BAM Day 1 - How to Offer Virtual CFO Advisory Service to your Bookkeeping Clients with Peter Konefal

So let's just focus on.

The content and then you'll have lots of time, lots of time to go through that PDF after and continue the conversation. One cool thing about all the events, they're all designed to work together and they're all to foster conversations. So by no means will everything you want to talk about be done in today's session. Keep the energy going, keep the comments going, keep, keep. If you read something in the PDF and you want to know more, that's great. That's what it's all about. So without any further ado, I am, I think, gonna get started.

So yeah, let's see, what's the time here? Yeah, it's about time. So, all right, so let's get started. I'm going to.

Switch to.

Okay, can everyone see this? Okay.

All right, let me just. Can everyone.

Okay, so I'm Peter Kahnafal. Actually, let me just stop this here.

Okay, can everyone see that? Okay. Okay, good. So yeah, there's the full screen mode was.

Driving me crazy. So I'm Peter Kahnafal, I have an MBA and a CFA and I started my firm Tulip Consulting about two years ago here in Vancouver bc.

We've since grown since then to not a huge number of clients. So I don't have Neil Crittle's numbers, but we're growing slowly and surely. So I think we've got maybe 10, 15 clients total and adding slowly but surely to that group. And our focus is definitely on full service advisory, certainly bookkeeping and certainly that CFone controller angle. And so what I'm just going to do is go to full screen here and, and go through this. So.

So that's a little bit about me, a little bit about my background. I've joined Marks Academy seven months ago and honestly it's been the best thing I ever did. I've learned a ton and there's always more you can learn. So as far as the agenda for today, so this is what we're going to cover over. We're going to talk about, you know, putting yourself in the client's shoes.

They often feel quite intimidated talking to finance people and they also are faced with lots of problems as they'll get into around information asymmetry. They don't know who to trust, they don't even know what questions to ask. It is scary being a client. So that's super important. Next we'll talk about kind of what is a cfo. Roger was doing a wonderful job talking about, you know, what the conversation should look like and sound like. So I'll extend and build on that. I'm also going to talk a little about controller. The reason is, is that a lot of what I would suggest I do or that, you know, virtual CFO is doing is not really in many cases CFO or virtual CFO work, but more virtual controller, if you will, especially if looking at 0 to 12 time frame. So again, lingo wise, clients don't know what a CFO is. They don't know what a controller is. So again, you need to use the. Use the language that connects. Right. And also when you're building your packages, you might decide to use that CFO term because the fractional CFO virtual CFO term, think of it as a marketing term in it to an extent that has more connection emotionally to the client perhaps than controllership. They might really not know what that means. So just be careful. Even though you might know the definitions, maybe you just put that to the side when you're doing your marketing. So I'll hopefully we'll have a bit of chat about that. Okay, next, the tool set, the people, the advisor, skill and aptitude.

The client fit that gets neglected sometimes. It's extremely important. And then your processes, you know, as I'll talk about workflows and fancy bookkeeping or fancy CFO work can't really happen without great bookkeeping. All right. And then I hope we'll spend a lot of time actually doing work. I'm looking at specific examples and scenarios and cases, and I'd like to jump ahead almost that as quickly as possible.

In order to kind of get the most value out of it. I want this to be a participative session and I have probably more slides than there's content for, so it might feel a little bit rushed, but that's okay. If we spend the bulk of the time on the actual work and thinking about what the conversation can sound like, thinking about tools and thinking about how we do the work, to me, that's time really well spent. Okay, so let's move forward here. So next. So put yourself in the client's shoes. I think that's super important. What I've done is I went ahead and I thought about all the clients I've served and I wrote down all the problems they faced and all the complexity of that. And I kind of divided it up into five areas.

And those areas are as follows. Clients have many complex, interconnected problems. It's not just one problem, it's not even two. In many cases, it's three or four. And they're different and they interconnect, and they are stuck as to what to focus on first. So that's the first issue. The second issue is there's a big finance skills gap. That's obviously where you come in. But the skills gap is so profound that it extends to.

Issues like, well, even if you might be the most qualified finance person in the world, how does the person on the other end. How does the client perceive that? Can you hear me? Can I just jump in? Your slides aren't showing.

Oh, they're not? Oh, no. Sorry to interrupt you. Oh, not at all.

