The Virtual CPA Success Show: Episode 75
In this episode, our host, Jamie Nau, Summit CPA's Director of Virtual CFO, and Jody Grunden, Partner at Anders CPAs + Advisors, discuss time tracking and project management data to improve agency profitability with Marcel Petitpas, CEO and Founder of Parakeeto.
[00:00:20] Welcome to today's episode. This episode has been while in the making,; we have been trying to get Marcel on here to talk about Parakeeto and how it connects back to some of the stuff we're doing here at Summit. So we're really excited to dive into this topic. So we're just gonna start off and really dive into it.
[00:00:38] One of the things that we've at least seen in the industry over the last couple years is that the agencies are getting much more sophisticated. You know, when we first started, a lot of the conversations we were having with agencies was low-level education. You need to have this information, you need to have this data.
[00:00:53] And so we've found that companies are getting much more sophisticated so they know what they need to see. It's getting there that's getting a little more difficult. And this is something that we at Summit deal with and as well as they do at Parakeeto. So we're gonna jump into that topic, but let's start with that baseline knowledge, that baseline topic.
[00:01:08] We’re joined here by Jody from Summit and Marcel and Parakeeto, and we're gonna talk about those baseline numbers that everybody needs to know. So, we'll start off with you, Marcel. What are you seeing that every agency needs to know and the information that they have?
[00:01:22] We'll let Jody kind of bounce off of you when you start going through it.
[00:01:25] Marcel: Sounds good. And before I get into any of that, I just wanna thank you guys for having me on the show and acknowledge that, Digital Dollars and Cents and Jody, and a lot of the amazing thought leadership that you guys put out into the industry is a lot of the foundation that we've built our company and our thinking on top of.
[00:01:42] So it'll be unsurprising if we're perfectly aligned. We should at least come from the same kind of line of thinking. But with that said, I think in all the audits that we've done on agencies, the thing I see time and time again is that almost nobody, especially if they're working with a firm that's not Summit CPA, when they look at their P and L, knows what their gross margin is, or contribution margin, or we've started calling it our own thing, which is delivery margin, mostly because we'll talk to their accountant and then we don't agree on what that thing is supposed to mean.
[00:02:11] So it's like, well, this is all semantics anyway. The bottom line is, your client doesn't know what it costs them to earn a dollar of revenue, and that to me is tremendously problematic because without knowing that number and without it being healthy, it's very, very, very difficult to be profitable.
[00:02:27] But when that number is healthy, profit starts to feel more like a choice than a random outcome or happenstance. So to me, it comes down to gross margin or delivery margin. And then, there are a bunch of non-financial metrics. I think the non-financial metrics are important because they're so much more timely.
[00:02:45] They are so much less expensive to make precise in terms of the different areas of the business that you can measure, and there's basically three of them that control that gross margin: average bill rate, utilization, and then average cost per hour. If you're thinking about this in terms of a client or delivery cost, if you're thinking about it more broadly at a department level, those are basically the only three things that you need to pay attention to, as it relates to the foundation of profitability, which is your gross margin, and then everything after that, which is overhead fiscal management. I rarely see agencies have trouble with this. I'm not often walking into agencies going, “oh, you have too many kombucha taps, and you can't give everybody $700 office chairs.’
[00:03:26] That typically is not the mindset at an agency overspending there. So that to me is kind of the critical thing is, do you understand what your gross margin is and do you understand how to influence that number and what levers you have available to you? And with a simple set of metrics, which again, you guys really laid the groundwork for, an agency can get so much visibility with very little expense and complexity as a starting point.
[00:03:51] Jody: First of all, thanks, Marcel. Such kind words, coming from you especially, so I appreciate that. We've known each other for a long time. Jamie, I don't know if you've known this, but I met Marcel in, was it Arizona or–it was in some hot place?
[00:04:04] Marcel: I think it was in Utah, actually.
[00:04:06] Jody: That's right. It was really hot. I was sitting there, and I just happened to be walking by and we pretty much hit it off ever since; it was at one of the Bureau of Digital Camps that we both attended. I have known him for a long time, great friend. And you know, kind of getting to the topic here,, Marcel kind of took what we had as a foundation and really kind of created a software to manage that.
[00:04:28] And, so, it's something that we definitely need to investigate, take a little bit more of a look. But with the ideas that we talked about there, average bill rate, as you mentioned, utilization, you know, as you'd mentioned, the combination of those two is the effective rate. Gross profit is the big driving force.
