Stride Clean Advisory

CFO Financial Partner

• Guy Lamothe - Financial Partner

• Matt Kerrigan - Financial Partner

CFO Financial Models and Analysis

Product: Win4All Ratio

The Win4All Ratio is a concept that is very appropriate to managed service based businesses that are interested in managing their profitability at a customer level. I say, managed services, because very often, managed services are priced on a flat fee, monthly basis. What that means is that the company is taking most of the risk to manage its costs and very often, managed services operate unprofitably at the client level because they simply don't have a handle on their cost of labor.

Most often, when client engagements go south, the engagement is already not profitable and the service provider "feels" like they are bending over backwards to get back into favor and the client continues being uhappy. The Win4All is a data driven approach to measuring and managing customer level profitability.

I explain the win4all ratio and provide a download in this blog post here.

At the simplest level, the W4A is a ratio that looks at your MRR (monthly recurring revenue) divided by the theoretical hourly bill rates and the hours for the functions that are servicing that account. In a perfect world, that ratio would be 1.0.

Here are the key inputs you need to help a client calculate their win4all by client

1. MRR by client

2. Time based on function to support that client. A function could be engineering, design, account management, etc...

3. Bill rates for each function. What would you bill out design at or account management?

4. Direct expenses associated with managing that client account (e.g. materials, software licenses, etc..)

Remember, the bill rate is different than the employee or contractor pay rate. Pay rate is what you effectively pay your employee or contractor on an hourly basis. Bill rate is what you would charge a client. In other words, the "gross margin" is already built in.

Note: If a client has other direct expenses that factor into the denominator beyond labor, make sure to add those.

If you help a client manage their win4all, it will do wonders for them. They can also use that data in their QBR (Quarterly Business Reviews) with their clients to right size the economics of their agreement.

Product: Waterfall Forecasting

Waterfall forecasting is a method of helping clients visually how well they are tracking to their operating plan. It forces a monthly conversation to not only assess prior month variance to plan but also to discuss what the proceeding months could look like. This is not designed to substitute for a forecast model but you can take the key outputs from that model (i.e. revenue, personnel costs, marketing expense, balance sheet cash, etc..) and put them into the waterfall.

Attached is a .pdf that we wrote targeted to our MSP customer segment on this topic MSP_Forecasting_Waterfall.pdf

Here is a link to the waterfall forecasting sheet (note, you could tie this into your forecast model or just past as values:

https://docs.google.com/spreadsheets/d/1d3ARyvbm6qbA5azLqR-YF5LE8rS9EuosIVylxwy2e4E/edit?usp=sharing

Here is a video that walks through how to use it.
Video Link Here

CFO Engagement Best Practices

Client is Requesting a Documented Scope for Hourly Work

So you have a client that you are doing hourly work for and they would like to have a tighter shared agreement around it and something to sign. No problem. Technically we don't need that Statement of Work because hourly is embedded in the professional services agreement. However, it's always helpful/valuable to reduce ambiguity. The other benefit is that you and the client get clear on the deliverables.

There is no need to document this in Miles. This will happen in a Google doc outside of Miles.

Here is what you do

1. Open this Google Doc and fill it out: https://docs.google.com/document/d/19jN_oRV6aEhfDCrEkoJuXVE3O4E7x9djLvShxA20_gM/edit?usp=sharing

2. Convert to a .pdf

3. Upload to Dropbox Sign (used to be HelloSign) and map the fields for signature. If you need access, please request from BOSS

4. Send to client via Dropbox Sign

5. Simultaneously, email client and let them know that it is coming and attach the unsigned .pdf. Let them know that they will be receiving an email from Dropbox Sign for digital signature (check spam if you don't see it).

6. Once complete, download the signed agreement from Dropbox Sign and upload into Miles (or email Guen and have her upload it).

N​avigating a 2-Hour CFO Free Consultation

I​n some of our partnership arrangements, we align with groups that connect with prospective clients of ours. For example, here is an offering for a 2-hour free CFO consultation session when a client buys an annual subscription to Gozynta Mobius through TechTribe: https://stride.services/gozynta-and-stride-techtribe/.​

W​e believe these are interesting customer acquisition strategies to get our CFO's in front of prospects to build confidence, credibility and opportunity. This card lays out a framework for how to engage a prospect should you participate in this effort.

G​oal: If the prospect is a fit, we want to convert them to an engaged client. An engaged client can take the form of an hourly, project, or retained engagement.

I​n order to achieve this goal, these are some of the important ingredients:

1. Y​ou understand their problem deeply enough that you can help them

2. T​here is a good "fit"

3. Y​ou give them confidence that you can solve their problem

T​he outcome for the end of the call is agreement on an action plan and priorities and timing. Note -- I already created the action plans (or most of them) for you (see below)

T​he first step is doing a diagnostic and we have built that in the Powermeter for MSP's (www.stride.services/powermeter-for-msps). Take this yourself and see how it outputs. There is an email received and a custom web page where they can get a download based on their results. This diagnostic is a GREAT setup for your engagement with the client. You goal is to help guide them to "Freedom" on the Freedometer.

