The BIGGEST Problem for Fractional CFOs in 2023

Fractional CFOs, bookkeepers and accountants. Today I want to talk about a massive problem that's facing each of our industries. And even if you haven't had to deal with this problem just yet, the odds are very high that you're gonna have to deal with it at some point or another. My name is Michael King and welcome back to the Connected Accountant. What is the 500 pound gorilla in the room that I'm talking about? Well, it's bookkeepers and accountants that are selling themselves as fractional CFOs, but they're only delivering bookkeeping and accounting work. Today I'm going to talk about why this is such a huge problem for each of our industries. And I'm going to share some ideas on how each of us can get involved in the solution. And at the end of this episode, I'm going to invite you to a free special event for bookkeepers, accountants and fractional CFOs. And to the best of my knowledge, an event like this has never been held before, so you're absolutely going to want to stick around and check that out. But before we dive into all the nitty gritty details, let me first dive a little bit deeper into what exactly I mean by this problem. Let's take Barb. Barb has been the CEO of Barb's Bookkeeping for the last 10 years. And over that 10 years, Barb has slowly increased her prices to the point that she's really at the high end of what most bookkeepers and accountants can charge. But just like me and you, Barb wants to increase her revenue and net profitability. Barb's also noticed that a lot of other bookkeepers and accountants have recently rebranded themselves as virtual CFOs or fractional CFOs. And she's also noticed that when they do this, they normally double or sometimes triple their prices. Barb decides she wants to get on the virtual CFO bandwagon. So she rebrands overnight. Barb has become a fractional cfo. Barb then goes out and wins some new clients at these much higher prices. Here's the problem. While Barb has changed her branding, she's still only providing bookkeeping and accounting services. She's doing things like transaction allocations, monthly closeouts, reconciliations. But she's not doing a lot of the strategic work that fractional CFOs need to be offering. After a couple months, her clients start to catch onto this. They realize that they're paying her double or triple what they used to, but. But they're still getting the basic bookkeeping and accounting services. After a while they get tired of paying more and they fire Barb. They're left with some really good bookkeeping and accounting work, but a really bad taste in their mouth around what a virtual or a fractional CFO actually brings to the table. As you might imagine, this makes it much more challenging for fractional CFOs that are providing those strategic services to land new clients. See, a lot of people don't realize this, but selling fractional CFO services is a lot harder than most people think. First, outside of the tech world and the startup space, the entire concept of a fractional CFO is brand new to most people. When you combine this with the fact that fractional CFO services range anywhere from three to five to ten times more expensive than bookkeeping or accounting services, that results in a market that's understandably skeptical of the value that a fractional CFO can provide. Then when you add in the fact that a lot of businesses, their first experience with a fractional CFO was smoke and mirrors, it makes it really challenging to build our industry and to get new clients. But this isn't just bad for fractional CFOs, this behavior is actually bad for bookkeepers too. The bookkeeping and accounting industries are already hyper competitive on pricing. When you throw in the fact that a lot of them are now confusing the market by calling themselves fractional CFOs, it really puts a bad taste in consumers mouths. This isn't good for anybody. Now before I continue, I do want to point out two ideas that are very close to my heart. First, I've had the privilege of coaching hundreds of bookkeepers, accountants and fractional CFOs over the last couple of years. Never once have I seen anybody rebrand themselves from bookkeeper to fractional CFO with the intention of defrauding anybody or or tricking anybody into paying them more money with the intention of not actually doing the services. What I do see are people rebranding themselves and not realizing what should be going into fractional CFO services. The second thing I want to point out is the fact that I believe that bookkeepers, accountants, tax preparers, tax strategists, and fractional CFOs are all vitally important to the long term success and viability of small businesses. That said, I truly believe that a bookkeeper is the most important role on the financial team. The without good books, fractional CFOs don't exist. Without good books, I don't have a job. So all of this is not to pick on the bookkeeping or the accounting industry. All I want to do is point out the fact that there are differences between each of these roles, and each of these roles are all very important in their own unique ways. Now that we've identified this as a problem, the next question is, what do we do about it? First, I think it's past time for the thought leaders in each of our respective fields to come together and start working on some common language. We need to be talking about what it is each of us do, what we don't do, the value that we each uniquely provide. But more importantly, how can and should we be collaborating to better serve the businesses that hire us? Once we do that, I think it's the job of the thought leaders to go out and start educating our industry. We've gotta be setting the example for what good looks like for each of our respective services so that other people can see what good looks like. Finally, we've all got to come together and start educating the market. Like I said, these services are confusing. They're new for a lot of people. We've got to go out and do a much better job of telling the market who does what, what they don't do, and what expectations they should have from us. Finally, I think each of us should do a quick identity check. It's okay to be a bookkeeper or an accountant or a tax preparer or a fractional cfo. Like I said before, all of these roles are vitally important to the success of small businesses. An identity check is just an opportunity to look ourselves in the mirror and say, hey, are we bookkeepers? Are we accountants? Are we fractional cfo'? And being okay with that, if you want to move from one to the other, that's completely okay. Make sure your services move as well. Now I believe I should be the type of leader. That is the change I want to see in the world. That's why I'm so excited to announce that on August 29th, I'm going to join other thought leaders in the bookkeeping, accounting and fractional CFO spaces to talk about the challenges facing each of our industries. We're also going to talk about the types of services that we each should or shouldn't be providing. And we're going to talk about how we can collaborate to better serve our clients. So join me, Lalette Kaleha, Robert Brent and Lance Rubin in an event hosted by Danielle stein Feinhurst on August 29, 7pm Eastern, 4pm Pacific. Go to the cfodebate.com to get registered absolutely free. And don't worry if you're not able to join us live. A replay will be provided. In the meantime, I can't wait to see you right back here next week, my friends. See you then, Sam.