[00:04:44] And, we've focused on that; that's what we drive in. Even with our own business, we drive in the concept; if we have a specific gross profit, we're going to have the bottom line that’s gonna be what it's cause is. You know, they're pretty well managed for the most part. Occasionally, we'll see marketing spend that's way outta whack, but that doesn't happen. That's a few and far between type of scenario.
[00:05:18] So, a hundred percent right. Managing that gross profit is key, and managing it through utilization average bill rate. So that being said, is time tracking.
[00:05:31] Marcel: Well, if we agree that gross margin is important, then I think the answer to that question lies in ‘do you care about anything beyond what's happening at the entire agency level or to what you can cleanly attribute people's payroll to?’
[00:05:46] And if you care about getting insight anytime, anywhere beyond that, then time tracking data, to my knowledge, is the only way to achieve that, because how else can we attribute cost at a more granular level? So my answer is yes, and I'll put an asterisk on that and say that I think a lot of times when we start talking about time tracking, there's a lot of baggage that people like to bring along with that.
[00:06:06] And I want to just address some of it. That does not mean billing by the hour. It doesn't even mean using a timesheet software, like Harvest, because there's other ways to track time and depending on your business model, you might not actually need your team to fill out timesheets to get that same record of time and where it's allocated and have it be materially accurate and be able to use it for these kinds of insights.
[00:06:24] So really, it's about asking the question. Where is our largest expense? Payroll and in particular, delivery payroll. Where is that being allocated? And when we have a model for that, then we can start to ask really great questions like with what type of clients or services or different types of deliverables or departments are more or less efficient at earning revenue?
[00:06:46] And that is, I think, where we can start to surface the insights that empower us as owners. or our team members. to actually drive the profitability of the business forward, and really make smart decisions and prioritize where we make those decisions.
[00:06:59] Jamie: I think this is the key to any financial number, right? As a client, I could get you to the point where you can see your gross profit, you can see your gross margin within the first week of working with us. I could jump into your QuickBooks, I could change your account mapping, and I could tell you your gross margin is X. Great. And that's where I think a lot of companies are right now; they can get to that point where they know where their gross margin is.
[00:07:22] But then, how do I take those next steps? Do I love my gross margin? Do I hate my gross margin? Is my gross margin good? What does it mean? And so, I think that's where those next steps come in, and I think that's what's really important about gross margin being such an important metric; it's because there's so many things that could go into it.
[00:07:39] You can look at it by the job, you can look at it by the person, or you can look at it by a department. And so I think that's really what makes this metric so important. And it's not the only metric that's like this, but it's such a key one, especially for a service-based business to get right that if you can get your gross margin right and understand whether it's gonna be good or bad based on before even finishing the numbers.
[00:08:00] That's really what makes a business powerful, and I think that's really where the key is.
[00:08:06] Jody: Yeah. I have to agree with that. If everything was perfect, if you had the perfect net income all the time, the exact amount of cash you needed in the bank all the time, then, no, you wouldn't have to keep track of it.
Right? But life isn't perfect, and when things go south, that's when you need to really dig in to figure out why. There's so many improvements that we've made over time because we track time, and I don't know how we would've done that; I don't even know how we'd have identified those issues had we not tracked time.
[00:08:34] A perfect example is that we provide a cash flow forecast every single week for I'd say most probably 60% of our clients. And that was taking, on average, it probably took an hour maybe a half an hour for the presentation.
[00:08:53] But when you dig into it, it was taking 3, 4, 5 hours, sometimes even longer, just in preparation for this cash flow meeting that lasted a half an hour. And we had that every week. That's one issue. Multiply it by 150 clients for 52 weeks outta the year. That's a lot of people.
[00:09:11] We were able to know what was actually happening because we did track time. We identified it, and we were able to find a solution for it. It wasn't the process that was wrong. It was maybe the software, the tool we were using, Excel. It was breaking down all the time, and we had all these different issues with it. We were able to identify that and reduce that and save our company a lot of time.
[00:09:35] A lot of it was, time translates directly to money. That just a small issue there saved us a bunch, and I don't know how we would've done it. I really don't without tracking time and analyzing it. Not just tracking it, but analyzing it.
[00:09:53] Jamie: And so I think this is where a tool like Parakeeto comes in. There's lots of ways to analyze the data and a lot of those ways are very time consuming.
