158. Building a CFO Firm? Don’t Make These Mistakes

Can you look me in the eye, you the CFO and I'm the client and tell me that you've helped me make more money?

I love that question. What would you say are the two or three most critical mistakes that you've made along the way and what did that cost you?

Easy. Number one, nothing there. I don't know that there's even a close second is hiring. I'll say mishiring. Right.

I'm worried that if I niche down it's going to limit my market too much and I may not be able to get enough clients to build a business around it.

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Jim Emerick, thank you so much for being here today.

Thank you, Michael King for having me.

Of course. Let's dive right in. You're the CEO of Backbone cfo. How in the world did you get started as a fractional cfo?

It's interesting. I remember when I did start it definitely was not called a fractional cfo. And in fact I think it wasn't really until kind of when around I met you, which would have been 2022, 2122, that I even really started seeing the term fractional CFO. When I started back in 2020, really I was still working as an in house CFO for a company and I started doing like some project work, what I would today called like very ad hoc advisory. And locally to where I live, I kind of had the reputation of being the CFO guy within my community of business owners and friends that own businesses and be like, hey, have you heard of QuickBooks? Could you help me with that? Or I just got a loan and I have no idea how to manage this and it was just like, yeah, sure, I'll come in and, and kind of lend a hand more than anything else. And that's really the origin in its most raw form, very organic in that sense. And it was back then that I realized, okay, there is a need in small business for this. And as a cfo I inherently knew that. But it wasn't until I started getting the unsolicited reach outs to say, hey, I need help.

So you've got a full time gig as a cfo. What kind of, what industry was the company in?

Yeah, so I was in manufacturing, the company I Worked for was a manufacturing and engineering service. So we were, the industry we were in was defense primarily.

Okay.

The level of service we provided was manufacturing. So think of CNCS Mills, large machine shop.

Okay.

So that was, that was really where I cut my teeth.

Why, why make the jump? It sounds like a pretty cool gig. You're doing cool work for the government. Why, why take the risk?

So you know, to be honest, what actually ended up happening was I got recruited. So I was, I was the CFO at this company and I got recruited by a headhunter to go work for a large German owned manufacturer based in Ernabuck, Germany. And they were building a plant here in New Jersey as a US operation. They needed a VP of finance and contracts. And I, the money was really good and I took the money. And when I did that, I went and worked for a significantly larger company in the process to 3,000 employees. Something in that range. And I thought that was going to like bury the entrepreneurial edge of me. Like, hey, this is going to be big. It's a lot of money, it's a lot of people. It's, you know, we're not, now we're not talking tens of millions of dollars, but hundreds, millions of dollars literally. And you know, working with Boston consulting group and PwC, KPMG, I mean a lot of, like a lot of the, the names that I read in books and like in my studies and now all of a sudden I was in the throes of it and I realized very quickly that I had lost the small business impact that I had prior to, to doing what I was doing as a cfo and I missed it. You know, why make the jump? It partially was I had the entrepreneurial itch since I was 19. I mean, we're talking over a decade and I realized, oh my gosh, the place that I want to exercise that entrepreneurial nature in me is not here in a 3,000 person company. It's going to be with a maybe 1 to 200 person company at most. Because I always tell a story. Like as much as I was a vice president of finance for a 3,000 person company, I was a booger. Like my impact was so small in the grand scheme of things. And I wanted to get back to.

The roots, compare that kind of impact to what you see the impact being as a fractional CFO for a one to 200 person company.

Yeah. So I think it's a couple of things. One, working directly with the business owner, I mean it's very simple. But you know, you get you get to a certain point and you're no longer working for the sole man or woman who runs this company, who, this company funds their family and their lifestyle and their plans, hopes and dreams. You're talking to a board, you're talking to conglomerate of stakeholders, syndicated banking groups. I mean it was not at all the same. So getting back to that place where it's no, this is maybe the husband or the husband and the wife or the wife that runs this business. And this business is a legacy. It's, it's, it's kind of built into the DNA of, of the person running the company. And the same projections, the same financing support, the same leadership on the financial level that you provide in, in arena A, the outcome and the impact is wildly different. In arena B, the same thing translates different and the impact is wildly, wildly, wildly different.

What, what is that impact in arena B, the small business arena? What does that look like in real life?

Yeah, I, I think it's, it's very personal. I think for us as human beings. Like, you know, I was just talking with somebody earlier today in a, in a, in a meeting and I was just. We're talking about the impact that we have in small business and we're talking about, when we talk about the, the outcomes, we're actually, we tend to go down these rabbit holes. This is now funding my kids college. This is now, this is now planning my exit so I can retire and be with my, my grandkids. This is now helping me create a legacy business for my kids. We have clients right now or their second generation kids are stepping or thinking about stepping into this business. What does that look like and how do we set this thing up to be generational? I mean that's, that's a, it's a pretty crazy impact. I mean it's one as a business owner I hope to have with my own kids at some point, you know, 10 years from now. So to me that's what that impact looks like.

