How to Build Your Entire CFO Firm's Strategy (2023)

Hey there. My name is Michael King. Welcome back to the CFO Report, where I talk about starting, scaling, and optimizing fractional CFO services. If you are new to the fractional or virtual CFO industry, you're probably asking yourself questions like, how much should I charge for my services? What kind of goals should I have in place? What kind of strategies does my firm need to make sure that I'm able to reach my goals? If you've asked yourself any of those questions, you're in the right place today, my friend, because in this episode of the CFO Report, I'm going to walk you through some key questions that you need to answer, and I'm going to show you exactly what you need to do to answer them. First, we're going to talk about how to set personal goals and use those personal goals to set your firm's goals. This is really important so that you can make sure that you're designing a firm that works for you and not the other way around. Second, I'm going to talk about how to price your services and set financial goals for your virtual or fractional CFO firm. Finally, I'm going to talk about how to set quarterly priorities and monthly goals so that you can be sure you're working on the right thing at the right time. Let's dive in. The first step that I take when thinking about strategic objectives for my business actually has nothing to do with business whatsoever. The first thing that I consider my personal goals and my personal priorities. Now, that might seem a little bit counterintuitive, and a lot of people ask me why I do that. But what I found is that if I start by setting a lot of goals and priorities and tasks for my business, putting all these things in place, building my calendar around it, what ends up happening is those things that are important to me personally end up taking second seat to those business goals. And that's where a lot of those problems that I mentioned earlier, with the resentment and the burnout, the health problems and the relationship problems start to fall in. I didn't prioritize those things. And so what ends up happening is I end up feeling like I'm working for my business rather than my business working for me. The good news is, is that I found that when I put my personal goals and priorities in place first, I have those defined on paper. And then I sit down and start to go through the things that I'm going to cover in steps two and three when I do those things, the business thing. Second, I end up having a business That I feel like works for me. And it's been a complete game changer. So when I think about personal goals and personal priorities, I actually think about those in four separate buckets. The first bucket that I think about is income. Now, income sounds pretty intuitive at first. It sounds like common sense. But as we've all know, common sense isn't always common practice. But I actually think there's a little bit more to consider than just how much money do you want to bring home? How much net profit do you want to have out of the business? Here's where it comes into play. For years in my business, I was actually generating a pretty healthy amount of profit. But because I was so bought into the idea of growing my business, I would constantly spend more and more money growing the business and taking less and less money home. And what that can result in is a lot of resentment from your partner. They see you working all these hours, they see you putting so much effort into the business, they see you putting so much risk by being an entrepreneur instead of working at the corporate 9 to 5. But they don't see money coming home. And so over time, they can start to resent the fact that they're not seeing you, that there's all of this risk. You know, there's. It's like, what's the payout? What's the reward here? Why are we doing all this? You're not actually bringing any money home. So I think it's really important to think about how much money do I need to bring home? Because that starts to inform how much money you can afford to reinvest into the business. How much can you pour into marketing or hiring team? I think it's really important to have that conversation. Whether you have a partner or a spouse, or maybe it's just you. But really think, how much money do I need to bring home? Because I can tell you firsthand, even if you're kind of by yourself, you're not married, or you don't have a partner, if you go long enough without bringing any money home, or you're just scraping by, maybe you've heard the term entrepreneurial poverty, you will start to burn out and resent the business, and you'll eventually end up just giving up. So I want to encourage you set those income goals. How much money do you need to pay the rent, but to also feel like it's worth your while. The second type of personal priority that you might want to consider are your lifestyle goals and your lifestyle priorities. And when I think about lifestyle goals and lifestyle Priorities. The things that I think you should consider are what kind of hours do you want to work? Do you want to work, you know, 8 to 5, do you want to work? 9 to 6, do you want to work 1pm to 3pm it's really important to know what those hours are. Another thing to consider is like days of the week, what days do you want to work? I know a lot of people in the summers, they want to work maybe like Monday through Thursday. Some people want to work weekends because of their spouse's schedule. Other people want to work, you know, five days a week, Monday to Friday, nine to five, whatever that is for you. I want you to consider that like, what are those hours you want to work? What days of the week do you want to work? Do you want to have the ability to come and go? For me, I love to be able to work out in the mornings. I like to be able to go do self care. I like to be able to run to the store, you know, anytime Apple drops