[00:10:03] So I think what we talked about, and I know you talked about Marcel, is that if you get it set up right away and you get it set up properly, you're gonna be able to know the right spot to look pretty quickly. So, do you wanna talk about some of the issues you see and some of the complexities you see around getting to the answer of ;why is my gross profit not doing well?’.
[00:10:21] Marcel: So I think the first thing I want to talk about is this separation of finance and operations. I think we share the thesis that the complexity of the average agency has gone through the roof over the last 20 years, largely as a reaction to, I think, downward pressure on margins.
[00:10:37] People want to get paid more. Clients want to pay less. We can't work employees 80 hours a week like they did back in the old agency days when that was just kind of a standard thing. So we have to find other ways to protect margins, and that has come through more complex billing models, often several different billing models within a small shop.
[00:10:54] Lots of complexity around staffing models and lots of intermingling of full-time employees, freelancers, and then these weird combinations of those two concepts at times. And then also lots of different service offerings departments. And so a lot of complexity has emerged. I think for that reason, finance can no longer be the only way that you get this insight.
[00:11:14] And you guys recognized this very early on and, and started looking at these and defining these non-financial metrics. But what that starts to involve now is operations. So, the critical assumption, of course, if you want to do this with finance, Is that the data is gonna be clean and accurate.
[00:11:30] One of the most immediate things that we see when we start to audit clients is something very, very simple. Like you estimated time. By role, how many design hours, how many development hours, how many project management hours, and then we go into your time tracking tool and there's time tracked against 300 discrete tasks, none of which map back to or are tagged to, or can be aligned cleanly to with simple linear logic statements, project management design pro.
[00:11:56] So in order for you to answer this one simple question of, “Did this take as long as we thought? And if not, or if so, where were or weren't, we aligned.” There's this huge process of having to clean that data up and a lot of times make subjective judgment calls that are unique to that one project that don't scale, that don't, you know, horizontally align to other projects.
[00:12:16] And that inertia is what generally holds agencies back from ever being able to consistently leverage this kind of insight. And then the second thing that often holds them back is the lack of horizontal consistency. You have 300 tasks on this project. There's probably a task on there that was the same exact thing on the last project, but the naming convention is not exactly the same.
[00:12:38] So now you can't even really compare things horizontally, or maybe you've broken things up into 300 tasks instead of collapsing that into like five broader buckets. So there actually is some amount of statistical relevance to the things that you're measuring horizontally. So it's a lot of the thinking that goes into the data structure.
[00:12:56] And then how that should influence the way the tools are set up and how that should influence the process around how data is collected, how it's cleaned, how quality assurance is done on that, so that at the end of the day when you pull a timesheet, or you pull a task list from your project management tool and you want to answer a question with that, the data's ready to do so, and you don't have to wait all afternoon or all week for somebody to go and do all this manual.
[00:13:20] For you to be able to get the answer that you need, it just becomes a part of the rhythm. And there's just, I think, a lack of thoughtfulness that goes into setting up these tools a lot of the time, which undermines an agency's ability to really get value from that and will undermine, for example, your ability to give your clients insights because their data is not capable of enabling you to do that
[00:13:42] Jody: Or, gives you the wrong insights because their data's showing something completely different than what it truly is.
[00:13:48] Jamie: Right. Yeah, it's interesting cause I'm looking at that book behind you starting with the why, and I know that's not the point of this book, but I know when we go into these conversations, that's really the question we ask is, what information do you need and why do you need it? And then it's crazy to see, okay, if you just ask that question, you come up with a list and they don't even know what path you're going down.
[00:14:08] But when you talk to a company and you say, okay, what would be the most important information for you to need in order to run your company? And you come up with this list, and then the next thing you do is you look at what they have in their tool and half that information isn't in there.
[00:14:21] So I'm sure we have those conversations all the time. And is that kind of what your audit looks like when you've talked about doing audits with the first companies, is, you just try to figure out what are their decision points or what's what? How does that conversation work?
[00:14:31] Marcel: Yeah. Yeah, so the audit process is, of course, as you know, we generally have to rely mostly on their finances, and we're doing exactly what you described.
[00:14:39] We just have a spreadsheet where we basically apply classes to their PNL to get them to, okay, your gross margin looks like it's about this, and you know, all the benchmarking that you would also do. This percentage goes to sales and marketing, and we identify. Basically we're showing them this is what your business looks like through this lens that we look at every business through, and here's how it compares, and here's where you have opportunities and here's how to think about moving these things around.
