[INTRO]

[00:00:01] ANNOUNCER: Welcome to Branch Out, a Connection Builders podcast. Helping middle market professionals connect, grow, and excel in their careers. Through a series of conversations with leading professionals, we share stories and insights to take your career to the next level. A successful career begins with meaningful connections. 

[00:00:22] AD: Hey, everyone. Welcome to the Branch Out podcast. I’m your host, Alex Drost. Today, we welcome Ed Warren, an accomplished sales executive with over 25 years of professional service sales and marketing experience. Ed has worked in marketing, business development, and practice growth roles in top 100 CPA firms, and is here today to share his insights on growth opportunities for professional service providers. Ed and I discuss how practitioners can leverage a Client Advisory Service or C-A-S, CAS model to drive increased revenue and build a more scalable practice. I hope you all enjoy. 

[00:01:00] ANNOUNCER: Connect and grow your network. We are on LinkedIn. Search for connection builders. 

[INTERVIEW]

[00:01:08] AD: Ed, welcome to the Branch Out podcast. Looking forward to this conversation today.

[00:01:12] EW: Absolutely. Good talking with you, Alex. I'm looking forward to it.

[00:01:15] AD: Why don't we jump in with just having you share a little bit about yourself and what you do today? Then we'll dive into today's topic.

[00:01:22] EW: So in my day job, I work with Sage Intacct. Sage is a multibillion-dollar company, and the group I work in focuses with helping CPAs and accounting services or providers grow their practices through a world-class [inaudible 00:01:38] product.

[00:01:39] AD: So that's exactly why I wanted to have you on here today. I think that knowing our audience, it largely being professional service providers, whether being accountants, lawyers, or others that are selling and kind of in the knowledge base world, I think you have – one, your day job is to help enable that for organizations. But you also have a really unique perspective around client advisory services. 

So you recently authored an e-book, and we'll have it linked in the show notes here, that is called Seven Ways to Increase Your Revenue Through Client Advisory Services. So our plan today is we're going to walk through each of these seven, just kind of high-level talk about them. But before we jump in, why don't – For our listeners, can you just take a moment to explain what client advisory services means?

[00:02:25] EW: Sure. Although it's been going on in CPA firms in one form or another for years, it's really just been, since the advent of cloud-based software, that you can really build a business, a practice around outsourced accounting. What we call client advisory services is sort of higher level. Traditionally, firms have been able to offer bookkeeping and write-up services that kind of went along with taxes. But there never was a full sort of holistic approach to accounting and advisory in that model. 

What you get when you work with a CAS firm is you get the basic close of the month, which we would call controllership. You might or might not get tax planning, which is kind of important too. But you're probably not getting stuff like a cash flow calendar, an idea like of what bills are coming due over the next 90 days, what revenues are coming due over the next 90 days.

Those are things, especially in a small and medium-sized business, you live on cash flow, right? I mean, that’s – cash, cash, cash. So if you have somebody who's working with you, who can give you a dashboard that gives you what's coming in versus what's going out and can help you make long-term decisions about, “Hey, is this a good time for me to buy capital equipment? Are there tax benefits of doing something in 2022 versus maybe waiting until ‘23 or ’24?” That's really what the advisory piece of it is. 

In the old days, not that long ago, the finance department is really focused on the rearview mirror and what has happened. What a CAS partner – A good CAS partner is not only going to be able to tell you what you've done, but they're going to be able to help you form picture of where you want to be in 12, 18, 36 months.

[00:04:21] AD: Hearing you describe it, it is the difference from someone who was on one hand preparing reports and completing compliance-based requirements and ultimately reporting versus someone who is forward-thinking and advising in the organization. I think another way I've heard you describe it was its CFO-ish-like work, right? 

It’s in many ways – This is – I know we're talking about this purely or in the accounting aspect right now. But I think thinking about this broadly for anyone who is in professional services, this is taking whatever your underlying service that you're doing, right? Because the reporting is a service. The tax work is the service element that needs to be done, right? The reports have to be made. The financials have to be prepared. The reconciliation has to be done. The taxes have to be prepared and filed. 

