty fascinating. how did you get started with that? well,

jody grunden  06:49
it was one of those deals where we, and the first two years we started off with, like traditional tax and accounting and write-up type model. and, and, you know, i had left public accounting didn’t like it went to the corporate world didn’t like that either. and kind of was orphaned, right. and so i was like, well, what did we do now i got this free cpa license, i’ve got an accounting degree, and i hate public accounting. i hate corporate accounting. so the entrepreneur kind of took me took ahead, you know, i got an offer to run, operate a firm, for a regional firm, or an office regional firm. and i started doing that. and i thought, you know, what, i, i’d rather not be have a boss, you know, i’d rather him do this myself. and so i left that after about a year and started summit, right, right from there. and from there, hired adam, he is my first, my first employee, employee, number one, who became a partner four years later. and in the meantime, we thought, you know, hey, let’s let’s do things differently want to change the way that people thought about accounting, that was really the only way i was going to actually do this new entrepreneur vision because i, i had worked a lot hours in public accounting, and corporate world was pretty, it was pretty groundhog ish day, it was over and over, you do the same thing over and over, and he didn’t like, and that’s why i didn’t like about either. and i thought, you know, what, if we can build a firm that i wasn’t the main driver of the actual revenue, i mean, the billable hour, and that sort of thing, you know, maybe we can make this different. and then maybe we can also leverage people differently, so that they’re not working, you know, bazillion hours during tax season, or, you know, that type of thing. and so we wanted to really kind of do things differently. and with the we started off with, with doing it, just like everyone else does, hourly bill tax returns hourly bill, accounting stuff, and, and it quickly i realized, you know, hey, this is we can’t do it, this is not gonna work. and so i had to beat that head thing. how can we change things? so we thought, well, what if we met with our clients on a monthly basis, you know, with that allow us to do things throughout the year, so the tax seasons, not as heavy and we thought, yeah, i think that’s a great idea. and so we started actually converting or our bigger tax return clients that we had at the time, which big at that time was maybe five, or $6,000, and not a ton. and we converted them to a monthly, you know, a monthly touch in media with a monthly they love the idea they have this is great, they got an opportunity to meet with an accountant to kind of walk through stuff. and then we started really kind of talking about their financial statements and that sort of thing. and we saw that their eyes kind of glaze over pretty quickly, you can kind of see they either weren’t getting it or didn’t really care. and we thought, you know, hey, how can we make this more so they get more bang for the buck? and we thought, hey, let’s, let’s flip it around. let’s start talking about the future. let’s talk about how their financial statements really impact going forward. and, and we started doing that we started creating forecasts for the client, where initially it was cash flow. we’re talking about the next 13 weeks and kind of working through hey, here’s what your cash flow position looks like over the next 13 weeks. and here’s here are the inflows and outflows we weren’t talking accounting jargon, it was, you know, money coming in money going out and that’s pretty much what it was and, and they really saw that, hey, they really kind of saw they could actually start planning and we we did this on a monthly basis, a weekly basis, we did it every, you know, on a regular basis and regular cadence with the client, and they really, really, really enjoyed coming to the meetings. and so they asked for more. and when they asked for more, i was like, well, what is more mean? and, and we thought, you know, hey, let’s, let’s really build this forecasting out even bigger to where we’re not meeting with them on a regular monthly basis, unless we add some more more frequently. and then we can actually plan, you know, over a longer period of time we started offering forecasting over years, you know, it was like, hey, here’s what the next 12 months looks like, hey, here’s what the next three years looks like, oh, by the way, you would retire in four years, here’s what we need to build the firm your company up to, to the point where you can retire. and we really started going into really helping the client figure out how they can manage their, their company, how they can really work with their company. and it was kind of nice, because it got to a point where we became their number one person to go to, and they had issues, you know, hey, they’re like, i think i might let this person go, what do you think, you know, what does that look like? you know, what’s it look like in the forecast? or i might be losing this client? i don’t want to tell anybody, you know, at the firm, i don’t want that, you know, i don’t want to startle them. and what does that going to look like? what do i need to do? do i need to hire right away fire right away? what do i do? what are my options, and so it really gave the client the ability to take a look at what their what their current role was, and really kind of extrapolate that out and make solid decisions versus just like they used to do just kind of make a decision on a whim. and it might have six might have been a great decision, or it might not have and they learn from that. but instead, they’re actually built to make an informed decision based on true numbers and data. and that’s fully provided from the very beginning. and it’s kind of funny, because they call that cas what 2.0 right now, and so we’ve been doing that for a long time. and it wasn’t until, you know, we started trying to think, you know, how can we provide even more services, and some clients came to us and said, you know, hey, we’d love for it to do we want we want to do what you’re doing. but can you also do you know, the bookkeeping? can you do some, you know, bill paying or like, i guess so. so we we started incorporating the cas 1.0 services into our model, and started doing transactional work. so i’d say right now, even today, about a third of our clients, we actually do cas one point on which is built maybe some bill paying maybe some bank recs, maybe some invoicing payroll, you know, whatever that might be in kind of a hybrid type of situation, or how a car type situation, but 90% of our clients that we have, and in this goes to the very always in the back, we do probably half it was a meeting with them on a monthly basis on half our clients for meeting with on a weekly basis. and so they came to us not for the cas 1.0 stuff, but they came to us for the strategic leadership stuff, which we had called virtual cfo services back.

liz farr  12:48
that’s really amazing. and, you know, one thing that piqued my curiosity, is what kind of tech are you using for these forecasts? was this just excel at the beginning? yeah,

jody grunden  13:03
it was excel. and it broke all the time. it was horrible. it was one of those things that you think you got it down and you go into a meeting? and it’s like, oh, no, you would notice right away that there’s something wrong and it’s like, okay, now, what do i do. and so, we realized that that was not scalable. and even though in the other thing was that i would make a change in my forecasting model. and, and no one else in the firm would make the same change. and so all sudden, you know, i’ve got the right one, maybe they’ve got the wrong one not realizing it. and, and it was just, it was just super hard to scale it all. so we abandon that fairly quickly. we try all different kinds of forecasting models, some that you don’t, you’ve never heard of, because they don’t exist anymore. and, and currently using a couple right now and jirav and then play here are the two that we’ve settled on. and i’ve been using that for various clients throughout the process that’s made things a lot easier. because the software is designed so that you can make changes universally versus just simply on a one on one basis. but yeah, excel that was that was that was not a fun experience. and i’ll tell you what, when we went remote with it, it was even a worst experience. because back then, the technology wasn’t there really to go remote, especially with excel. so even excel was crashing all the time. so we’d be in the middle of a forecasting meeting with a client and excel up and then we crash and be like, oh my gosh, so yeah, excel definitely was not the way to go on a long term basis. it definitely served the needs. the short term was super easy to learn, super easy for people to use. but we knew that wasn’t if we wanted to scale the way we want to scale there is no way we could continue using it.

liz farr  14:39
yeah, you know, i had some experience in my career using excel for for projections, and it was just mind bogglingly complex and finding the places where it was broken was just and nightmare.