But the voice is working. Yeah, the audio is fine and we can see you the slides. Okay, Maybe that's actually okay. Anyways, are they working now? Okay, no problem. Okay. So, yeah, I'll just leave it in this mode because that seems to. I can see the chat instead of full screen. So anyways, put yourself in the client's shoes.

You know, so what was I kind of around.

The lemon problem? Right. If you're. If you're ever on a used car lot, you know how scary that is? You're. You. The cars look shiny. They look amazing.

Oh, do we. Do we still have sound? So everyone. Can everyone still hear me?

Okay, I can hear you fine. Okay, great. Sorry, I just got a note from Gene Reiser in the chat. I just want to make sure. Are you okay, Gene? Just want to make sure. Okay, that's maybe an isolated issue. Regardless, continuing along. So you're that person in a used car lot. You don't know who to trust. What are the things the salesperson could say to you to build trust and to build a perception that you're not there to sell them, you know, the closest car? You're their trusted salesperson. Right. So I know it sounds crazy, but that's the mindset of the client.

Now, what's moving along here, a lot of times they're price focused, and at some point along the way, you have to adopt language very close to what Roger and Mark Wickersham were talking about, around positioning your value and that. I think you need to do some work around. If the client wants a cheap service, help them understand what that means. Help them think back to a time in their life where the cheapest thing they bought was. Was the most expensive thing they bought. They hired a really cheap architect, and then the house fell down. They hired a, you know, bargain basement physician. And, well, there was something that was left in their body after surgery. Right, that's. That's maybe an extreme example, but these are things that clients can relate to if you help them along the journey of where price competition leads to at its, you know, most extreme end. Right. So anyway, so that client fit piece is important. Sometimes it's really hard to figure out in the beginning next thing that is really a strong indicator of a CFO or controller controller target client. Foundations are missing. It's just the nature of the beast. You very infrequently are going to get a client that's like, hey, I have perfect bookkeeping and I just need you to connect to sift or fathom and presto, the reports will come available and all I need you to talk me through the numbers and my goodness, please charge me $2,000 a month. That will not happen most of the time. So you frequently will be taking on a client that needs bookkeeping cleanup for six months and a chart of account redesign for seven months before at nine months, you can finally say to that client, hey, you know what, Mr. Client, your patience with the process is going to be rewarded now with high quality cost of goods sold numbers, proper inventory valuation. And I can now tell you what your gross margin actually is. You know, the fanciest ratios in the world are useless if the underlying data quality is bad, which I would argue in 90% of cases it is.

So that's super important. And I think the biggest mistake I made as a company, I would say year and a half ago, is kind of almost leading the client to think that they would get these wonderful reports right away. And so the big mistake I made is not setting expectations to say, hey, you know, if this process, if I uncover huge cleanup problems, that two or three month cleanup could be nine months and I don't know until I get further along the process. So just setting expectations is so critical. So any comments in the chat about that? Have you guys experienced that when you onboard a client.

Properly kind of positioning that CFO work is high level work, Controllership is high level work. And it won't happen unless the bookkeeping and the fundamentals are in place to allow that work to happen. All right, let's move on. So here's some financial indicators that you have a CFO or controller target client. No surprise here. Cash flow problems, poor profitability, no predictability to past or future sales. Sales happen, but they don't know how it happens. And very frequently clients, you know, don't have much of a marketing engine. Maybe that's just the clients we have. But a lot of clients have become successful sometimes almost in spite of themselves. You know, maybe through word of mouth or Informal methods of getting that first, you know, bunch of customers to buy from them. Sometimes.

They don't know how to predict the future sales that they might have in their business. So sometimes you as a CFO or controller will be the person that says, hey, I can't forecast your revenue in 12 months or even one month without knowing some of the things you do that lead to sales. So if any of you know of the, of the term drivers, if everyone says, hey, I'm going to build you a financial model and I want to know the drivers in that financial model, they're really speaking to you. What are the predictors of the future state of your business, Whether it's a cost driver or headcount or maybe how many email promotions you're sending out every month, that could be a revenue driver. Right. So.