A moment ago you said you kind of started getting into the fractional CFO thing and like let's call it 2022, 2023 I think is what you said at the time of this recording. We're in Q1 of 2025 and I can say as a guy that's plugged into thousands of fractional CFO firms around the world, the rate of growth that I've seen in your firm over the last couple years, I mean when we first met, you were doing a couple hundred grand a year. I think by the end of this year, you'll probably be on a multi 7 figure run rate or something that looks a lot like that. First, congratulations. I'm so proud of the work that you've done and just seeing how you've built your team and the impact you've had for your clients. It's been an awesome thing to be able to have the privilege to sit back and watch. But I'm curious, when you think about that kind of explosive growth, what are the, what are the keys to, to that success, to that growth that you've seen that you'd like others that are kind of following in your footsteps to be able to, to grab onto or to latch onto?

Yeah, A, I appreciate that. And B, I'll say, I think it was 2022 when you and I first connected without really being plugged into your world and the community, the greater community of fractional CFOs. But you've really liked, you've created this incubator of.

What I would call entrepreneurship within our space. I don't know that I would be here today, nor maybe I would be here with a lot less hair or a lot more terrible stories to tell. But no, I think it's been absolutely critical. And I would say the keys to that success, certainly. I mean.

Let me take a step back. I don't know that I have it all figured out. I know that I don't. I think that the truth is scaling any company like our clients, right. It just requires so much from the entrepreneurial leader to do it. And, and it's, it's, I tell people all the time, it's the biggest roller coaster you'll ever be on and it somehow never ends. You think the loop, the last loop is like the final loop and then you're going to come to a stop and get off and then there's another loop. So, But I would say some key things that have helped me as a leader, growing backbone, cfo, you know, certainly number one, you know, especially starting off, just figure out how to sell, sell, sell, sell, sell. And you can never stop business development. You can't, you just can never take the foot off the pedal, even when you think you have enough clients, when you think your book is full, when you think whatever you're thinking, it's, it's a lie. Don't stop, do not stop business development. So I would say that's probably the first key to success. And you know, certainly I'm talking to the, when I say this, I'm saying this in light of not just starting a fractional CFO firm. But scaling a company, the second thing I would say again, in light of scaling a company has got to be hiring. And again, this has probably bit me in the butt more than I'd like to admit because it's so difficult on so many levels. But I would say the second thing you should consistently be doing just like your business, developing and prospecting and that kind of thing, be constantly on the the lookout to see who you can connect with and network with. That may be future partnerships, future employees, subcontractors, whatever your method or model is going to be. I'm not sure. But what I do know is you need people and you have got to constantly be connecting. So I think you have to figure out how to prospect and business development on one hand and then on the other hand, you need to be consistently out there networking and figuring out who's going to help you build this thing from a delivery perspective.

Any other keys to growth?

Jim I would say two more on the operational side that just have impacted me. You know, I said this before, right before I said those two is just being in Community is huge for perspective and feedback loops. And I'll share this story Being on this podcast, I remember Mike was, it's probably been maybe over two years ago and this was definitely before we were, I want to say before we were even in the Mastermind together. But you had, I had lost a sale or something like that and you said, hey, flip me over the recording. Like I want to, like I'll look at it. And I, to that point, I had never had anyone willingly, other than my wife, like, look at a sales recording and like give me some kind of constructive, constructive feedback. And I just remember thinking, oh my gosh, this is an absolute grand slam. Somebody is going to take time out of their day that knows what they're talking about and give me some corrective feedback on what was going on. And I don't even remember what the feedback was at this point. It's been so long. But that was the start of a journey that, that, that I realized, oh my gosh, accountability is going to go so far for me personally as a leader and sales operations, you kind of name it, right? I don't care what quadrant of the business business you're talking about, that accountability piece is to commit to change, to commit to growth is huge and you need that. So I would give a shout out to Community and then again I'll also give a shout out to eos when your company gets to the right size and scale has been operationally.

It'S really helped us solve issues, it's really helped us set the right goals at the right pace. So I would say EOs, I would say as a second is just a must have if you're scaling the company.

For those people that are watching or listening that don't know what EOS is or maybe they've kind of heard about it on the streets, if you will. How would you describe EOs? Like what, what is it?

It's a great question. What the heck is eos? I think there's a book actually that, that, that is that title. The way I would describe it and the way I, I, you know, I would articulate it. Somebody you know, even like a client or a prospect who I'm talking to is, is really just a management system to help frame how to scale your business. And when we say scale, what do you mean? How do you scale your business? Well, just like some fundamental, very basic, simple but not easy areas of your business that you need to get a handle on. Things like what are the measurables, right. What should I be actually looking at that will be a future indicator of success or failure? How do I have meetings? I remember specifically on meetings I came out of, you know, large company, we were like meeting to death. And I remember coming and starting Backbone cfo. I literally said this to my like initial team. We're never having meetings. I don't want meetings, I don't want to talk to you unless there's a problem. Like and that was like my mindset. Now of course I went the pendulum swung way too to the left. But this is I think a pretty good center ground for how, how to have effective meetings and solve problems and then ultimately to create accountability in your organization to get from here to there, wherever those here to there are.