jody grunden  15:01
oh, and you didn’t know it until you knew it. that was the part. and that was that was tough. yeah. so so yeah, you’re right. it was it was very difficult to scale in. so we had to, you had to abandon, we had to kind of look for a different solution. and now there’s like many solutions out there, which is great. we didn’t have that opportunity back then. yeah,

liz farr  15:24
yeah. and i love the emphasis on helping the client and helping these small business owners make plans for the future. you know, i can think of so many cases where we could have really helped somebody if we had had the capacity and bandwidth to do that. so, you know, was it hard to sell people on this? yes or no?

jody grunden  15:53
initially? yeah, yes, or no. so it was not as difficult on the client, even though we’ve only had the clients for a couple of years, you know, the tax clients, you know, we developed a pretty solid relationship with, you know, we call them all the time, you know, working with their families or whatever. and some of the some of the folks were actually relatives, you know, how it is, when you start a business, you’re doing taxes for everyone right. and so there was a confidence there, you know, that they had in us already. and we didn’t, we didn’t really price it properly, but we priced it enough to figure it out. and that was the that was the key. and what i mean by that is, if we look back at those clients, way back then we never would pick them up today, because they’re just too small, right? but we didn’t have that we didn’t have the million dollar clients at the time. and so it was one of those things that we had to figure out, how can we make do with what we had and, and we, you know, we just basically said, you know, hey, here’s what we’re going to do. and for some of our clients who said, you know, what, we’re not going to charge you for the first six months, you’re just gonna go ahead and do this, see what you think. and then afterwards, if you like, what you’re seeing, then we’ll go ahead and price it. and and they said, that’s great. no problem, why would they? why would they not do it? you know, they’re getting more meaning and we’ll helping them out. and they wouldn’t have anyone that said, afterwards, no, we’re not interested, they all did it. you know, and, which was nice, which was super nice, because we had to make sure that what we’re offering really, you know, really met up to what we promised, you know, had the had, the offer had to equal the promise there. and, and it did in into probably to our detriment, it probably did too much. because we, we overserved the clients, you know, we overdid it, because we just didn’t have the format, we didn’t have the processes. and so it wasn’t until a lot later that we actually figure processes out that were able to, you know, put people into different buckets to make sure that we were profitable, and you know, the profits the key, right, and you want to you want to have a contribution margin, at least we do of about 75%. so, meaning that, you know, if we’ve got a, if we’re selling $100 deal, we want to make sure we only have $25 in costs into it, which generally goes down to about a 50% gross profit, which generally goes down about 25%, you know, net profit, you know, so it all trickles down with someone a fan of fashion that you’d find in a, an hourly billing model, but it’s done on a flat fee, bill model, and subscription base to that. and it just, it was just everything just worked out perfectly with it. so, so yes, to know, if i’m gonna go and try to talk somebody into it probably would be difficult, i’ve got to get, i’ve got to create that demand and create that want, create that interest, let them know what we do and how we do it. and from there, they saw it, and once one at once, one or two clients loved it, and we use, we definitely use that and leverage that with other, you know, other potential clients, you know, and it just kind of snowball effect. so again, it was something that nobody was doing back then it was a brand new concept. you know, when we said virtual cfo, they’re like, are you going to be real? you know, what’s that mean? you know, all you know, because they never, you know, it was something we just kind of made up. and you know, with that it was just one of those deals that we just took that that risk, we took that leap of faith and we’re hoping that we could provide something that clients would actually enjoy and like to do, versus you know, when when i worked in the corporate world, we got the financial statements every month. i remember i got i had a whole desk full and i just grabbed it and stuck it in there. very rarely do we look at it, you know, it was and that that was the funny part about it was is that i was when i was in the in the public accounting were like, oh, these are they going to be perfect, which they do. but i’m just gonna love this, they’re going to understand it, they’re going to read it. and when i got on the other side, it was like the opposite. it was like we couldn’t wait to you know, push it in for you know, because we were in a lot of times it was given to us so late that it didn’t help us anyways. so it was one of those deals. and so when we could actually provide that cfo level service on a timely basis, you know, a few days after the month closed for the client. it was it was night and day difference.

liz farr  19:56
that does make a huge difference. you know, and and just this speed of being able to do that just a couple of days, rather than, you know, well, it’s the 20th of the month, here’s your financials for last month. so oh,

jody grunden  20:15
yeah, back then the 20th month that have been like, perfect, that’d be great. because they were getting, you know, we got in like, a month, two months behind, you know, it was, it was comical, really, i don’t know, we got the financials, you know, now, if you can get it within five days, 10 days, at the end of the month, clients love it. and it’s not a, it’s actually it’s kind of expected. now, i think for the most part, they kind of expect that, when they have, i don’t know how you provide a service level like ours without getting it too quickly. because you just need that you need that information, and they need to be able to react on it.

liz farr  20:47
right. and they need to know where we ended up here. so they know what the starting point is, for all the plans for what they’re going to do tomorrow. yes, so vital. 100%.

jody grunden  21:02
because when we, when i talked about a forecast, wanna make sure everyone understands what that means. you know, what that means is that, you know, we create what we call a plan or budget at the beginning of the year, so and then november, december, whatever it is we create are like six months in advance. but anyways, it’s really, it’s just how do we think that year is going to look like, and it’s not taking last year and using the same numbers or multiplying it by 10%? or anything like that? you know, we don’t do that, you know, what we do is we try to determine what the non financial indicators are that actually trigger revenue, what causes the revenue? is it the amount of trucks that are go through the repair shop? is it the average dollar amount that it costs for those trucks? you know, there are other sources of revenue? do we sell trucks, in addition to that, you know, whatever that might be, you know, we create that based on that. and so we’ll create this this big thing and say, hey, this, this, you know, the, the owner thinks they’re gonna run five trucks a month, you know, consistently every month, here’s the average dollar amount. and so great, now we’ve got the revenue source, and then we figure the cost of sales based on that revenue source, what they what do they need to actually be able to handle that and the owner knows that and so we’re, we’re plotting it out and then, but the administrative and marketing, all that kind of stuff, that’s pretty basic, you know, it is what you try to match things up what happened last year versus this year, so that you’ve got it in the right month versus against spreading it out equally. and then you have your net income at the bottom now that we do the forecasts, not because when i say that net income is we want to see what the cash position is. and so we immediately flip it over to our balance sheet, and we’re looking at hey, what does december 31 look like? so it looks like we started with, you know, let’s say $100,000? in cash, we ended with 200,000. is that is that good enough? is that well that? well, that deal is what we need to do? and we look and say, oh, what about our debt? make sure our debts all paid down to everything a line of credit, our accounts payable receivables within line, how much did we take out throughout the year for three distributions. and so we’re looking at all of that and planning the entire year out. and so that’s the big, that’s, that’s the number one step of it. but the number two step of is in january, once actuals happen, boom, we move actuals in there, that’s going to automatically change everything that just happened in the forecast now, it changes not just the revenue, but it changes the balance sheet now, whether good or bad, now we’ve got a little bit extra cash in the bank, we go with that not enough, we go with that. but it looks like november, we’re going to be on the line of credit. are we okay with that, you know, it’s we know this way in advance. and the great part about it is it takes the surprise out of the anxiety out for the owner, which is which is really what causes the issues at the end of the year, we’re gonna call in and say, hey, you didn’t tell me you did this or should have done that. it’s because, you know, you weren’t, it wasn’t your fault when you did the tax return that you didn’t tell them to do so throughout the year, you know, although, right, as well as you get credit for any huge refund they might get, but you know, throughout the year, if you can plot it out, and they can see exactly where it out, and you’re so transparent with it and, and they can see every step by step and, and they know they’re gonna have this giant tax bill at the end of the year. and they also know they’re gonna have cash in the bank to be able to handle it and it just makes it so much easier for them to actually manage their business better. and so that’s that’s the idea of the of the forecast super dynamic, it changes every single month. so every single month we’re having a meeting showing them how what happened last year, and the nice thing about is going forward, it’s never fixed, you know, right, even though you’ve got the plan in there, you know, if they’re going if they’re running 10 trucks do that to to the business instead of five and let’s say the dollar amount was a lot different than what they had. well, well the conversation is hey, should we change our forecasts you know, hey, do we do we need to move it up to 10 you know, each month so we can kind of see what’s happening because because guess what, we’re gonna really base our hiring on how this how this hits and if if 10 is the way that way to go and we need to know that and then we’re also base taxes on that so we need to set a little more aside for taxes and so again, it gets the the business owner to thinking like a business owner versus just thinking about you know, hey how many trucks it basically doing their job which they’re always great at, but it really just kind of shows them and it teaches them business acumen as you’re going, going through the process. so they start reacting and making decisions based on, you know, solid financial data, again, as i mentioned, which is, which was just huge.