[00:15:05] So it really kind of helps clients understand, oh wow, these are all the things that I can see when I look at my business this way, and these are all the things I can model. We increase your average bill rate by a dollar, what does that do for the next 12 months to your business? So that's really what the audit is about.
[00:15:20] And then of course in that we start identifying, here's all the reasons you're struggling to see things in this way. And a lot of times education on, this is why you might wanna stop. Calculating utilization in this way where you, for example, strip out all people's vacation time in capacity, and here's why.
[00:15:35] That's making it harder for you to see what's really going on or why considering time on the company website is billable, is also making it harder for you to see what's going on. So there's a lot of things that go into the audit, but yes, the end state of that is usually the client. It would be pretty nice to be able to see the business in this way and to be able to zoom into clients or projects or so on.
[00:15:57] And then, we're kind of stretching the gap, candidly, so that they can buy the next portion of the engagement, which is, let's get into those details. Let's get into the weeds together and figure out how you can start getting these insights and how that needs to get structured in your tools and what the process needs to look like.
[00:16:15] For that to be something you can get all the time and empower your finance team with, empower your ops team with, and empower yourself with to make better decisions.
[00:16:25] Jamie: I feel like in these conversations that I've had, the information isn't complicated, right? It's not like we're talking nuclear science here; we're talking about very few metrics, but the fact that it takes clients or companies a while to get there is what gets complicated. So do you wanna talk a little bit about, from our experience and doing those, onboarding in those kickoff calls is where that disconnect is at in terms of the information they need.
[00:16:51] Jody: I think it comes down to really the information they need. They don't know and they don't know what they need, and then they do know what they're looking at. They just dunno how to read it. Right. So they're getting these numbers and they're getting it from the number's sake.
[00:17:06] They're looking at it and they're saying, yeah. They look at the very bottom and it says positive. So, oh, we must be doing well. And that's really all. And then when it comes down to the end of the year, they're like, well, where's all my cash? Yeah. Because it was positive and they don't really understand the whole picture of things.
[00:17:22] So, and, but more importantly, they don't really understand how they can control the outcome. They may have gotten lucky from the very beginning and charged the right price or whatever, and it allowed them to accumulate a bunch of cash and they think, oh, I must be Super great at managing my finances.
[00:17:38] In reality, it's like, no, you just kinda got lucky. Like a lot of us do when we start a business; we do get lucky, and it's when things don't go the right way, I think it is when they really need to start diving in, and figuring it out. So, kind of circling back to what you're saying, when they're coming in, they really don't know what they don’t know.
[00:17:59] I guess that's the saying there. I think that's where they could use the software that Marcel brings to the picture, or they could use the consulting that we bring to the picture.
[00:18:18] But we gotta come to that same information. We gotta figure out what's important, what drives the revenue, what drives their expenses, you know, where the gaps are, what's their ideal profit margin need to be in order to be able to achieve a 50% bottom line or 20% bottom line or, or 30, or whatever bottom line they want.
[00:18:38] Because again, we're not necessarily comparing to industry or comparing to what they need and what their business needs to go forward. And I think that's the kind of the big circular reference there that they just don't know, and they just don't know how to get there. They might have lucked out at one point and they're kind of riding on that watch.
[00:18:53] Jamie: Once you stop lucking out, it becomes a spiral and a download spiral pretty quickly. There's those underlying things that have been there for a long time that just start to happen all at once. And you're like, wow, I went from having $700,000 to cash and six months later I'm down to like barely being able to make payroll because this just came so quickly.
[00:19:12] And I think that's the key to not truly understanding your numbers and just looking at that bottom line is you're gonna spiral pretty quickly. So I'm gonna talk a little bit about shifting direction here a little bit. So one of the things that a lot of companies are going down the path of, and I know we're guilty of this sometimes as well, is there's so much technology out there and there's so many tools and everybody's signing up for a lot of different tools, oh, we're gonna use this for project management, we're gonna use this for this, and you end up using 20 tools.
[00:19:42] How important is it to make sure these tools all speak the same language? And what are some of the problems that you've found when your tools don't actually sync together and you're trying to do some of this analysis?
[00:19:52] Marcel: Yeah, so man, this is such a good question cause I think this is the symptom that I hear all the time on, on a sales call, right?