a new product, I like to be able to go and pick those things up. So having that ability to kind of come and go is really important to me. Another lifestyle consideration might be travel. If you're the type of person that's kind of like me and my wife, we love to be able to travel all over the United States, if not all over the world. And so it's really important that I build my business around the fact that I might be in multiple different time zones at any given time. I think it's really important to consider what are those lifestyle goals, those lifestyle priorities that you have, and build your firm around it. The third bucket that I consider are what are those family goals and those family priorities that are important to me? You know, when I grew up, we always had dinner as a family every evening. I think it was at like 5:30 for me. It's really important. Like as many of you know, I'm getting ready to adopt. I want to be able to go to soccer games and soccer practices. I want to do PTA stuff. You might have aging parents that you want to be able to care for. So I think it's really important to like be intentional and think about from a focus family perspective, what are your goals and what are your priorities? Because again, if you're not intentional about structuring your business so that you can do those things, then you're going to end up in a spot where your business isn't allowing you to do those things. And again, that resentment, that burnout, the relationship consequences, those will come to bear. So be really intentional about thinking about those family goals. The fourth type of personal goal, I think, is completely underrated. And honestly, I don't hear enough people talking about this as a personal goal. So I'm really excited to bring it up to you today, in case you haven't thought about it. But that fourth type of personal goal, those are like community goals. What is important to you to be able to do in your community? You might know that I absolutely love donating, not just money, but more importantly, my time to my community. I love to get out in the community, and I love to teach about business and entrepreneurship and those kinds of things. I also love to volunteer. My wife and I volunteer together all the time. We absolutely love that. We also like to go to church once a week. We like to be part of our community group. So doing those things in the community is really important. A few years ago, I had a CFO client that really modeled the way for me when it comes to community. Every single month, he was absolutely dedicated to donating $10,000 in cash from his business to his church. His church was building a new wing, and his goal was to donate $120,000 a year for two years towards his church. Every single decision that came up in his business, the first question he asked himself is, does this impact my ability to donate $10,000 in cash to my church this month? And if the answer was yes, then he said no to whatever that thing was, because that was his top priority for his business was being able to donate that $10,000. So I think it that if community is important to you, make sure you write down those goals and those priorities that you have around your community so that you can make sure that you build your business intentionally and build your business in a way that's going to allow you to realize those community goals that you have. Now. One final note that I'm gonna leave you with. When it comes to goal setting those personal goals that you have in your business, if you have a partner or if you have a spouse, I want to encourage you to sit down and talk about each of these four buckets or each of these four types of goals or priorities. Because a lot of times we tend to, as entrepreneurs do these things in a, like, we'll sit at our desk, you know, get out our journal and write down what are my income goals, what are my lifestyle goals or family goals or community goals, and we lay out these great plans, but we don't include our spouse or our partner in those conversations. And that can result in them feeling kind of left out or isolated or not part of the process. And again, that's where a lot of that resentment comes in. I can tell you that when you have the support of your partner or your spouse, it can be a complete game changer in the success of your business. So you definitely want to make sure that you're including your spouse or your partner in those conversations. If you don't have a spouse or a partner, then I would encourage you to find a friend or somebody that can be an accountability partner for you to help you think through these goals and maybe identify some blind spots in your reasoning or in your thought process. Step two is we're going to get into some actual calculations. This is the fun stuff that we love to do. As fractional CFOs, we are world class at putting financial goals and financial strategies in place for our clients. But the reality is when it comes to our own firms, a lot of times we leave a lot on the table. Now that I've worked with over 100 firm owners, I kind of see two big things happening. One, people will drastically overcomplicate the process of figuring out their own financial goals. And you probably know exactly what I'm talking about. You'll spend days or even weeks on end deep into spreadsheets, putting together these complex models, trying to get everything dialed in and make it completely perfect. But if we're being honest with each other, those projects never really come to an end and it ends up being a drastic time suck. And it ends up being something that we don't actually use to implement in our business and to move our firms forward. More commonly though, I see firm owners taking the other extreme when it comes to financial goal setting and financial strategies. They'll pick a vanity based revenue number, maybe a million dollars a year, and then they go out and they just