Mastering Your Financials: Insights from Virtual CFO Kristen Deese

When you look at a profit and loss statement, what are the top three things you look at?

Gross profit margin tells us whether or not our labor is in check and or our materials are in check or if one of them is out of whack. Because that sets us up for whether or not there's going to be enough funds to cover the overhead.

Welcome to the Home Service Hacks Podcast, the show for contractors who refuse to settle for average. Hosted by Bill Brown, licensed H Vac contractor, AI and automation expert and founder of service titan Hacks Community, each episode features real conversations with contractors, hack founders and innovators who are reshaping the trades from AI and automation to pricing, marketing and management. If it's working in the field, you'll hear about it here. Let's get into It, Start over then.

Welcome back to the Home Service Business Hacks Podcast. Today I'm joined by Kristen Deese from founder of Virtual CFO for the Trades. She's helped contractors all over the country get control of their numbers, fix broken financial systems and grow with clarity. If financials stress you out and you're not sure which KPIs actually matter for your team, this episode is for you. Kristen's all about making the numbers simple, actionable and aligned with real business growth. So let's get into it. Kristen, thanks for joining me today.

Thank you. That was an awesome intro.

Great, thanks. So could you tell me a little about your background and how you became the virtual CFO for contractors?

Yeah, sure. So about 20 years ago my husband and I started actually my husband started our first home service business and then a few months after that started I kind of got pulled into it. I think like a lot of entrepreneur couples do I have a background my accounting or my degree is in accounting. So it was pretty natural for me to take over the accounting like all the money side of things of our own business functioned in that role for a long time in our own businesses. And over the years we bought and sold and started and did all kinds of things in the in home services. And then a couple of years ago I worked myself out of the day to day so I was performing high functioning CFO stuff but I was not really in the day to day and it freed up my time and I started doing a lot of training for myself on coaching, adult learning, human behavior, all kinds of really cool things. And then that opened up the door to start doing some coaching and consulting work in home services. And then I had a former client reach out one day and say hey, I have this guy And I think he would be really good in the accounting department, but he doesn't know anything about accounting, and I don't know anything about accounting. Do you think you could train him? And as any good entrepreneur, I was like, sure, sounds good. Let's do it.

How hard could it be?

I know, of course. Yeah, we'll figure it out. And that's kind of how the virtual CFO started. And then it really morphed into the realization that a lot of business owners just don't feel comfortable with their numbers. They don't know what they're looking at. They don't know what reports to look at. Even if they are looking at the reports, they don't know what they say or what they mean. And they're running their business with their bank account and whether or not there's enough money to cover payroll. And so when that realization that the need for this virtual CFO service was out there, specifically in the trades, that's kind of how it took off.

That's awesome. It's great. That's a great backstory. And I like that you have that experience in home services. And I'll tell you, how helpful was it for you and your husband that you had that accounting background? Because so many contractors are. They don't have that. I mean, that's just not like a core competency of a technician. And most trades are started by good technicians. They. They're great at their craft. Then they say, I'm going to go do it on my own. And then the whole business revolves around these numbers, and you don't know them, and now you have to learn them as you're running a business. And that's. That's got to be really stressful. What do you think? Why do you so many contractors, like, avoid learning this or misunderstand their numbers? Why do they struggle with this so much?

I think it's because they don't. They lack the confidence in their own ability to be able to understand it. The accounting seems really threatening and confusing. Confusing, especially when we start using words like journal entries and debits and credits and balance sheets and. And all these things. And it does not have to be that complicated or that confusing. So I spent a lot of time just really simplifying the entire process and not talking to people like an accountant, talking to people like a business owner who needs to know their numbers. A lot of it is just the, well, I'm not an accountant. I'm never going to be an accountant. I don't want to be an accountant. So I'm not even going to look at it at all.

And that's death right there, right? Not looking at it.

Yeah, or they'll. Or what they'll do is they'll. There's a lot of education around the difference between a CPA and a cfo. So a lot of them will say, well, I have a cpa, but I don't feel like they're really giving me any guidance on anything. They're just either giving me my financials and saying, here you go, or they're prepping my taxes. There's some education that needs to come around the difference between a CPA that is hired to do taxes and a CFO who is looking at the same set of numbers as your CPA is, but is looking at them through a different lens. So most CPAs are looking at your numbers through the, through the lens of how do I reduce the net income Low enough so low that you don't have to pay as much taxes. Right. The virtual CFO or the CFO position in general is looking at operations and profitability and efficiencies and saying, how can we maximize your net income? And so we're looking at the same set of numbers, but with two totally different motives. And so therefore, we're looking at different pieces of the business. There's a lot of times that CPAs don't know what your cost of goods sold should be or even what should be in there. They're not necessarily equipped to be able to provide the feedback that, that the business owner is wanting from that standpoint. And so, you know, a business owner might get frustrated with the CPA that they're not getting enough information, but it might be that they're looking to the wrong person for that information.

