Episode 29- Maximizing Business Profits with Jody Grunden

 In this episode of "Small Business, Big Moves,". Thomas Bennett is joined by guest Jody Grunden to explore creative strategies and innovative approaches that have propelled small businesses to new heights. Discover the steps to maximizing profits and increasing cash flow for small business.

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Small Business Big Moves is a podcast where innovation meets entrepreneurship. Join Tom Bennett as he explores all things  business growth! From business funding and business tax credits to conversations with leaders who have grown successful and innovative businesses! 

Transcript

Speaker: 0:03

Welcome to Small Business Big Moves, a podcast where innovation meets entrepreneurship. I'm your host, Tom Bennett, and we'll explore all things business growth from business funding and business tax credits to conversations with leaders who have grown successful and innovative businesses. Welcome to the show. Today's guests will be Jody Grundon. Jody, you can introduce yourself.

Speaker 2: 0:26

Yeah, Tom. Hey, thanks. First of all, for having me on the show. Jody Grundon started out as a, an accountant and became an entrepreneur. And from there, build a business bootstrapped it from 0 to 10 million and eventually sold the practice in 2022 to a large CPA firm, which I'm now the Equity partner that manages virtual CFO services, a term that I coined 20 years ago, never would have imagined that it would have had the the strength that it has today. I mean, when I, when I, when I coined that term, when you Googled it, you couldn't, you couldn't even find what that even meant. And so that's, that's kind of how that, that, that all came about. Man, when I, when, in 2020 or 2002 you know, it was one of those, I was at a cross crossroads trying, trying to think about, you know, hey, what, what do I wanna do with my life? Because I worked in public accounting and, and didn't really like it. I actually got fired from public, public accounting firm. I said I would probably, it just wasn't the right personality for that. That type of business. And that should have gave me my biggest, you know, clue there. And then I went to the corporate world and thought, Hey, you know, that's where I want to be. You know, the corporate world sounds great. Worked for a 250 million manufacturing company. And that was exciting for the first year. And then after that, it was kind of like Groundhog day. And so it was. You know, same thing over and over and over again. And so I thought, well, I don't like public accounting, didn't like the corporate world, what do I do? You know? And so I thought, well, let me start my own practice and see if I can kind of change the way that, you know, take the good things from the corporate world and take the good things from the public accounting world and kind of combine them there. And that's how I started a summit about, you know, back in 2002, you know, with that idea, you know, just changing the way people thought about accounting. And I went to jump anywhere from shoot billing to How we dressed, you know, back then it was like suits and tire ties, suspenders. And, you know, it's like, I didn't want any of that stuff. I wanted to, you know, I want to dress down to what our clients were, you know, used to doing it. And small business owners typically don't dress in suits and ties all the time. At least they didn't back then. And you know, with that, I just want to be one of them and be part of that. And then I also realized that hourly billing sucks. And so I, I wanted to, you know, do something different there. And so it created A, what we call a subscription based billing model back in 2000, probably six or seven, you know, very similar to Netflix where, you know, it's a weekly fee and the clients can stop anytime they want. And, you know, it's just, it was a completely different, different approach to. To accounting. And so I thought, you know, Hey, this is great. So offering a CFO service where it can be advisory, meet with clients weekly, and then you know, put it on a subscription based billing model where they can cancel anytime they want. And you know, it, it, it, it, you would think back in 2007, that would be like, wow, genius lights going on and we're going to make all this money. Didn't happen that way. It took a long time for that to actually catch on to where it really started hockey sticking action. It took probably about until 2011, it took four to five years, you know, just doing it over and over and, and being, you know, figuring out honing, honing the craft and making sure the processes are in place. And then it and then it just blew up, you know, it blew up in a great way. You know, it went from doubling our size every three years and having a 25% bottom line profit margin which was, which was outstanding, you know, so we went from really maybe a hundred thousand dollars in business in 2002 when we first started my partner and I, and then we grew it to a 10 million plus practice and with a high profit margin. And that's that's why we decided to. sell the practice and, and, you know, see what we can, you know, see if we can make it even bigger than the 10 million. Can we double it faster? Can we get to 50 million? You know, that that's kind of where, where it went. So I've been through the, you know, from the very small firm, you know, firm mentality all the way now I'm in the big firm mentality. So I've been, you know, through a whole gamut of situations. So I can't wait to see where this conversation goes, you know, Tom, this is I'm really looking forward to it.