liz farr  25:12
that is huge. and i also really like how you relate everything to non financial drivers. because that’s, that’s really taking the cpa acumen and turning it into the business owners point of view. and that’s something that a lot of accountants don’t do. and we look at your we’ve got the numbers, you know, it was this much this year, we don’t know where that came from, or what created it. but we’re gonna guess, oh, maybe 20% more next year? yeah. right.

jody grunden  25:5
yeah, no, exactly. in a lot of people, you know, you know that they go wrong as they they accounts feel like they have to, or maybe it’s just by nature, whatever, they have to talk over the client, or they’ve got to make themselves look big, by throwing these big accounting terms in their client could care less about those things, you know, they want to know, you know, what my bottom line is, they want to know, you know, what i need to do how much cash we’re going to have, that’s what they that’s what they want to know. and that’s where it’s so important to get on their level and talk their talk as if, you know, hey, this is my best friend, we’re talking, you know, shop or teaching you how to run a run up, run a business successfully versus, again, trying to be that person and a big in a suit and tie, which is what accounting firms always had in the past when i worked there, and they did that, because they want to represent themselves as being super professional. and of course, they’ve got to talk that terminology. clients don’t want that they want you to be down to earth with them, they want you to dress the way they dress, they want you to be different, they don’t want to they don’t want you to suit and tie any longer, you know, they want you to be just like them.

liz farr  26:5
exactly, exactly. makes you so much more relatable. especially when you speak their language and in the terms that they understand, you know, you know, what would it be if we add another truck? you know, what would that cost? how do we finance it? we got to hire a driver to and we got to do all the maintenance, you know, what is the all of that entail? and do our clients? do our customers have the capacity where we could do that? do we need to market more, you know, i think it’s it’s really looking at their business from the point of view that they care about. but also you’re stepping back. and you’ve got to a slightly you’ve got the outsider’s point of view. so you can really show them the things that maybe they don’t see.

