The Virtual CPA Success Show for Creative Agencies: Episode 14
We have touched on the topic of forecasting before in this show, so this week we want to talk specifically about how a forecast can be used to help your firm grow.
In this episode, we are joined by Jody Grunden and Tom Waddleton to talk about using a forecast to hit your firm’s growth goals. Listen to learn about the “Four Levers of Growth” that you will need to cover in your firm’s growth plan.
Jamie Nau: Hello everyone, and welcome to today's podcast. Today we have a really good topic to discuss. So in previous podcasts, we've been touching the outsides of a lot of topics. We've talked about forecasts, we've talked about metrics, we talked about a lot of things, and now we're going to do some deep dives on those topics. We're really excited today to talk about forecasting in more detail, but more specifically forecasting for growth. So we brought in one of our trusted CFOs, Tom Waddleton, or as I like to call him: “Tommy Tommy Tommy,” That’s from the movie, The Talented Mr. Ripley. So I always say: “Tommy Tommy Tommy.” So we're joined by Tommy and Jody. So let's start with you, Tom. Before the podcast, we were talking a little bit about a client that you just went through on forecasting. There were some pretty aggressive growth goals. How did you start that process?
Tom Waddleton: That’s a really good question. So the way the client started the process was looking forward and saying we have a target at the end of 2021, we want to be $30 million in revenue. And they backed that up and said for investment reasons, company evaluation, that's where they set it. Then they came back and said in 2019 we are getting around $10 million so let's set the target of $20 million in 2020. So 100 percent growth and then 50 percent growth after that. So that was the very beginning of the conversation from them. And from then we started into the forecast process.
Jody Grunden: So when they said they wanted to double in one year, what is your thought?
Tom Waddleton: So I had only worked with them for a little while. So it really surprised me because they had not hit any of their sales targets for 2019. And luckily, the CEO, before I said it, had said to me, I know this seems kind of crazy because since you've joined us we've missed all of our targets and this is what we're going to go for, for next year.
Jody Grunden: So this really intrigues me a lot because, you know, you get that a lot, where people have this pie in the sky, hey, I want to grow a bazillion dollars. If I put pen and paper together, it's automatic. It can happen. Obviously that's the first part of it. That's the catalyst, right? Putting pen and paper, getting that plan together. But what do you do after they put the pen and paper together? What's your thought process after that?
Tom Waddleton: That's a really good question. So the very first thing I suggested to him was let's have a high level plan that your leadership team can gather around, because he admitted that the leadership team didn't completely believe in their sales targets before. So the first step we talked about with him before we got the team together was, let's look at your sales capability, because you've been missing targets and you're telling me it's not because your team can't produce, it's because you're not getting sales done. So then we started talking about the capability, their ability to close work and get things done. And what came of that was one of the people they felt like was in the wrong seat, that the person they've had lead the company so far, they didn't believe was on the right team. So that started discussion about sales capability and that kind of piece. And we talked a little bit more about kind of where that led. But that was the beginning of the conversation was, what's your ability to actually go out and get this work?
Jody Grunden: So they were good at self-identifying. Recognizing that they really didn’t have the right people in the right places in order to double their sales. Otherwise, they'd have been doubling year, after year, before that, right?
Tom Waddleton: Yes.
Jody Grunden: Unless there's just one big fish out there that they knew they were going to land and that was going to get the majority of that increase, right? So the self-identified? Wow.
Tom Waddleton: Yes. And so we talked about that investment, but that's where we started. Also, when we talked about sales, they break their work into design work, engineering work and product work. So we looked at each of those amounts of revenue and how they had been changing, and then talked about okay, so if we're going to set this goal, where do you think the growth is going to come from? And it was interesting because engineering is the biggest part of their business right now. They saw a lot of growth there. They saw the biggest growth in product, where they admitted that they build products, but they're making almost no revenue. So it’s, how do you turn that into revenue? And the other piece was a huge amount in design. They do some upfront design work, really cheap to try to get the engineering work. And they believe they can start charging. So those are the areas that are growing much more than 100 percent to try to build it up. But then engineering being so big, it had to also continue to grow quite a bit. So the beginning of the conversation really dealt around, can you actually get this work. And where would the work come from to do that? And then somewhere on the sales side.