But then you're also layering in there an advisory component behind that and really trying to act more as a value-added partner. Is that a fair way of looking at it?

[00:05:31] EW: That's absolutely the way to look at it. It's interesting. I think COVID and cloud-enabled computing, I think a lot of things have created what you might call a perfect storm for fractional level services or for, in this case, fractional CFO. We call it Client Advisory Services, but maybe a better way of thinking of it is if I've got a CFO, maybe somebody with 20 years of accounting and financial planning and financial management, who’s really available to me anytime I need them. I think that's the beauty of it.

[00:06:10] AD: Fractional is a good way to look at that, right? In the cloud computing element of all of this, and we'll jump here in a minute into the actual seven points you have here, but what I think is really interesting about the cloud element of this is that has rapidly advanced and evolved in the last handful of years. The ability for an individual to be anywhere and still have full access to systems and the data and the information needed and to communicate with the appropriate parties to fulfill that role has drastically accelerated. I mean, COVID being the number one example, when we're all working from home. 

[00:06:46] EW: Absolutely. 

[00:06:47] AD: The fractional, again, that using that term, that model works well when an individual can spend a fractional, a small amount of time on a continuous basis to provide high-value service, right? Really, what you're advocating for, what you're kind of highlighting around all of this is that there's a change there. For practitioners, for individuals, and speaking into this case around CPAs, but anyone that's in the professional services model, this is about thinking differently in how you engage with the ultimate client, the ultimate customer, and how you add more value and advisory role in a consulting type fashion versus purely just the underlying service. 

When you meld those two together, it becomes more interesting, right? Because you provide the service that's required. They need it anyway. Because you're already doing that, you're well positioned to also add in advisory-type services on top of it.

[00:07:49] EW: Absolutely. It’s kind of ironic. I sometimes refer to myself as a recovering accountant because I started my career doing accounting for a Fortune 30 company. I think back to that model, I was one of about 150 people who worked in a data center with a mainframe and a bunch of people who did programming. With the cloud and cloud-enabled tools, you essentially can have the resources at your fingertips through these fractional executives, in this case, a fractional CFO, and connected to the Internet, you can have the kind of dashboards with one of these guys that will help you make the best decisions for your business. 

Literally, all you got to be able to do is potentially call your fractional person or pick up a tablet device and look at the dashboards they put together, which can be what you use to drive your decision-making. 

[00:08:42] AD: Ultimately, this is driving greater value for the clients, right? That’s the –

[00:08:46] EW: Oh, absolutely. 

[00:08:47] AD: It’s win-win in every direction. So, let's dive into – and maybe the right way to go through these seven is we're talking to individuals today that are practitioners that have a service, and maybe they've done some fractional or some advisory, some CAS-like services here. But they're looking to think about expanding that. Let’s talk about these in the context of how these help you get there.

[00:09:13] EW: Sure. 

[00:09:14] AD: So starting with number one, finding your niche. Let's dive in there. Help us understand that.

[00:09:19] EW: I think that's a great place to start because what happens in a lot of small businesses is we're opportunistic. We will take the business as it comes because when we're starting, we're hungry. We want to get paid. If we've got staff, we want to be able to pay the staff. So what happens a lot is whoever comes through the door, real or virtual, we think can pay our bill is somebody that we're going to engage with. The challenge with that is that if you're only ever a generalist, you don't get to charge specialist pricing.

[00:09:56] AD: Let’s do that again. I think that's really important. Say that again.

[00:09:59] EW: So if you only work as a generalist, you can only charge generalist prices. You can't charge the prices of a specialist. I joked with my dad. He had to have bypass surgery several years ago. In theory, in a pinch, if you really need to have bypass surgery, you could probably get away with doing it with a general surgeon. But would you want to? You want somebody who's gone to school, who spent the extra time, who has worked in emergency rooms, who is a specialist, who just does cardiac surgery three days a week, five days a week. Probably three days a week because I'm sure if they're a cardiologist, they're probably golfers, right? Or tennis players. 