That'S not having that in place is. It is a signal sometimes that a CFO controller is in place. Because if marketing funnel isn't really organized, forecasting is probably not happening and problems are going to emerge from that. All right. The other thing that happens a lot, if you think of our industry, tax comes up a lot. Compliance comes up a lot. And the way that we train accountants and bookkeepers frequently focuses on that compliance function and, and not on the communication sizzle and needs assessment fine arts that are so important as well. And so frequently when clients say, yeah, I've got a bookkeeper. Yeah, I've got an accountant. I don't need you. They may not be having rich conversations with those other service providers. What they may be having is, hey, here's my T2 corporate tax return. It's done. Don't talk to me for another year kind of conversation with their, their advisors. Right? So anyways, you don't know until you find out. So you gotta ask these questions. These are all your, your needs assessment questions. Hey, tell me about your. Tell me about the conversations you've had with the prior advisors that serve you. Right? Okay, so let's move on. Lack of strategy. That's pretty, pretty common.

This is scary. Look at that. 43% of new firms survive after 10 years in business. I would throw the. I would be comfortable that this statistic probably equally applies to the United States and Canada. It's a Canadian statistic. But that's terrifying. That's 57% of people's dreams and ambitions getting destroyed after 10 years of being in business. Right. So we're here to not have that happen. We're here to help businesses be part of that 43% that are still Alive. So I think when Mark talks about you need to create value in order to capture it. I think it's really important to. When you're having those conversations with clients and they're saying, yeah, I don't have a budget, I don't have forecast, I don't have.

Any revenue drivers, I have no marketing plan, I have no business plan to say, hey, you know, help me understand. What do you think that does to your chances of still being a business after 10 years? Right?

Ask them, what do you think businesses do that go out of business? Do you think they maybe have cash flow problems? Do you think they have customer concentration risk? A large construction company has two customers. One of those customers doesn't pay for 180 days. They go to business, right? You need to freak them out because these risks are real. No one, three years ago imagined what you'd be, you know, two months into a global pandemic and inflation and supply chain. Like, no one planned that.

Not the best CFO did. So you just need to. Not that they, you know, you don't want to freak them out too much, but you do need to create urgency. Need to create a sense of the cost and or benefits to them of not receiving the service that you offer. And you're not selling used cars. You are selling the future, the future viability of their business. It's nothing more important than that. It's enormously valuable. So I think really, if you're having a. If you're thinking about rolling out a CFO or virtual controllership service, I would definitely focus. Don't. Basically don't neglect the attention to the target market.

Don't neglect the kind of conversations that are going to have a resonance. If you have a sales team, if you've already hired two or three people.

Pretend to be a customer and listen. Listen to what the sales conversation sounds like. Maybe do some mock.

Pretend. I'm a construction client. I'm John Smith. I'm in a construction company. I'm 30 years old. What does the sales script sound like, you know, versus someone who is 58 and, you know, runs a cleaning business. What are the different things that you would, you would react to and position depending on who your customer is. Now the other thing I want to focus on is pain points. So I think we all need to do a better job of. When you're rolling out services, you're not going to roll out everything.

Maybe you just roll out.

A corporate performance management service focused on kind of understanding the month that was and looking forward one month and Maybe you use Fathom HQ or Sift for that corporate performance. You know, financial metrics, financial ratio, conversation. If that's all you did, that's awesome. That's a powerful service. You could charge, who knows, probably anywhere from 500 to 2,500 to more per month just for that service, depending on the subject client that you're dealing with. So don't feel that you need to take on the whole world.

You know, just. Just maybe think carefully about what your scope is and what, what it makes the most sense for you to offer and what the pain points are that correspond to that. So anyways, so pain point, no matter how good and current the bookkeeping is, I can't pull the data I want out of my financial reports. Can you, in the chat, put into the chat, what's the solution? Right? You guys are bookkeeping professionals. What would you say.

If you heard this in an introductory call? What would you say? Hmm. Mr. Client, it sounds like you have issues with your.

What would you guys say?

Yes, Bill Robinson, thank you. Yeah. Lisa Software. Yes, Bobby. Perfect. And how often. Thank you. Yeah, communication, Perfect. Yep. Bill Robinson, you're 100% right. Which reports are you looking at? Yeah, good question. So report. That's even a better question, Sarah. I like that. Yeah. So I'm thinking, you know, balance sheet, you know. Well, okay, so those, those measures that Mark was talking about, the return on assets, the.

