Avoid These 3 MAJOR CFO Traps (Bonus: How to Escape Them!)
Michael King identifies three traps fractional CFOs fall into: difficult clients who drain energy, undercharging for their work, and getting stuck doing tactical compliance tasks instead of advisory work. For each, he offers concrete fixes: have honest conversations or send a breakup email, use a "one new one old" pricing tactic to raise fees, and renegotiate scope with your best clients to focus on higher-value work.
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As fractional CFOs, I've learned that there are three distinct types of traps that we can fall into that leave us feeling stuck, burnout, resentful, and thinking about shutting down our firms. In today's episode, I'm going to identify what these three specific types of traps are, and I'm going to give you some very simple, practical advice on what to do if you ever find yourself in one of these three traps. Let's dive in. Hey there. My name is Michael King, and welcome back to the CFO Report, where I talk about starting, scaling, and optimizing fractional CFO services. Have you ever had one of those clients that when you're due to get on a call with them, you start to get this feeling of anxiety inside? Or maybe like one of those clients, when you see that there's an email from them in your inbox, you don't even want to open it because you know that there's something mean or aggressive or feisty or just otherwise kind of draining inside. Maybe you've got one of those clients that consistently show up late for your calls, they're under prepared or they're not prepared at all. I, I call these cringe clients, and cringe clients are the first type of traps that CFOs can fall into. Why do these clients become a trap? Well, because they're a complete energy drain. They're demoralizing. It's not a great use of your time. But a lot of times when we get these clients, like we don't know what to do. We feel like we're stuck. We're not sure how to deal with them. So what do you do when you find a cringe client? The first thing we've gotta do is take an honest look in the mirror. If you've got clients that are consistently underprepared or not prepared for their calls or they're not showing up on time, ask yourself if you've done a great job of setting and managing expectations. We've got an obligation as the fractional CFO to communicate with them what we need them to do so that they can be best prepared. We've got an obligation as fractional CFOs to make sure that they know where they've got to be and when they've got to be there. Most of the time, clients want to do the right things. Most of the times, clients want to do all the things they need to do to get the most value out of the relationship with the fractional cfo. So this is a great place to start, just ask yourself if there's anything you can do to better communicate what you need from the client so that they can get the most value from the relationship. If you've got a client that's not following through on the tasks and meeting the other obligations they've agreed to, ask yourself if you've done a good job of recapping those action items and sending them to the client right after the CFO calls. A lot of times our clients just need that to do list so that they don't lose track of all the things that they've agreed to. If you've done the best job that you can at setting and managing expectations, it might be time to move to the second step, which is having an open and honest conversation with your client. Now look, I know that these conversations can feel uncomfortable. I know that they feel awkward. But that's part of the game. If you want to be a front fractional chief financial officer. If you want to be a fractional executive of the company, part of that territory is having uncomfortable conversations. You owe it to your client to let them know that the way that they're showing up or not showing up is resulting in you not being able to deliver the value that you want to. It's making you feel like you're unfulfilled in the work that you're doing and letting them know exactly what you need from them so that they can level up. So that you can level up. You've got to be comfortable having those uncomfortable conversations. As an executive, there are two exceptions to this. If you find that you've got a client that is massively disrespectful or they have a huge values misalignment from you. I don't think that there's a point in having a conversation because it's not gonna end very well. If you find yourself in this case, or if having that open and honest conversation hasn't worked out, it's time to move to step three, which is the breakup email. I've detailed exactly how I do breakup emails in other episodes, and we'll be sure to link those below. But the one thing that I want you to keep in mind is when you have the breakup email, you've got to check your ego at the door. The breakup email isn't about you having a platform to be heard and tell them all the reasons that they're a horrible client and you're too good for them and all those other things that come along with our egos. The breakup email is to do just that to let the client know that it's no longer working out and in the best interest of them and your firm, it's time to move on. Again. I'm not going to belabor this because I have an entire other episode where I walk through the breakup email step by step. So check the description below and we'll link to that episode. The second trap fractional CFOs can fall into that leaves them feeling stuck is, oh my gosh, this one stings a little bit. This one's tough. You invest a bunch of time and effort leveling up your technical skills as a fractional cfo. You get some clients, you get some wins for those clients. You realize the value that you bring. You realize the impact you can have as a fractional cfo. And then one day you wake up and it hits you like a ton of bricks. You are