I've experienced that personally, and I wish my CPA would have said, look, it's my responsibility to reduce your, your tax burden. That's what I do. You're going to want somebody like this to analyze your financials so that they make sense to you. But CPAs that I've talked to kind of play in that, in the game of coaching, but they are, they're not very helpful with it. I've. I've had CPAs every quarter that want to talk to me about how my business is going to. Is going, but they didn't have the knowledge, the industry knowledge of what, what we should measure and how we could get there. So I was relying on them to do a job that they maybe pretended that they could do, or I, I'm not. I'm not sure how they made the decision to advise me when really they shouldn't have. But I've had that happen with many CPAs, so it's interesting to hear that that's happened with a lot of other contractors as well. And so what you're really looking for is a cfo.

Yes. Yeah. So when you think about the accounting department in general can be compared to the technician track of growth. Right. So in the. On the technical side of things, we have the technician, and then we'll usually have like a lead tech, and then we'll have a service manager, and then we'll have a gm. Like, you can kind of see it go up the chart of. Not the chart of accounts, the organizational chart.

Yeah.

So in. So in the. In the accounting side of things, you kind of have a similar hierarchy there. And each position is really. We want to make sure that we're relying on each position for the appropriate things. So that hierarchy on the accounting side would be data entry, slash bookkeeping, which anybody can call themselves a bookkeeper. There is no special certification or anything for that.

You're not kidding. You're not kidding.

So it's definitely very data entry heavy. Bookkeeping is data entry heavy. Then we have a controller. So the controller is. Their main responsibility is ensuring accuracy in the data entry, preparing the reports. It's. It's still pretty data entry, but it's more of a higher level. We're overseeing a bigger process. Still very tactical, though. The next step then is the cfo. Most people will have some sort of bookkeeping CFO or bookkeeping controller in place, whether it's internal or external. They may be relying on those positions for that strategic CFO thing, but. But they might not necessarily be getting it. So. But it's very much that, you know, tech lead, tech, service manager, bookkeeper, controller, cfo. It's a very similar comparison there. Okay.

So for contractors who are just starting out, you know, they're going to. For me, I can only really. It's easy. Easiest for me to draw from my own experience. But I hired a external bookkeeper early on. So first. When I first started, I did it myself, and it was very tedious, but it was accurate. And I knew I had went to school and I had some accounting courses and bookkeeping courses. So it was pretty easy for me. When I handed it off to a bookkeeper, just as you said, anybody could call themselves a bookkeeper, they messed it up so bad. And it wasn't. It was like a botched H Vac installation. I had to Go back and fix the books. And so I went back and fixed the books, hired another bookkeeper. That person messed it up. And this was a cycle that lasted multiple times before I found a really good bookkeeper. I can't believe how long it took me to find one. So if you're a contractor and you're looking for a bookkeeper, how do you find that? Because it seems to me like you need that first before in order for you to be able to do your job right, you're going to need these accurate books. How do we find that person?

So. Well, the virtual CFO provides bookkeeping. But. But here's, here's what we're looking for in terms of what we consider good bookkeeping in our industry. So there is cash, there's cash basis accounting, and there's accrual basis accounting. And without getting too theoretical here, most bookkeepers will do their job on cash basis, which just essentially means that they are taking the transactions that are running in and out of your bank account all month and in and out of your credit card statements all month. And they're just duplicating that into QuickBooks. Accrual is more involved than that. Accrual is identifying the difference between an expense where we used a card and it's what was a point of sale purchase from a bill from a vendor, so we might buy from a supplier, and then we pay them 30 days later. There's a difference in the way that we need to be handling that in our QuickBooks. Similarly, with revenue, we're not counting revenue when we get the money. We're counting revenue when the job is done. And there are additional steps and things that need to happen within the bookkeeping in order to get all of that right. The other thing that we want our bookkeeper to do is departmentalize our numbers so that we can see a gross profit margin between service and install. If we are in H vac, it's not quite as easy to do that on plumbing. Sometimes plumbing is just easier as plumbing. But maybe if you do drain cleaning and plumbing service.

Right.

And so, so we want to be able to utilize classes to be able to get to gross profit margin by department. So it's just. It's just more involved. So if you can find a bookkeeper who is going to do accrual basis accounting for you, who is going to utilize your classes in a way that you can get a gross profit margin by department and is going to do all of that by around the 10th of the month, assuming that they have all the information that they need it. Good, that's good. Obviously the, it's because it's just more time intensive. There's going to be a price difference. So if you have somebody who says, oh yeah, I'm going to do all of that and it's going to cost you $200 a month, that's a flag, right?

Right. What can a contractor kind of expect to pay? Let's say you're just, you're just starting out maybe a couple years in, you do a half a million dollars in annual revenue as a, as a residential heating and air conditioning contractor. What kind of budget should they have for a book of this kind of bookkeeping service on a monthly basis?

So I would say if you're a couple years in, I hope you're greater than a half a million dollars in revenue, but let's just pretend that you are.

That shows how old I, when I started, gosh, I really, I just felt aged right there when I started. A half a million dollars was a lot.