If you could take that. And I love those, right? Learning, learning to sell and committing to sell. I think a lot of people, Jim, they lose sight of the fact that it is a skill, it's a thing you learn. Nobody's just born a great salesperson anymore that they're born a great to be able to put together a great three way model, right? It's a thing you learn, it's a thing you practice a thing, hopefully you get constructive feedback on and you practice it. But from sales, in business development, hiring, being in community, eos, the summation of all of those things. If you could go back to day one, Jim, the CEO and give yourself advice, what would that one word of advice be that you think would probably shorten your Journey even more and help you grow faster.

This is so easy. I would niche, I would pick a niche and I'd get so stinking specific about what I did and who I did it for. We're just now like, you know, navigating those waters and we're constantly shaping it. But I will tell you, like, not that we're a huge company by any stretch, but when the payroll's approaching a million bucks, like, you know, you gotta, you gotta turn and burn your. Like, get as much work in and keep it going as possible. When it was just me three years ago, three and a half years ago, it would have been a lot easier just to say, let me go find five clients in this whatever business. I honestly don't care what niche you're in. I think it has. I. This, this is probably someone's going to tell me I'm wrong here, but I actually don't think it has anything to do with what you're passionate about. I don't think it has anything to do with what, like, what, like, pulls your heartstrings. Like, just go find people in an industry that, you know can pay you have significant margin and have problems that you can solve. And if you're just trying to scale a business, this is a really great place to start. Because when people can pay you and you can solve their problems, you have like a pretty decent chance of starting a successful business.

How did you end up landing on your niche? What is your niche and how did you get there?

Yeah, well, we're still like, again, navigating through that. We spent a lot of time kind of claiming agnostic and an agnostic approach to business development. And to a degree we still do, but we've really, in the last year, year and A really started leaning into our construction contractors. And we're developing this little niche in the restoration world. But again, that's more of just a subset of contractors, service service providers. And how did we get there? I'll tell you.

Again, it was just like where I started. You know, maybe it's where I live in, in suburbia. There's a lot of contractors, general contractors, and you know, you do good work for one person. This is actually how our business got started. A local millwork shop, still client today. They, you know, kind of talked me into helping them and I did. And then that kind of grew and grew and grew and that was one of our first clients. Then all of a sudden, you know, landscaper down the street heard that we were helping that mill workshop. And then all of a Sudden, one of that mill workshops, customers who built custom homes heard that we do this, and they signed us on. And it's just one of those things that kind of kept compounding. So that's really how it helped us. And I'll tell you, I heard early on, I mean, it's literally been years since I've heard this, but, you know, solve hair on fire problems. This is a hair on fire problem. Like, I have got to solve this freaking problem or nothing else matters. Right? And for us in the contracting space, construction, cash flow, I don't care who I talk to, cash flow is constantly a challenge, even for profitable companies. So I knew that, okay, this is a complex problem that I have personally solved as a cfo. I've done it many, many times. I knew exactly how to solve this problem. And that was a great starting point. So, you know, we've kind of just continued that trend and again, niching down now it's still becoming more and more ch. It's. It's still challenging, but it's very simple because it actually makes the language, the messaging, the. We were talking today in an internal meeting. Even now we have, as of April 1st, we'll have five CFOs. That will be the teaching element to make sure our team is equipped to be able to speak the same way, solve the same problems, come to this table with the same solutions. And now that level has become even more heightened. We have to be consistent there. It's not even just a marketing thing, so I will tell you, it just makes life easier. Unless you like complex lifestyle where everything is constantly changing, then don't niche. But if you like simplicity, niche.

So it's. It's around not just the messaging for business development in sales, I find that it touches. It makes hiring your team easier because you know exactly what skill set and experience to look for. It makes onboarding, I think, more efficient and effective. Like you're able to get clients up to speed faster because you have a smaller toolbox of things that you need to kind of pull from and apply. It is easy mode. It's easy mode for business. And what would you say, though, to the people that. I think it's a valid concern. But what would you say to the people, Jim, that are like, I'm worried that if I niche down, it's going to limit my market too much and I may not be able to get enough clients to build a business around it.