jody grunden  27:5
yeah, it was kind of funny, because when, when we created this virtual cfo model, it was one of those deals where i got an opportunity to speak at a conference where there is 30 business owners who happen to be creative agencies at the time web designers, web developers, all you know, all probably between a million and $20 million in revenue. so they and they did all your websites that you’ve seen before mbas and msnbc, cnn you name it, they did all websites, harvard, you name it. and when i went there, they what they liked about what they saw with me is that i i didn’t again look like their traditional accountant, so i didn’t dress i didn’t act it was one of those things that they appreciate it and so i got an opportunity to speak at the event. and a lot of things happened prior to the event that just really caused a lot of issues that pull my my my back my neck pulled a muscle my neck there and early move and it goes on you know a lot of leave and medication the doctor gave me and all that kind of stuff and and i was traveling to the event and my luggage was lost and so all the prescribed medicine i had for my neck and everything all my clothes gone ended up in a different state altogether. right and so my now what do i do and so i i hobbled over it while i was in new orleans i hobbled over to the fashion mall because which is literally right across the street from the hotel that we’re at and where the cruise ships come in and i got a bottle of aleve you know, i thought right away i gotta get some for my neck. it’s killing bottle water. you gotta leave paid for it. then i got a charger for my phone because was completely dead. and then i thought you know what, i’m going to i’m going to go over there and i gotta get some clothes and there was a tommy bahama store right across right across the lane there. and i thought you know, that’d be perfect. that’s a little different. and that’s the good again, that’s what they wanted something a little different. i went over and bought a few shirts and if you know how expensive they are. my wife i knew was going to kill me when i got home and bought a couple shirts, got some pants, and i went to pay for it. it’s kind of funny. i’ll i’ll never forget what to pay for my credit card got denied, like, well, this was strange. and so i got my other card out. and i paid for it. no problem. i thought that’s weird. and so then i went, like, okay, all my adventure getting my clothes right. and so i went to the shoe store next guy showed me i showed him what i had, he matched me with these really cool shoes. i thought this is awesome. i got to pay for that. and again, my credit card got denied again, my second one, oh, no, what’s going on here. so i got my debit card out and paid for that and went back and hotel got dressed up took the aleve all that kind of stuff and, and then i had this dinner pre dinner with a bunch of the folks at the, at the conference, right? and so, you know, being the finance person new to i thought, you know, i’m going to pay for their hors d’oeuvres you know, i want to i’m going to go ahead and pay for all these appetizers you know that the this is kind of cool. i it gives me an opportunity and everything. and so we go through that and, and i go to pay with my debit card, and that got denied. and so here i’m at a conference, i’m the finance guy, i turned to the person i’ve never met before. i’m like, hey, do you mind picking up my meal and all the appetizers by the way? i’m the finance guy talking tomorrow. what happened? he goes, he goes, oh, you don’t travel much do i go? no, no, honey, he goes, he goes, well, you got the credit freezes because of the travel. because you’re traveling. i’m like, just go back. and you’ll get them out. you’ll get all your cards, go back and call them and you’ll get all your cards release. oh my god. okay, so i went back and did that super embarrassed, though. i mean, here, here, here, here i am, you know, i should know this. and so the very first, when i was actually speaking, i was on the very first meeting, i really had no idea what i was going to talk about. and i started the story now, what happened to me and why i’m wearing a tommy bahama shirt and all this, they loved it, they laughed and thought was great. it was a great icebreaker for me. and then just dawned on me, i got the i got the easel board out and i’m like, you know, hey, i want to show you basically, what should everybody hear how you make money. and and i started off by saying, you know, hey, how many people here can raise their billing rate by $10? because everybody in there was was a hourly bill client or average person. and they’re like, oh, we could definitely raise $1.10 would you lose any clients now and then i went up to all the way to 100 people are dropping off and then eventually, you know, nobody was nobody’s doing that. okay, let’s not forget that. and so then i went through, and i then went ahead and started drawing it off, you know, one person, you know, at, you know, how many hours i went utilization, average bill rate, build it out. and i came up to you know, every everybody here should be able to bill about $200,000 a year, based on one person i go now take that with 17 producers, we got $3 million. i started off by talking about that 10%. but i also started talking on the $10. i also start talking about how much money they should have in the bank, which i am a firm believer should have at least two to six months of cash in the bank at all times. and easy math, that’s 10% of your annualized revenue. if you want to do the math, it works out pretty close to that. and so i’m like, hey, you need to have that? does anybody have it? and half the people had to have people didn’t? and so i’m like, okay, well, let’s, let’s look at this oh to $3 million. now what if we did by increasing the price by $10. and i went to the exact same formula. of course, i can’t calculate in my head. that’s a an issue that i have personally. so i had somebody do my calculator. so i hit the person in the front row has been my calculator, calculating it up recreating this up, it basically came out to $300,000 by increasing it by 10 bucks. and it was like, it was like, wow, everybody’s like, well, that was magic. and it was like, i just broke it down. and those simple forms, and showed them you know, hey, here’s the amount of money you need to have, which nobody knew. and then it was like, here’s how you make money, which really nobody that they knew what they didn’t know, they just priced it right. that was how that’s that’s how most of them got lucky. they did their pricing, right. and that was it. and i just showed them hey, here’s what one little change like that makes. it was kind of funny because the conversations went well. well, we’re gonna get this unlimited vacation and all that kind of stuff like hold on, let me show how much that costs. and so then we went through and we went through that vacation thing we found out that you know, by just adding you know taking time away you know, that cost him a lot of money to like it realize yeah, i think something’s gonna cost us money and and it was just one of those things it was it was really nice because it really brought perspective to to them and really kind of showed them you’re really here every all the decisions have a financial consequence to it. and if you’re not if you don’t have the money in the bank, you know, maybe here’s how you get the money in the bank, you know, so that that was the important part about it. and it just came back through hey, just being on their level and and really kind of showing them how to do it allowed them to, to go no go forward. and from that conversation, i continue to read aspects that speak in other events and they continue kind of god walking through that same story, same tommy bahama shirts, and you know, with that, just kind of being on their level and showing them how to make money and that’s really the thought leader is the bulb that popped in my head like you know, hey, becoming that thought leader is really the key of selling anything and because you’re educating you’re not selling and at no point did during that whole, that whole retreat that i talk about my services. i thought we i came in and showed him how to be profitable. and you know, did they did they? did they buy my services? no, not one of them. and but the funny part was, it was about four or five of those seminars later, all sudden, people from the first seminar in the second seminar started calling. and that’s when i told you it just really snowballed. it took about nine months of doing seminars like that, just teaching that we saw our very first client. and that’s when we saw a love. and like i said, in one month, it was like six or seven the next month, and it just continued on. it was because they saw the value in that thought leadership and had i tried to sell them or hard closed them or anything like that guarantee, none of those folks would call none of them at all they would have, they would have, it would have been a pride thing more than anything. and because they would have felt like they were sold. and it wasn’t it was, hey, let’s educate, and let’s teach you how to be successful. and with that, that earned their respect. and again, that’s, again, the thought leadership. and that’s really how it all circled around from being on their level, making it simple for the client and just kind of working through their issues, and making sure that you’ve got that forecast in place that really kind of helped make them solid decisions.

liz farr  36:11
yeah, and you really hit on something with being a thought leader and how that really pays off in the long run. maybe not right away, but in the long run. because i see that with some of the, the accountants that i write content for, they’re afraid of putting out all of their intellectual capital, because then somebody will take that information, and they’ll, they’ll, they’ll fix their own tax situation, they won’t need to call me and it’s like, well, if they’re going to do it themselves, you don’t want them as a client.