[00:19:58] ‘My tools are the problem.’ The tool is never the problem. You know, spoiler alert, the tool's not the problem. It's how you're using it. I'm sure it's not the first time you've heard something like that. The fundamental issue is, I think historically what people have looked for is a tool that's gonna do two things.
[00:20:17] And because they're looking for those two things, it's kind of an impossible task to meet. The first is it's going to be great for their workflow, right? Our team tracks their time. We're talking about time tracking specifically. My thesis is the best time tracking tools, the one your team actually uses.
[00:20:35] Because if you don't have good compliance, then it doesn't matter how precise the data is, it's not gonna be accurate. And precision and accuracy are not the same thing. Often precision actually comes with the cost of accuracy if it increases complexity enough, so workflow is the first consideration.
[00:20:50] And to me that's the primary consideration: is this workflow going to make it such that your team actually uses this stuff? Ideally use it in the right way consistently. You're collecting the data. That's the first step. And then the second step is the reporting. And I think the fundamental problem with tools that try to do both of those things is, you probably hear this all the time. I just wish my team would track time and manage the projects and it would go straight into a dashboard and I could see what's going on.
[00:21:19] But it's like, if that was possible, we wouldn't need bookkeepers. We wouldn't need QuickBooks. Right? But the reality is people are gonna make mistakes, and the bigger the team gets, the more mistakes they're gonna make. Sometimes you're gonna forget your timer's running and you're gonna log a 99 hour time entry.
[00:21:33] Sometimes there's gonna be an apostrophe in the client's name in the time tracking tool. But not in the finance tool or the project name's not gonna match up, or someone's not gonna use the right naming convention for the task, or an engineer is gonna log time to strategy by accident. Do you really want all of that going straight into a report?
[00:21:49] The answer is no. You probably need a middle layer. And I think that's the big part that no one's really doing. There's the data collection, there's the output, there's structuring all of that data, which is not trivial, but let's assume you do all of that stuff well. But the other piece that everyone's missing is the process of monitoring compliance–doing quality assurance on the data and spotting these errors, lining things up.
[00:22:07] Perhaps you've switched time tracking tools three times in the last three years. Do you need to stitch all of those things together and now normalize things? I don't really have a strong opinion in terms of like all in one tool versus a bunch of smaller tools that are really good at that one thing and work really well for you.
[00:22:29] But what's important is making sure that you understand, number one, what is the core data schema that you need to measure for your business? What are the departments you want to track against? What are the role categories, the task categories, the the different types of services, whatever that is for you.
[00:22:42] That should be independent of all the tools. And then everything is evaluated against the question of is it capable of producing data that looks like this? And in each tool, the mapping to, you know, the specific object, whatever might be different. But if you understand that core, Outcome of it needs to produce data that looks like this, then you can align everything, right?
[00:23:04] And there just might be a little bit more work to do in spreadsheets or in your ETL tool, or your database or your warehouse, whatever you're using to manage your data. But, I think those two things need to be thought of as separate exercises. Collection and workflow is one. And just pick the tools that are gonna work for you and then actually manipulate and clean the data that should probably happen as a separate exercise.
[00:23:26] And then you can visualize that data wherever works for you. Spreadsheets are usually great for that. You know, if you're good at Excel, you might use Power BI, you might use, you know, something else. You might be working with a wonderful finance firm that provides a lot of this reporting for you, as long as you just give them clean data or whatever the case might be.
[00:23:43] But that's kind of my thesis around tools is number one, can your team use them? Number two, can it create the data structure that you need? And then you really should have a process that's deliberate for extracting, cleaning, transforming, getting that data into the right format, and then doing something.
[00:24:00] Jody: How does that fit in with the time tracking? What void does it fill?
[00:24:13] Marcel: Yeah, and it's important to note that right now the goal eventually is to be able to sell the software to people to use on their own.
[00:24:19] But right now we're a managed service. So you can almost think of us like bookkeepers for your non-financial data. So that middle part I talked about extracting it, doing the quality assurance, cleaning things. Making sure that, oh, hey, an engineer logged time to strategy. Is that a mistake? Is that correct?
[00:24:35] Like all of this work that has to happen to the data to make sure it's actually clean. That's what we do. And we've essentially built like, for lack of a better word, QuickBooks for time tracking and project management data. It's an environment where we can more efficiently do this type of analysis and quality assurance.