You know, net income margin, those would be, you know, income statement and balance sheet measures. But maybe you're looking at inventory turnover, right? You're looking at inventory turnover on your company. But you know that some inventory is turning over really quickly and some inventory is not selling at all, right? So to get that data for that manager, you might get a customer saying something like this. No matter how good the current the bookkeeping is, I can't understand how one component of my inventory is turning over relative to other inventory. So if you heard that from a client, you would know, as so many of you put in the statement or, sorry, in the chat, you need a better chart of accounts. And I would say 90% of the clients that we've talked to have a default chart of accounts from Xero or QuickBooks. And it sucks. It was never designed to be perfect forever, right? Those are. That's your starting line. That you then hopefully adapt and customize to exactly meet your future needs on an ongoing basis. But it's a thing that owners don't know about and that a lot of accountants don't spend a lot of time positioning as a Thing that needs to be updated and rightly is a service in and of itself. Hey, what does it sound like to you, Mr. Client, if I update your chart of accounts every year and make sure it accurately reflects all the ways that you spend and earn money, does that sound good to you? They'll be like, yeah, but again, you have to put a pain point along with it. If you don't have this, your reports are useless, you'll be flying blind, and you'll go out of business. Don't. Don't be that extreme. But you could do something like that, right?

Yeah. Bill says if you're connecting QBO to Live Planner, Fathom or whatever, you may have to rethink the chart of accounts. Absolutely. To get actionable forecasting to drive insightful advisor service. So Bill Robinson is 100% correct. And not only that, what a great diagnostic tool to understand how engaged clients might be in the process of making financial decisions. Because good chart of accounts design emerges from. Hey, what questions do you need to resolve? What questions do you have? What decisions do you want to make? Those strategic goals. Strategic questions guide the design of the chart of accounts and how granular it needs to be. Because the more granular it is, the more options there are for bookkeepers and the more work is imposed on the business. It's complicated, right. There's not a one size fits all solution there.

But if the owner is disengaged and they're like, I don't care, figure it out on your own. Gives you a bit of a hint as to who you're dealing with as a client. It's not bad. Maybe you still work with that, but you'll learn a lot as you engage in this process in this. In this thing. So, Bill, you're absolutely right. Yep. No accounting system place. I'm just reading Edgar's comments. Pigment. Yeah, absolutely. So, totally. So how many of how many people are selling chart of account services? Probably none. Right? Why is it, if it's valuable, charge for it. It's a service. If they don't think it's a service, show them reports from a business with a proper chart of accounts with all the numbering done properly and one without it, and charge for it. Lesson learned for me. I spent three to six months for a highly complicated business with a complete disaster in terms of accounting. And I fixed it and I asked for tons of management input and we went through things and it's a whole. There's a whole Miro board. I could. I could show you guys how insane that process was. And because I didn't diagnose this, diagnose and charge for it, I ate all that cost. And I was happy to eat it because I knew that the end reports would be glorious. But, like, that's crazy, right? That's not a way to run a business.

Jonathan. Awesome. Yeah. Sabrina. Wow. So this is all really powerful stuff. And no one in accounting school teaches you how to do this stuff. So that's why we're here. All right, so moving along. Pain point. As a manufacturing firm, we only find out what our gross margin is at year end. We're afraid we're selling at a loss. Sometimes we keep adding new features, doing more, costs keep rising, and we might be selling at a loss, but we just don't know. Have you heard this from any of your clients?

Yeah, Sheila. It's crazy. Yeah. Awesome. Great, great comments. You guys are amazing. And David, I hope you're charging. David Wilkins, I hope you're charging for that service. It's extremely valuable.

For a business to have good. Yeah, it's great to have a proper chart of accounts. So wonderful, wonderful. All right, so in this example, we've got a manufacturing firm. They don't know their gross margin. You guys know all the answer? The answer is we likely don't have a perpetual inventory system. We're valuing inventory often at year end, but in between, we don't know. So do we have maybe negative unit economics? Possibly. The more you serve your customers, the more it costs. And if that's not being factored in and priced in cost of goods sold as you're selling it or as you're producing it, as is frequently the case, then.

You have an information gap there. Right? Yeah. Carol says SOS Inventory works great. Yeah, absolutely. Qbo. So there are solutions here, right? There's lots of solutions, but yeah, cost accounting. Exactly. Managerial accounting. Really getting into the weeds of. Of what things cost and building out.