jody grunden  36:51
that’s exactly right. we’ve never had that that’s, and that’s a big, huge fear that a lot of people have. and, and i would say accountants, probably more so than, than really anyone it’s like, they all think they have their secret sauce, and how to hire people, how to train people how to onboard client, all that kind of stuff. and it’s like, you know, nobody’s got a secret sauce to let’s just help each other out, share information, try to figure it out. and that’s one thing i did learn from the creative agency space, because those folks, that’s pretty much what they did. they’re used to open source, that’s, you know, that they, they, you know, that that was the language that they build websites on web design, you know, they’re collaborating together as different teams, you know, heck, our first virtual cfo client was a creative agency. and they referred our second one to us, you know, it was like somebody that they hung out with, you know, at different events. so like, you know, hey, these guys are doing a great job, you got to gotta check them out to help you out with your finances. and it’s like, you know, if that’s one credibility that you would, you would definitely not see hardly ever in accounting. it’s like, well, what about geographic? you know, they’re gonna poach my clients in this area, or whatever. and it’s like, it’s just kind of silly. i least i think so i’ll just just share information help people out. and we’re completely open book. if you ever look me up our look our website up or look, our youtubes up, we share everything. so we they get us getting more people out there more companies out there, doing what we do in making it even more common than anything. again, that’s going to drive revenue for everyone. yeah, yeah. and that’s, that’s so true. you know, i’m gonna switch gears just a little bit and talk about pricing. now, subscription pricing is something that’s kind of new. and it’s getting a lot of press. thanks to ron baker’s new book. and there are quite a few other firms that are starting to do this. but you’ve been doing this for years. yeah. how did you how did you kind of land on that? you mentioned that the hourly based stuff wasn’t working. so how did you how did you figure out pricing? how did you do that? yeah, first of all, kudos to ron baker. ron’s doing a great job for the profession really leading the way with it really being an evangelist for subscription based billing and, and ron and i are really good friends. so you’re kind of putting it out there there. but it’s kind of funny, because i i read all the time. and so i, especially at the very beginning, it was book after book after book, then it was on tape, and then it was on cd that was on ipad, you know, it just kind of continued, i probably have the same book on four different mediums. i’ve listened to him all several times. and that was just a big thing. so i absorbed everything that people were thinking and saying. and so i would say that everything i’ve ever done, isn’t because i invented it it’s because i saw that i gave that wow, that that could really work with what we’re doing. and really kind of work, you know, improved on it. and so the concept that we had is that, hey, we want to we want to create this monthly concept with our clients, right? we want to meet with our clients on a regular monthly basis. and we want to we want to do that us. so the clients want to come back to us, they enjoy us. they enjoyed working with us and so forth. so how can we how can we do it without hat without scaring them away, because i know when i worked in public accounting before, it was like they, they came to us all the time. and then once they got the bill, we never saw them again. so that was a big issue. or even when even the first two years when i was building hourly, it was like, i felt like i was spending more time defending the bills, and i was, you know, doing their work for them, or, you know, supporting their work and, or, or i, i’d be so afraid of the bill, i’d start discounting and then they would get it and they’re like, i thought was a lot more expensive. it’s like cheese was more expensive but i discounted it. it was, it was just kind of that stupid, stupid back and forth thing. and i, i found a lot of time, as you know, it took time to create the bills and the invoices out there always late because i didn’t have time because working on clients. so it was kind of like a one of those cycles, i had to get out of it. i didn’t enjoy how to get out, i had to figure a way to get out of it. and when i when i decided, you know, hey, we’re gonna meet with clients on a regular basis. why couldn’t we just simply build them the same dollar amount every single month? and so then they think, well, they got certain months that you could do a lot more form in certain months. and i can do hardly any form like, yeah, that’s what i had to take as an owner, i had to decide, you know, hey, because that okay, am i okay with that? because if i’m not okay with that, then probably, i really believe the way to go and stay on it forever, and go through all the pain, pain, the button, the happy that you have with it. but if it wasn’t which, to me, i thought the sacrifices had to get rid of all this other noise, and really work with the clients. i think that’s great. so the key is, i’ve got to price it properly and price it right. and so i bought put myself out of business because i couldn’t price it right. so it was one of those things that one, i never thought anybody would pay for it. because i it was a new concept. so, you know, hey, if i charge $5,000 a year is someone gonna pay for it. and if i charge 10, no one’s gonna pay for it, then i charged 15, i thought i’m gonna lose all my clients, no one’s gonna buy this, like 20. and then it was just kept going up and up, i was closing just about every deal that i had. and i was like, i can’t take all these clients and, and i wasn’t profitable, because i’m spending all this time on it. and so it’s like, so my price continued to increase until i figured out really how to price it and how to really take it to where it was super profitable and beneficial for the client. so we weren’t accepting every engagement, we were losing 60% of our clients on purpose, you know, which was great. you know, that’s, that’s kind of nice. and we’re picking up 40%. because we know we can handle 40% based on on the team we’ve got in place. and so pricing was a big thing. and then it was like, well, now we got this monthly deal, you know, and we get this fixed price, we call it value based billing at the time. and, and the tree was based on what we thought the value was to the client, it was it was to the client, not the value that we’re giving the client, but you know, whatever replacement value was there? are they going to replace an accountant or they replace a bookkeeper? what are they going to replace, right? and so we started pricing it that way. and it wasn’t until we kind of the kind of the bulb went on, we had to kind of figure out how can we price this so that we’re super profitable, and clients that love it. and so we thought, you know, hey, first of all, we got to figure out what our breakeven point was. and so we we figured that out on all of our all of our different engagements we looked you up, because it because we track time, we still do track time, i’m heavy proponent of tracking time, i just don’t bill by the hour, super important to understand. so we figured our breakeven point. and then we looked and said, you know, hey, have these services, what does the client value the most, and, you know, reconciling a bank account, they could care less about they know you got to do it. so that had a low markup, you know, paying bills, low markup, but a high markup if the if it was a pain in the butt type project, you know, receivable, same thing, if a super easy, we didn’t like doing them. so we’ve marked it up a little higher. and then if it was hard, we marked it up even higher than that. and so we did it based on what we wanted to do one and what was you know, what we perceive as again, the value of the client. so we we did that with all of our services, and that was just the accounting side. and then we looked at and said you know what, people coming to us not for the cas 1.0 over the coming test for the cfo stuff. and so what we had what we did, we marked it up four times. so instead of the one time or whatever it was four times because we want to make sure that hey, this is what people come in to us, that’s the highest value that we have. if they scrapped everything else would it make sure that you know we weren’t the cheapest by any means we wanted to be one of them to be serious when they came to us because we were spending a ton of time with them. and you know with that we did that. and so we continue to do that we continue to look at our our average closing rate and so once we got it down to that 30 to 40%. we knew that hey, we’ve got a good good markup there and then for every year after that will actually every month we are always looking at our our profit margin per client, our contribution margin per client there and looking at only the averages, which is again tough because you get some clients that are going to be 50%. and some of them be 90%, we want our average to be 75%. and so long as our average is in there, i’m good with both sides. the other thing is, is that i always look at the lowest sign and say, you know, hey, what, what can we do to bring that up? and so now my focus is not adding hours or dollars to at my focus is, how can i bring that up as a technology that needs to bring it up? are they using? who’s on that case? are they using the right software? do they need training with that software as a client giving them too much? too much? do we price it in properly? when we did it, maybe it was even out of scope, we’re not pricing at all for that level of service. so we looked at everything. and we always looked at, hey, how can we bring that up to where it’s within that, you know, we say 65, to 65 to 80% range there and 75 being the ultimate goal. and you know, which worked out really well. and then when we did our price increases, it’s like, well, we didn’t just give a five or 10%, across the board increase, we looked at the clients that need that one matched up with our current way we start recruiting pricing clients, but to see if our 90% profit margin that client, we’re not going to increase that person’s price to the point where or maybe the 50%, or, you know, that type of thing, or maybe we talked to that person during price increase. so you know, hey, you’re going to increase by 20%, we can either go with that, or we can look at maybe pushing some things back on to your plate, and have you do to kind of help us, you know, have a win win for both of us, because it’s kind of walking through them, because again, we’re partners with them, we’re not vendor, but not that vendor relationship. and so that’s kind of the key there. and, you know, with that we give our, all of our cfos, the ability to change pricing, change scope at any time. and we’ve got the same pricing model. so it’s pretty consistent from one client to the next, based on what they’re picking in. and we stay up with it throughout the year. anytime they change. so cool, we’ll make that change. but then we’ll also do the the one time price increase, and then the year between, you know, five to 10%, sometimes more depending on last couple years even more because of inflation. but typically, that’s not the case, it’s usually about 5% increase from year to year. so all new clients get that and then we try to bring clients up, you know, accordingly based on, you know, margins that we currently have with them. but the key there was that we never send one invoice out, everything is automatically done. instead of on a monthly basis, we zap their account every single monday. so it’s really cool to get no accounts receivable never have well, never the first years we did have, we’ve never had accounts payable after that usually really, our accounts payable is negative, if you look at it, because we clicked over money on monday before the weekend starts. and we’ve been doing that for geez since probably 2006 2007. so a real long time. clients love it because they know what the bills is going to be they know what everything is gonna be there’s no surprises, and we love it. because you know, that’s never a conversation or cfos never have to talk about that, during their calls or conversation with the client. it’s not it’s a non issue, which is which is great. which makes that makes the makes even better, stronger relationship, because we can then serve as the client better. and so for those that are billing hourly out there, you know, i definitely recommend, you know, hey, let’s let’s try it, especially if your taxes, you know, why not look at last year’s tax returns and say, hey, what are we? what’s the average bill for this for client a over the last three years? well, let’s take that average. and let’s mark it up by five or 10%. and let’s push it out to mid november and say, you know, hey, we’re changing our structure. and you know, hey, here’s what the new the new model is, here’s what your price is going to be, you know what, if you pay it before the end of the year, we’ll give you a 5% discount. otherwise, it’s due on april 1 or april, right when you when you send your organizer and you’ll send a check in and you know, just kind of work with the client and really kind of set it up. and you’ll be surprised at how many clients will just jump to that right away. and when we did that with our, with our tax only clients, because we had, we’ve had the same tax only clients from the very beginning, we’ve really not added many at all. and they i’d say probably 80% of them pay us before november 30. for the for the tax the tax year coming up. and so which is kind of cool, you get a lot, you get a lot of money there, you got to pay taxes on it, but you’re gonna get all the money there. and then the rest of the 20% pay is before they actually get their return and in which, which is great. that’s how it should be not sure why a lot of folks decided to do it the other way, but it’s just so much easier. and our margins on tax turns are pretty solid. and so it’s not like we’re just giving tax returns away. i think our minimum tax rate is $1,500 for an individual, and then corporations like 5000. so and that’s just for you know, just because we don’t want to focus in that area. and if you want to if they want to come we’ll spend the time and spend the energy and and really make make sure they get a high class service when we do their stuff. it kind of just goes the same way the cfo with the tax treatment. we did the form. okay, audits, same the same way there.