[00:24:51] And data transformation for clients so that we don't have to cost $20,000 a month. We can cost the equivalent of a junior project manager, or less, but provide them with really, really high-quality data engineering on the back end so that all the effort they put into collecting this data doesn't end up being useless.
[00:25:10] Jamie: Yeah, it's, it's really interesting what you talked about there because what we're noticing is the majority of the time when we sign up with a client we talk to them about how often they look at their data; it's pretty slow. They're like, oh, we look at it whenever we feel like we need to, or we look at it quarterly or, you know, whatever it is.
[00:25:27] But it's a pretty slow pace. And then, start working with us, and we get to the point where they're looking at their data every month, right? They're looking at their data every month and we're explaining what they need and what changes they need to make in our business based on that data and that information.
[00:25:40] And then they start saying, well, you know, we're getting that data 10 days after the month closes. That's a little late. So one of the things we're making a change, too, is how we can provide weekly information to companies so that they can know what's going on. But we actually just had a CFO call right before this where all of our CFOs were talking about this.
[00:25:59] And that problem you mentioned came up is that, if I'm looking at last week's time sheets and trying to figure out what my revenue's gonna be, there's three people that haven't reported their time yet. There's one person that made a mistake, and so I'm sitting there in a meeting with a client, and that's my biggest fear of weekly time information is that it's not gonna be automatic.
[00:26:15] You do have to have some scrubbing of the information because I'm in a meeting with a client telling them, this is gonna be a great month. And then I found out that someone accidentally booked 160 hours last week instead of 40.
[00:26:29] They booked a whole month instead of just one week. And then I'm backtracking that conversation and if they're trying to make information on or decisions on that, it's gonna be a big, big problem. And so exactly what you're saying is, where companies are going, they want their information quicker, but it needs to be accurate, which is a big challenge.
[00:26:44] Marcel: And I think this is where we spend so much time because there's a heavy consulting component to what we do. There's a very heavy engagement because all of these things, right? What is the cadence by which you manage timesheet compliance? Do people log every day?
[00:27:00] Do they log every week? Do they log every month? That by and large is gonna determine the cadence on which we can look at this information. And then I think the big challenge is, initially when a client starts wanting to look at data, you might have had this experience as well. They get really excited about precision and they try to track everything, not realizing that there's just this super punishing exponential cost and drag and friction that gets created by that.
[00:27:25] It's especially true in finance because now it touches invoicing and payroll and expenses and it's just this crazy curve of complexity. But even outside of that, you wanna measure time at the subtask on the task, inside the deliverable, inside the milestone, inside the phase, inside the, it's like, well now your team has to track time at that level.
[00:27:44] You have to estimate at that level; do you really understand what this means? And usually the answer is no. So there's also a learning curve often where they bite off a little more that they can chew. Then they realize, we're not getting anything out of this because we've made it way too hard for ourselves.
[00:27:58] And this kind of reeling back to that intersection of getting enough without the exponential increase in complexity. And that's really what we work hard to guide our clients toward the point of diminishing returns and let's get you right up close to that without actually making this something that's setting you up for failure in terms of being far too complex to manage.
[00:28:20] And let's acknowledge the reality of how often does your team really submit time sheets and how on top of that can you really stay? And then we can align expectations and cadences, and all of this stuff around those real.
[00:28:36] Jamie: Yeah, I think that that's great. It is such a challenge. Oftentimes, we talk about account mapping, and I love it when I log into a new client's account and they have 3,000 accounts set up in their chart of accounts. It's like, well, I need to know how much this is being tracked to this one account.
[00:28:51] This And it's like, well, yeah, but then you look at the big picture and it makes no sense, and it's really hard to make decisions when you have that much data. Now I think that there's a cost benefit to everything. And so I think there's ways to look at that information without getting into the details.
[00:29:05] But every personality is a little bit different. So I think you definitely have to reign it in when it comes to the amount of data you don't want; you could spend all day looking at data, but then you wouldn't have time to make decisions and think about it. So you wanna make sure you have just the right amount of data, which is a really hard place to be in.
[00:29:21] I know we've worked a lot on that. You wanna kind talk about what is the right amount of data and where to draw that line?
[00:29:28] Jody: I think the right amount of data is the data that you actually pay attention to. So you could have a financial statement with one line if you wanted to.
[00:29:35] It could actually be two lines, sales and response. And then, I guess three if you're looking at it, cause you have net income below it. You could have that as your point, and that'd be perfectly fine. You could file a tax return, you could do all the things with that one.
