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The Summit CPA Backstory

Published by Summit Marketing Team on 09 Jan 2020

The Virtual CPA Success Show: Episode 1

For over 17 years, Summit CPA Group has worked with creative agencies all over the U.S. to help them improve their businesses, and this is the story of how and where it all started. In this podcast episode, Jamie Nau sits down with CEO, Jody Grunden, and COO, Adam Hale for a deep into the backstory of Summit CPA and how it became one of the first distributed virtual CFO firms in North America.


Jamie Nau: Welcome to episode 1 of the Virtual CPA Success Show. My name is Jamie Nau and I'm the Director of Accounting here at Summit CPA. I'm going to be the host of this podcast. Today we are going to talk with Jody Grunden and Adam Hale about the beginning of Summit CPA. We'll start with some quick introductions. Jody you first.

Jody Grunden: I’m Jody Grunden. I'm the CEO and co-founder of Summit CPA group.

Jamie Nau: All right. Adam how about you.

Adam Hale: I'm Adam Hale. I'm the COO of Summit CPA Group basically put another way Jody comes up with the craziest ideas and I figure out a way to get them integrated into our system.

Jamie Nau: And Jody has lots of crazy ideas that's for sure. So Jody let's start with your first crazy idea. How did you get into accounting?

Jody Grunden: Accounting it was kind of funny. Originally I went to school to be an economics major. I want to do something in finance and then I realized at some point that I would have to move to a big city. And at that time it was like well it's probably not what I wanted to do after all. So I thought, what else can I do that I could benefit from if accounting didn't actually work out? Or actually, you know, whatever major worked out. Like a biology major. Like what you’re going to do afterward if you didn't go to a med school.

So I picked accounting. I thought that because something interesting something I was good at was very good at math very good at inquisitive things about you know I love crossword puzzles love word searches all the etiquette stuff. And it was something I could actually make something out of down the road.

Jamie Nau: After you studied accounting, what was your first job out of college?

Jody Grunden: Gosh first I was mowing lawns. It was one of those things I knew for sure that I would never have to. I would never get that opportunity to work outside again. So I thought about what can we do to work outside. This is perfect. So I took a lawn mowing job right after I passed the CPA exam I passed it because they ran out of college took a lawn mowing job for about four months and then I started working at [inaudible]. At that point which was a regional accounting firm. I loved it. I had a great time there and then kind of just went from there.

It was one of those things that we actually moved away from the city that we're from Fort Wayne Indiana and the office was located in South Bend and which is about two-hour difference differentiator there. Just happened my wife was studying to be an attorney and she was going to a law school about an hour west of that. So it made good sense to work in South Bend. Then once she graduated that it was like when those things like do we want to live in South Bend or we want to move back.

So the kids can you know get to know their grandparents and stuff like that. So we thought well let's uh let's move back. So we had a couple of kids we moved back to Fort Wayne and have been there ever since.

Jamie Nau: Great how about you Adam. What was your background in accounting and also your for your first job?

Adam Hale: Wow. Well, that's why he's the CEO. His is more like dreamy, mines more practical than that. So back whenever I went to school there was a newspaper. The thing that they passed out and what I was always told is, look for something in there that's like a job you can find. So at first, it's like, oh business, I like dealing with money, and all these other kinds of things. And I was pretty good with numbers and everything, and not really a math whiz by any means, but I was just good with money and so I thought business.

And then whenever we look in the papers, that means I could either like run McDonald's or I could own this huge company, so I was like, wow that's not practical. So all these accounting jobs were like specific things. And then they brought somebody in from the FBI, whenever I was like a freshman in high school and said that was the number one career, the college choice, in order to be in the FBI. I thought that be pretty cool too, so that's how I got into it. Then whenever you get into college it's one of those things where you get like halfway through and you're kind of like, I don't know if I like this thing or not, but you see it through, and actually that's what led me to Jody. So right out of college, my very first job was, I interviewed with Jody and he was like “Man you're amazing. I want you to be here. Do you know how much money do you want to make?”