Jamie Nau: So that's a great starting point. So you talk about the sales team, you talked about the sales process. Now, did that eventually lead to sales forecasting? Where you are saying okay, if we're going to hit this number, if we're going to grow to this amount is this the size of the sales team we need? Or is it just about shifting seats as well?
Tom Waddleton: No it did get to the size sales team. So three months later, they have hired a new V.P. of Sales, and part of our forecast process was him building out a staff. So he came back and said, here is our capability. He had hired a consultant to help him build and use the pipeline tool. So they had a pipeline, but as we started to dig into the pipeline they very quickly admitted they weren't good at keeping it up to date, so it was really hard to look at the pipeline of work and see if they had enough. So this consultant is coming in. He's actually in the process now saying, here's the information you need to capture, and the salesperson has helped them grow a different company close to that amount. So they felt like he had the experience, and then he came in and said, here is what my team needs to look like. He also took two people on the existing sales team and moved them into different roles outside of sales. So he also looked at the capabilities and said, get the right people on the right bus, including putting some people in place and then pushing some people out of where they were.
Jamie Nau: So I think that's definitely a great place to start, especially with a company that's looking for aggressive growth. But Jody, what are your thoughts? For companies, instead of look at aggressive growth, and just looking for more of a natural growth, maybe 20 percent growth, is sales still the right place to start?
Jody Grunden: You know, I am kind of torn between that. I think the process is the first thing started. What are we actually billed to do? Are we a recurring revenue model based company? Or a hey, you have to hunt and kill everything that you find and then next year you've got to replace your entire sales things? I think it really depends on the type of sales you are. If you're replacing, then yeah, you need to continue looking at your sales funnel. Continue building it up so it's big enough to win 20 percent of those out there, 30 percent, you know, something like that. If it's a reoccurring revenue model, I think you're a little easier on the growth because, you're going to have your base already. You might lose 5 percent attrition from your base, but you’re going to have your base, and as long as you can continue to perform well for the existing clients that attrition should be low. Then you're really just looking for growth. How much do we need to add to that in order to get that 20 percent, 30 percent, 50 percent growth, or in Tom's case, 100 percent growth. A lot easy on a recurring revenue model, then it is to go out and find that type of growth unless you're looking for that big whale out there. Now, if you've got the big whale that you know is going to get you that 50 percent growth, well, that's a possibility. There's a huge risk. You know, you might get started in that big whale and something might happen, might get over your head a little bit or, you know, something might happen, which, you know, you're going to get stuck. So that's a risky thing to do if you're looking for that one big thing out there. But I would say reoccurring revenue is really easy. Not real easy, but it's easier to grow at that 20 percent rate. But it all beings with the process, and then from the processes you're building your forecast. You're looking not only at the next three weeks cash flow, you're looking at twelve months. You're looking at a year, two years, three years, or in our case, we look all the way to 10 years. So we're pretty confident based on our trajectory where we're going to be at in a 10 year period. Now, obviously we won’t be at the exact number, but we are going to be really close, because we know what our trajectory is. We know what we have to do now to generate that base in order to do that. So if you're looking for that 20 percent growth, I think first of all, you need to look at the processes in place, know what type of company you are built for, and then kind of build onto that model. Put it to pen and paper like Tom was mentioning earlier. Then from there, just simply execute. How many sales calls do we have to have in order to get the three clients we want? What's our closing ratio? How long does it take to close a deal? How big are the deals are we looking at? Are we looking at a lot of small ones where it's going to take a lot more pipeline? Or are we looking at bigger deals, which is not going to take as much, but they're going to take a little bit longer to close the cycle. So there's a lot of things you're looking for through that whole cycle once you actually put the pen and paper together.