[00:29:51] So you can't figure out what you're doing right or wrong. And so by breaking it out to even more specific categories, breaking out to revenue than your cost of sales, what do you include in your cost of sales? Do you include everything under the sun or just your production costs?
[00:30:06] You include your production costs, your production employee costs, their burden costs, everything that belongs to that employee, generating and costs, any kinda education that employee would've in there, the technology they're using, you know everything that burdens that employee.
[00:30:23] Then you go below that and you're looking at your marketing costs. And your marketing costs would include your marketing teams; that could be a biz dev person, it could be a marketing person, it could be a combination of both. It could be the expenses to go to trade shows–all the different things that belong in that marketing.
[00:30:40] And then the facility is just simply the cost, you know? And for some people that still have brick and mortar, it would be the rent and utilities and trash and all that kind of stuff. And then everything else falls into there. Or you could combine all three of those categories and just call it overhead if you wanted; it gets into the complexity of how deep you wanna dive into it.
[00:31:01] But, like I mentioned before, if everything is going well, you don't need to dive into it. But when it doesn't go well, that's when you need to have it broken out so that you're not doing a fire drill trying to figure out, why is the ship sinking? You've gotta be able to get to that pretty quickly.
[00:31:16] The more familiar you are with that information, the easier you can react and understand it. Let's go to the pandemic for instance. Every one of our clients meets every month, and we're going modeling and we're doing forecasting, and we're planning different scenarios out.
[00:31:37] Pandemic hits. We go through modeling, we go through forecasting. We plan scenarios out. The client's used to doing that all the time. They're used to seeing that information. They're used to reacting from that information. If it was the first time that they've seen that information during the pandemic, I can't imagine the anxiety as an owner that I would've had; why is my ship sinking?
[00:32:03] Why are all these other things an issue? And in reality, it kind of gets back to, what you can control is the important part of how much data that you need to see. And that control has gotta be something you have control over, but you've gotta be able to manage it and monitor it on a regular basis. And that's just part of running a company.
[00:32:28] Marcel: There's another concept here I think that's important to talk about, Jamie, that we spend a lot of time with clients on, which is this idea of structured versus unstructured data. And an analogy I use all the time is, I think the natural tendency that a lot of our clients have is, they come in and it's like, okay, we wanna measure everything and we wanna measure it all the time, right?
[00:32:47] We want all of this stuff to be like official reporting that's horizontally consistent. It's like, okay, well there's maybe 20% of that stuff is reasonable to track all the time. And then there's probably the other 80% of that stuff that can be unstructured data that you make your best attempt to track.
[00:33:07] There's all kinds of strategies around this. Maybe that's metadata that's on a task in the project management tool where it's easier to add a lot of complexity, but it's not something that you bring into the time tracking tool where it's gonna really decrease your time, track, and compliance, right?
[00:33:21] So there's strategies on how to create additional complexity without having to bring down the whole ship. And the way I explain it sometimes is, it's the difference between having a suit or a tuxedo and wearing it all the time in case there's a wedding versus putting the tuxedo on when there's a wedding.
[00:33:37] Right. So I think the clients get in this mindset of, what if one day or this one time last year, I wanted to ask this question? So I went and like the data was available to me. It's like, okay, but if that increases the cost and complexity of your entire reporting system by 200% all the time, just so you can ask that one question one time per year, is that really worth it or does it make more sense to make this.
[00:33:57] Unstructured data that maybe is captured in notes on a time entry or is a field that you put on a task and then use the task ID to look that up and run a pivot table and maybe it takes you an extra 10 minutes to find the answer. But if you do it once a year, then and it takes you an extra 10 minutes, isn't that better than it taking you an extra hour every week for the entire year, just in case that's needed?
[00:34:18] So starting to create these separations of, where do we need this rigidity? Where if it's structured data, it has to be perfect all the time. And that's now like part of the drag of running this reporting process. And then where can we let it be unstructured data that can be accessed when it's needed and might need a little bit of that manual processing to get the answer, but it's because that is gonna be a, a time and place.
[00:34:40] Very specific kind of question that we want to ask, and therefore we don't have to apply the same rigor to that data, and we don't have to carry that complexity with us all the time. So that concept I think is important as you think through how far you want to take the complexity in this stuff.