Yeah. So I think, you know, you can decide to niche down from a marketing perspective, but if your best friend Comes to you and says, like let's say in our world, like we want to work with contractors. And this actually recently happened. But you know, a great referral partner came to us and said, hey, would you work with X company? And in this case it happened to be a large retailer locally to us. Very, very large. They met from a psychographic and demographic. Every single checkbox for us except industry. We made an exception and they're a great client and we were able to fulfill it. Right. There may have been an instance where we couldn't, meaning the industry was just so specific or outside our wheelhouse. We had to let, we just had to let it walk. In this case, it was tangential enough to where we could still fulfill and do a great job. But I would say don't. So if those opportunities come to you, great. But start somewhere, right? Start somewhere. And even if it takes a year or two to really materialize to where you get confident, but start with your outward facing. Marketing, business development. I sat with a. Gosh, he was in financing. He's like a aftermarket financer. Strategic partner. I was sitting with a couple of weeks ago and he actually asked me like, you know, he works with thousands of clients, blah, blah, blah, who can he refer me to? I was just construction and trades. But Jim, I have thousands of clients. I don't care. Can you give me one? Actually, one would be better than 10. Can you give me one referral right now in this size and this. Oh, well. Cause what it did was it took. And he, I believe him. He had a thousand clients. Right? And if I had a thousand clients, there's not a shot. If you just said, you know, I work with business owners. Which one should I give you first? Let me think about it. But if you said no, I only business owners who are wearing a black shirt that says backbone CFO on it. Well, I mean, there's only one of those. Oh, Jim. Yeah, let me, let me tell you to tell you about Jim. That makes it a lot easier. And most people, I think listening to this underestimate the fact that they only need probably like three to five leads a month, maybe less. And you know, and if they're quality leads, your business is gonna freaking take off.

If you find content like this helpful, then I'd like to invite you to join my inner circle program. Inside the inner circle, you'll find a highly engaged and highly supportive community of 300 other fractional CFOs. Many of them are just getting started, but many of them have been in the industry for Years. You'll find it a great mix of all experience levels. It's super collaborative and super supportive. I also go live on Zoom every month and share the latest, latest lessons, insights and best practices that I've learned over the last nine years of running my own fractional CFO firm, KFE Solutions. Just click the link below to try the inner circle. 100% risk free for 30 days. I hope to see you inside. Guys. One. One sale a month, 12 new clients a year. Like that's, that's ridiculous. I mean, you've got a multimillion dollar firm in no time, especially if you're, you're serving them well. Can you walk us through what is your niche if, if somebody on the street? I mean clearly construction and trades, but is there anything beyond that that you look for that you would consider as part of your niche or your ideal client avatar? Ideal client profile. There's all the acronyms out there. How would you describe an ideal client for backbone?

Yeah, we use language, ica. So our team is very familiar with that. We break it down into two buckets, demographic and psychographic. The demographic that we kind of talked about, but we're really targeting trades, construction, manufacturing. So we'll call it contracting, which is a pretty blanket statement. When you really uncover what does contracting mean, it can mean a lot, but basically, you know, we're looking to work with complex businesses who have inventory, work in process or some type of balance sheet movement where they're like, you know, cash flow is not, not simple. But beyond that, we're trying to work with clients above 5 million in sales, typically under 100 million. I think our largest client this year will probably be in that $80 million ballpark. I would say we were probably falling somewhere in the 10 to 15 million on average. We work with profitable companies. I actually don't mind saying that we're not a turnaround specialist.

I had bankers early on try to give me these crazy scenarios for me and I'm like, well, how am I getting paid here? Not to say we need to work with very profitable companies, but we work with generally profitable companies and we're trying to help them become more profitable and cash flow positive. So that's really the demographic, but then the psychographic I would say is equally if not more important. Which is why we brought on the exception that I was talking about. And that is we are generally looking. Not generally. We are always looking to work with folks that are teachable and humble and have a growth mindset. Meaning you could be a $10 million contractor right down the street with 50 employees, has work in process, complicated business, but doesn't want to grow. It doesn't work. And I would be the first to admit there's no reason to pay us 80 to $90,000 a year if you don't have an ROI attached to that. Meaning if there's no dollars and cents that, you know, the love language of business is money, let's face it, right. It just is. Anyone that tells you anything different is flat out lying or incompetent. So if you can't connect your value back to how you're going to help your client have more money, like let's make it real simple. Do they have more money? Yes or no. And if they don't, that's a really hard value proposition to continue to service them. So for us, like there has to be a growth incentive. And, and more and more we're actually finding that we like working with clients who have an exit plan. Like they have a date, a number in mind. Why? Because of exactly what I just said. It's much easier pill to swallow to say we're going to pay back $300,000 in the next three years. Roughly. Right. I'm rounding up, but we know that we're a $30 million company with an EBITDA of 10% and we have a multiple of four in our industry. So if they can even help us, you know, a half a point, the 300 grand doesn't is a no brainer, right? Or maybe it's not even that, it just expedites the process or it helps us, you know, with our quality of earnings. We don't, we have less other advisory expenses. So you know, there's, there's got to be a connection to value. And when I say value, I'm not saying that like pie in the sky value, I mean dollars and cents in the bank.

When you think back to the last few years in business, Jim, there's been a lot of up and to the right movement for, for backbone. But it hasn't been all, all rainbows and unicorns and like whatever else along the way is, you kind of reflect back on, on your journey. What would you say are the two or three most critical mistakes that you've made along the way? And what did that cost you?