But that person, that woman or that man is somebody who has spent all of the time going to medical school, but extra years in specialty training, extra years maybe in a fellowship, I want that person because that person is really good at what they do. They've specialized in that work, and they're worth what I'm paying out of pocket or what my insurance is paying because they're really good at what they do. 

I think people assume sometimes that just because somebody has a CPA after their name, that they understand your business. They understand what you do. So, what I say all the time to my colleagues and the firms that I work with is being a specialist and knowing an industry, being able to get up on a stage at a national or regional conference as a subject matter expert, those folks who were sitting in that audience are going to be handing your business cards after that session because you're able to explain to them, for example, why you might need to have a conservation easement on your property that's going to give you tax advantages. That generalist, they're not going to have a clue about that stuff.

[BREAK]

[00:11:56] ANNOUNCER: This is Branch Out, a Connection Builders podcast.

[INTERVIEW RESUMED]

[00:12:03] AD: I wholeheartedly agree with everything you said there. What I’ll also layer in there, and this is on the business development front where I spend a lot of time, and we do we do a training program around this, where we help individuals recognize that if you are all things to everyone, if you try to be too broad in what you're doing, and I understand the scarcity, I'll take whatever I can get. I'm just trying to find something. You have to be at flexible times. You have to look for creative ways to generate opportunity. 

But if you're all things to all people, you're not going to be remembered by it, right? To your point, having a niche, having an area, an expertise area. Oftentimes, you see professionals or firms that may have two or three or four expertise. But they started with one, and they slowly built that up over time, and they still had select niches, right? All along the way, they have niches, and they continue to have niches they focus in on. When that's there, to your point, your people want to do business with you, and they trust you more because you have that deep domain expertise. 

But you're also known for it. There's something unique. There's some – You are the agriculture person. You are, right? As soon as that happens –

[00:13:10] EW: You’re the dental practice guy. 

[00:13:12] AD: Yes. Yeah, it creates that memory. Yup. 

[00:13:14] EW: Absolutely. 

[00:13:15] AD: All right, let's jump in. Next one, low-hanging fruit, leverage low-hanging fruit.

[00:13:19] EW: So in this context, I'm speaking specifically about CPA firms, but it could be another professional services firm. Some of the kind of idiosyncrasies of being in a firm is there are governance rules. If you're doing an audit for somebody, you can't be independent, if you also happen to do the accounting work for them. We do their P&Ls. 

So one of the things I say to people that have large audit practices, especially if they have clients who have really bad financials, is maybe you want to give up the idea of doing that annual audit and say, “Hey, I'd much rather help you work on your financials and your dashboards.” Just drop the ongoing audit relationship and focus on helping these guys build a better business, right?

Because, ultimately, if you do that you're doing more for them, honestly, than the value of the audit because if they can close their books on time, if they can get their financial statements out on time, if they happen to be publicly traded, or they're not a family enterprise, that's even more important. At the end of the day, especially if you're in an area like nonprofit where the margins are kind of in on that audit work anyway, you may be able to make 5 or 10 times revenue doing ongoing accounting work for this client than you'd be able to do with the audit. You're probably going to end up with more margin in the deal as well.

[00:14:44] AD: What's interesting in kind of your – Again, speaking in this case, specifically to CPA firms, but just the thought in general, if you're offering a service today, or you're performing a service today, and you want to change your service model and likely your revenue model, in this case that the crux of the issue in the accounting world is that you have the compliance issue, and you can't be preparing the books that you audit. There's a little bit of a conflict that exists there. 

But even taking that element out, just the idea of changing a service model and as a byproduct that changing a revenue model, which is, I think, a lot of the underlying conversation behind this, going to a client that you already have and saying, “Look, I know this is what we're doing today. I think we can find someone else that can do this for you, and we're happy to help you find someone else to take over doing this component of work for you. We believe that because of our relationship, because of how we're changing and how we operate our business and we know you that we can provide you more value here.” 

It’s an existing relationship. It's a much easier conversation to go and have. If you really want to transition into finding more revenue that falls in or more of a business model that falls in this new way of thinking, you're going to have to make some of those changes, and you're leveraging those opportunities that are already sitting in front of you. 

[00:16:11] EW: Absolutely. 