It was a lot, a lot more.

Than it was today. So let's just say, all right, you're, you're three weeks in and you're a half a million dollars in revenue and, and you're struggling because a package of hot dogs is $16 now.

Right.

So you're going and you're ready, you're ready to hire your first bookkeeper, which hopefully is day one. Unless you do it, can do it yourself. Right.

But yeah, for sure.

What's kind of the best, the going rate, the budget that you.

For a company that size, I might say, because there's not a ton of transactions that are happening in a company that size. So you know, eight to eight hundred to a thousand dollars maybe you're going to find a lot of price range differences in these services. A lot of times what will happen is bookkeepers, the ones who are doing like the accrual, the full out stuff, a lot of times what they'll do is base the price based on like the number of accounts that you have. So if you are, let's say you're a profit first, you want to follow profit first. And profit first suggests that you have like six bank accounts or something. Because you have so many bank accounts, it's that many more bank reconciliations that need to be done. It's that many more items that need to be watched throughout the month. And so there's a lot of times that bookkeepers will price based on the number of accounts you have and, or a rough number of the number of Transactions that are being dealt with on a monthly basis between entering bills and entering expenses and deposits in the whole nine yards. So you will find a range of, of pricing for, for bookkeeping. A lot of times what'll happen is we will see a cusp in the size of the growth where it makes more sense to be pulling that stuff in house instead of having a third party do it. And usually that's like 3 million a year in revenue. When you kind of get to that point, it's more beneficial to have that in house because if you have a person in house that's doing that, there's also other things that they can be doing. Because while the accounting tasks might not be full time, there's other things that that personality type might be really good at that other people in the business don't really like to do. Like warranties, permits, HR stuff, All the things that people don't really love to do. The accounting person has the personality for that.

They could probably do good at purchasing and stuff like that.

Yeah, maybe some inventory stuff. Yeah, it's a, it's a very, it's a specific characteristic. It's attention to detail. It's a rule follower. It's like, you know, you can build out the, the ideal profile of somebody who would be good at the accounting stuff. And there's a handful of other things in the business that they would also be good at. We do not want to have them be a CSR part time. Right. Like that's a different personality. But there are things in the business that they could do. So you kind of get to a point where you're like, all right, this, I'm paying, you know, two or $3,000 a month for bookkeeping. If I were to bring that in house, what else could I get? That it would cost me a little bit more to have a full time person. But what am I, what else am I getting for that too? So.

Yeah, that makes sense. So what's your go to method for making these financial reports feel less overwhelming for contractors?

We do a review every month. Every single month. When the, when the books are done and the numbers are ready, we take an hour and a half and we go down through the three main reports, which is the P and L, the balance sheet and the statement of cash flows. Most people are pretty familiar with their P and L. That's the one that they focus in on the most. We definitely look at that. We look at it in a variety of different ways, filter it in a few different ways so that we can see all Kinds of really cool information from it. And then we also spend time looking at talking about understanding the balance sheet. What it tells us what a bank would be looking for if you're trying to get a loan, what PE would be looking for if you're trying to sell. The other one is the statement of cash flows, which almost everybody that I talk to is like, I didn't even know that report existed, let alone look at it.

It is wild though that the, of the three financial statements that the cash flow statement is like completely ignored. The balance sheet is something you open up and you're like, what is this? And the P and L is just something it's so much easier to get comfortable with right away, you know. Well, it just makes more sense.

Yeah, you can. And it makes more sense. It's more logical. You can kind of see, you can start to see faster how what you're doing in operations affects the P and L. A lot of times, especially when we first get started, a client will say about their balance sheet, well, I mean, there's so many things on here that aren't right and I don't even know how to fix them. Like that hasn't been a thing for seven years or whatever.

Right.

And, and they're like, we just don't know what to do. So we don't do anything until they go to want to do something with the balance sheet like get a loan or you know, if they're being seriously looked at to be purchased, then, then it becomes important. But that statement of cash flow helps them to connect the things that jump right over the P and L that never show up on the P and L but are affecting cash. So a lot of times you'll be like, oh, Well, I have 10% net income on my P L, but I don't feel like I have any money in the bank and I'm still struggling to figure out how to make payroll. Well, we can go right into that cash flow statement and usually pinpoint what's happening.

Yeah, that makes sense.

Yeah.

I have not looked at, I did not look at that cash flow statement as much as the other two. But as the owner was funny because I felt like I could always feel what that statement was going to show. It was like, it was like a. It was just a validation. Of what? Of reality, you know, so. No, go ahead.

Well, I was going to say the cash flow statement will give you to a certain extent what your real break even point is. Because break even point is not always going to be $0. If you are A company that has a lot of vehicles on loan, you're taking a lot of distributions out of company. All of the principal payments and the distributions from the company do not show up as an expense on the P and L. So let's say that you've got a whole fleet of vehicles that are on loan and each month it's $15,000 of principal payments that you're making each month. Your, your break even point is now not zero, it's $15,000. Because you have to make sure that you're generating enough net income on the P and L to cover what you know is going to be coming out of the bank account in the, in the form of principal payments on loans and those. That's usually the connection that is missed until you really start understanding what that statement is.