Speaker: 4:15

Absolutely. No, I appreciate sharing that. I always like to have people kind of walk us through where they started and how they get to where they are. So I appreciate you pretty sure you covering all that. And I really wanted to just Jump into that, into all that a little more as well today, right? And really have this focus on really all things financials, right? And really being able to grow a business, maximize profits, minimize taxes, and increase cash flow, right? Some of those main things that you've been able to focus on. So yeah, if you wanted to just kind of jump into the lot into that a little more, right, mainly just just helping businesses kind of maximize their profits and what they might be able to do to improve those areas.

Speaker 2: 4:54

Yeah, I'd be happy to do that. You know, when we, when we created this subscription based billing model, we had, in order to do that, we actually had to productize a service. And what, what does that mean? It means taking a service and making it so that. It can be bought similar to what you, you would buy a software for, you know, you go online here, the different things that software hasn't, and that's the product tie service. And in order to productize, we had to come up with a process that we repeatedly talk to all of our clients about, and we call that profit focused accounting. And, and what that means it means that we, when looking at, when, when looking at. The overall picture of a business. And as a business owner, you want to start thinking about this, what truly generates our revenue, you know, and, you know, cause when you look at it, you know, you're looking at, if you're a, let's say you're half a million dollar business and you want to get to a million dollars or a million dollars, you want to get to 5 million. The number really makes no difference. You know, what actually drives that revenue? You just can't magically say, I'm going to double my revenue next year. And all of a sudden it doubles, you know, so you have to break it down. And Hey, what, what is it? Hourly rates. Is it, are you a service based company where you're looking at hours and time and all that kind of stuff? Are you a, you know, a truck manufacturer or, you know, where you're maybe a truck repair company where you've got to track the, the, the number of trucks coming in and how much, how much you're charging on an average truck and how many, how many trucks you have in inventory. And how quickly are you pushing them through, you know, what are those drivers? Are you a baseball academy that needs, that has teams that has, you know, workouts that has, you know, lessons that has tunnel rentals, you know, is that your, your revenue driver, you know, whatever that revenue driver is, it's something that you personally have control over. And, and, and that's where you have to really think as an owner, you know, if I got control over it and I can control my revenue, What do I have to do to do that? And so when, when, when a CFO talks, when your financial person or a CFO should talk to you, they should be talking, not numbers, but objects, you know, Hey, how many trucks did you run through, you know, last week or last month, you know, 20 you had on the books that you have, we had your forecast. You're going to do 30. What happened, you know, we didn't get as many done for this reason. Is that gonna be a normal thing? We need to adjust our forecast, you know, based on that. And so the number one thing there is creating what we call a dynamic forecast. And that dynamic forecast really has to be tied into the revenue side of the business and the net income, you know, revenue is really easy to predict. Expenses are really easy to predict your bottom line. Super easy to predict if you know what the drivers of that revenue would be, and then when the costs come into play. And so that's the, that's one of the first metrics that we talk about is creating that dynamic forecast, finding out what those revenue drivers are and how that really, really brings down the bottom line, the next one you want to look at is cash, you know, and. With any business, we say that you wanna have at least 10% of your annualized revenue in the bank. And so for a service-based business, if you're a million bucks, you need to have about a hundred thousand dollars liquid cash that you have available for just simple cash flow, for opportunities for risk management. Super important. And that equates to about two months worth of expenses. So if you hear a lot of folks say, Hey, I need at least six months worth of expenses, that's about 30%. So if you do the quick math in your head. million dollar company, 300, 000. It would be a nice cushion to have. So between that 10 percent to 30 percent is where you really need to have in the bank. And that's going to really help risk management. And, and, you know, and like I say, it's super easy to, you know, say, no, I'm going to take all that money out of the bank and I'm going to put it in my personal account. And when I need it, I'll put it back in the business. If you're single, not a problem. If you're married