[00:16:11] AD: I like that one. 

[00:16:13] EW: There are some other low-hanging fruit too. I mean, there can be triggers for when this makes sense. One of the most gratifying deals I worked on was actually with a guy who was still going to work at 72. He loved his job. He spent 20 years in the Army, retired, went back, got a CPA, and went to work as the controller of an association. He saw outsourcing the accounting function as his exit strategy. 

Working with him a couple of years, we were able to pick up the ball when he retired, and we've got a fractional CFO who has been managing that relationship now for two years, and it's great. It’s win-win for both the client in this case, an industry association, and for the firm that's doing the work because they're able to provide comparable or even higher level services, and they're doing it for a fraction of what a full-time controller would cost them.

[00:17:14] AD: Going back to where it's a win-win on both sides into all of this, right? 

[00:17:17] EW: Absolutely. 

[00:17:18] AD: All right, let's jump to the next one here. Think like a general manager.

[00:17:21] EW: Sure. If you're going to do this successfully if you're going to be fractional, and honestly, this could be in the legal realm, this could be in financials, it could be in growth, is you can't just operate in your little silo. If you're going to run a fractional practice, you're going to have to pick up the marketing baton. You're going to have to close some sales. You're going to have to look at operations. You're going to have to look at HR and staffing. It might not necessarily be all the things you want to do. 

But if you're not thinking about all these elements of this business, then one or more of them can go out of focus. Perhaps more than anything else, if you think about a fractional CFO as being in the business of closing the box potentially for 100 clients every month, think about that from a scale perspective, efficiency, effectiveness. You can't have people that are underproducing, that make lots of mistakes, because especially in a fractional relationship, you are probably not seen, and you are judged by the quality of your work product. 

So, the client experience has to be even better. If you're working in a company, and you may not be doing the greatest job, but you're part of the football pool every week, you've got a special dish you bring to the company picnic, that's a whole lot different. But if you're virtual, and the only thing you're – Maybe you're having a one-hour, two-hour, three-hour phone call over the course of a month, but the rest is just stuff that lands in your inbox. If you're not delivering –

[00:19:08] AD: You're gone. 

[00:19:09] EW: You're gone. So thinking about all those aspects of your practice and making sure that you've got a pipeline, both for revenues, but also potentially for new hires, for people to bring onto your team. 

00:19:22 AD: I’m going to tie in a couple of your future points here. We're going to tie this all into one big conversation around this because I think you're hitting on a really important element. So the two points I'm going to tie in with this. We were just talking to think like general manager and let's also loop in here develop a staffing model and document your process. What I think I hear you saying and the underlying message of all of this is this conversation is focused around shifting the traditional service model to drive more value-added service and function more like a fractional provider. 

We're talking about CFO. But, again, this can be – You can do fractional in-house counsel. You can be – There’s a lot of different ways you can apply this. The difference and why this model is appealing is because the traditional, billable, deliverable projects, you gain scale in profitability by having people that you can pay less than you build them for.

This model creates a reoccurring revenue that has everything to do with efficiencies. It's more of a fixed revenue element, oftentimes. What you're really striving for is operational excellence and efficiency to drive true scale, true value, true value creation within the organization that doesn't have to do with – You will need more bodies as you grow. But it's not just purely stacking different folks that lower bill rates, right?

[00:20:55] EW: Absolutely. It’s not that traditional, “Okay, I've got to have five more people because I’ve got to produce five more vehicles.” You do develop that scale. If you have the processes and the workflow working, what you'll find is you can handle more clients because you're getting more efficient as you build these things into your model. 

There is a great book called The Entrepreneurial Myth, The E-Myth, by Michael Gerber. Great book. One of the things he talks about in that book is not that Ray Kroc wanted to sell more milkshake machines. He wanted to create a system to build millionaires, right? That's what drove him. Part of being able to build a replicable model is you have to have those systems in place. If you don't have those systems, you can do it because it's between your ears, but nobody else can because they don't know how you've done it. One of the things he says is you need to build a model, essentially, so that someone with a sixth-grade education can do it. 