[00:34:56] Jody: What would an example be? If you track your admin time, right? So you have your billable time going to clients. But then your admin time where you have some folks will track every single thing they can think of. What admin time, such as, I was doing emails, I was going to the bathroom, I was meeting with somebody or whatever.
[00:35:17] Whereas we just track admin. It's just admin; we don't really care. Because we're not gonna analyze that information. That information's never gonna come into play. Is that what you're talking about?
[00:35:29] Marcel: That’s a really good practical example. Yeah. What we might push a client to do is say, okay, on every single project we're gonna track these five categories.
[00:35:37] Design time, project management, time development time, quality assurance time, whatever those five core role categories are. So that's your structured data, and that's the same all the time. You can never mess that up. And then, when you see a project where you've doubled over our design time, what the heck happened?
[00:35:54] Then you can go into the time tracking tool. You can pull a task, export from the time tracking tool or from the project management tool. In this case, look at the task. I'd look at the notes or the fields or the description of the task, or maybe do a filter “contains X word” and then figure out it was the email templates that took twice as much time as we expected.
[00:36:18] So You can go and get that answer. It takes you like an extra 10 minutes, but you don't have to track time at that level. And now instead of being able to see how much design time it took you,, it's actually less easy to see that because now you have time split out into a bazillion tasks.
[00:36:35] So there's a way to have your cake and eat it, too, with stuff like this. And it's just about understanding where are we gonna draw the line on structured data? And then, how do we make this other data available to us if and when we need it? For things like tasks or notes or these other more discreet or more detailed pieces of information about work you really have to make the decision.
[00:36:53] A good example of this in accounting is, you have the account and then you have all the transactions in the account. And it's like, well if you need to, you just go and pull a report on the transactions and then filter it in a pivot. You know, like run a pivot table, filter it, and we could still go in and see how much we spent on Zoom last year. It just takes us five minutes.
[00:37:17] Jamie: I think that's exact. It's a really good point because the numbers are what they are, right? You can look at the numbers, but eventually you're going to make decisions on them. And so the question is, how long is it gonna help us define the information to make decisions?
[00:37:29] And if you set it up properly, it might take an extra 10 minutes; if you set it up improperly, it might take a couple days or months or weeks to find that information that will help you make those follow-up decisions. So I think that's really important. So we're right at the end of time here, I'm gonna give both you guys a chance for final thoughts.
[00:37:46] And so we'll start with our guests, Marcel.
[00:37:49] Marcel: Well I just am honored that I got to be on the show and talk to you guys. I respect you so much. I think what you're doing is amazing. I think we should just talk more and I hope that we do that. And for all of those of you listening at home, I hope this was helpful.
[00:38:04] Reach out to me. I'm on LinkedIn, I'm at Parakeeto, and if you need help with this stuff, let us know. And I hope that this was a helpful episode.
[00:38:12] Jody: Yeah, same thing. You know, I think we definitely need to be involved more. The more and more we talk, the more and more we have things in common and I think we can definitely help each other out.
[00:38:21] So again, it feels like a little love fest here. If you need help bringing your time into project management, getting everything kind of sorted out, you know, definitely take a look at Parakeeto. It's gonna help you get to that next level and make life simpler.
[00:38:39] And that's how I look at things; what can make my life simpler? Is it hiring somebody to do something? Is it a tool that can do something? Is it a process that can be changed or is it a combination of all three? We continue to look at ourselves. I think everybody in the audience should continue to look for themselves, too, and figure out where that little kink might be to help process time, and help people out completely.
[00:39:04] Jamie: Yeah, and I loved your description. I know you said it a couple times: we're bookkeepers for your non-financial data. It's that one sentence where I get exactly what you do.
[00:39:16] And I think it's so needed. I think one of the other podcasts I listened to talks a lot about the NFL, and they're talking about analytics and how it's a fourth and third. I'm going because the analytics say so, but you also have to take into account those non-financial factors; what else is out there?
[00:39:31] Like if it's a fourth and third and my third string quarterback is in and it's a blizzard; do I still go for it just because the analytics say that I do? That the thing with financial information–it's only as good as the information you have around it. For example, when a business owner says, my gross profit is, is great.
[00:39:45] That means I don't do anything. Not necessarily, maybe there's those other factors that I need to be thinking about. And so I think that's exactly what you provide and I think it's really, really helpful. So again, I thought this was great. I know I learned a lot, and it was really educational for me.
[00:39:58] So I appreciate both you guys coming on and thanks for joining us.