liz farr  49:57
yeah, and i like how you’re tying seeing your prices to the level of service. because so many people say, well, you know, this value pricing, that’s just ripping the clients off, what i’m hearing from you is that the price increases give you that extra bandwidth and the capacity, so that then you can actually provide them more than just, well, here’s your financials for last month, can you give me the bank statement for this month, so that i can start working on it? you know, it’s not just a transaction, but you’re, you know, you feel more obliged, or you feel good about providing that extra service going the extra mile, you can.

jody grunden  50:55
yeah, and clients will stay with us right now, it’s an average of five, who are four and a half to five years with us. and we have no obligation to a client, so client could leave us tomorrow. it’s a weekly subscription base, right. and so it’s just like subscription, you can leave anytime you want, no different than netflix. so with that, they have the option of leaving anytime they want and surprising that our average clients with us four and a half years, and that increases every single year, as our clients have been with us even longer. and we bring new clients on because all these new clients are bringing ons that should be bringing it down. well, the nice thing about us are older clients are staying with us even longer, which is actually bringing the average stay with us up. and so that’s something we look at all the time, you know, hey, how long our clients actually sitting with us? and then we actually there’s a lot of things that we do is that we we pull our clients every single month and ask them how are we doing, just like delta does after everything, you know, we do the same thing, give us a one through five rating. and that’s all we asked for. and, and then if you want to leave a comment they can and it’s great, because our average rating is about four and a half out of five and we get, you know, shoots between 30% response rate 60% over the year response rate for you know all of our clients. and for those that we don’t we will give them a call or our cfo is always talking to me anyway. so it’s not like we were not talking to them. so they’re always talking to it’s just gives you that constant feedback on how we can course correct if we do make mistakes. and you know that pricing is a big part of it. but retentions even more important because you know, we don’t want to price it, they’d be with us for nine months, and they leave because they’re not seeing the value. we want them to stay with us for a long time. and that’s the big thing about subscription base is that we’re not looking at billable hours and all that kind of stuff anymore. that’s not not what we look at it all we look at how many clients we’re bringing on, what’s the average client, you know, what’s the frequency and bring you the clients on? what’s the retention rate, which is the biggest part about that we want to see above 90% all the time, knowing that we’re going to have 5% of our clients are going to leave because they sold because we got them to that end goal there where they were able to sell their company, which is great. it sucks for us, but great for them. and with that really great relationship, long relationship and great referral and everything. but you know, with that, you’ve got to kind of build that into your model there knowing that that’s actually part of it. and so, you know, it’s just one of those things that if you’ve got to if you create that model, you want to make sure you service that. now one thing i didn’t answer, and the answer was the billable hour thing because we we don’t go by the only time we actually build by the hour is when we get to the loi stage where a client is looking to sell their business, we will still build flat fee, but we build additional, you know, for the for the time put in because i we haven’t figured out how to actually price that out yet. and so we do build once they go to the loi, but outside of that we don’t. one thing is also is that we obviously we do track time, and we feel time is super important. now we don’t judge our employees on time at all. so they really have no clue what their average bill rate is, or their profitability or anything like that. they don’t, they have no clue what that is at all. we don’t want them to know, we don’t care, we we don’t want that to be a factor in how they perform. but we do use that as a training tool. so if we see that a client a or b is at a 50% margin, we need to get them up to 75% well, who’s working on it? what are they doing? how are they doing it? and so we can kind of dig into the time and kind of see that where we wouldn’t be able to before and so once we know that information is at a commonality with the tool they’re using, is there a commonality that with the employee? is it the customer you know, what is the reason for it, we can actually work and train and help that individual maybe look for a different tool maybe then i use the tool they’re supposed to be using and train them up on which we found that out. but you know, another thing is like you know, we we assume that a lot of things to you as you’re going through when i’m doing a cash flow. it takes me real quick i can get it done no big deal. i you know, but when we train a new person to do it, it was taking them four hours to do it. and sometimes it was taking them longer. i had no idea right we thought oh it’s super quick, i can do it quick. because i’m, you know, i’m jody, no, that’s surprising. and you realize that everybody’s a little different. and so what happened was, is that what we thought was taking a short period of time was taking a long period of time. and so we were pricing completely wrong, because we were almost losing money on it and not even realize. and once we actually dug into a few of the clients and saw that we’re like, oh, my gosh, we need to figure this out. and so what, what was the cause of that and how it worked? well, again, we were using excel templates, which we thought, you know, at that time, for the cash flow, without all we can do that’s fairly simple. we didn’t need something robust. and we realized right away, that wasn’t the case. and so we looked for a solution, found a solution that worked. and it took everybody’s time down from four hours a week, to one hour by one hour, one and a half hours a week, which we saved about two and a half hours, per client per week. and you can imagine that over 200 clients, that’s a lot a lot of money, or a lot of freed up time, at the end of the year, you know, to do and that was only because we track time, there would have been no other way that i can think of that to be able to determine that that was an issue, you know, within our pricing model without having that that ability to track time. so, again, time is important to us to track for that reason, for training reasons for educating our team for pricing our product, there’s a lot of reasons why we do we just never build a client by that, by that method.

liz farr  56:2
that’s, that’s, that’s an approach that i’m in favor of, you know, i’m i know, you know, ron baker says you shouldn’t track time at all. but i’ve heard an awful lot of people say that they use it for their internal metrics, just to make sure that they’re on task. right.

jody grunden  56:46
if it’s used the right way, i think i think it’s great. and i see your rounds going with that and everything. and, and you couldn’t do that very first successfully, let’s say if your entire team was a outsource team, which you know, the dollar amounts, very minimal, you’re not paying him as much money. you got a good markup there? well, yeah, you probably don’t need to track time for that. or if it was all contractors, where you mark them up, you know, x amount of dollars, and you knew that you had a specific margin for every kind, every dollar spending on the contractor. but you could do the same thing there. it really you are charged, you are tracking time, but just doing it differently. but with that, there are reasons, there are ways you could do that, and making effectively. but if if your labor force, i just don’t know how to do it without i just i have a hard time. i know how to do it, i have a hard time justifying why you wouldn’t want to track time because it’s just so valuable in other ways, outside of the billable hour.