Easy. Number one, nothing there. I don't know that there's even a close second is hiring. I'll say mis hiring, right. And I'll break that down into two.

Buckets. One is just hiring the wrong people. We've had plenty of that. And so as much as there's been up and to the right, I will say that's not without a ton of pain, expense error, flat out wrong decision making. And it's a painful thing to admit because a, it's a person's life that you're actually failing, right? So as the leader, when I select somebody to say, hey, come work for Backbone cfo, and it doesn't work out, whether it's my fault or on my. On us or on them, it doesn't matter. Like, you really are impacting somebody's life. And I always look at the people component of it, and I hate that. You know, as a leader, there's a significant gravity and weight on hiring, right? So every time we say yes to that, like, there's a significant amount of domino effects of consequences that are going to result to that. When it's great, it's great. When it's not, it's terrible. And there doesn't seem to be a whole lot of middle ground there. So I would say hiring the right people and then the second one that's kind of bit us in the ass, if I'm being quite honest, is not hiring fast enough. And the reason that hurts, it does two things to your organization when you do have a decent pipeline. One, you're overworking your people. This really hurt us. In Q3 and Q4 of 2024 this past year, we had a Just. We were landing deals and we had a consistent flow in the pipeline, and we kept hiring. Well, two things. One, we were hiring behind. Behind closing deals. In other words, we were waiting for deals to close, build up a queue, and then hiring. And then, boom, we brought somebody on. It's like, congratulations, you got hired. Here's six clients. And it's like, I don't care how good you are and how experienced you are, that's a tough. It's a tough, um. It's a tough endeavor. And. And we face the results of that a little bit this past year. And then the second thing is, you know, obviously when you. When you do that, it. Selling becomes difficult, right? You're about to close a deal, and they're like, all right, we can start in two weeks, right? And I'm like, yeah, we can start in two weeks for sure. You know, and then I'm immediately hanging up and calling my business partner, hey, when is that person starting? What's their start date? Can we start them earlier? And that's not a great feeling. So it hurts selling, you know, with confidence, and then it hurts the Person, really, because they don't get a fair shot at onboarding with your processes and procedures and training and everything else.

So, so hiring, big mistakes there. Any other areas that stand out is costly missteps.

Yeah, I would say again, kind of embarrassing to admit to a degree. Right. As a cfo, I've certainly had those seasons where I have not done enough financial projection. Meaning that, yeah, I'm looking at, we can make payroll next week. Great. But what about three to six months from now? How am I deploying our resources? Do I really? And that goes back to kind of hiring and our. Listen, in our business we don't have to go buy machinery or equipment, we don't have inventory. Our capital is really deployed in terms of growth in one of two ways, continually business development and marketing or hiring or both.

And you know, there's operational expenses, but let's face it, by and large, the software and stuff we buy, you know, pay for, you know, Microsoft 365 or Google, like it's not that expensive. But where we do have a significant responsibility is planning our resources to hire a market and be out there in business development. For us, that got expensive this past year. You know, very expensive. We're looking at myself, you know, I don't certainly I'm in the six figure range in terms of how I'm deploying capital to be in various groups and environments and being around other CEOs, you know, which is great results, but it's not, it's not small dollars now and travel and everything else. So, you know, I would say that's definitely bit me in the butt.

In the past for sure.

What's a mistake you keep making?

I will say we made it for the last year and a half, which is just like really.

Really hiring behind capacity. It's been the biggest pain point, I think for us. We did change that this year. As I mentioned, we've hired two CFOs this year so far. One started March 1, one starts April 1. And this is, I'm proud to say this and equally scared to say this, that person will have either one, but maybe no clients when that person starts. We knew it was the right thing because we wanted to get out of this trap and this, this terrible cycle of you onboard. Monday and Tuesday we're dropping you two clients and Wednesday there's two more. Like we just wanted to get so far away from that. But I would say, you know, continuously making, we made it a lot last year. Sometimes we try to hire ahead of capacity. People we hired didn't work out. And as a. Again, as a leader especially, I'm a people person, so I feel like that's a reflection on me, right, as the CEO of this company. You know, certainly there's a lot of contributing factors, but, like, the fish stings from the head. And the truth is that's been my fault, my burden to bear. And the downstream effects of that have been, you know, I hired a recruiter Last. Was it Q1 last year? Last. First and last time that'll happen. I truly felt like I went to the bank, took out $25,000 in cash, went into my backyard, and lit it on fire. I mean, I still, like, there's a lot of mistakes. I can get over that one. Hurts so, so bad. It's the tuition, I guess, of being an entrepreneur, but like, some of this stuff, dude, you can't get it back. Right? I mean, it's. It's. It's behind us, but it. Like, there's some mistakes that it might take me a little while to get past.

Why did that one sting so bad?