I mean basically begging me to come and I was like, “wow you know I've got four or five other offers but we'll see.” Long story short it worked out. So I end up working with Jody at a different regional CPA firm only for about two or three months and then that's where our Jerry Maguire story kind of starts. You know unfortunately Jody's you know the, Tom Cruise character, and I'm Rene. So no goldfish. Although oddly like later a fish story is kind of pivotal in Jody's life but for right now there's no fish.

So Jody decides to pick up and leave during the busy season. You know he's like, “Hey you want to come with me?” and I was like twenty-two years old. He's the reason why I took the job in the first place. I was like, “hey let's do it.” So that's kind of how we kickstarted Summit CPA group.

Jody Grunden: And there's more to that story too because when he, you know what happened, was that the firm basically gave me an ultimatum. They had me there, I'd let him go or I had to quit. And it was like one of those things that I wasn't going to quit because I didn't want to work a bazillion hours. I didn't want to. I mean it would have fired him. He was doing a great job. He was the only person actually apply for the job ever.

So when it came time to make that decision was pretty easy. I quit the very next day and started my own firm, and there was probably a week or so later, got a knocking on Adam like, “hey would you be interested in coming with me?” and I'm like, yeah I could definitely use somebody. I didn’t have any money at the time to pay him. I Didn’t have any clients. We just had a handful of clients that I had prior to going to the prior firm type of thing. I thought, well, we can make it work and we kind of started it from there.

Adam Hale: Yeah I think what was a little bit unique though was where the issue came in was that Jody’s a leverage guy. So right out of the gate, I, you know, it's drop it on your desk and leave, like he's on to other things trying to sell clients. You know he's doing the sales side of the business, the operations, really trying to grow the company, and that's what he was trying to do for the small regional firm that they purchased - probably a subpar CPA firm, and he was trying to change the way we did things and bring in new blood and do all these things. Well, he knew that you know he couldn't be the person cranking out the tax returns and meeting with the clients and doing all the behind the scenes stuff.

He needed somebody to kind of grind that stuff out which is why he wanted to hire somebody like me. Somebody that could just kind of do all that day to day stuff so that he could help grow the business. Well as you know, especially in CPA land, this is now how it works. It's like the partners expected the bill. Twenty-four hundred, twenty-eight hundred hours, something ridiculous, and it's you know the majority of the profits and everything drive from the partner, that just wasn't his role. So I think that's probably a little bit of the philosophy knock that he got, you know here he hires me and they're thinking, “Hey we're just getting off the ground you should be bootstrapping this thing bleed now until you can't take any more than we can hire an Adam”. That wasn't his philosophy and that's not what we did at Summit.

I mean sucked for him for the first couple of years. I mean I got my salary. I transferred over the exact same thing that I was getting paid, and fortunately for me, he made that happen. And you know he kind of paid the price for that. So whenever I say co-founder it's a little loose. I was employee number one. So I wasn't really, so starting in 2002 I definitely hope that I may help shape the practice, but he was definitely the vision behind that. I didn't become a partner until 2006. So about four years later, but yeah, it's been a great journey.

Jamie Nau: Adam mentioned Jody’s philosophy a little bit and a lot of these philosophies led to the way Summit does things. So, Jody, can you talk a little bit about the start of Summit CPA, and some of the things you wanted to do when summit first started?

Jody Grunden: Yeah it's kind of a kind of funny because you know I've worked in public accounting, I worked in corporate accounting, public accounting, I didn't really want to work, and because it was a bazillion hours it was one of those things that I couldn't see my kids. I coach hockey and all that kind of stuff that you know really were kind of playing against me. And then I went to the corporate world was there for you know two or three years there and realized how boring it was there's kind of the same thing as a groundhog day the same thing over and over and over again.