Now, that's not going to be true for all the accounting we're talking about. But if you're talking about a model, where you're doing bank reconciliations and tracking credit card expenses, that absolutely can be automated, if you will, or at least documented so that you're not reinventing the wheel every time. That’s really the key with these processes is if you have those processes documented, you literally could have someone come in. By the end of a week, they're part of the assembly line, essentially, for creating those financial statements and those procedures.

[BREAK]

[00:22:43] ANNOUNCER: This is Branch Out, bringing you candid conversations with leading middle market professionals.

[INTERVIEW RESUMED]

[00:22:50] AD: That's why I think this all does tie in really well. If you want to be successful in that, and this is maybe going a little off track, but I think it falls in line here, entrepreneurial-like thinking. If you want to build an enterprise that creates value, it has everything to do with the scales, the system that you put in place that allow you to get leverage and the scale, right? That's where – What you're describing under all of this is you have to have a thoughtful, systematic approach to what you do, understanding that you can't systematize everything. You can try, but there's always going to be kinks. Things are always going to change. So you strive for it. 

Then, recognizing that you have to just start somewhere. It's not going to be perfect on day one. But as you develop the systems out you and you document that process and the think like a general manager here, you're taking a broad perspective because when you have a system, many different components work together. If one component breaks down, they all stop working like they're supposed to. So you take that macro view and develop your thinking around really creating that scale and that ability to leverage that going forward. 

[00:23:57] EW: Absolutely. 

[00:23:58] AD: I like that. All right, let's jump into creating a sales and marketing plan. How do we think about that?

[00:24:03] EW: So, it's amazing. There are CPA firms out there that are 100 years old, and some of them have been enormously successful, just because they're the biggest firm in town. Or they've built a great network. But in today's world, where most people shop for what they're looking for, not sure what the latest number is, but I remember reading a stat from HubSpot that said that somewhere around 65% of people who are looking to buy something are looking on the web before they even walk into a dealership or sign an engagement letter with a professional services firm. 

We're in a place where our consumers have power. So, if we are not writing content that's appealing to them because they're searching the web for a provider, we're missing an opportunity. So, understanding who your potential clients or your client personas are, writing the kind of content that's going to appeal to them, understanding what search terms they're putting into Google, all being tremendously important. 

The most successful firms that are building large and profitable fractional CFO services typically have either a person that owns marketing and business development, or they have maybe a firm, a fractional firm, that's doing some of that work for them. I've worked with a partner in my day job, who's a founder of a firm, and she's spending 40% of her time trying to grow the practice. It is possible, especially for someone who's gone out on their own, to think they have to do everything, and that it's easier, and maybe it's cheaper to do it themselves. 

But the reality is one of the first executive hires or senior level hires you should have is a business development or growth specialist. I'm not sure which one would be first and which one would be second. But shortly after that or somewhere in that vicinity, this is COO because many, at least among the people I've met, the people that build successful businesses are not COOs. But they really need one, right? 

[00:26:21] AD: It’s a visionary integrator, right?

[00:26:23] EW: Exactly, the integrator from the entrepreneurial operating system. Absolutely. Because somebody's got to keep the trains running on time, and the visionaries of the world – I never met Steve Jobs, and I've heard all kinds of great things about him, but he was not the guy who made the trains run on time. He's the guy who invented the train, right?

[00:26:43] AD: Yeah, yeah. No, 100%. Under all of this, and again, kind of recap, and then we're going to round down at the very last one here. This is all about rethinking the way you approach your business, the model, the approach, how you drive value, how you engage with your customer base, your client base. All of that is really created by – All of that is accomplished by, I should say, rethinking the service you're providing, repositioning the value, looking for where you drive the greatest value, and then building an operating system within your business around executing on that with excellence, while also doing it effectively and efficiently. 

So our very last one here is be anticipatory. How does that play, and how does that kind of tie this all together?

[00:26:43] EW: So to me, that is the one element of all of this that takes you from the rearview mirror, which we talked about before, to the forward thinking. It's really easy to make pronouncements about history because if all you're doing is looking at historical financial statements, you don't have to think about what goes on in the future. But an invaluable, indispensable fractional executive is going to help you chart the path for your business for the next 12 to 16 months. 