I think because I gave up a significant amount of control to the recruiter to do the placement, the recruiting. In other words, I tried to outsource something that was too vital to what we do. And I thought I was hitting the easy button. I thought I was delegating. I thought I was doing the right thing for the organization. But, you know, obviously it didn't work out. And. And I think I really try to. I really tried to shortcut the process. And looking back, it was an absolutely terrible decision. Probably put the recruiter in a bad position, to be honest. And I say that. Not that the recruiter was bad or did anything wrong, but I think in our business.

And maybe this is me classically saying, like, our business is so unique, but like most of actually our entire team, no, we just hired our first CFO who came as a. He worked for another fractional CFO firm. So that's. That's not true. So four out of the five of us have never been a fractional CFO before. We became a fractional CFO at. Back when cfo, myself included. So what does that mean? Well, it's. It's difficult if you're just going to go be another CFO for the manufacturing company, like I was. Well, I could probably easily replicate what I did in that environment into many others, but what we do here, I think, is so unique to even translate it to a recruiter so they have the context and the perspective of what they're looking for. In betting, it's very difficult and it pains me that I made the decision to think that that was the right move. But it wasn't and I won't be doing that again.

What do you do now? What's, what's working now?

What I was saying earlier, I'm. I'm constantly proactively talking to people. Even if I don't think I have a job tomorrow lined up for somebody, I do not care. What I've realized is most anyone who's worth anything anyway has a lot going on. If, as you know, case in point, the guy that we're bringing in starting April 1, he's coming out of a private equity backed company. He's got 20 years of experience. He wasn't like ready to jump in two weeks. Like, he had a lot going on and he had a lot of financial upside to stick around for certain periods. Right. And I want people like that. But I had to network with that guy literally for years before I actually tried to convince him to come work for me in 2022. And he flat out said, no.

That'S cool. Like, and now he's saying yes. So it just was the right season. But my point is now it's much more proactively being in front of people, communicating the vision of what I'm doing, what we're doing, and really getting people to buy in. And you never know when the right time's gonna be.

The theme that I keep hearing from you is a lot of your success has been predicated on two things. One is this nurturing the hiring pipeline and then nurturing the sales pipeline. At the end of the day, you provide great work to your clients. That's a fundamental given. But on top of that, work the pipeline for hiring work the pipeline for biz dev.

Let's talk about the biz dev pipeline. That's probably the biggest thing that the vast majority of our industry struggles with. It's not our fault. Nobody's. We've never been in a role where we had to know how to do that before. And so now we're coming in. We need this brand new skill set for somebody that's just getting started or maybe has been in business for a year or two and they haven't got that full pipeline yet. What advice would you give to them on where to start and how to think about it?

Number one, I would resource yourself. Meaning that like, you know, there's some great resources out there. $100 million offers by Alex Hormozi, like, you know, do some things to where don't, don't believe the lie that you need. Like if you're starting out, that you need 25 people in your pipeline at all time, like get really specific about who you're going to help and go find one or two people. And if your offer is good, good enough and the value you're bringing is good enough, and it will be and you're finding the right person and the right people you need to help. You don't need 25, 30, 40 people in your pipeline. You don't need social media spending, you don't need to go crazy content creation. You just got to be in the right place, kind of rubbing elbows with the people that you serve. And it's not as hard as you think to come across those. Thank, thank God. There's a lot of environments that are already created that you just have to show up to and you have to be in that mindset of help first, give first. And if you do those things, if you're there, if you're helping, you're giving, you'll that, that will come back to you. And that sounds really fluffy and I hate fluffy things so much. But the truth is like, it's a lot in most people, like you said, don't come from a sales background. I did not. And for me to get out of my own.

Get out of my own way really was just to say do the hard things. I have this sign somewhere in here. I don't know where it's at, but it's like, you know, work harder. Nobody cares. Like get, get out of your own way. Like, no, your wife and your kids don't give a shit if you don't like selling. They like eating and it costs money. So just go do it now. Don't wait till tomorrow. You know, I, I tell my team all the time, hungry dogs run fast, get hungry. It's good if you're not eating today, right, because you're probably going to be hungry tomorrow. So you know, set it up that way to where you need to, you need to run fast. Get in those environments where you know your business owners are. And I'll tell you just what's worked for me in, in what we do. Like I said, I spend a lot of time, effort, energy and resources at this point in being in things like Vistage, C12 entrepreneurs organization. I am constantly, my, my assistant staring at me right now like with my artist schedule, like it's wild. I'm constantly somewhere. I don't know that it's going to be replicatable to be, you know, 3, 4, 5 million in sales, but it'll get you to a million easy, easy. Pick one of them. You're, you're a million dollar company.

A lot of those things take time. In my experience. They're relationship driven. You've got to nurture them. Let's say that somebody doesn't have the time or the capital to invest in those groups. What advice would you give them on how to find their first three clients?