Jamie Nau: I think the process you talked about, and we talked obviously about what what's your sales size needs to be, but I think kind of to go with process is also strategy. I think if you're going to have any kind of sales strategy, you need to understand what works and what doesn't work. That's really important going into that sales conversation. To think about the past. Do you know your past sales numbers? Do you know where you sell better? Do you sell better when you go into speaking events? Do you sell better to recurring clients? Do you sell better to certain industries? I think really understanding the strategy, and being able to have that conversation. It's great to have just a talk, we can talk all we want, but it's great to have some numbers behind it where you can always look at it and say, you know, actually our recurring clients come back 90 percent of the time maybe we should focus on that. Maybe we should focus on getting a couple of more big fish in here, and just holding onto to those type of discussions and having those numbers behind that makes it really helpful.
Jody Grunden: Sure. Without a doubt. I mean, that's the key, understanding what's under the hood. That's where it starts. You have to have an understanding, or you're just flying blind. You know, it's really risky to grow up.
Tom Waddleton: Yup, and I'll admit, for this particular client we were a little bit blind that they're their sales capabilities, as I mentioned, were a bit lacking. So, Jamie, a lot of the numbers you talked about were difficult to get. So it was more of a, we need to get someone in here and build the capability to do it. But it was definitely one of the risks that we saw as you're trying to grow and, you know, sort of where in the numbers, but you don't know exactly where that's going to come from and which customer should you count on. Do you need a couple more million dollar customers that will get you there? Or is it a bunch of really small ones? That kind of stuff was difficult in this particular case.
Jody Grunden: Yeah well, I think the other thing that is difficult is that you really never know how much cash you're going to need to because, growth requires cash. There's going to be a certain lag before the efforts actually result in money coming into the bank. So you need to know what that lag is going to be. Is it going to be a three month lag? Is it going to be four months? You know, if you are looking to double your size, there's a pretty significant lag between how much money you've got to put into this to get it going. Unless you get completely get lucky. And if you're lucky, then that's great. I wouldn't be planning on luck. You don't want to get in and then in three months think, oh, no, now where's all my money? Because I just invested in adding another marketing person. I’ve got all this spending money out there. I've added a couple more team members anticipating this growth, and then it doesn't happen. That could put you in a bad situation.
Tom Waddleton: And we've talked before about the importance of an operating reserve. This particular client has more than a 10 percent, of their trailing twelve months revenue operating reserve. And so we said, you guys are in a really good financial position that you can do that. They do a lot of billing to clients upfront. So that helps their cash position. But they know when they grow, they may not be able to continue doing that. So they can lean pretty heavily on that, and that does give them a lot of room to take this risk to grow. For example, the sales team, it is going to take a little while to build up that pipeline.
Jamie Nau: I think that's a great thought. I think a lot of times we talk about cash reserve, and we talk about the 10, to 30 percent. A lot of companies will take that with a grain of salt. They will say, yeah we will get there eventually, but I think once you want to do something like see growth, it gives you the opportunity to say, hey, we can grow. Let's put this growth plan in place, but let's wait six months. Let's wait until we have our cash reserve in place. Then you can get the whole team on board. You can go to your sales team and say yeah, we can grow, but in order to do it we need to get more cash in the bank. And you know, a 10 percent cash reserve goal probably isn't going to cut it. When you're looking for growth, you kind of bump that up to 15, 20 percent in case it doesn't happen, because if you really want to grow, you want to be all in on that growth. You don't want to be in on that growth in three months, and then you're out of cash and have to say, alright, I guess the plan didn't work.
Tom Waddleton: That's a great point. This company has four owners, and so them taking distributions was a decision to build up that cash reserve. So it's the kind of thing you could do and say, you've got some cash. Do you pull it out, or leave it in that bag, which is that you're choosing to do?
Jamie Nau: It’s an investment. It is 100 percent of an investment in your company. And that's what a lot of people don't think about. They think about investments as in stocks or, in a mutual fund. But if you're willing to grow your company, you keep that cash in there as an investment to make that company worth more. So it's definitely a great point.
Jody Grunden: When you say you keep the cash in there, you are really actually buying employees, right?
Jamie Nau: That's right.