more difficult, you know, your spouse is like, Hey, why are you putting money in the bank? Are you losing money? You know, then it becomes an issue there where if it's in the, if it's in the business, the whole time it's earning interest, you know, it's in some sort of liquid fun, you know, it's getting three, four, 5 percent interest. Perfect. Just keep it in there. It's, it's good for a rainy day. And as you get bigger, of course, that dollar amount that nest eggs will get bigger for you there. So cash is really important, knowing exactly how much money you should have in the bank. It is really subjective in nature, anywhere between 10 percent as a minimum, 30 percent of a maximum, and there's a lot of risk factors that go into determining, hey, how closer should you be to that 10 to 30%. Next step would be that financial statement you know, once you've created that forecast and you've got that bottom line, you really need to look at industry averages and say, you know, hey, Is this truly realistic? Because what the worst thing you could do is create some sort of really cool forecast. It's going to show that you're gonna have a mountain of cash in December. And then you find out in reality, that's not even possible because the industry doesn't have those margins. You might think you can get those margins, but the industry doesn't have them. So you got to look at that and make sure that, Hey, you're within range. Running a fast food restaurant. And you said, Hey, I'm going to have a 30 percent bottom line. Woo hoo. And you, and you base all your decisions on that. You'd be, you'd be really disappointed at the end of the year when you had industry averages of about 5%, you know, so a huge, huge difference there. And that's where the financial metrics really come into play is bucketing things in different areas. We can kind of compare it to the industry, but also you can compare it to your own forecast there. And then the final metric, the format, the final metric is your pipeline metric. You know, that's super, super interesting to look at it. Cause when you create this forecast, you know, I say this forecast is like a map, right? If I live in upper state, New York, and I wanted to go to Fort Lauderdale, Florida, I could easily get there by getting in a car and just driving South. Eventually, I will get there. I might end up in Alabama. I might end up somewhere different, but I'm going to figure out how to get around that coast, and I'm going to figure out how to get there without using a map at all. Right? And that forecast is the map, actually. And so the forecast is your GPS system in the car. And the nice thing about the GPS system, it now tells you, hey, construction ahead, take this detour. You know, it also says, you know, hey, This is the quickest route. You want to go this route, you want to pay a little bit more and go take these toll roads and get there quicker. You know, all those things really is what a forecast can do for you. It really gives you that guideline on, Hey, here's where I, here's where I'm going to end up. And here's the easiest way to go there. How would I want to get there? And how do I want to avoid everything? And that's how dynamic this forecast has to be. It can't be a budget where you just do it and November and you look at it. Periodically throughout the year and say, yeah, that was, I close to guessing. That's not a forecast. A forecast is it's designed based on all those non financial KPIs that you've created, and then taking those numbers and looking at it every single month and adjusting it based on life. Really important, you know, and life changes all the time. So if, if, if like, if I was at truck manufacturer, that's bringing in those trucks, again, I mentioned if, if, if I thought I could do 20 trucks a month and I'm Doing 10 now, then I can't have the forecast showing 20 going forward. I've got to make some adjustments on that, or I've got to pledge to myself, Hey, I'm going to figure out a way of getting it to that 20 that I originally had. And so, you know, those are the things that's where the pipeline really kind of brings things back in line, where it's basically shares with it, basically readjust that forecast over the next three months. You know, you always want to look at about a three month pipeline. You know, what do I have? You know, am I going to be able to hit those numbers over three months? We need to adjust up or down. Do I need to adjust up and I need to hire more people? Do I need to adjust down or, you know, and maybe I have too many people, you know, whatever that situation might be. Do I need contractors, you know, whatever that might happen to really solve for that. But those are the four different things. You got your production, your cash, financial, and then your pipeline metrics.

Speaker: 12:28

Absolutely. No, I appreciate you sharing that. And then the other area I wanted to jump into also was I know you mentioned being able to use industry metrics to help grow and scale a business. I wanted you to kind of touch on that and walk through how people might be able to benefit from that as well.