You start seeing it every month. Yeah, that makes sense. So could you tell me the story that where you were able to help a contractor kind of turn the lights on in their business through Better financial insight?

Yes, there's a lot of them. There's one in particular though, who he is fantastic human being, very good at running his business. Grew his business to, I want to say, 6 or 7 million by the time I got involved with him and it was almost accidental. Accidentally got to the a 6 or 7 million business, but just really did not have a clue in terms of numbers or financials or reports or any of the things. Started working with him. Worked a lot on just understanding all of it, how important it is, how to tie it back into operations and then see the changes that you've done in operations and how it reflects on your, on your financials. And then a couple of years later, he was able to sell his business to private equity for a ton of money that he never would have been able to do prior. He was generating a lot of revenue, but his net income wasn't great. Right. So he's really good at generating revenue. He had a great culture. Customers were happy, you know, all the stars. But then at the end of the day you're like, I'm working so, so, so hard, but my net income is 2%. Why am I doing this?

Yeah, you can have. And I think that's common in the home service space where you could have a company that's generating a great amount of income, has happy customers, happy employees, everyone's paid well, everything looks great. And then the owner's not making any money and the business is not making any money. They're just treading water continuously, just kind of being ignorant. And that's that actually might be more common than a well oiled machine, you know. So I see online, and I'm not specifically not calling anybody out, but I've always seen, especially during COVID a lot of contractors would post their revenue. They'd put a snapshot of service titan and say, look at all this revenue. And for me, the way I look at it is I don't really care what's the profit, what's the cash generated. I just make the assumption that if the revenue's going up, if everything's correct, so is cash generated. But I know that some of these companies could be in low single digit revenue. And I always thought like, or I'm sorry, profit. And I always thought like, man, generating $10 million worth of business and then walking away with, you know, right. $300,000 of paper profit and then zero by the time you're done paying on debts and things like that. It's just, that's really bad.

It's exhausting is what it is. Right. Like that's, it's a grind to be able to generate big revenue numbers like that. You gotta have a lot of trucks on the road, you gotta have a lot going on from, from that standpoint. So to put all that work and time and effort and energy into it and then not make any money on the bottom line, it hurts my stomach to think about it. But here's what happens though is companies, they don't have a good foundation. Right. And so they're struggling when they're small. And the knee jerk reaction is if I just get more sales, it will be better. If I just get more sales, it will be better. Everything will fix itself and it will be better. But really what's happening is they don't have a strong gross profit margin, their overhead is already too high and they are piling revenue on top of a failing foundation. And it's just exacerbating the situation. So sales does cover some sins, but not all of them. And there's a lot of times where you just make the, make the problems worse. I would much rather have a company that does $5 million in revenue and 25% net than $10 million in revenue and 5% net.

Right, right. There's twice the headaches, twice the people, twice the HR liabilities, all that. Yep. I've always felt personally, and we're going to get into KPIs, but I always felt the amount of money that, that a amount of cash that a business generates is everything. I always thought if you were generating a good amount of cash in your business at the end of the day, that that's a good business and that everything else is. Maybe the other KPIs and metrics are more for larger corporations that have investors and sell public stock and things like that. But I always came back to cash generated as being the best KPI. Now I'm sure that you've seen millions of KPIs. Way too many, so many that it confuses everybody. But for you, let's, let's start with the profit and loss. When you look at a profit and loss statement, what are the top three things you look at? Right. When you look at one, as far as KPIs.

Yeah. The first thing I'm going to is the gross profit margin and whether or not the gross profit margin is where it needs to be. Gross profit margin tells us whether or not our labor is in check and or our materials are in check or if one of them is out of whack because that sets us up for whether or not there's going to be enough funds to cover the overhead. So gross profit margin, that's always going to be number one. It does not even matter what size company it is. Small company, big company, doesn't matter what which industry within home services there is. They're in.

It's.

That's always number one. Number two then would be our percentage of overhead labor. So our non revenue generators and their labor wages and what a percentage of revenue is for that. I'm looking for 10% or better. I'm not counting benefits and taxes and retirement. I'm not counting any of that. Just straight up wages.

Straight wages.

Okay, just straight wages. Are we at 10% or better? Gross profit margin by the way, should be at least 50%, but depending on the industry, closer to 60.

Blended across all departments. 50%.

Correct? Correct.

Correct.

Yep.

Okay.

The third one then would probably be advertising if I were to go there. This is also assuming that we're profitable. So you know, if we're not profitable, then of course we're looking at net income. But advertising tends to be the next one because it can be very good for you. Right. And it can also be a giant money suck depending on how it's getting, how it's being spent. And the amount of money that we're spending on marketing doesn't determine always whether or not our marketing company is doing well without looking at our own booking rate, conversion rate and average ticket. If those three numbers don't aren't good, we cannot blame our marketing company for not generating Enough leads.