Jody Grunden: That what you are typically doing with the cash. It's not like it sits there forever and ever and grows. You're buying and building more of a machine so that the value overall, is the value of what the machine can produce, not the individual components of it.
Jamie Nau: So Tom, once you've established there we're going to have the sales team in place, we're going to have everything we need in order to grow this company. What are the next steps you take? What do you have to look at?
Tom Waddleton: So the next thing for me was the really fun part.
Jody Grunden: Wait. Accounting and fun?
Tom Waddleton: Yes, I know…
Jody Grunden: Okay. I just wanted to clarify that. Okay. Go ahead.
Tom Waddleton: Now the next pieces, do they have their production capacity to do this kind of work? So we do pretty detailed models where you're saying, okay, on a per person basis how many hours do they bill in a week, and what's their billing rate for that? Are there write downs? And so we have that information, with the goal being getting the entire team on board with this massive growth. The approach I took was not to go out and say, hey, what would your plans be if we tried to grow huge, and tell me by person what you need? We put together a really simple model with a few variables where it showed a calendar year across the columns, and a few variables like how many resources, how many hours will they bill per week? What would their billing rates be and what would you write downs be? If I had that, then I can say how much work can I expect to produce? I also had the conversation with the owner about, if you look at 20 million dollars over 12 months, that’s an average of 1.7 million a month. But you're not going to jump from $800,000 this year, to 1.7 seven immediately. So we came up with a slope growth that ended the year at 2.6 million dollars. So way above that average, but it started at about a million. So given that, I could without any of the production teams input saying, given your current variables, here's how many people you need to add to do this. The first step is we looked at is, okay is this billable hours expectation and will that continue and is that reasonable? And had some good conversations about what they would do, and what if they had a bench of people of 10 percent to grow that? What would that do to their hours? And we adjusted for that. Then we had a really good conversation about billing rate. This is what you're able to bill today if you grow this fast. Do you expect that billing rate to go down because you're being aggressive just to get the growth in it? So let's go out and make sure we bill that piece in. Then what about write downs? The same kind of conversation. So it was really valuable conversations where we made a bunch of changes, and ultimately we came up and said they thought they needed to add as much as 180 people to their team to do this kind of a growth, which is huge. That's more than double the size of the production team. They also do some work offshore where they said we can't find that many resources in this country because we're already feeling maxed out, and they were starting in a second country and said, let's put most of the growth there. So we got into several really good conversations about size of space, the number of teams and all that stuff. But we walked away after a couple of conversations with the team saying okay, I think this is the right size from how many people it is in total and where they should be. Then the next step was getting to more detail after that. But that's where that piece started.
Jamie Nau: I think it's a great point there. I think you kind of hit on four levers, right? Four levers of your growth is one, you're existing people. You can push your existing people more hours. Two is, hire new people. That's obviously going to help you get more hours and pretty quick, quick turns on it. Then the third is, average bill rate, you could charge more. You could charge more to your clients. And I think the fourth you touched on was, we could write off less. So I think, you know, just to have those four levers at your disposal is huge. And I think when you're going through a growth plan, you're probably going touch each of them. You can’t just say we're only going to do this through the write downs, or maybe you could, that would be an amazing growth. But usually it takes a little bit of all four those to actually make it work. Sometimes it's in waves, too. Sometimes you start by pushing on your current employees, have them work a little more, and then start charging more. So a lot of times it comes in waves as well.