You are not going to be able to do that if you don't understand what products and services that you're selling today are generating the most margin for your business. You are not going to understand where to go if you don't understand the tech trends or what's happening. There's a great book out there called The Anticipatory Organization. In this book, they talk about hard and soft trends, and hard trends are things like the advancement of technology, the advancement of broadband.

When Netflix started their business, they chose the name Netflix because they knew that broadband was going to enable them to stream all over the world. But when they started their business, they were sending tapes and CDs via mail. Somebody in that organization was enough of a visionary to know that that's where we were going. I'm not saying your virtual CFO is necessarily that guy, but having an intimate understanding of your industry because that person is a niche specialist, understanding what trends are out there, understanding what the market is doing, where you are financially if you can afford to invest maybe a million dollars in fixed assets in your business or in plant and equipment. 

Or if, for example, you're running an HVAC contracting business, that it's time maybe to acquire winning competitors. Those are the kinds of things that a fractional executive if they're the right fit for you, they're going to be able to help you make those kinds of decisions that can change the future of your business. 

[00:29:49] AD: What I hear you saying, and for anyone who is either implementing a kind of fractional approach model or is considering transitioning as a practitioner into spending more time in that service line, it's recognizing that part of your responsibility then becomes to consume the thought leadership that's out there, to learn industry research, publications, and spend time above and beyond the actual work that you're doing. But to actually learn and understand the industry and to have conversations with your clients and others in the industry. Build your network in that area to become a thought leader and knowledge expert within certain industries. 

Because as you have that greater awareness of the factors and the dynamics impacting those clients that you serve, it ultimately allows you to see things that others are unable to see, right? To kind of gain – Pick up on those trends. Understand things in a different way and then bring clarity to that. Describe that to your clients. I would argue that at the root of all of this, that is the advisory. That's the A in all of this, right? Is being able to do that. 

Forward thinking is that looking ahead is the only way you're going to really be successful at that, and that all does come back to putting in the thought and effort around that and knowing that that's one of your responsibilities now. It's incumbent on you, and it's the value driver, right? It's really what will set you apart. 

[00:31:17] EW: Absolutely. Yeah. 

[00:31:18] AD: This was great. I appreciate you sharing those thoughts. We'll make sure that this is linked in the show notes below. I’ll link for everyone listening to go ahead and grab a copy of your e-book. I guess my kind of final parting question, anyone that – Someone who's sitting here saying, “Oh, this is interesting. I want to learn more. I want to explore this. It’s something I'm thinking about doing,” where should someone start? What's the first thing a firm or a practitioner today should do to start on the client advisory service journey?

[00:31:48] EW: I would say figure out who you want to serve. If you're a person that has a passion for restaurants and you have a network, let's say, you understand a little about the business, maybe you worked in restaurants, in college, or somewhere in your life. If you've got a passion about something and you feel like you can help those people, that's probably where you should start because if you know anything about the restaurant business, they've had a tough three years. 

I'm not sure I can think of any business that could benefit from good financial advice maybe more than folks in the hospitality industry. You know what? A lot of the folks that I know in the accounting world were doing things with special pricing. They were helping their clients with P2P loans and all of the other recovery programs, and they were in it for the long haul. I think those people who were specializing in the restaurant trade are getting that loyalty back from their clients today because things are starting to open back up.

[00:32:55] AD: Well, and back to – You know who you want to serve and why you want to serve them. Focus. Find niche, right? Right where we started. Then lean in and carve that out. That's where you're going to drive the value. 

So, I appreciate you being on here today. I appreciate you sharing your thoughts. Again, we'll make sure that there's a link for folks to get a copy of your e-book here. 

[00:33:16] EW: Awesome. 

[00:33:16] AD: Thanks a ton.

[00:33:17] EW: You bet. Thank you. 

[END OF INTERVIEW]

[00:33:20] ANNOUNCER: Thank you for tuning in this week. Share this podcast with your professional network to help others connect, grow, and excel. Like what you hear? Leave us a review and don't forget to subscribe now.

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