try to do everything they can to fill up enough business to hit that million dollar goal. But because there's no strategy behind it, because there's no why behind it, they end up burning out and not hitting those goals. So how exactly should you go about setting a financial strategy for your firm? Well, over the last six and a half years of building and scaling my own firm, I've actually boiled this process down to a super simple but highly effective seven step process. The thing I love about this process is that when I'm done, I know exactly how many clients I need. I know exactly how long I should spend on each client every month. I know exactly how much I need to charge my clients. And the best part is that I know that this strategy is in alignment with the personal goals that I set in the first part of this series. The first step in this process is to determine your services and scope of work. For me, setting a fixed set of services with a very well defined scope of work was the absolute key to unlocking scalability for my firm. When you have a proper scope of work and services lined out, you're able to put automations in place, systems in place. You're able to write processes and procedures that maximize efficiency. Now, in this episode, I'm not going to do a deep dive into which services and scope of works you should be offering, but if you need help, I'm going to put a link in the description below to an entire episode I did on the minimum services and scopes of work that every CFO should be offering. The second step in this process is to calculate exactly how long it takes you to deliver your services every single month. Now, there's two ways you can go about calculating how long it takes you to deliver your services. There are a million free apps out there that you can put right on your computer that will help you log and categorize all the time that you're spending so you know exactly how much time it takes to deliver your services every month. But let's be real. As fractional CFOs, we hate clocking time. We've spent so much time in our careers with billable hours and logging time. I know that most of you aren't going to do the hard work and actually calculate the time. So if you absolutely must, you can estimate. But here's my challenge to you. If you're just estimating, I really want to encourage you to multiply whatever you think the final final estimate is by 1.5 or 2, because we tend to be horrible at estimating how long things take. For the purposes of this episode, let's assume that you go through the process and you calculate that it takes you 10 hours to deliver your fractional CFO service per client per month. Once you know exactly how much time it takes to deliver your service, the next thing that you want to do is calculate your bandwidth. And when I say bandwidth, that means that we've got to figure out exactly how many working hours we have every week and every month to deliver our services. Now, if you think back to step one of this process, we work through some family goals and some lifestyle goals. Using that, I want you to think about exactly which days per week you want to work and how many hours per day you want to work. So let's assume for this exercise that you want to work Monday to Friday from eight to five. That's nine hours. And when we multiply nine by five, that's 45 hours a week. But we all know that we're not going to be doing billable work every single day, nine hours a day, Monday through Friday. So a good rule of thumb is to assume that you can do a maximum of 60% of your time towards billable work. So in this example, we're talking about 45 hours a week. We're going to multiply that by 60%, which leaves us 27 available hours per week. Now, we want to extrapolate that out per month. Now, here's a mistake a lot of people make. You might be inclined to say 27 times 4 equals your available hours per month, but that's not the case. There's actually 4.33 weeks on average in every single month. So I want you to take that 27 and multiply it by 4.33. That's going to leave you with roughly 117 hours per month. I know that 0.33 sounds like nitpicking, but we're CFOs and we're into the details. Plus that 0.33 does end up making an appreciable difference over the course of a month or even a year. Now that we know that we've got 117 hours available every month for client work, the next thing that we're going to want to do is calculate the maximum number of clients that we can serve and in a given month. So the math here is really simple. We're going to take 117 hours per month available. And we know that it takes us about 10 hours to serve any given client. So we're going to divide 117 by 10, leaving us with roughly 11 or 12 clients. Let's round up because we're optimistic people, and say that we can serve a maximum of 12 clients every single month. The fifth step in this process is actually really simple for us numbers nerds. We're going to want to calculate some meaningful revenue goals. Now, if you'll think back to the income goal that you set in part one of this series, what I want you to do is assume that that's net profit. Now, I know that that could come in the form of net profit or distributions, but for the sake of making things simple, for this exercise, I want you to just assume that it's net profit. What we're going to do is we're going to take that number, net profit, and we're going to divide it by our net profit margin. So let's assume that you want to be able to bring home $200,000 for your firm. And let's assume that you've got a 50% net profit margin in your firm. We'll take 200,000 and divide it by by 0.5 or 50%. And now we know that we need to hit a revenue goal of approximately $400,000. Now, I know that if you're a solopreneur, your net profit margins are likely a lot higher. Maybe you've got a team or an assistant, maybe you've got an office space. I have no idea where your profit margins are going