Jody Grunden: Yeah when I look at that, I look at the three different tools. There's always three different things you can leverage to pull the company. One is the tools that you're using. The other is the people using it in processes. And so I think in order to grow like what you're talking about there, you've got to have a really good solid foundation on all three of those. You know, do we have the right people on the bus? Like Tom mentioned, not only on the right people on the bus, but in the right seats on the bus, like Jim Collins mentioned. Now do we have the tools that's going to allow us to get there quicker, faster and more efficient? Or are we using something arcane that's taking three times as long for somebody to do and not maybe getting the quality? So we're always looking at the tools and the processes. You know, Tom mentioned the offshore team. You know, do we have the processes in place in order to be able to manage that offshore team? There becomes a lot of variables, and a lot of unknowns when it comes to an offshore team then versus when you have someone at a desk near you. And that doesn’t have to be just an offshore team. That could be a distributed team. It could be that you're used to having everybody in your office. Now you hire ten people that are in a different states, do you have the processes, tools and right people to be able to manage that whole thing? Because if not, you're spending a lot of money and usually throwing it right out the door. So it's one of those things I think, you know, have to understand if you have all three of those things working for you, that's when everything works really well. That's when you're going to have that high growth and the growth is going to be profitable. It's not going to be growth for growth sake. You're not trying to increase your topline revenue, your bottom line revenue better be increasing at that same slope or better. You know, that's the whole idea for growth in the first place.
Tom Waddleton: I couldn't agree more, Jody. Just one example of what you had said is the way that they assign work in their project tool currently is very sort of people based, because they have a small team and it's easy to tell people what they're going to do. And they admitted with this kind of growth, they can't continue to manage that. So they talked about investment in actual project management tool to assign work and track what people are working on and things, because they admitted it would get out of control with that kind of growth. And that was just one example. But we had a pretty good conversation about what process and tools would have to change if you're suddenly a really big company, operating in two countries where you're currently just in one, we're sort of everyone can look across the room and see each other in that same room.
Jody Grunden: And Jamie, I think we've had the same issue internally. Of course, we're obviously distributed. We had like 40 plus people throughout the US. Now we've got another 12 individuals in Indonesia, in India, and so managing those folks, Jamie you've been tasked with that for a long time. Tell us, like your pains and struggles with that, because that's part of our growth process. We want to grow big, too. So how do you manage that, Jamie?
Jamie Nau: I think the biggest thing and that's exactly kind of what you're talking about with tools and processes. And then we talk about this with our clients all the time is the more you grow, the more overhead costs you need, and especially when it comes to this area. You know, I think when we initially brought on the India team, those like, oh, all we need to do is have our have our seniors go in and they can handle the project management, they can move stuff over. But there needs to be a match. There needs to be something to ignite moving stuff over. People aren't going to do it on their own. So that's where obviously my role came in. I was the CFO. I've moved into this role now where more I'm a director because you need someone to run the process and make sure it's happening and makes sure the ball is moving. And obviously taking me off the board as a revenue earner and putting me in overhead was a conscious decision as part of our growth. And again, that that's something that's going to happen is the bigger you get. That's what I've noticed the most in us moving stuff to India is you really have to be constantly looking at the process. You take your eye off the ball for two weeks. I guarantee nothing's going to happen during those two weeks. Nothing's going to move forward and things don't move without someone pushing it along. So I think that's the biggest thing we see that all the time. We see it with every one of our clients. The bigger you get, there are those certain thresholds where you're like, yeah, I can't do this anymore. As the CEO, we need the COO or we need even a director below that COO to push things forward. And that's the hardest part of growth is you're used to operating at a certain size and you don't think that your overhead costs are going to grow with you and they always do.