Powermeter_for_MSPs_1_.pdf

The attachment provides characteristics and action plans for each stage of the Freedometer. T​his is a great and easy way to navigate with the client as you help them understand why it's important and how to prioritize the actions. The categories of inquiry and understanding you're diving into incluce:

• V​ision for the business

• A​bility for the owner to scale themselves (work on vs. in)

• F​orecasting and projections

• C​ore accounting and quality process

• Reporting metrics and actionability / transparency

• C​apitalization

I​f you are selected as the participating CFO, all you need to do is:

1. I​ntroduce yourself (great to meet you.....)

2. S​end them the Diagnostic link

3. A​cknowledge receipt once completed

4. R​each out to schedule a call

5. H​ave the call and agree on the action plan

6. D​etermine next steps (if any)

7. I​f an engagement opportunity, let sales know so it's on the pipeline

8. I​f not an engagement opportunity, also let sales know so they can continue to cultivate

Asking a client for a CFO testimonial

We don't want to miss the opportunity for a client to share a testimonial for your great work. We use that testimonial to put on your website page and further enhance/promote your impact in the marketplace. Here is a script that you can use to request a testimonial:

Dear [Client]

Thank you for giving me the opportunity to support [company]. It has been great working with you and your team. I wanted to ask you a favor as we are working to grow our impact in the marketplace as well. Would you be willing to write a couple of sentences as a reference for my work with you? I would love to be able to share that as we are expanding our footprint. The testimonial could be about a specific project that we worked on together or the overall relationship. You have flexibility ;-)

Thank you so much for considering.

Regards,

[CFO]

CFO Questions to Probe a Prospective Client

Here are some questions to probe a prospective client. You don't have to ask every one of these but if you get stuck and want to unlock some content, these might help. Remember, the goal is to spend about 20% of the time talking so you want to engage the prospect with questions that will be rich in response.

1. Life Questions

   • Tell me about where you live and your family

   • Why did you start the business

   • What do you do when you're not working

   • What would you like to do that you're not doing right now

2. Business Questions

   • What makes your nervous about the business today?

   • What have you done to try and solve those issues historically?

   • What complicates executing your goals?

   • How would you evaluate your key leaders on your team?

   • How are you spending time today? Is it an area where you get energy?

   • What are your hopes for the business over the next 5 years?

   • What are the most significant investments you have made in the business over the last 12 or 24 months?

3. Finance Questions

   • What are you struggling with today around finance?

   • If you could wave the magic wand, what would your business be performing at? Growth and profitability

   • Are you part of any peer groups and what are you learning from being a part of it?

   • What areas do you have confidence in today? Where does your confidence get shaken?

CFO Role Practice

• Initial Sales Discovery for CFO Services specifically

  • Video Link Here

• 9.2.22:  C​FO Role Practice - Scoping a Prospect in the Sales Process

T​his recording is a role practice to how to engage with a prospect that sales has brought you into because they have expressed a desire for CFO advisory service. The goal of this 30 minute call is to:

1. E​stablish prospect confidence

2. D​etermine fit

3. D​etermine information required to scope the engagement

A​ few key parameters in the role practice

• T​alk 20% of the time

• I​ntroduce yourself but do it efficiently -- enough to establish why you're on the call

• S​how that you have gotten up to speed on the client in advance

• C​reate a "link" to the person if possible -- either you work on similar clients, are from the same town, went to the same college, etc.

• L​et the prospect know the agenda for the call

  • F​or the call, the goal is that we get off the phone with a good determination of whether there is a fit and that I have enough infromation to make a recommendation

• S​tructure your questions

  • F​irst I'm going to ask some questions around the future and looking forward

  • N​ow I'm going to ask some questions about your core accounting

  • N​ext I'm going to ask some questions about your capitalization and exit planning

• S​ummarize what you heard in those responses

  • "​So what I heard you say is XYZ. Is that right? Anything else?"

• A​dd value

  • W​here you can, give them some value. Examples include:

    • Y​es, we see that for most clients that invoicing is the most complicated and where energy gets drained because of the amount of information that needs to be collected timely for submission

    • T​here are three responsibilities of a CEO: Don't run out of money; drive strategy; hire the right people for the right roles

    • W​hen we think about analysis for a client like you, we really want to bear into labor utilization and capacity as well as customer level profitability. Here's why.....