to land. I just picked 50% for the purposes of this exercise. So again, we know that we want to make $400,000 a year in revenue, or approximately $33,000 per month. Now that we know that we need to make approximately $33,000 a month in revenue, we now need to go about setting our target price in step six. And what I mean by that is we know that we can handle about 12 clients a month. We know that we need to make about $33,000 in revenue per month. So now it's just simple division. We'll divide $33,000 a month divided by 12, and we're left with an average price point of $2,750. Now that we've completed the first six steps in this process, we're armed with some really powerful numbers. First, we know exactly how many hours per week and how many hours per month we need to do client work. We also know the maximum number of clients that we can serve, and we know ballpark how much we need to be charging them each and every month so that we can hit our revenue and net profit goals. Now, I know that there's a lot of variables that come into play when you're calculating this out for your particular situation. For example, maybe you realize that you don't think that you can charge $2,750 a month per client yet, but now we understand what we need to do to be able to fix that. If you think that you for your particular ICA, the most you can charge them is $2,000 a month. Now you can go back and say, all right, what do I have to do to be able to make up for that $750 per client per month so that I can still hit my take home goal of $200,000 a month. That tells you that you either need to hire help or that you need to be more efficient so that you're working fewer hours per client. This really gives you a lot of direction on exactly where to focus in your business once you're armed with that remarkably powerful, powerful information. I want you to do the seventh step in this process, and it's so important. I want you to go back and I want you to adjust. Another way to think about it is I want you to go back and sandbox. And what I mean by that is I want you to critically think about the type of firm that you want to build, the type of team you want to have, the hours, the revenue, the price points that you're able to charge, and go back into this math and play around with it and see what's true for your firm and how you need to adjust. As an example, a lot of us, we want to have a team around us. We want to hire more people. And once we hire more people, that means the number of available hours that we calculated in step three goes up. So maybe you want to hire somebody and have them work 50 hours a week for you. That would mean that your available hours per month goes from 116 to maybe like 156. Right? You unlock a lot more hours, and so that unlocks a lot more revenue and a lot more net profit for you. Maybe you've got a team now and you don't want a team, but you still want to be able to hit that $200,000 net profit. Well, that might mean that you've got to get a lot more efficient with your services or might mean that you need to raise prices. Well, you might say to yourself, my ICA can't pay anymore. Well, maybe that means it's time to level up your ica. Find an ICA that's got a higher revenue or a higher net profit for their industry. All of these things start to really play in and how you determine the overall strategy for your firm. So I really want to encourage you. Take the information that you gained in step one, where you set your personal goals, and I want you to sit down with a very basic spreadsheet, and I want you to walk through these seven steps, because the numbers that you that you're going to get are going to be so incredibly powerful and important. Now we can jump into part three, where we talk about setting specific goals and objectives. Now, for me, setting specific goals and objectives is really important because if I don't have laser focus, I tend to work on a lot of things and not make a lot of progress on any of them. And so that means that I end up working a lot of hours, putting a lot of money and effort towards various projects, but they never seem to get completed and they definitely aren't moving my back Business forward. Over the years I've come up with a process that helps me determine which goals and objectives I need to focus on. But more importantly, I know that those goals and objectives are the right things at the right time and that they're going to move my business forward. So how do I set those goals and objectives? Well, at a high level, I first consider the three buckets of my business. I'm going to get into those in just a minute. Then I use those to set quarterly objectives and I use those to set monthly goals. Let's go into just a little bit more detail. What are those three buckets that I'm referring to? Well, the first bucket is what I call sms. SMS stands for sales, marketing and services. Under the SMS buckets are things like sales or my sales process. How exactly is it that I'm selling my services? Am I converting enough leads into closed business? I'm thinking about business development and marketing. I'm thinking about how do I get the word out into the market about my firm and all the amazing things that we can do. I'm also thinking about pricing. Am I priced right for the ICA that I'm going after? And I'm also considering scope of work over time. As your business grows, as your ICA changes, your scope of work will likely change. So in that first bucket sms, I'm thinking about pricing, scope of work, sales process and business development. Now I have a ton of resources that can help you in these areas. I'm going to include links to those below. But the one I want to make sure that you're aware of is my free sales training where I walk through the eight step CFO sales process that I use to close all of my clients. I'll be sure to include a link to that below. Be sure to check it out if you haven't already. The