Jody Grunden: I think a lot of that is that we as individuals, we do a lot of things our self that maybe somebody else should be doing, or on a smaller scale. You know, whether smaller means 60 people, 100 people, or just 3, or 4 people. A lot of times we're doing a lot that we should be passing down. And until we actually feel pain, we're going to keep doing it. You know, it's going to happen. You know, we're going to do it's really easy, why would I have to change? I don't care if there's somebody below me that could do it quicker, faster. It's going to take me time to figure it out how to show that person how to do it. Thinking that that person is going to screw up every time they do it anyways. Eventually they may get it right, but I don't have the time to see. So it comes down to the pain. You know, I don't have the time right now. Well, I'm not going to have time tomorrow when I have three more responsibilities to do, or 10 more responsibilities do. So I have to make the time. So what does that mean, making time? You just can't, like, create time, right? I mean, time is one of those things that is pretty static. But what it means, is that you've got to figure out what kind of sacrifice you can me this week in order to get this achieved so that it's going to save a bunch of time down the road. Can I combine a couple of meetings this week? Can I get somebody to help me with this one project so that I can work with this team to really develop it, you know, because I truly have control over my own time. If you think you don't have control of your time, you're dead wrong. You truly have control of your time. If something were to happen tomorrow, let's say somebody really significant to you passed away tomorrow, you would find a time to go to the funeral. You'd find time to go to that person, you know, to take time and grieve. You would take a week, two weeks maybe, just to clear your mind. Why can't you do that for just something as simple as, hey, I need to take time off my plate today. And so that's the process that Jamie's talking about, that people, even though you need them to delegate, they don't because they don't have control of their time because they just don't know how to manage their time. They don't know how to create the sacrifice in order to do it. It doesn't mean working a bazillion hours. That's not what that means. It just means managing, shuffling things around temporarily so that you can accomplish something more long term. And that's where the biggest parts, the growth I think any company is going to experience is just simply how to delegate, and how to get your team to delegate. How do you empower your team so they can push things down, not abdicate it and move it to somebody and then just forget about and walk away. But move it to somebody where you can actually review it, make sure it's done properly, the quality standards that your company has, you know, that's the key there. And so when we do the offshoring to somebody outside of the company, whether, again, it's up to another state or to another country, it gets even more difficult because they don't see them. They become a non-person to a lot of people. That person in Alaska, they are a non-person. Obviously it’s a real person, but it's non-person, because I don't feel, touch or see them all the time. So it becomes a distant thing, and becomes an afterthought. And so the key is getting those people to be more real. Videoconferencing is a great way of doing it. You know, getting them on, making sure that everybody's communicating the same wherever they can see that person getting together maybe in huddles, you know, maybe once a quarter or whatever it is, so they can get together as a group to meet in the event that brings them to your office. You have got to do that with an offshore team. You better at least go over and introduce yourself to them. So, again, they're part of the team. Again, a real person, not just simply an afterthought, that somebody can just kind of push aside. It's just one of those things that you have to make sure you control.
Tom Waddleton: Hearing you describe it Jody, makes me think of, what I felt was a fairly innovative approach for the CEO to try to get everyone to buy into to this. So like I said, we went through this model and got them to agree. Jamie, to your point, the leverage were really important where we could show if we don't bill at this rate, look how big the impact is when you're multiplying times is really big number of hours. If we can get average billing rate up $10, down $10. Once everyone bought in, we said okay, in a short amount time, we need all the detail for these 180 people. And the CEO decided, to your point Jody, to have everyone in the same place for a full week for a leadership retreat and do all of this planning. They actually invited me to attend. It was down South American. I had a personal conflict that I couldn't go, but it would've been a great opportunity to work with that team.
Jody Grunden: They could have invited me. I will go next time, I promise.
All: Laughing [in audible]
Tom Waddleton: But they did this for the week, and so I gave them the assignment of then by role, by date, who are you going to put in, and what's their salary? And so they came back with all those names, and we had a work stream for all the administrative people and the sales people. Then the production team, and so we got that back in, and that allowed me to say okay, let me plug that into the forecast and actually show you what the result is. So now we've moved from our simple model into our actual forecast model. And a few things came in differently where they added some different resources, they changed some of the billing. And so we work through that. But that started to give us a really good detailed forecast. Got them on board. So another meeting where they locked in on that. And then the next step of the process to do a more detailed forecast to say okay, what else changes? Simple things like rent is going to go up if you're going to add this, many people. Sales and marketing expenses is going to go up. So we started plugging in those kind of things. Then we've got benchmarks of the industry of what should people be spending, 10 to 15 percent on sales and marketing. So now we can compare back to that and say we are within that. We were actually pretty light on that, and looked and said, interesting that we're way below the industry in what we think we're going to spend on sales and marketing, yet we're trying to way outgrow what people are doing. So it caused us to invest a significant amount more in sales and marketing as a result, but that was sort of the good next step to say okay, we think we're figuring out sales. We've got the right number resources. Let's build a detailed forecast that then supports that and we can measure against.