• A​sk the client at the end if they felt the goals were achieved

• T​ell them that you will follow-up with an email summary based on what you heard

• E​xplain the next steps in the process that you will be putting together a recommendation

H​ere is the role practice recording

• Video Link Here

Additional role practice recordings:

1. 9.16.22 -- HD Cavalry -- Russell/Andy/Matt: https://drive.google.com/file/d/1tTB6J6SqVagiM69Bd67pnoMt33bQLiY8/view?usp=sharing

8.19.22: CFO "TEC" Prep and Navigation

When sales does its initial discovery call with a client, they ask questions to understand the client goals. Those goals may be bookkeeping/accounting related (rearview mirror). They may also be future forecast related (windshield). If sales deems that a client has forecast / strategic / growth related desires, they will schedule a parallel call with a CFO advisor. The intention is that the CFO advisor will be introduced on the call and ask a series of questions designed to determine the right recommendation for how we might support them. The purpose of the TEC (Technical Expert Call) is NOT to give a recommendation but to:

1. Have the client like you

2. Build client trust

3. Learn as much as you can so you can reasonably scope

Below is a video role practice and discussion with sales on this topic.

Questions that Sales Asks to Determine Appropriateness of Introducing to a CFO Advisor

• What are your growth goals?

• What have you done or are you doing today to plan financially to achieve those goals?

• Do you have a thought partner today to help guide you on strategic financial decisions?

• What are you building the company to achieve? Why is growth important to you?

• What is an area of finance that makes you the most uneasy or you would like to have more confidence?

• What would you be looking for in a strategic advisor or finance partner?

• How urgent is this for you in terms of priorities?

What information should sales get over to the CFO Advisor in preparation for a TEC Call?

• Background on the company

  • Background paragraph (company description, size (revenue and employees), client goals)

  • Link to website

  • Linked to LinkedIn profile of CEO

  • Where did the lead come from

• Support statements for why certain services might be of interest to the client -- what did sales hear?

Key actions for the CFO Advisor on the TEC Call

• Introduce yourself

  • you don't need to say how long you have been at Stride. Share how long you have been a senior finance professional and how your experience applies to the company you are talking to

  • share what you have done in the past

  • share where you live

  • share something about yourself so they get to know you a bit

• Can you find a common link?

  • Where they went to college

  • Where they worked

  • What they like to do for fun

• Be a strategic thought partner

  • Show them through your questions that you are elevating their awareness unlike others around them would do. Here is a card with some sample questions

  • Sample Questions like:

    • What are your goals?

    • What keeps you from achieving them?

    • What is something you have tried in the past around financial strategy but haven't been successful?

    • What would you like to STOP doing so you can be doing more of "X"

    • Are there acute issues that you want to address sooner than later?

    • What are your ultimate goals for the company? What work have you done to determine priorities today in service to that?

    • If we're sitting here a year from now, recount to me what you accomplished (then, as the CFO, ask them probing questions about how they did it)

Video Link Here

7.8.22: Explaining CFO Services

This was a role practice where a CFO was brought into a call with a client by a CSM to discuss what the CFO does for clients.

https://drive.google.com/file/d/1oU679c9ExmMDsfCQte7Cml7FDOhNNIjZ/view?usp=sharing

Stride CFO Consultants

Links to the CFO Spotlight

Here you will find the links to the CFO spotlight for sharing with others:

Guy Lamothe

• Spotlight page: https://stride.services/guy-lamothe-spotlight

• CFO page: https://stride.services/cfo-services/guy-lamothe-cfo/

Matt Kerrigan

• Spotlight page: https://stride.services/matt-kerriga-spotlight

• CFO page: https://stride.services/cfo-services/matt-kerrigan-cfo/

• ​LinkedIn Profile 

[Legacy] Cards not on a Board

Kennedy Events - CFO Services

This is where you document the CFO related activities that you are performing for the client. The lens to take on this documentation is to assume that someone was stepping into your shoes and needed to get up to speed on the engagement and what you're performing for them. This is designed to be a living document that maintains update over the course of the engagement.

CFO Consultant:  Matt Kerrigan

Google Drive: https://drive.google.com/drive/folders/1hyQdAFluan2TlbqvOHLkH4PdGCcr-LZO Vista: https://sites.google.com/stride.services/kennedyevents/home?authuser=1 GDS: https://datastudio.google.com/reporting/789cc451-6f83-4509-9df8-ce51290239b1/page/mvEFC Recent CFO Services Presentation Template: https://docs.google.com/presentation/d/1nP0WvLKnP4I7OG4eDFUzWyyMPhFkqna3/edit?usp=sharing&ouid=115434383328959467348&rtpof=true&sd=true

Major Projects (Updated 12/1)

• Build financial forecasting model. The initial focus was around cash, but it's grown to be the P&L. Inputs were added last month. The biggest question is around frequency of updates and when the final cut off is each month / quarter to add information.

• Vista has customer level profitability. This is a new feature added last month, and one that really excited the client. Rashid is working a few improvements, but this should be the focus of a lot of analysis in the upcoming months.