next bucket that I consider is operations. Now when I think about operations, I'm thinking about things like processes and procedures. I'm thinking about things like automations. I'm thinking about things like my tech stack. Now again, if you haven't seen my processes and procedures video, I'll include a link to that below. And if you haven't seen the 10 must have tech stack items for a fractional CFO firm. I'll include a link to those below as well. But when I'm thinking about operations, these are the things that need to be in place in order for me to deliver my CFO services to my client every single month. The third bucket that I consider is team. Under team, I'm thinking about things like hiring, I'm thinking about things like maybe firing, I'm thinking about things like managing, and I'm thinking about things like leading. So with these three buckets in mind, the next step in the process for me is I think back to those goals that I had set previously, those financial goals, and I think, what is the biggest gap when I think of these three buckets, which of these three buckets is the biggest gap or hurdle that's keeping me from achieving those goals? Here's an example. Maybe you have your price super dialed in for your ica. When you get people on the phone, you're able to close them down and you've got honestly more leads than you could ever hope to handle. In that case, SMS isn't your problem. Let's also assume that once you get clients in the door, you're able to deliver service to them at a high level every single month. They are absolutely loving what you do. You likely don't have a problem with processes, procedures, automations and tech stack. So ops isn't the bucket you should be focused on. Maybe in this example you realize you're just at a point where you need to have more available working hours every month, but you can't work more hours and you've already dialed in all of your automations and tech stack. So maybe the thing for you, it's time to hire additional help in your firm. So for the next quarter your bucket that you would focus on is your team. So the first thing I do is I think about where is that gap that I need to focus on over the next three months. And I set that as a quarterly objective. So in this case we're going to focus on team. The next thing I do is every single month in that quarter I think of one or two very specific goals that I can focus on for that month that is going to help me remove that overall bucket gap or hurdle from my business. So in this example we're focused on building our team. So maybe the first thing that I'm doing now, next month, my one or two goals that I might set are really focused on creating a job description for the work that I need and getting that job description posted. That's the thing that I'M going to focus on next month. At the end of the month, if I've accomplished that very specific goal, for the second month of the quarter, I'm going to set a new goal. And so in this example, maybe the second month's goal is to get that job posting out there and to interview five people. At the end of the month, I'm going to go back and evaluate, did I get the job posting out there? Did I interview those people? Maybe for that third month, your goal is to hire somebody and get them onboard. Once the quarter's over, I go back to the drawing board. I'm considering the three buckets now. I have somebody new on my team. So maybe now as you get into the next quarter, you're like, okay, my team is super dialed in. Processes and procedures are hitting well. But now that I've got this new person on my team, I'm realizing I don't have as many leads or as many new clients as I thought I could get. So perhaps for your second quarter you should go back and find. Focus on SMS now. And so if it's an issue with leads, maybe for that first month you're focused on marketing and business development and you're going to set some specific goals that are going to help bring more leads in the door. So the process is continuous. It's always working. One of the things that I've learned after six and a half, almost seven years in business now, is that you're going to always remove bottlenecks or hurdles. And as soon as you do that, that is just going to be like, by nature of the beast, creating a new bottleneck or hurdle in one of those other buckets. So it's a continuous process and evolution. I think one of the biggest mistakes when it comes to goal setting, and this was true for me too, is lacking that clarity around those three buckets and around those specific goals. Because if you're anything like me, you work really hard and you're really smart. So it's not that you don't normally have any goals, you're normally working towards something. But when you don't have that laser focus when you're not, like, driven for that particular mission. A lot of times we start a lot of things, we don't finish all of those things. And the ones that we do finish, they're not really tied towards something that's going to deliberately move the business forward. And so again, we end up wasting a lot of time, we waste a lot of money and we end up burning out. Today I want to really celebrate you and cheerlead you for taking the time to go through and put a deliberate strategy in place for your firm. Like I've said before, I think this is the best time ever to be in the fractional CFO space. I think it's going to absolutely explode. And because of the fact you're going through this work right now to put the right building blocks in place, I know that you're going to be a thought leader in the industry and you're going to be here for the long haul. All right, my friend, I hope you found this episode helpful. If you did, you might also like this episode that I'm going to link to just over here to the side where I talk about my best time management tips for fractional CFOs. In the meantime, I can't wait to see you right here next week.