liz farr  57:4
right. now, what do you do about scope creep? because that’s another argument i’ve heard against fixed price, fixed price billing. what do you do? when a project blows up?

jody grunden  58:0
yeah. so again, keep in mind that we’re going to have projects that blow up, you know, we’re gonna, we’re hoping that our goal is 75%, average across all projects, meaning that some are gonna blow up, and some are gonna be gold, you know, so you’re gonna have both, you’re gonna have both sides. so you got to accept that. now, the scope creep? how we define it. on the accounting side is pretty simple. right? so we’ve defined it as how many bank recs you have, how many credit card wrecks do you have? how many do you use spend management, expense management, us do payroll management, you want us to do bills, us invoice. so we’ve gotten broken down to those main categories. and so it’s pretty easy yes or no are doing or not doing it? fairly simple. it’s our job, then the price approximately. and then we put some levels of difficulty in a few of those, like, we’ll have, like, on our payables, we’ll have low, medium or high. and we’ll define that for the client. and we’ll have the ability to adjust that a little bit. as we go through the project, if we find out it’s not. and so there are some of those things that we can do on the accounting side. tax side is just simply based on revenue, or basically, we lost service based company. so we base it on revenue. and that’s it. so we’ve got the model, we know exactly if your x amount of revenue, here’s your tax return cost, pretty simple. with the cfo side, on the transactional level, which is our lowest level historical stuff, it is what it is. we don’t do forecasting, nothing like that one meeting a month, pretty simple. with the with the second level, we’re meeting twice a month, we’re doing forecasting with them. and we set up a separate meeting to do whatever so it could be, if we can do it within that meeting, great. if we can’t, there would be an extra cost for it. and that extra costs, we would figure out based on you know, you know, like if they wanted to do something out of scope, we would double our fee for the next few months and bring it back down. if it was out of scope in that controller level. and then the cfo level. there is nothing out of scope really. i mean, it’s you know, hey, here’s, here’s what you’ve got, you know, it’s it’s kind of like the netflix model or you can do it anything you want, and they can they can, we can help them out with a bonus plan, we can help them out with phantom stock options, there’s obviously certain things we can’t do, we’ll find the vendor that can do it. and, and, of course, they’ll pay for that vendor to do it will manage the bank accounts, if they need to hit a line of credit, we’ll look for your work for banks, for that line of credit, we’ll get everything put together and push it through for me. and so there’s a lot of things that we’ll do at that cfo level, that’s all encompassing, and you think, oh, geez, i can really get taken advantage of and it’s like, no, people aren’t going to take advantage of you. why would they take advantage of you? no, that’s not gonna happen, now won’t be some months that you’re spending more time than other months. absolutely. that’s just how that works. but over time, it’s going to all equal out. and that’s why we always look at running 12 months with all of our clients, just to see exactly where we’re at. we’ll look at the running 12 months, the last quarter and kind of compare, you know, hey, is that snowballing up? is there a reason why we’re spending more time as a reason why the, you know, the project, or the you know, the engagements not as profitable this month, there is a reason why super profitable, are we not spending enough time on it? you know, that’s another thing, right? are they are they, our team, just giving it a window, you know, window, look at it. and that’s it, and not really dedicating the time that we need for quality. and so, you know, those are all the different things that we look at. and scope creep typically is not an issue. if we define everything specifically, and then give our cfos the ability to, again, change the engagement, you know, when the client wants to so like if, if the bookkeeper leaves, and the client says, you know, hey, could you cover the bookkeeper for the next eight weeks? or maybe he or she’s on maternity or paternity leave, you know, great, we can do that. here’s, here’s the cost for that boom, we start off that week, here’s here’s the dollar amount for that week. and we we go on, they come back, you know, it goes back down to the normal fee, and it just works there. so you got to be really creative on on how to handle it just be acceptable that you know, you’re not going to be, you know, 75% contribution margin every single client just not going to hammer and doing it that way. but you want your average to do that. and that’s the that’s the goal.

liz farr  1:02:02
all right. right. yeah. sweet switch gears a little bit. one of the big challenges these days is talent. but you guys have been fully remote for a long time, for 10 years now. how has that helped you with attracting and retaining talent? i imagine a town’s