But it's so much easier to blame a marketing company. Right? Right. Look, I gave you all this, I gave you $5,000. My expectation is that that turns into 50.

Right?

Why, why isn't it? Well, you didn't answer the phone. Yeah, 25% of the time. Then just get me more leads. But I'm not paying you any more than the $5,000. Yeah, we like more leads in marketing to make up for sins in the, in the CSR arena. Right, so, so you said that 10% wages to overall revenue in the company. So if you have a million dollar shop, that means you can pay a hundred thousand dollars in wages for everyone that's not in the field. Is that pretty much how it works?

So again we're just wages. A million dollar shop, you should not need a whole lot of overhead. That, that's not a 3 CSR. A whole accounting person, you know, whatever. But, and what happens, here's what happens with that too is it's called, I call it a variable expense, which means that it is level until you add a person, then it jumps up, then it's level. Then you add a person, then it jumps up. Level. Okay, so what we see with that, that percentage is that we're trucking along and we're probably a little bit over for a while and then our revenue is increasing, so it's bringing that percentage down. As the revenue increases, it brings that percentage down and then when it's down below 10% in like the 7 or 8% range for an extended period of time, we start to hear from our admin team, we're overwhelmed, there's not enough time. We start to hear the clues that it's time that we need to add another person to the team. Then when we add another person to the team, we go up above that 10%. But it's, we're, we should be continuing to generate more and more and more revenue which then again brings that percentage down. So we, we level that out again and then it gets to a point where we start hearing the words of there's I didn't have enough time or I, I don't have enough time or I'm overwhelmed or things start getting dropped, overlooked and then we need to reevaluate as to whether or not we're getting too lean. All the while we're looking for ways to be as efficient as possible. How can we incorporate automations in order to make CSRs and our admin team's job easier? The more automations that become available in the world, the easier it will be to be able to keep our admin percentages where they need to be. But where they used to be doing the task, now they're monitoring the task. They're monitoring the system that has been put in place to make it more efficient.

Yeah. And Tersh and Josh will talk about that a lot. Right. About automations and everything. Tersh is a big, big automation and AI nerd. Just like, just like me. I know. I think about automating, that's it, automate and AI everything, everything.

So which it doesn't eliminate all the human aspect of it because somebody still has to monitor the process, make sure all of the automations are working correctly and the whole nine yards. But there's so much room to gain efficiency there that it's over time going to make it easier and easier to stay in that, you know, 10% range on your admin wages.

Right. Which helps. And, and it's nice because the automations and increase in efficiency allows you to have less people and pay the people that you do have more money. Now does that help the economy as a whole? That's a whole different podcast. But I've always wanted, when I had my company I always wanted to have, I always leaned on technology first to be as, to maximize efficiency. So can a computer program, can an automation do this? And then after that relying on humans to monitor or work that technology, work that process. And it left me with, with a lot less people in my company. But I could pay the most in the city because I had less people. I had a one CSR full time CSR and one part time one in the summer when we were at three and a half million in revenue because of, because of utilizing automations. Back then AI wasn't a big thing. But I just tried to automate everything so that, that, that will help your KPIs. But with that, what are some KPIs that people obsess over that don't matter from what you've seen.

Ooh.

Or they're just. They do but they're so low on the list and they for some reason they just think so much of this KPI when it's really. Yeah, no, there's a bun them these other ones that you should look at first.

Oh, this is probably going to start a little bit of a controversy but I would probably say recall rate only because it's very important. But there's a handful of ones above that that might be slightly more important than your recall rate. Here's what happens Honestly with KPIs is we're either we either don't look at any KPIs at all or we get super gung ho and want to monitor 45 of them at one time. Okay. So really, really what needs to happen is we're going to pick the five ones that are going to make the biggest impact on the business and we're going to dial them in, get them to where they need to be, get them consistent, like focus on those five. Once those five are consistently in a place where they need to be, then we start adding on some other ones that are important. But you can't turn the Titanic in a day. So if we start watching 45 KPIs today and we try to make them all perfect at once, nothing is going to get better really. So it's more about saying, okay, these KPIs are important, but we're going to dial in these handful first. Those handful are most definitely going to be your booking rate, your conversion rate, your average tickets. And then once we are looking at that then, and those are in a fantastic spot, then we're also looking at tech generated leads. If we are selling tech company then we're starting to look at, you know, what are our reviews. We're looking at our recall rate. We're bringing in all these other ones but we need to make sure like the main four or five are being hit consistently where they need to be first.

For sure. Yeah, that's great advice. And it's, I've always been a big dashboard guy, which is, you know, the visual representation of these KPIs. And I remember when I first started to put dashboards together, like if you ever looked at like snapshots of like a Microsoft BI dashboard on online, how there are so many metrics on it, it looks like a, like a Fox News ticker going across. There's just so much stuff on it. And I always thought when it comes to KPIs that like less is more like yeah, put my, my feeling on a dashboard is that you should be able to walk by it and just at a glance know whether or not it's good or bad. And I kind of look at KPIs that way. Really, really focus on just a couple that are going to make the biggest, the biggest impact in your business. Like utilizing the pareto principle, that 8020 rule. Right?