Jamie Nau: That's great. So I'm going to take a take a real quick break here and talk about our email address. So, you know, this show, we want to make sure that the listeners are getting involved and we're hitting on all the right topics. So if you have any ideas for us, feel free to e-mail us at: firstname.lastname@example.org. If you want to be a guest on the show, if you want to have a topic for us, please email us. Let us know. We're always looking to make the show evolve. So we have a couple minutes left here. I really want to hit on one more topic with this, Tom. So I love what your team did. That sounds really good that they got the team involved. I think you get that excitement. It's a really big deal. Once people are excited about it, they can be willing to do a lot more to grow the company. So my question is, we talk about budgets versus forecasts all the time. Obviously you've built the budget for this team get to this number. What are you going to do is six months in, the revenue numbers that you came up with by month were hitting low? How do you create this moving target to make sure people still stay excited about it?
Tom Waddleton: That's a great point. So we have the plan for the year, that is, we actually came up about 21 million dollars is our forecast. Each month, of course we do a financial statement review, and then we're also going through and modifying the forecast each month. One of the challenges we have, but I've seen it in lots of different clients is, in the short term, our pipeline isn't so good. But if you look out a couple of months, it's really, really good. And so there's a piece of, there's an element that we can talk more about, about how do you say, okay is it really good in the future? Or are you just like sort of pushing off a difficult decision? But then there's a side of saying, then we shouldn't be hiring as many people as you thought you were during this time period, because let's not spend the money if we don't have the work to do. So it's changing that forecast. Once you start plugging the actuals, so now we've got the first month of January, okay, is our run rate really still 21 million dollars? Or since we underperformed, do we think we're going to grow more and make up for that? And those are the two decisions we have to make. Okay, are we now a 20 million dollar company and we're saying that's good enough? Or are they saying no, we still want 21 million, which means we have to grow even more in the fourth quarter and can we build a capacity more. So that ongoing forecast is really important. And to your point, Jamie, if you change it, then you can still keep the motivation of the team up, because now they're saying okay, we are meeting the forecast in the future. Versus maybe an entire year of once again, we missed that original plan and that could carry on every single month and be very demotivate for the team.
Jamie Nau: For sure. I think the biggest thing here with me is, if you look at it as a set period of time, that's where it gets dangerous. Like if you're saying in 2020, we want 2020 to be our $20 million a year. Obviously as every month goes by that you get less time to catch up there. Time does go away eventually. So January is over. Fine. We didn't hit our targets. We have 11 months to make it up. Now we have 10 months to make it up. Now we have 9 months to make it up. At some point it becomes impossible to make it up. And so I think to keep your company moving and constantly thinking about how eventually we're going to be a 20 million a year company and just make sure that goal is in place, because at some point your people are going to be extremely disappointed if like in July, if we are still going to be a 20 million company, it means hitting four million dollars of revenue a month for the next four months. You know, it's is very hard to do. And so making sure that you're constantly reevaluating that. And oftentimes what happens is, is the team had great success. They grew to 80 million. Their profits grew. They had all this success. But all the leadership team is disappointed because they didn't hit that 21 million. And it's like you guys did. We're on track for 25 million this year. So it's making sure that you are always looking at those goals outside of just that fixed period.
Tom Waddleton: Now, I do have a question for you. I'm struggling with one thing right now to how to provide a service. In the past in this foreign country, everyone got the approval for the one leader they want to hire, each individual person. Which makes sense when you're small. Now you're growing quickly and they're trying to give these people a lot of power, and what they're afraid of is people hiring too big of a team. And I'm trying to help them with a fairly simple solution to say, when is it okay to hire? If we're hitting all the sales targets then it’s pretty obvious. But it's a combination of watching the pipeline, and what work is coming in, and what you need to kind of balance that stuff. So I am interested in what your thoughts are for different clients of, how you tried to simplify so people feel like they are empowered and make the right decisions?
Jody Grunden: Questions for you on that is, are these people all being paid the same wages as everyone else? Are they getting a lower wage than everyone else, or are they equal to everybody else and their leaders?
Tom Waddleton: The leaders?