jody grunden  1:02:29
oh, yeah, for sure. yeah, our retention rate right now is really good. you know, with that the, you know, when we when we when we fully went remote, that was a big issue. how are we going to find employees now that we don’t have a brick and mortar office? how are we going to find employees, and you know, it because we wanted to look nationally, because we knew that, hey, if we wanted to really grow this, we had to, we had to we had to really service clients all across the nation, not just fort wayne, indiana, where we started. and so that was one of the first things we realized that, hey, how are we going to do it? and so with that going remote was a big part of it in so once for the remote, our talent pool that became the nation versus fort wayne, which was nice. and so how do you market to that? well, you continue, you do a lot of content marketing, and you’re really kind of put it out there, hey, here’s the benefits of working remote. you know, here’s, you know, all the different things that you can think of that would generate that. and so we started doing that. but what really helped us is that forbes recognized us, it was like in 2015, forbes recognized us as being one of the first basically, if not the first financial firm to ever go remote. and it was it was like instantly, we get like 2000 resumes a day. it was it was it was hilarious. because i was on a conference call with our i was on a call with a client. and we always have another person on the call with us. so we just have two people on a call. and that way the redundancy is there and that sort of thing. and also, my inbox starts just like dinging every second and a half, there’s like a new resume pop up that said, you got an application application. and i’m like, i don’t know how to turn it off. i’m like, i’m like it was distracting because we were everybody was seeing it. and i i’m not sure how to turn it off. from there. i know, i’ve never shared my main screen on a client. it was always my second screen. and, and afterwards, my employer was on there. she’s like, no, i think no worry about no, i have no idea. and then, and then we tracked it back. and it was we thought we were being spammed and it wasn’t it was because of that article that went through gave us a ton of opportunities or a lot of opportunities there. and then the next thing was how do you open that many trying to find the one and it was really tough. and so we had to set up procedures in place to really kind of fine tune them. and it seems pretty regularly that anytime we put out an applications we hire probably between eight to 10 folks a year pretty regularly that increases every year and we usually have somebody a button to see you know, within within probably, i’d say probably six weeks is probably a good lead time you know we actually put an ad out there, to the time that they’re actually interviewing go through the process, and then the, they start with us, and we have a pretty solid amount of candidates to look at. and, and a lot of that is just for the fact that the content marketing is out there, they know who we are, you know, that’s, that’s a big part of it. the thought leadership’s out there, they understand that and then they also know that, you know, we’ve been doing this for 10 years, so we kind of figured it out. during the pandemic, you know, that was a really bad time for everybody, you know, with with us, you know, we didn’t really miss a beat, you know, we, our clients were used to us meeting on a regular basis, going through the forecast, going through the modeling, or our team was used to it, that was not a big deal. the only difference for our team was this for the, for the folks that had kids, you know that instead of having kids at the daycare, and not have kids running around the background, you know, that type of thing that was really bothering but the clients didn’t care they understood, so it wasn’t a big deal. but it was just one of those things that allowed us to retainer, retainer people, because we go through that process and, and the, the pandemic really, you know, really, really kind of taught us a lesson on on the frequency that people really do need to feel and touch each other and be with each other beer hanging out. and with that, we always had team retreats once a year. and during the pandemic, unfortunately, our team retreat is scheduled for that may when they hit in march, we had to cancel it. so it was about a year and a half after that, we weren’t able to have a retreat, and we lost just about everybody that we hired during that pandemic period. again, a lot of the folks that we hired probably four months or so before that. and it’s just they just had didn’t have the connectivity, and that all the rest of the team had the other rest of the team, they were still there, they’re in place, no issues there. but all these new folks that we hired. and so from there, we just said, you know, hey, we’ve got to have at least two retreats a year and we spend a lot of money to have these retreats. but we’re, again, we’re fully remote. so we don’t have that facility cost was kind of a one on one exchange there. but with that, you know, we feel it’s really important to have that ability to hang out with each other. and so we spaced them out every six months, we have one of them in st. louis, where the anders headquarters that so they get the chance to hang out with folks that aren’t in the vco fo practice, which is pretty cool. and then the other one we we have somewhere off hands so that again, the folks that are in st. louis get an opportunity to kind of enjoy themselves without having to go home and that sort of thing. and so it makes it really nice. like we just got back from oh, shoot we got back from nashville went to las vegas, we’ve been indianapolis, we’ve been in california, our latest was in scottsdale, arizona, that was back in may. and, you know, the team just loves and we try to spend a lot of time on soft skills, you know how to how to work with how to you know how to handle difficult situations, how to work with people better how to you name and it’s more soft skill stuff, you bring in speakers to help out with that, we use a company called navigate the journey, which does a lot of the soft skill training for our team, you know, we go through and we, we pound out different issues that we have inside our team with our leadership group while we’re there. and so it’s a lot of great stuff that we talk about. so it’s not talking about tax code, or the new, you know, audit or whatever that is, we don’t talk about that stuff at all, it’s more more so in the soft skill stuff. now if you’ve got something really important to talk about, we are rolling out a new software, we’ve got everybody continuing my introduced at the time and, and spend an hour or two with that. but for the most part, it’s really kind of just team building. and it’s kind of funny, because, you know, when you go to these events, and if you’ve been to events in the past, you know, you’re like you go to you can’t wait and look at your clock and you finally get fired and boom, you’re out of there, you’re back to the hotel, or you’re out, you went to the scene or you did something away from everybody else with our team is not like that at all. so it’s so dynamic, it’s, you know, they they can’t wait to you know, after that after the event, they can’t wait for the happy hour, and then go out to dinner and hang out with each other. and then then they’re uptight, one o’clock in the morning, just hanging out, maybe at a bar, you know, maybe going to whatever, but it’s as as a group of individuals and, and we purposely do things like, you know, after after busy hour, maybe we’ll take a penthouse, we’ll rent it out, and have a bartender there and so that they can come back at a safe place and hang out with each other or, you know, something like that. or maybe we’ll take everybody to an event, you know, that there’s really a lot of things that we do to really make it make it work. and then the cool part about is we never start before 11 o’clock in the morning. and so i guess that gives them a chance to recover if they want to hop on client calls or whatever, they can do that during that timeframe. but again, when from eleven to five, their focus in the event and and people we have, you know, it’s probably 95% attendance rate at all of our events and people just love it, they can’t wait to go to it and and that’s how they develop that friendship that you have is which is one of the most important things that keep people is building that bond and that friendship and, and they they do build a lot of friendship during that time and a lot of great stories that come out with events that they remember and talk about and participate in so, yeah, that’s really important is that the rentention is super important. and, you know, especially in a remote environment, you’ve got to be deliberate on it. and that’s what we’ve been doing.

liz farr  1:10:12
yeah, it sounds like you guys have figured out really how to do this. and those events, you know, geez, i wish i worked for you guys a little bit. you know, my, my substitute for that is going to conferences, right, because that, that does a lot of the same.

jody grunden  1:10:35
but it’d be nice to have the whole team at a conference, and then that they would do the same thing. and we didn’t do that beginning to save on costs, we, we would stay an extra day to conference, you know, we’d have everybody go to, to engage, and then spend an extra day and hang out, or something of that nature, just so that we could, again, have that time together. but you know, as as they got bigger, we thought, you know, hey, let’s have them separate. and now we’re gonna separate and, and we give them we give everybody an education stipend, where they can spend money on their own education and, and do it that by their on their own time, whether they want to in person or whether they want to do it, you know, on online, we give them a budget, and they manage that. and so that that kind of took that away, but it also allowed them to hey, if they want to save up and five of them want to go to a esop conference in florida, more power to them, you know, they can do that they don’t even have to ask, you know, they just use what’s on their pecs card. and if i actually said debit card now, whether use on a debit card, and from there, you know, if it goes over, then it’s on their own dime. if it doesn’t, then they can keep it so they can budget their own money in time. and, and it gives them that autonomy, which is pretty cool.

liz farr  1:11:45
that’s, that’s great. it’s all about control.

jody grunden  1:11:50
yeah, people. yeah, control connection. yeah, people, you know, they and they’ve, we’ve always wanted it really, we’ve always wanted the autonomy to make decisions in the past. it just wasn’t, it just wasn’t you couldn’t do it. in 20 years ago, it was the other way around. employee employers made the decision for the employees. now employees and change the rules reverse where the employees want that autonomy to make decisions. and if they don’t believe it’s that simple job market allows them to do that. and that’s the important part about it. as you give people the autonomy, give people the tools to do what they want. show them the direction or the path in order to get where they want to go and make it feasible for them. they know that they’ll they’ll be with you for a long time. and if they if they aren’t, they’re just not the right person.

liz farr  1:12:40
that’s exactly right. well, i think that that’s probably a good place to wrap up this part of our discussion, jodi, i want listeners to know that this is only part one of at least a two parter we’ve been doing with jodi, because he’s got a lot to share with us. and i don’t want to have to squeeze him too much. and try to force him to be real, real concise. but in case people only listen to this part, where’s the best place for listeners to connect with you?

jody grunden  1:13:21
yeah, you can obviously, you can obviously google me, all over the place, youtube, my youtube channels, you can hop on there and get a lot of resources there. if you want to, if you want to connect for any reason, just feel free to reach out to me through email. that’s pretty simple. it’s jody at summit, cpa dotnet. did the dotnet because i didn’t want to pay for the.com. so it’s dotnet there. so jody has some a cpa dotnet. and or you can go on linkedin. and you know, i’m really everywhere. it’s really simple to find me if you want and i’d be happy to schedule any kind of like a constant one hour consultation or something like that. if anybody wants to take me up on that. that’s fine. just ask any questions that they might have. and i’d be happy to help out with that, too.

liz farr  1:14:03
well, thank you so much. and i want to thank you, thank you so much for sharing your ideas with the listeners here. and i can’t wait for part two of our call next month. sounds great. liz. thank you. thank you so much, jody.

posted on june 20, 2024