Yeah.

Now so if you were to look at just one, I'm going to only give you one Kristen to look at in an H Vac company. What would it be? Just one One KPI. Yeah. Which isn't fair, but probably, probably total.

Probably total revenue.

Total revenue, Right.

Probably. Probably total revenue. Yeah. Because you, I mean that's, you're seeing that change like multiple times a day. So going back to your dashboard and like who's watching what and when and how many of the things. I really do. I, I would find value in a, in a very detailed KPI dashboard like that. But not for everybody in the position or I mean not for everybody in the company. Okay.

So customized to each individual role depending.

Sort of and where they, where they are on the organizational chart. So right. If they are the, if they are the baseline of the organizational chart. So tech CSR dispatcher. Right. They're probably really only should be watching like 2 or 3 or 4 max KPIs that are their things is. They are the. That's what they're focused on the next level. Your service manager, your install manager, your office manager. They're watching that plus a couple of more that matter. But because they are in a managerial position, it's okay to have a responsibility for them to have more KPIs that they're watching. And then above that we might have like an ops manager or a general manager. And so that position then is going to be watching all of the ones below them, plus a handful of other ones that are probably important too. Right. You can see as you get higher on the organizational chart, there are more things that you do need to be watching and keeping your finger on to make sure the whole business is operating in harmony. So the business owner or the basically the highest person in charge of operations probably does need that really detailed dashboard, but everybody does not need that one.

So maybe we'll put that like if.

We'Re putting it in a conference room or we're putting it in the hallway or putting in the front thing. We're not putting that one up there. We're putting like the main five up there. Yep.

Do you guys help customize dashboards for people, for contractors or.

No, that is very well. So that's. It gets into a little bit too much computer programming, which I'm not. That's not my, I'm not good at that. But helping you decide which ones you should be monitoring and which position should be looking at what. Absolutely. Building a beautiful dashboard, I leave that.

To the pros, no problem. But knowing which metrics should go on there is more important than having something.

Than how pretty it is.

That's. Boy, that is really pretty and on brand. But the numbers on it are Inaccurate and they don't matter or they're horrible.

Or, or your call Booking rate is 32%. Let's fix that.

Oh, you saw, you probably saw my post on call booking rate. How I, how. I do not believe Service Titan calculates that accurately. It's very frustrating for me. There was, that was the most popular post that that group has ever had in the two years that I've had the group. So, yeah, I just, I, I don't. That's a whole different thing. But call booking rate and Service titan is not accurate. That's all I'll tell you. It just, it is.

Leave it at that.

We'll just leave it at that. I believe they could do it better, definitely. So you, you guys offer this business Clarity audit, right? And so can you tell me a little bit more about that? So if somebody were listening to this and they, and they thought that they might need your services with, that would be how it would start. You guys would go through this Clarity audit.

There's, there's a couple different ways. So the Clarity audit is, that is something that we do with people who are interested. It's. It is, we send out extremely detailed questionnaire asking about all different kinds of things around their business. We take the answers back in, read over all of them, and then come up with a handful of recommendations of, you know, these are some areas that I saw based on your answers that might be opportunities for you to be able to plug a hole or tighten some things up or whatever. And then so we provide a ton of recommendations and then at the end we say, all right, well, based on all of that, if it was my business, these are the three things that I would focus on. The first, these are the highest priorities. These are the things that are going to make the biggest impact on your business the fastest. That is, there's a lot of times the feedback that we get on those is I did not. There was, you don't know what you don't know, or I never really thought about that piece of the business or I never really thought about it in that way or whatever. That's a lot of times the, the response that we'll get from it. And then, and the other thing is helping them to distill down to the couple of things that are the highest priority. Now a lot of times what'll happen is we'll go, let's say we go to an event and we come back with all these 4 million wonderful ideas of things that we want to implement. And we are either really good at picking One or two of them and implementing them. Or it's, we don't do any of them because there's too many. Or we try to do them all at once and then they don't get finished. Right. So we will, like put out a bunch of recommendations, but then say, all right, cool, let me make the decision for you and say these are the three that you need to focus on. That's one way to kind of get started, I guess you could say. The virtual CFO side of things is really very much. I've identified that numbers are not my strengths. I really want to know more about it. I want to understand it better. I want to make more money. Let's just book a discovery call and see whether or not this is something that is like a relationship that's going to work. And then we just kind of take it from there. So definitely two ways to kind of get started.

Do you guys have contractors who are just starting out utilize the virtual cfo or do they usually get to some point in growth where it's time to bring that service on?

Yeah, there's a couple different levels of service from the virtual cfo and there is one level of service that is very attainable for a smaller business to be able to just really start wrapping their head around like the numbers and what that even means, what what the books mean. And. And yeah, pretty much from any size business that that level is, pretty much anybody can step into that one. There are some more advanced, higher touch, more involved levels of virtual CFO that may not be right for the really small business or the new startups. But. But yeah, there is one for them.