Startup do this today. Actually, if you're listening, I don't care how much money you do or don't have or how big your business is, find seven people in your world that are trusted advisor type people. I do this every week. I meet once a week, Friday morning virtually at 8am with a group of, I think we're up to, I want to say eight or nine guys right now, an EOS implementer, a wealth advisor, a tax firm. We have a marketing agency, a health insurance broker, a couple other brokers of things, right? Brokers of things that know people and they are, they have my very similar ICA or in many cases exact. We meet once a week for 30 minutes and we literally round robin referrals to say, hey, what meetings were you in last week where your current client shared a pain point? Because I guarantee if they're any good, there's probably an issue in marketing, sales, finance, insurance, right? Like every business. And if you have seven people in your little circle that I'm sure there's someone that can help them and just go create that, like go just start it, Find people, rally and pull them in. Don't charge anything, don't, there's no, like we buy each other lunch every six weeks. We meet in person, just go start that. You know, we've gotten a bunch of leads from doing stuff like that. That's a great starting point. It costs nothing other than your time.

How do you even start something like that? That's, that's a brilliant idea. Let's just create an environment of people that serve the same target audience and let's just have time on the calendar to chat. How did that even get started, Jim?

Yeah, well, number one, you're an entrepreneur, so just go pioneer stuff, right? So don't wait for somebody to tap you on the shoulder. I mean if you're listening to this right now, consider this the shoulder tap. Just go do it. But the, the way this particular group started that, that I am part of is actually through an EOS implementer who is now our EOS implementer had just reached out to me on LinkedIn and said, hey, would you be interested? I mean, it was really that simple, to be quite frank with you, because why does it have to be complicated? Sure. Can I show up on a Zoom call to potentially get referrals every Friday at 8am? Yes, I can do that. And if that doesn't work, guess what? I didn't pay anything. I just don't show up the next week. So like, you know, now I think you need to go into that with a give first, help first mentality. And that's a whole nother conversation. But just start, just do that. Find four people. Why not?

If you came to work tomorrow as the CEO of Backbone, and just hypothetically speaking, let's say you got fired as the CEO of your own firm and you were replaced with a brandy new CEO, what is the first thing that that CEO would start doing that you're not doing today? And what's the first thing that they would stop doing that you've been doing?

So I would say if I was coming in on day one, the first thing I would start doing and start working on more proactively than I'm currently doing is figuring out how to get quality control and standardization in our fulfillment. And I say those are two different things. Right? So standardization is the process by which our team follows the quality control is ensuring that the process is being followed. And I would say, you know, once you get, once you have osmosis and you break off and you're now two people, right? So that's, that's when it starts. At that point, you have got to figure out a way to have quality control on your process. And it's not. It. I can tell you it becomes pretty challenging with where we're at. You know, there's, there's, there's a few of us now. Um, so we have as of today, three full time CFOs, myself and we have two subcontract CFOs. So, you know, there's, I mean, I don't have clients anymore, but the, for them, whatever that number is, do. And then we have another one starting April 1st. It's a lot, I mean, it's a lot of meetings, it's a lot of advice, it's a lot of reporting, it's a lot of time. And I'm constantly talking with my, my business partner about how does, how do we set this up so that we have the time, energy, effort, resources, systems in place to make sure that we're not just micromanaging people at the end of the day we're actually trying to help our team succeed, because if we do that, they help their clients succeed. So it's actually a trickle effect, downward effect. And I would spend a lot more time doing that. It's now just percolating to the top, you know, and I think I would spend a lot more time doing that. What I would spend a lot.

We've actually spent a lot of time on that recently as well. And I'm happy to share this with you if you want, Jim. But what we've started implementing is, you know, we have the CFO Academy, which is legitimately how, like the playbooks that we use to deliver client services. We've. We've made some adjustments to that that are specific to the construction industry, which is our niche as well. But that's kind of like our standard way of doing it. Now, on the quality control side, like, how do we make sure that those standards are being used and how do we make sure that the, you know, the client is getting a consistent product and that if we had to swap out CFOs, that the replacement CFO would do something that looks a whole lot like what the other CFO was doing. And so we've actually mandated that everybody in the company now reviews at least one CFO call per week. And we've come up with a checklist of things that, because we have an agenda for our call, I talk a lot about the agenda in the flow. And so we have an agenda that or a checklist that looks a lot like the agenda, where we're asking very black and white questions. Did the CFO do this? Did the CFO ask this? Did the CFO set the agenda at the beginning of the call? If they did, did they generally follow that agenda? And so we have it processed out, and we structured it in such a way that even my executive assistant, who knows nothing about CFO work, can watch a CFO call to make sure that the product was. The process was followed in the product is something that if you just factor out their perspectives, the CFO's perspectives, is it a consistent product? And that's kind of been our first draft with it, and that's been going really well. We've reviewed dozens and dozens of calls over the last 30 days or so. But then to take it to the next level, we're flying the entire team in here in two weeks. And we've actually put together a slide deck template where each CFO is going to get in front of the whole company and do presentations on each of their clients, and there's a whole agenda that they're going to follow through that again, takes that level of accountability to make sure that they're doing the right things, they're asking the right questions, they have the right strategies in place and to let the whole team poke holes in what they're doing with the clients. And I was actually on the phone with our COO yesterday and he was like, I think this is going to make people feel a little bit awkward. And I'm like, that's fine by me. What I want is a better product for our clients. I want our clients to have the best possible product that our team can provide them. And so that's kind of what we're working on right now to help with that standardization and then quality assurance. Because I think you're right. Like, you get to a point where you've got half a dozen or more CFOs, you want to make sure that it's not just all willy nilly and, you know, wild, wild west, everybody doing their own thing.