massively undercharging for your services. You realize that you might need to raise your prices by 50%, maybe you even need to double your prices. But usually the thing that follows right after that is this story that you start telling yourself, look, if I doubled my prices, there's no way anybody would ever actually pay me to do that as a fractional cfo. Or maybe you get the imposter syndrome that you're not worth it. But listen, let's use some math to kind of reality check us real quick. Isn't it true that if you doubled prices but you were only able to land half as many clients as you've been able to land before, that you'd still end up with the same revenue, the same net profit, but you'd be working half as many hours as you are today. You don't need to check me. The math works. Even if you double your prices and you only get half as many clients, you're working less. And I call that a win win. So I want to encourage you to avoid that mindset that things are going to catastrophically fail if you raise your prices. Now, that said, even when I raise prices, I still get a little bit antsy. I still get a little bit nervous that I'm not going to be able to close as many clients at the new price point as I was at the old price point. And that's why I like to take this approach that I call one new one old. Let me explain. Once I've committed myself to raising my prices, I alternate sales calls on the new price point and the old price point. And what I mean is, I'll get on a sales call and I'll pitch my services at the new price point regardless of if I close them or not. The next sales call that I get on, I'm going to pitch them at my old price point. And what this does is it allows me to get more comfortable and more confident at selling at my new price point, while knowing that even if I have some early failures, I I'm still gonna bring on some clients, some new clients at the old price point. This makes me feel a little bit safer because I know that I'm able to grow the business even if it's at the old price point, while I'm working on getting better at selling at the new price point. This strategy has worked for me tremendously well over the last few years and allows me to test things out and get the confidence that I need to move my price point forward. Another trap that you might fall into normally will come after you've been in business for a little while. When I started my firm seven and a half years ago, we tried to be a one stop shop. We were doing everything from bookkeeping and accounting to tax strategy to treasury services and fractional CFO services. But what we started to realize after a while was we didn't really like the compliance stuff. We didn't like the treasury stuff. We wanted to focus solely on advisory services or fractional CFO services. But what happened was we were spending so much time doing a lot of the tactical or compliance work that we literally didn't have any more time to bring on more strategic work. And so we started to feel stuck. It's like, do we need to go hire more people people to handle this work that we just don't want to do? That didn't feel right. And that leads me to what the third type of trap that I like to call the scope of work just doesn't work anymore trap. And that's when you realize that you've outgrown the scope of work that you started with and that you're doing a lot of work that you just don't want to do anymore. What do you do when you find yourself in the scope of work just doesn't work anymore trap? Well, this is how I approach it. Start by making a list of all your clients that have a scope of work that you don't want to fill anymore. Put your favorite clients at the top and your least favorite clients at the bottom. Let those clients at the bottom know that you're no longer those types of services anymore and connect them with another bookkeeper or accountant or fractional CFO that can provide great services for them. If you don't know where to find somebody to refer them to, check out my Inner Circle program. We've got over 200 other fractional CFOs that provide every kind of service under the sun. I'm sure you can find somebody awesome to refer your clients to in there. Now, as you work your way up towards your favorite clients, have candid conversations with them. Let them know that your services have evolved and that you're focusing strictly on advisory services or whatever you've decided you want to do going forward. Tell them that you would love to keep working with them, but you can only work with them in a strategic capacity going forward. Let them know what your price point is. My bet is if they're your favorite clients, you're probably one of their favorite vendors too, and they're going to want to do whatever they can to keep you on their team. More times than not when I've had these conversations, they're like, okay, you don't provide bookkeeping anymore. I don't care. Recommend me to another bookkeeper. I want to keep you around as our fractional cfo. I don't care what it takes to get there. Again, though, you've got to embrace those uncomfortable conversations and trust that your clients love you and that you're doing the right thing. Every time you get a new lead in the door, pitch your new service with your new scope of work. Over time, you're going to whittle away at those compliance services or whatever it is that doesn't fit your ideal scope of work anymore, and you're going to have a roster of clients that you love, and you're going to be doing work that you love too. Now, speaking of scope of work, if you're thinking about starting CFO services, but you don't know what you need to include in that scope of work for your advisory services, then I want you to check out this episode where I walk through the minimum things that every fractional CFO has to include in their scope of work. In the meantime, I can't wait to see you back here next week, my friends. I'll see you then.