You know, again, making sure all the transactional operations reflect that Deer inventory is another really powerful and awesome solution for Xero and QPO clients.

For those customers that really are doing manufacturing and things like that. So anyways, there are solutions, but I think important in this is how, what are the consequences of not having something here?

You know, it's very common for us to jump right to, okay, you got a problem, I got a solution. Without doing what Mark says, which is, okay, well, hold on a second. Before we propose a solution to you, Mr. Client, what are the risks and costs to you not having this work done or how more profitable, how much more Profitable could you be? If you had a rock solid perpetual inventory system with a lot of automations customized for you and automatic SKU generation ready to rock. What would that mean for you, Mr. Client or Mrs. Client. Right? And then they're gonna somehow you're gonna get to like. Well, it's probably means an extra 100,000 a year. Probably means we make 5 million more this year or not. Right? So then when you're capturing value, that connection back to hey, you, you told me that this would save you 5 million a year. My service is 50,000. It's bargain. That's half the price of what I normally charge for whatever. Like again, create that value, capture that value. Moving along. So I'll move like this one. We've got a monthly P and L, a monthly balance sheet. And this is a client that doesn't want controllership or virtual cfo. Right. You have to listen very carefully to what clients say. Sometimes they will tell you explicitly that they just want a rock solid bookkeeper and a conversation with that bookkeeper about what the P and L and the balance sheet really mean. They just want two or three ratios. That's it. Don't sell them cfo, don't sell them controllership because they'll throw something at the zoom screen, yell and scream, run out the window. Don't do it. Listen to what they say, right. Don't oversell someone that has told you about they want. All right, moving along. Okay, I'm gonna fast forward through all this. The point is, with pain points, it is a real skill to not jump right to solution, to understand and pull information. Before you jump into, here's my CFO thing and here's my menu pricing. Let's go sell you. Right? There's, there's some steps and some patience that I think is really important to have. Okay, so I'm gonna move quickly through these just for sake of time. All right, so let's just introduce the virtual controller role in the way that we imagine it at our company, Tulip Consulting. This is just some services that we think could belong in a virtual controller service package. So the chart of accounts, we design service, we talked about that extremely valuable perpetual inventory system setup service. So Jennifer Pottinger and David Wilkins have both talked about systems that allow cost accounting to happen. Right? So that's a service to me, that's a whole service. The implementation and the running and the operation of that service and the maintenance of it. That's a whole piece that I would imagine would be a service and there could be you know, the, the bronze level, the gold level and the, in the platinum level. You know, depending on how you're going to price that service and how much training and resources you're going to put up against that service or other drivers of value and cost that you can make available to.

Price that client properly. Monthly financial reports So I would think with Sift and Fathom for example, two gloriously powerful and beautiful apps that you could build a service that revolves around taking most financial reports, maybe adding two or three metrics. Don't overwhelm the client and talk them through that. What does it mean for every financial ratio? I know that you'll say that there's a good side to it. There's also a balance involved. If your cash flow conversion cycle is too slim, that's good. You know you're getting cash in right away, but maybe it's costing you revenues because you're not offering enough credit to customers. And you would, you would get more sales and more profits if you had slightly elongated cash flow conversion cycle to just use one metric. Right. So there's always balance with these financial ratios. So that's important. Prepares and reviews a 0 to 12 month budget and a forecasting service. So I think of one app, have any of you guys used the float app out of Edinburgh, Scotland? It's a really fantastic direct method based cash flow forecasting service. Essentially it takes your accounts payable, accounts receivable and all the knowledge that the business owner has about when those future payments will be made and just spits out, hey, here's what we think the future looks like. If you hire three people, we can put it in. You can actually do up to two years of forecasting with that. It's an incredible app. I imagine that alone, if you master it could drive a service around just cash flow within the kind of monthly management accounting service. Then again you, you, you could like throw in numbers. What do you guys think you can charge for that cash flow service? I, I imagine again anywhere from from kind of low range 500 to 750 to probably 3,000 or 4,000 or more per month depending on how rich and complex that is. Really, it's again, if you value price, a float oriented direct method cash flow forecasting service with lots of bells and whistles attached to it and lots of support, lots of service, lots of training.