Speaker 2: 12:45

Yeah. So, so the biggest thing is, is that when you're, when you, when you prepare your financials and you, you want to make sure one they're done timely and timely means you should have your financials buttoned up within 15 days at the end of the month, you know, there's no reason. With technology nowadays, software out there, you should be able to get that done, but they've got to be good. They've got to be clean. They've got to be something that you can actually be actionable, make actionable items off of. And so with the metrics, you know, looking at different different platforms, there's a lot, just Google, Google out there, you'll find different platforms. You can use it wide range of costs that that you, that we have in their profit sense is the one that we have used for the longest time. But with that You can pull not just the financial metrics in there because, you know, a lot of times you'll get into all these accounting buzz terms like, you know, quick ratio, all that you don't need to know that kind of stuff, you know, find things in there that actually you can, again, influence or impact and so if your cost of sales. Needs to be 50 percent and yours is at 75%. Well, there's an issue there. So the, you know, the issue is that, Hey, maybe there's, maybe I'm, I'm not pricing my product, you know, high enough, or maybe my, you know, I'm not getting the best for my vendors that I can get, you know, if it's a product based business, so you want to look at all those different metrics that the finance, that the industry can provide to you to kind of compare, to see how I'm doing, if I'm exceeding all those metrics. High five. I definitely don't want to go the other way and reduce them back down to what the industry has. But if I'm not hitting those metrics, then that's really when it comes into play that, you know, Hey, maybe, you know, maybe I am, I'm not paying my people high enough, maybe that's why there's the turnover so high, you know, the industry is saying, you know, Hey, your direct labor should be about 25 percent and you're looking at yours and you're at 10%, it's like, well, that's great. That could be the reason I have so much turnover. And so, so there's a lot of metrics that you want to look at and really kind of determine what best you know, fits you and then make those solid decisions, you know, based on those metrics. It's really important to, to have that knowledge or have that knowledge base that, you know, you don't want to create your company based on industry metrics, but you want to create your company and you want to. Justify it based on the industry metrics.

Speaker: 14:59

that's great. I know another area, I know we see a lot of people online or whether they're considering themselves influencer or guru, they may not necessarily be great at at running the actual business. So, and I know a thing that's important to both of us is actually being a Thought leader and providing value. So any like tips or insight on how someone may be able to become a more of a thought leader in their industry?

Speaker 2: 15:24

No, that's a great question, Tom. I get that all the time. So, so you know, I'm kind of unofficially a thought leader in creative agencies where I've worked with a lot of creative agencies over the, over the years, and I'm also a thought leader in the accounting industry where I work with a lot of accounting firms and teach them how to provide CFO services to their clients. So kind of a thought leader in both areas. The, the biggest thing that, that I would say is you have to be able to get out in front and do speaking engagements you know, either through, you know, webinars, you'll get used to webinars, maybe do podcasts, you know, something that can get you out there and get your face in front of people. The other thing is, is that you've got to be willing to give away your stuff. You know, your knowledge, you know, that's what thought leaders do, you know, thought leaders, aren't protective of their, you know, secret sauce, you know, they're willing to give it up and, and, and share with everybody how you do things and what, what works and what doesn't work. And, and that's where people lean on thought leaders, you know, thought leaders are really there to help everybody else out. When you look at your, you know, I guess the biggest way to determine if you're really ready to be a thought leader is looking at your, you're basically, you're, Your core, you know, your, your core value, you know, we, we, we make core values up for businesses. Well, what's your personal core value? If it's not generosity, if that's not one of your top three, then you're probably not a thought leader because the thought leader gives away their generous, not in their dollars necessarily, but they're generous in their knowledge and their time. And that's one of the biggest parts of thought leader. And so, you know, I would say really get out there. And share with the world, you know, what, what, you know, your knowledge, and you can do that, writing books, you can do that podcast webinars, as I mentioned, but the easiest way of doing it is speaking at different events in which the audience is out there, whether, you know, for me, it's it's two different events. It's an accounting world event where I'm out teaching other accounting firms, how to be a virtual CFO, or I'm in the creative agency, not teaching creative agencies what a virtual CFO does. I'm teaching creative agencies how to be profitable. You know, that's the thought leadership here, something that they can take and really kind of help their business. And if you do it well enough, they shouldn't need your help at all. And that's the cool thing about it. You know, I've had many, many, many people come up to me years after, you know, after I, you know, maybe they heard me speak at an event and say, man, I gobbled all that information up. And I just want to thank you. And we got our business now from a million to 5 million or whatever that is. And we owe you a ton of, ton of, ton of gratitude for it. Can I, can I go, can I go buy you a beer or whatever? And to me, that's. Just as cool as having a client for that long. And it's kind of a weird, weird thing to think about, but man, that, that it's just as cool, maybe even cooler because I helped them get to where they wanted to be without, it was just that conversation or the book that they had or the article that, that I wrote, and so it's really important to be out there, put yourself out there, be vulnerable and you know, really just share your successes and failures.