And it was something it was like, well this isn't really long term for me either. It's like now what do I do? I don't like the public, and I don't like corporate. And so it's like well I kind of want to be able to control my destiny. I was given offers from bigger accounting firms saying, “Hey we'd love to have you text me at your blah blah blah”. Well, the thing is I didn't really want to get back into that because I knew that really meant working for somebody 70 - 80 hours a week, and really not really had a quality of life type of thing.

And so when we made the leap to Summit it was one of the things I wanted to do things differently and I wanted to do things that other accounting firms weren't doing. And the other one of the big things were you know we're originally we're like know, “hey let's work just four days a week”. This would be kind of cool, be the only CPA firm, back in 2002, and work four days or eight weeks if we had to work on the fifth day. Great. If we don't. Not a big deal, it's not a scheduling thing.

And we did that for a really long time. We kind of still do that to a point today. The other thing was that when I went to do things a little differently and didn't really want to bill by the hour. And that really didn't hit until the second or third year actually in business. You know we had to initially figure out how to bill we had no idea and billing by the hour is really bad. And I remember when I worked at [inaudible] and worked at the other two accounting firms it was where those deals that we brought on new clients they called us all the time.

And then all of a sudden about two or three months later they quit calling us. And as a naive person right out of college I had no idea why. I figured out why pretty quickly when we owned our own CPA firm and it was because they got a bill. And as soon as they got a bill they were like, “well I'm not going to call and you know I’m going to actually argue about that bill because what does .25 minutes in a meeting mean especially when we're both in there”. In all these different things that evolved around nonessential things and nothing that we really wanted it to be part of when it comes to client meetings and so forth.

We had to figure out a way to do things differently and that's what we thought. Well, the flat fee billing that's going to be the way to go. We want to try that. No one else was doing the time and everybody told us that we would completely fail. And you know obviously, we almost did. Well, that's the story in a little while. But the other thing was that you know we wanted to leverage you know big time and I gave Adam the really great book that I love is called the E-myth and I gave it to Adam and was like, hey you got to read this book. This is how he went to actually design our company. We want to basically design it so that we can walk away. Do you remember that book Adam?

Adam Hale: Yeah. There are several editions of it. E-myth Revisited was fantastic. I mean yeah it was all about just process and leveraging people and making sure that you're doing everything the right way. And I mean it wasn't like super easy right out of the gate. I mean like I said I'm a grinder by nature, shoebox accountant. So we definitely put in more than our fair share of hours. So whenever he's talking about four day work weeks he met people we hired, not us, but at the same time. Like when my buddies that were 23 - 24 calling me from working at you know Big Four firms whenever they'd call me and be like me and everybody here is crazy. It's seven o'clock at night. I want to go home. I've been here since 6:00 in the morning, and they're all looking at me like I'm nuts for one to leave at seven o'clock. You know I might have just left an hour before that but I felt great about the day because I was making an impact. You know one, I was having great contact with our clients which you know doesn't always happen in big firms.

You know we were making an impact in their lives, but I was also getting to put a spin on what my day looks like. So Jody was always very open to trying new processes, new tools, those kinds of things. So I really felt like I was empowered and I could kind of make my day better. So if I was there by six o'clock it was by choice, you know I was trying to make things better. And it took a little while to do that but we did.

Jody Grunden: For sure, and you know it kind of went from there. We weren't above anything, you know we answer the phones you know we didn't have a receptionist at the time, even when we did have you know Tier 3 accounting professionals with us we still answer the phones. We just took turns and so it was one of those things we had to deal with we had to do it to make things happen. Well we kind of thought it either because we had that flat fee built and another way everybody liked our bill because it was super hard.

For sure because as we were pretty naive when it came to how long it actually took to get things done. It was one of those things that just kind of bit us in the butt. But we learned from it definitely but it bit us in the butt for sure. It was a couple of years before I actually took a paycheck. I mean I pretty much worked off my credit or lived off my credit cards for a couple of years. And I would never, ever, ever advise that to any client out there. So if you're listening. you did not hear that.