Right. Sky's the limit as to what you can do again, especially if you adapt that to who your customer is and what their pain points are. Moving along. Risk management, compliance, secretarial service, Mark Talks about this. Lots of lawyers do this in Canada. There's a company called O W N R. I'll just put it in the chat.

O W and R.

There's something, I'm sure there's similar equivalents in the United States. Bottom line is if you could maybe partner with a junior paralegal or a lawyer and offer a service that links to your, what your virtual controller does and really just extends that sales, payroll and corporate tax compliance over into.

Corporate annual filings, maintaining a cap table. I know tons of people in Vancouver that are high tech companies that are like, yeah, no one's handling that or we pay a lawyer to do it and we paid you money. So lots of services that could be added that are kind of in that thing, in that bucket. And because controllers are focused a lot on risk and because so many organizations don't have basic two factor authentication and basic employee safeguards in place like password pass protect, that I think a lot of us are fans of, why not roll that into a service and say, look, I'm going to scan your entire organization for kind of some, some risks that you may be exposed to. And we all know what the cost of that is, right? Information leaks, client Privacy breached, and IRS guidance 4557 compliance just speaks to the fact that the IRS has specific guidance there that us tax preparers need to follow. So if it's there, you could probably speak to it with your clients. Right?

I've broken down controllership and CFO separately and the reason for that is.

The CFO function I really think of as that 12 month to 5 years future looking person. And just like a controller, they're focused on risk and opportunity. Obviously the finance function, but a lot of people don't think about their CFO as also being a technology person and I really think they should. And whether you bundle it as a controller or CFO or however you do it, I really think you owe it to yourself to bundle in some technology advisory into that bundle. Whether that's simply setting up the client in the cloud in the first place or helping to recommend appropriate apps like Pluto if you're doing payables or Accounts Receivable or Waypay or just other apps that belong in that cluster that, you know, work really well together. I really feel that you're probably in many cases doing a lot of work in that territory, but not charging for it or not explicitly, you know, creating and capturing value when you should be and to bundle that into kind of CFO engagement. A couple other things right Here. If people have any questions about any of this, please throw it in the chat. What the heck is a three way forecast for five years? What is that? What goes into that? What's a dcf or what constitutes exit advisory or compensation advisory? In some of these areas, you may want to partner with a certified financial planner, or in Canada, PfP or CFP, or depending how complicated it is, maybe a CBV chartered business valuator for valuation, or a CFA like myself for valuation, or whatever the appropriate people might be for some of these engagements. But the secret sauce of thinking big picture. Thank you. I'll explain the first to you, Dorian. Thank you very much. I'll get into that in just a bit. The secret sauce here is if you don't offer any of this, but you know someone that does, and you know they do really good work, wouldn't it be incredible if you offer your clients rock solid sift advisory conversations on their monthly performance metrics, but someone else offers them five year financial models and you partner together and you send referrals and you have a referral agreement and it covers everything and you both prosper as a result.

There's just so, so much opportunity in knowing that these things are important, knowing that clients meet them, diagnosing the need. You don't. You can't offer everything, right? So honestly, network more, vet people and think of the way that you can create some really beautiful partnerships to help you succeed. All right, so I got a question about. What was it here? Question about the first day. Okay, so Pitch Deck Advisory, another website I'd like you to go take a look at is slidebean. So slidebean is a company founded by a really incredible founder. He's got some really incredible YouTube videos that I encourage you to actually take a look at. But anyways, his whole thing is he's focused around beautiful presentations and he built a whole business out of making pitch decks better. For those of you that don't know, a pitch deck is basically more common in equity fundraising circles. When a business owner and entrepreneur, you might have seen Shark Tank or something like that, when they go in front of a bunch of investors and they pitch themselves, they pitch themselves, they pitch their business, they pitch. You know how charismatic they are and people buy or not. And a lot of times executives suck at communicating.