Okay, so what is one financial process that every business should tighten up this month? If they had one action to take for July of 2025? Give me one financial process they should tighten up.

Receipts, slash documentation of expenses.

Okay.

Okay, so we got credit cards for all of our technicians and they ran to Home Depot and they got blah, blah, blah, part and the receipt never got turned in. So we don't really know what they purchased for what job or why. If we had that information and we saw that they were purchasing something that was in the warehouse that they should have had on their truck before they went to the job site. We have now paid them to go to the store. We've paid the increased price to buy the retail price of the thing as opposed to the supply house price of the thing. And then we've paid them to come back to the job and get reorganized and redone on the job. So a Lot of, a lot of times the what we're purchasing, AKA through the receipts, doesn't get reviewed and we find a lot of opportunity for, to capture some more funds through that.

Yeah, that's right. I have experienced that myself. When I had all of our technicians that had credit cards, it got a little messy. And yeah, all you get on the credit card statement is the dollar amounts, Lowe's $160. And it's like they could have snuck something, they could have snuck a gift card for themselves in there. And then we got a monster and.

Some Doritos and some beef jerky. Something little.

Something little. Right, like what we do when we go buy stuff.

Right, exactly right.

That's what we do. I'm the only one that's allowed to put that stuff in, in the business name. Right, but. And then we switched to a PEX card that was like a spend card. So it wasn't, it wasn't a credit card, it was a debit card. And it had some tighter controls on it, more than a credit card did. And then it required them to upload their receipts. But we, we got it to the point where we had turned their cards off so they couldn't buy anything until they called. Because what I wanted was, I wanted them to tell me why they were at Lowe's. You know, why are you at Lowe's? I don't want to find out that they bought something and then just see a receipt. Because you're right that, that's a truck stock item. So what, what broke down in the process that we're, that we're spending $10 on a 2 inch PVC hub fitting when I buy them for six all day and there's 10 of them in the shop, by the way. What happened?

And, and the time that you paid them to go and then whatever. Like all, all the things. It's those types of purchases. Yeah, it eats up, it eats into your gross profit margin, which eats into your net profit. And it's a silent killer until, until you shine some light on it. There's times where we'll pop open the materials purchases for the month and there'll be 50 Home Depot trips across the board. And you're like, do you have any idea how much that's actually costing you? No, no.

Way more than the part price.

Correct.

It's hard because the metrics that are in that are hidden. Right. They are hidden costs like you said. You don't really know. It's just it, it does translate over to labor. But the nice thing That I like, that I really liked about Service Titan. And you'll see me crap on Service Titan continuously online because coming from an engineering computer programming background, we're all about talking about the problems with things, not, not celebrating the good things. But what they do really good is they do have good labor and hour tracking detail. So it is nice to know exactly all that, that payroll that went out to that technician, exactly what was he doing for all that. And I was able to see that with some technicians about how some were more efficient with their time versus others because of Service Titan's really good time tracking.

Well, and the other thing too, like the rebuttal that I've heard to that whole, like let's say the technician is performance based pay. So it's their own time that they're using in order to go run to Home Depot and get whatever it is that they need. So I would say yes. And if that's happening multiple times a day or multiple times a week, how many additional jobs could they have done for the company and for themselves? Correct. That we're missing out on because they spent, you know, a combined four hours. If they spent a combined four hours in the vehicle going back and forth to Home Depot throughout the week, maybe they could have picked up one or two more jobs and that would have helped them and the company. So it's very hidden cost, but it's very real and it gets overlooked a lot. A lot, a lot.

Yeah, we had some installers that were on piece rate pay. In fact, I moved all of them over to piece rate pay and some of them would get done with their jobs at 2 or 3 o' clock. Installing a full H vac system. In Ohio, it was just furnace and AC and typically the furnace was in a basement. And then I had other ones that would be seven or eight o' clock at night. And management, it was, it was tough because I would tell management, talk to them about it and said they still shouldn't be done at 8 o' clock at night every night, even though we're paying them the same as we're paying somebody who gets done at 2 to 3 because they're going to be more fatigued, the customer's going to be a little bit crankier. And then when it comes time for Saturday, if we wanted to pick up an additional installation, they're not going to have the energy to do it because they've been working so late because of their inefficiencies. So with you on that, just because we're trying to cover up those inefficiencies and not incur those costs. There's hidden costs within that. That it's really just. It's opportunity cost.

Correct.

And it's, you know, we got to do everything we can to help these technicians be as efficient as possible as possible. Even if it doesn't direct, even if we can't immediately see how much money that costs.

Right.

I think that that's the responsibility of management, ownership and leadership is to continuously refine and improve processes.

Yeah.

And just see where they break.

Become elite. Become elite.

That's right. That's right. So awesome. So keep track of your receipts. Stop buying.

Yes.