Speaker: 18:17

I agree with all that. That's perfect. I know you're also a, published authors. So I wanted you to jump into those books a little bit and and what that was all about for the audience.

Speaker 2: 18:26

That was brutal. I will tell you that was a brutal experience. I did it twice too. So it tells you, it tells you what type of person I am. It was like, geez that first book took me about a year and a half to write. And It was definitely, it definitely, I stepped out of my comfort zone big time. And it was kind of interesting because certain pages, certain, you know, chapters really, I could get done like within an hour and it was like, Oh, I want to roll here. Other chapters, I would take weeks to get completed and it was never the, what I wanted to do. And I revised it and revised it and revised it. So what, what I would say is. You know, if you decide to go a book route, which I highly recommend, you know, to, to everyone, it's, it's just a great exercise. It's it's you know, you'll find out a lot about yourself doing it, but do the book thing and be consistent with it. And we, we tell, we tell our You know, our, our clients, you know, the, Hey, the, the key to a great, you know, great financial literacy and everything is just being consistent, you know, Hey, meeting weekly with the CFO or meeting monthly with your CFO. And, and, and finally I took that my own advice on writing a book, you know, being consistent, you know, going from, Hey, instead of whenever I want to write, you know, I, I, every week I spent at least an hour and I. Punch through something, you know, and, and try to create that consistent manner over time. And that's where I lacked in the first, probably half of writing that book. And the second half, when I, when I closed it up, that's how I finished it up, just being consistent. And sometimes, like I said, I could do a page or two, sometimes it was a chapter that, that part didn't make any difference. It was just consistently doing it, and setting time aside to do it. Not, not let work You know, you know, Trump, everything, you know, it happens a lot of times, oh, I've gotta billing, I gotta build this client. So like, I've gotta do this versus do that, you know, set it on your calendar and just repeatedly do it. And, and it really was, it was a, it was a really great process. The other thing I would recommend if you're gonna do or write a book is, is have someone ask you tons of questions and record those questions, and, and then take the que take how you answer the questions. And formulate that into your, you know, your chapters and so forth. That, that was super helpful. And it also realized how poorly I speak because I would, I would look at the transcript and was like, Oh my gosh, I, I talk that way. Kind of eyeopening in a lot of different ways, but you know, with that, that helped really keep the flow going. So I highly recommend that as a. A tool and then just have everybody proof proofread it afterwards and then hire somebody that is a great editor to come in and really edit the book and then get it to the point where you can publish it. Really important you know it's kind of amazing after I spent a year and a half on the book and had quite a few people look through it looking for just, you know, You know, grammar errors, you know, all that kind of stuff. And I gave it to the editor and told her, I actually told her this. It's kind of funny. I told her, I go, Hey, you're not going to find a whole lot. I went through this many times. You know, just what I want to give it to you. Look at the first chapter, see what you think. And, and they got through that first chapter and they gave it back to me. It was completely in red. I was like, Oh my gosh, I am horrible at writing. And so she rewrote a lot of that stuff. And I told her, Hey, just go ahead and finish the, the other 12 chapters and, and go ahead and take care, take care of that. And, and then that was a, that was a big eye opener again, again, not, not, not, I didn't go to school to be a writer. I went to school to be an accountant and that's again, where it stepped out and let the professionals help you get you to that next step. And so great experience. The second book, a lot quicker, you know, the first book was to creative agencies that really opened my playbook. And Hey, here's how you'd be profitable. The second book was to accounting firms and showing them, Hey, here's how you create a virtual CFO, remote office, you know, and, and all that kind of stuff. And, and both books are super successful. And it was only because again, you take that time and just the consistency and getting it done. And, and, and like I said, it was, it was a A bucket list for the longest time. And I finally just went ahead and did it.