Jody Grunden: No the people that we're hiring.
Tom Waddleton: So how do you make the decision, they're making about the same wage, It's fairly low wage since it's a foreign country.
Jody Grunden: So it's like they're making sixty thousand dollars in the United States and five thousand somewhere else..
Tom Waddleton: Almost all the resources are in the other country and they're probably making about twenty thousand a year.
Jody Grunden: So it is significantly less. So the risk is not as big, I guess is what it’s coming down to, okay Jamie, go for it.
Jamie Nau: Yeah what I've done in a situation like this is create approval processes that are pre-approved. So you have your budgeting meeting and you say okay, for this we know where we're at this month. Since we're doing the forecasting, and we're doing the pipeline, we kind of know what the next three months look like. So you can give them a quantity. You can say okay, you can hire X number of people this month or, these are the numbers that we could make do with, giving you that latitude to make those choices. And then if they do anything outside of that, just creating a very efficient approval process that goes up through the ranks. So okay, I've hired my four people. I really need my fifth. I've only been approved for four this month, by the time that happens they are probably already almost to that next approval period anyways, and if they're not, just having a chain that they can go up, and having a very quick process they can go up, whether it's a Google sheet, purchasing a software or something where they can make sure that approval happens and gets to the decision makers. Again, the decision maker might not be the CEO, it might be the manager, it might be a director, or something like that. Doesn't necessarily have to be the CEO, just has to be someone that understands the numbers, and understands what that one additional head is going to do for that month. That that's how I've dealt with it in the past.
Jody Grunden: I think it's also important to make sure that they've got a solid hiring manager in place. You know, you can't be just anybody deciding who's going to come on. I think they've got to go with a solid interviewing process no matter who that person is. A lot of times you hire all these people because you need these bodies in place, and you find out half of them aren't even a good fit for the company. Then now what? So it's important to have a solid process. And if you've got a solid hiring manager in place, constant interviewing these people, because it has to be a constant thing. You're growing pretty fast. It's going to be inevitable that they're not going to be able to find 10 people. To start right away. It'll be a process. So it's more of a process, saying hey, we've got this great candidate, we'll pull the trigger. Well, we need to get two more clients before I can do that, okay, great. We know what that is. We can give that candidate about two to four weeks before bringing them on, and continue to keep the ball moving along. So I think the hiring process is really a key focus. There are a lot of people that get mixed up and they think, oh, I need bodies. But they it needs to be right body in there.
Tom Waddleton: I really like that. I'm not sure I've focused enough on that. But thinking about how you could easily say, if you don't start off hiring the right people and on board them to get your 180 people you might have to hire 250. That is overwhelming, to think about people coming and going. Where you could fix that up front by saying, if we get the right people from the start, it could be a matter of 10, 20, 30, 40 less people that you're hiring, maybe more than that, because you go the right people coming out of the gate.
Jody Grunden: Think of all the money wasted hiring 30 to 40 more people. A ton, and that goes right to the bottom line and out the door for sure.
Jamie Nau: I definitely agree with the hiring manager. I think the last point here, just to nail home, and it goes back to what I said, when you're in a growth mode like this, looking at your forecast very frequently is very important. You want to make sure updating it, and make sure you're talking about it. You want to make sure you have a plan every month of what the next month’s going to look like if you really are growing that quickly. Everybody needs to know what their steps are to make that growth happen. That's super important.
Tom Waddleton: And, you know, I'm sure we can make the point that even if you're not growing, if you're trying to stay about the same size, all of these points are still important. They're magnified when you're trying to grow like crazy. But all of them, Where do your sales come from? Do you have the resources and people on the bus? All of these things are important decisions to continue making to have a successful business. If you're out there saying, but I want to stay about the same size, I think it's almost just as important.
Jody Grunden: I agree.
Jamie Nau: Well I think this is a very helpful podcast, and hopefully the listeners enjoyed it. And again, feel free to e-mail us if you have any additional questions. Now, I want to thank, “Tommy Tommy Tommy,” and Jody for joining us today, I think it was a great show.
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