They're so focused on their product sometimes if they're engineers or they're just not good at talking, anyways, there's a lot of service that can be offered around. Okay, well, first of all, do you have a Backable business. Do you know what your cash flow forecast looks like? Do you have a target customer that you've already sold to? Do you have some traction that we can spin into a story that we can sell people? It's basically storytelling is what it is. Fancy word for storytelling. You're either going to storytell to someone that's going to give you equity cash, or you're going to storytell to a bank who's going to say, how much risk do you present and how. How quickly could your plan fall apart? And then who would be left holding that bag? And the bank doesn't want to be the person holding that bag. So they want to know that you've really thought through rather all the ways your business could fall apart. So those are very different conversations. And whether it's three slides or five slides or six slides or 15 slides, you helping them deliver a service around that I think is really powerful. Mark earlier pointed out, pointed out that when he encouraged members of the VP Academy to produce brochures, he doesn't usually recommend the accountant to do it themselves. Right. And often I would agree with that. So suggestion here, partner with either Mark's person that he recommended or someone else or maybe, you know, someone that specializes in this and maybe have that as something that you support or offer as a. Something that you, you know, one of your customers likely are going to need. Guaranteed one of your businesses will need to go to a bank and get funding. Right. So how amazing would it be that you offer a service around that and can vet their. Vet their cash flow forecast, vet their.

Vet the risks that they think they're exposed to. Right. So you have an amazing lens as a bookkeeper and as an accountant, use that lens in the way that it's useful for the client. So that's a lot to think about. Right. Profitability Advisor Service. Mark talks endlessly and rightly so about effective pricing and how to price properly. Our clients need the same things that we're using.

And I think Roger spoke to that. He uses that very well with his clients and it's powerful. So that's a whole service platform, I would imagine, and you could just continue along here. So I'll stop talking because I think all those you guys can see and envision and think about how you could roll into an expanded offering.

Okay, let's move on. So that's that. Let's go back to our customers. What do they really need? So let's go take a look at a specific example. So I'm going to go to this company. So here we go. It's a $4 million revenue business. Claris Auto Group, they're based in. And I made this up. So it's not a real customer. Actually they're real numbers, but the name has been changed for obvious reasons. But all these numbers are real. So what do you guys just notice about this? I haven't crunched any ratios. This is just off the napkin. What are some things that you think about when you look at this company? So just income statement here.

I see lots of question marks. Right, right.

They've got no depreciation. Yeah, revenue went down. Exactly. Interest, expense is curious. So likely. Yeah. Revenues. Yeah, revenue dropped a big portion. But again happened probably connected to possibly the pandemic. Right. So These financials ended August 31, 2020. So probably captured about six months of, you know, pandemic related slowdown and then the full hit to revenues maybe arrived in the fiscal year ending August 31, 2021. Net income is pretty thin on, on the margin. So what does that tell me? Is this a, a differentiation oriented business or a cost competitor oriented business? It's probably more of a cost competitor right there. Yeah. Sabrina asks OPEX seems to have risen, but how. Yeah, great. Well, we would think that when, you know, revenues drop, you know, know, maybe other things drop as well, but they didn't. So.

Yeah. Good question, Shirley. Is everybody copy the chat? That is a very good question. I don't know the answer to that. I think maybe before we wrap up. I'll try to copy and paste that somewhere though. Thank you for that. Okay, so some really good comments. Question marks. Right. Lots of question marks. So these would be things that.

Again you would want to think about with your CFO and controller hat on. Here's the balance sheet.

All sorts of questions, just tons of things that are curious. How can current liabilities be so large.

And why are current assets so thin for this company? You know, perhaps it's a service oriented company. Makes sense, right? Auto services. But you know, just for a $4 million company that seems a little thin and the owner's equity is negative, which is, which is bizarre.

All right, anybody may. I'll just few more seconds. Spending time looking at this, it's like for me the first thing I think about with this is how good is your bookkeeping? Can I even have confidence in these numbers?