So I'll tell you, like, just to piggyback off that, we have the scorecard as well. It's working to a degree. We have 16 points on that, so you can get one to 16. And like, we require a minimum of 12 or 14. I forget the number to be hitting, but the 11 16th of that scorecard, and I'm going to butcher this, but essentially says, does the CFO provide a degree of financial expertise and perspective? And we give some examples. Now, that's the meat of it though, right? Like, that is not 1/16th of the score. That actually is like the entire score. And when you kind of sum it all up, that's where I said earlier, like, we actually went through this in our L10 yesterday. Can you, can you look me in the eye, you the cfo and I'm the client, and tell me that you've helped me make more money?

I love that question.

Just, just answer the question right. And the answer might be no. Right? And you can tell me why and justify all day long, but if I'm the business owner and entrepreneur, I have this intuitive thing in me that will never leave. And it's a radar and antenna that has antennas that fly really high. And as soon as I get this inkling that this thing, whatever the thing is, isn't adding value, I know, I just know it. I know it instinctively. And for us as CFOs, we have to not only recognize it, but also be 100% okay with it, because it's the right thing and for us to actually stand behind our service. I want to make sure that we can be asked that question and emphatically answer yes, here's how. So we're actually doing something this week where we're going client by client and identifying how we're helping them make more money. Very simple.

So our template is getting updated because I love that question. I think that's brilliant. I think that's a perfect last question on the presentations that we're going to be doing. Can you look the client in the eye and tell them how you've helped them make more money or if you've helped them make more money? What a great litmus test. Now, before I forget, if you were to get fired, what's the first thing that your replacement would stop doing?

So I would say at the scale we're at right now, I am starting, starting to question how much of my time I spend in the very meetings and networking groups that I just mentioned. And the reason is it was, it's, it's great to get to that first million. I, I would almost say probably a couple million in sales because my personal network is, is enlarged by those environments. I think there is a diminishing return to it. I sense it coming. And I don't know that Jim, spending five days a week, one day per group or something like that is going to equal 5.5x growth, if that makes sense. Like, I think there's probably something where I sense a different season of business development coming, a different method, a different mode. And I would say I would if I was a new CEO walking into the exact pipeline we have, the exact client benchmark to the exact CFO team we have. I would look hard at probably doing, getting more creative on, on business development.

Jim, the industry is growing so fast. I mean, just from the, over the last couple of years, you know, you looked at, look at the trend on LinkedIn on how many virtual or fractional CFOs there are out there and the number, I mean, it's, it's almost like a logarithmic kind of growth or exponential kind of growth. What one bit of advice would you like to give to the industry that you think would serve the industry best overall?

I think for me, maybe this is a frustration being in the industry and thinking how we can serve our clients as a whole better is to look at how we standardize what we call fractional CFO services or virtual CFO CFO services. And I don't mean standardized in terms of like setting some kind of compliance or regulatory thing in place. I don't mean that. What I mean is how we help our clients grow. And I think that really, I think it's starting to get sussed out. I think clients today, prospects today are much more educated about what to expect from a fractional CFO versus, let's say three years ago. But I would say we still have a lot of work to do as an industry to say if we're going to call ourselves fractional CFOs and we're going to work with clients. And the clients could be all different shapes and sizes in industries. So like, you know, that doesn't matter. But the result of working with fractional CFOs should yield or will yield something. And to me, that really is growth. I think for us we're talking privately held businesses, by and large.

Small businesses, you know, and I think for us these are entrepreneurial led businesses. And I think we have to help them grow. I think that really is the standard. And how do we, as an industry, how do we make sure that that is, is the standard that we're setting?

It's an interesting idea. Maybe we should talk offline about putting together like a roundtable to talk about that and figure out maybe what that looks like.

I love that. I mean, and I think it's, I think it would again, because if you think of help first, give first, that's what we want for our clients. Right. So it seems to be like a good place to start.

Well, Jim, thanks so much for your time again. It's been such an honor to be able to watch you grow over the last few years and to build an amazing team and to have just some extraordinary impact on your clients. So thank you for allowing me to have almost like a front seat ride along on your journey. But thanks again for everything that you do for us and for the industry.

Mike, thanks for having me, man. Appreciate it.

All right, my friends, I hope you found this episode helpful. If you did, it would mean the world to me if you would leave a five star review on Apple Podcasts, Google podcasts, Spotify, wherever you're listening to this episode. In the meantime, I can't wait to see you back right here next week. I'll see you then.