Watch them.

Look at them. What are they seeing? What are they buying?

That's right. Look at the receipts. And there's no reason not to do that. Today with technology, everybody has an iPad or a smartphone. There's no way that they can't capture these receipts. You just have to be watching the guys and make sure that it gets done. Right.

Right.

So that's awesome. So what else do you want to talk about with me today, Kristen? What do you got? What else you got? Because I'm kind of flying through it. I. I could talk about this kind of stuff all day and nerd out on it, but I know. So are you going to. Are you guys going to any events coming up soon or you guys going to Pantheon in the. In September or.

Yes, I definitely am going to Pantheon. We are waiting for. I applied to speak, so we're waiting for the. For the decision there. Awesome spoke a couple of years ago, which was super awesome, and have been to Pantheon for the last couple years, which is my favorite show, I must say. It's so.

It is. They really do a good job with that, don't they?

It really is. It's very. I don't know, it's just. It's impressive. So we've done our. We've done our own events. Right. And you look at that and you look at something like Pantheon and you're like, I just can't even imagine all of the pieces that go into creating a show that's that big, that's that bright, that's that, you know, whatever. So. So we're super excited about that. I think we're going to reside this year. I'm going to be out. There's a couple that I wanted to go to, but I can't because I'm going to be hiking the Grand Canyon for a couple of days in October.

So there you go.

Hopefully. Hopefully we're waiting on the permits to come in for that. So. So yeah.

Do you guys do a lot of shows? Do you like. Is that where you find a lot of your clients? Do you guys set up a booth at these shows or do you normally just attend as like guests and, and things like that?

Honestly, we've attended as guests, we've done booths and we've been speakers and the speak. When we speak, that's usually when we have the most engagement that's happening after that. My marketing for the virtual CFO is word of mouth referrals and speaking. So those two are the two things that really drive the business forward. So I try to speak whenever, whenever there's opportunity, but there's a lot of times like Pantheon, I got a lot of clients who in Service Titan, so I like to go and see them in person and hang out with them.

Yeah.

And you know, that kind of stuff too. So there's very much that human aspect that is also a draw to go to shows like that.

It's one of the rare times that you get to see all of your customers from around the country.

Right, right.

I like, I thought Pantheon was one of the better shows that I attended. I'm going to go again this year. I was able to sneak some, some free tickets in, but I told Service Titan, I said, look, I feel like I'm keeping your customers engaged enough that you can hook me up with a free ticket to Pantheon, so.

Well, good for you if you were able to get them to agree with that.

I was able to. I was able to sneak one in there though. But good for you. Going and doing the speaking engagements. That's a little outside my comfort zone to sit in front of a bunch of contractors. So that would be the computer programmer, engineer type person in me. That, that makes gives me a little bit of, a little bit of a little anxiety there. Sweaty hands, a little anxiety. So you as an accountant being able to do that, good for you. That, that's not a typical accountant thing.

You're right.

You must really be in your. You're in your system.

I had to work on it. I had to work on it a lot. It was. I was terrified the first couple of times that I spoke in front of people and then I realized that I kind of liked it and have worked on it and coached and learned and done a whole bunch of things in order to try to be good at it. Right.

Yeah.

And so, so I enjoy it now. But there was the majority of my professional career, there's not a chance that I was going to be getting up.

In front of people so we can learn, right? We still can learn. That's awesome. So what's the biggest crowd that you've ever had that you've ever spoken in front of?

We were keynote speakers at Service Expo, Service Nation Expo last year. That was a pretty big. Pretty big room. And then my Pantheon room, I was a breakout room. But it. There was people in the hallway, so that was really cool. To be able to fill up the room and then have them spilling out in the hallway, that was very humbling experience. But. But really cool. Those were probably the two biggest. We did the Roto Rooter Conference. They do an annual conference. We spoke for them last year. So, yeah, a couple hundred.

That's awesome.

Great.

Well, everybody can learn from the information that you guys have because I know that it's a huge gap in what's needed in this industry versus what we have. We just. Just don't get into business with that knowledge. It's. And it's not. It's something that you get. I would say you could get it from college classes, but where else are you going to get that kind of knowledge about accounting and bookkeeping and things like that without. Without really studying it? You know, you don't get that in H Vac school, I'll tell you that. You know.

No.

So great. Awesome. Well, thanks for being a guest on the show today and I really appreciate it.

Yeah, absolutely. So just to. Just to do a little bit of a plug so I can be reached@kristendese.com www.kristindiese.com if anybody wants to reach out or connect or whatever. I'm also on social media as myself, so, you know, certainly reach out and I am happy to talk numbers at any point.

Fantastic. Well, thanks for joining us.

Absolutely. Thank you so much for having me.

Thanks for listening to the Home Service Hacks podcast. Be sure to subscribe on your favorite podcasting platform so you never miss a future episode. For more information or to connect with Bill, you can check us out on on Facebook @ServiceTitanHacks or visit our website at servicetitanhacks. Com. We'll see you next time.