These were submitted to a lender and as far as I'm aware the loan was approved. I think it was like 300,000. But it's shocking to me. These are yeah, high Debt. Exactly. So Patty says, highly leveraged, high debt. Yes. Like, it's quite risky business. Right. Thin 2. 2% at 3% margin, you know, and. All right, that's. That's kind of. Kind of scary. So let's move on down to here. So here's what we know. Here's the facts. Just a heads up. As I expected, the bulk of the time was in today's presentation spent on the introductory conversation and on this case that we're working at the end. This is on track. We'll end, I think, with kind of finishing some comments about this case. But really, that's the focus that I wanted to have for today's chat about virtual cfo. Really just opening your eyes, thinking about, holy cow, there's so much business potential out there. How can I position myself, capture it and spin that into a conversation? And needs discovery with a client. There's much more we could talk about. And yes, the materials will be made available 100% for all the attendees. And I'll try to copy that, copy that, this whole chat conversation. Nonetheless, getting back to the case. So we got a gentleman who is 58. He owns the business, plans to retire soon. The business might be worth $3 million, or that's what he thinks it might be worth. And he's got two managers. He pays $65,000 a year. The bookkeeping is done by Mr. Harris and his wife. And they use cookbooks, desktop. They're not. She's not accredited in accounting. That's very common. Right. What else? They've been using a local CPA firm. They just do tax compliance, though. So no advice. Right. If it's just tax compliance, they're likely not getting too much advice. And if the books are in that kind of position, you know, I'm not sure. Maybe. Maybe there's gaps on the bookkeeping side that the CPA hasn't fully patched up. That also happens a lot. What else? He's concerned about competition, low profitability, business feels challenged by generational changes in customer preferences. And he doesn't really have a marketing system. Right. He just relies on word of mouth. What else? He has a large net worth versus very liquid, very little liquid savings. And it looks like what he's doing is he's. He's paying himself large amounts of salary and when required, borrowing from the company to do that. That could explain that. That.

Right. Could explain some of this owner's equity. Could just be shuffling shareholder loans to current liabilities. Right. So when you're looking at that, that's What I think about, I think about, huh, I could just be a bookkeeper that has maybe handled things a certain way. And overall, what are some things that you think about? I think about a person that probably is worth around $5 million, but is paying egregious amounts of interest, 25%, needs to restructure a whole bunch of things, needs to get a new bookkeeper, needs to maybe hire a new accountant, and needs a marketing strategy rank. So that's my quick off the napkin needs diagnosis. And.

What would I do? Well, these problems that we think most customers have, are they here? Absolutely. Tons of problems. Don't make it impossible for the client. Roll it into three or four services. The top heavy hits, the things that you think they most likely need. And as I wrap up here, I'd like you to think about, you know, am I, am I right, am I wrong? Would you, would you agree or disagree on bookkeeping the service? Would you agree or disagree that they need to review personal and business assets and liabilities and restructure them, reduce the interest costs?

Thank you. Jennifer says just highlighting, copy using control C and then paste that format. So there's a solution. So if you want the. Yeah, all the above, Elizabeth. Absolutely. But again, you can't do everything right. And it's overwhelming sometimes. If you're like, hey, you need 10 services and it's going to cost you 80,000amonth, don't do that. Pick two or three and say, there's lots of things that I can see that you need. We're going to triage the issues we see, and we're just going to tackle one at a time. We're going to do bookkeeping cleanup first. Then we're going to do chart of accounts, or we're going to do chart of accounts redesign first, then bookkeeping cleanup, then we're going to roll in some support for you in the marketing side, and away you go. And you speak to them in a calm, you know, methodical voice, and they will sign up, they will pay you. They are desperate for solutions, right? They want to retire. They don't want to pay 25%. That's crazy. So, but that happened, right? So this is a real client, real business happening right now. All they need is someone to help them. Okay, so that's. Yeah. Patty says start with the basics. Most exactly. Then expand services from there. You can't scare me. Exactly. Don't scare them. It's very easy to do. You're intimidating. Believe it or not, you know more than they do. And they, they sometimes feel at a disadvantage. So be very soft and, you know, you know, assertive about why it's so important, but don't beat them up. Right. They've worked hard to get to where they're at. All right? So that's kind of. I've got.

Way more supports and resources, so this won't be the end. And as some have mentioned, we'll make sure that everybody gets the materials they want and the ones that were prepared, they're a great thing to read after.

The session. So any other comments, anything that I didn't answer or that anyone else would think of as coming up as they roll out or extend their service offerings?

Oh, we get an announcement. Gonna go to the stage. Okay. So if there's nothing else, guys.

Yep. Elizabeth, thank you. Wendy, awesome. Thanks. Jennifer. Thank you very much. Yeah, we'll definitely make the slides available.

And you can very much love your feedback as well. So please, feedback just in the chats or to Merc, anything that you would maybe say, hey, focus on more of this next time or talk about this more. We can only get better with feedback. Right? So thank you so much.

All right. Awesome, guys. Wonderful. Well, enjoy the rest of the sessions. There's much more content to come, so I'll sign out for here, but it's been a pleasure to have this chat with.