Speaker: 22:17

Good stuff. Yeah, I know. I I recently was a published author, but it was a collaboration. So it was a lot different. I only had to come up with a chapter, but it was still, still a lot of work and deadlines and And same thing, kind of eyeopening when you put the draft together and then when it comes out looking like, so I absolutely relate to that.

Speaker 2: 22:36

Well, it's final, right? You're putting it out there. You're like, Oh, is there something wrong? You know, you're always worried that I say something wrong, you know, that, cause it's going to be final, but what's in print, it's in print. Kind of the funny thing about books nowadays, it's not never final. You can go back in and modify things, even if you've, even if you've published it over, over a period of time. So, you know, don't Don't don't be afraid of being perfect when you're writing a book, you know that because you're not going to be

Speaker: 23:03

Definitely not. Yeah, I know. I know we threw a lot of value at him today, but I know there's There's a lot that you, you can speak on. So I wanted to see if there was anything we might have left out or anything else you wanted to leave the listeners with today.

Speaker 2: 23:16

You know, the one thing I guess I would say is, is through my experience as being an entrepreneur and an accountant risk is a really. The key, you got to be able to take calculated risk and you can't just wait, you know, wait and hope that, you know, that you're going to eventually make, take action, you know, perfect example is that my, my father in law, great guy been married for 35 years to his daughter, you know, and I remember in the first, you know, five to 10 years, he was like, I'm going to, I'm going to buy a McDonald's and put on that corner. And I heard about this McDonald's going up constantly and constantly constantly and finally went up and guess what? It wasn't his, he never took action and the McDonald's doing great, you know, so it's just one of those things that you've got to be able to take that risk and. And you know, as an accountant counts inherently don't like risk. And so that's what kind of basically kind of got me in a situation where accounting just wasn't you know, what I wanted to do long term being an entrepreneur was, and so that was the risk that I took opening a business, changing the way people thought about counting, doing things differently in all aspects, you know, each one of those steps, you know, I was told that, Hey, that's not going to work. Can't do it that way. No, one's going to want to do that. No, one's going to buy something. And not, you know, and not get an invoice and charge hour, they're never going to pay a flat fee. You know, that, that was what I was told that over and over again. Now it's pretty common that people are paying a reoccurring flat fee, you know, when they come to a service level like that. And, and, you know, accountants aren't going to be respected if you dress down or no one's going to, I always heard this too, no one's going to ever, Take you on as a client without you being in front of them and shaking their hand. You know, it's like, well, that's kind of funny. You know, here we are 10 years later, after we went remote that we, I never even met half my clients because, you know, we did everything, you know, virtually now it's becoming more and more common, but, you know, so all those things that, you know, may, people may think that, you know, you can't do, or hasn't been done before you got to think, you got to think, you know, as an entrepreneur, as a small business owner, you got to think there are no barriers here. I've got control over really anything that I want to do. If I want to do it this way, and I think it's going to be the proven path, don't be afraid to take the risk and make sure it's calculated, but don't be. Afraid to take that risk and move towards that. You'll be, you'll be pleasantly surprised when it succeeds. And, and you become that, you know, that groundbreaking entrepreneur, that disruptor in the in the field that you're practicing.

Speaker: 25:45

I love that. Absolutely. That's going to be a wrap on. This episode of small business, big moves. If you got value out of this episode or know someone that did what we asked is you share this and like, and review the podcast. And you can find me on all social media at Thomas Bennett, and we look forward to seeing you in the next episode.