But I had to do what I had to do. It was one of those things where I didn't have an income. You know my wife, kind of funny, you know she went to law school at the same time she left her firm, and so we both started with no money, entrepreneurs, and I would never have it anyway different. It's been an awesome experience. Tough start but definitely awesome experience.

Jamie Nau: So a lot of our listeners are owners or employees for service-based businesses. I'd love to hear a little bit more about some of the failures with the fixed price building because I'm sure that's something our listeners are very interested in and I know I am as well. So Adam Any good stories there?

Adam Hale: Well I mean it's like anything else. I mean you get a deck built on your backyard it's like, how long is this going to take? Well, I can get it done in like five hours- bull. You know by the time they run to the hardware store four times and whatever if you paid them by the hour you'd get creamed. Well that's kind of the reason why people don't like value-based billing or a fixed fee. If you're a CPA owner it's because like, hey some things just take longer, and I want to be able to build a client. You know for us it was about trying to create an annuity that we could just count on and be able to ACH out of our clients’ accounts right away.

So there some stability that we needed from a cash flow perspective so it came from, it was birth really from that need as well. But the failure is just not understanding our value. I mean it was nothing to do with time. So whenever I say, hey something might take four hours and we should have a charge for 10 or whatever. You know that's not the point. It was like the value of the service that we were delivering was worth far more than what we charge and it was just out of fear.

You know we're like will they pay 400 bucks? Will they pay 500 bucks? and then we started just tacking on services like it just in our nature it's like we always wanted to evolve and make things better and better and better. And before long you're doing a lot of great things for your clients and not charging them for it. So that really took us a little while to understand our value and really how to price things.

Jody Grunden: Yeah it was one of those things that were also like you said is out of necessity. We were small you know a thirty thousand dollar accounts receivable was a lot of money. You know we're waiting by the mailbox looking for the check and then being upset with the customer because they didn't send it. And then two weeks later we were like, oh you know we call the customer, hey, when you think you're going to pay that?, and they would say, well I didn’t get one. It was like, oh you didn’t get the invoice? Then we would reissue the invoice and then the whole process would start over. And you know we didn't have the cash. You know payrolls were like, oh my gosh you know we've got a payroll coming up. You know this is kind of scary. You know everybody I think in this probably listening has had that position for where you know they're in a position where, hey what do I do? I don't have the money. I don't have the insight really to see you know going down the road either so I don't know when I’m going to have the money. You know so am I going to have to dip into a line of credit to pull money out personally. That was you know that was all in play for a long time. And so once we decided, hey we're going to try this flat fee. And ACHing clients, because we did the flat fee and invoice clients we tried that too until one of our clients decide that they weren't going to pay us.

And then we got stuck with a month's worth of expenses with no revenue there. And then the other time we would do it we as basically managing that client's cash flow you know we were like, well you can just forget about our bill this week. You don't have the money. So let's push our bill next because you know it's really easy to do that you're always what you're always thinking about the best interests of the client. And it also in our bills were starting to get paid back and we were three or four months back on you know on everything and the accounts receivable build up.

It was like when those things that Adam and I talked about say we can't do this anymore. I go let's ACH the client every single month initially and we started doing that. It was like, well how do we go about the clients that we currently have? I go, well for the most part we will tell them how we're going to do it. And occasionally we had the people that still sent an invoice out. And we have that every once in a while here too. We have, we're five million dollar firm, we have maybe thirty thousand dollars of A.R. So to say we're 100% doing it we don't. But I would say 99% of the time we are actually ACH right away. And then the ACH was is like, well this is pretty easy. Everybody's doing it. No big deal we just told this is how we do it. And for all new clients we say we ACH your account every month. And the first of the month and that's how we did it. And then we were like, well why are we doing it monthly? Why not do it weekly? And so we started doing.

And we started ACHing clients weekly and it was a lot easier. They loved it because the bill wasn't as big. You know our fees aren't cheap anymore, and it was just kind of a nice thing. They can hit the account every single week. And it was just more driven by our need to have cash flow than it really was anything else. And it became such a cool thing that now, you know, every Monday is kind of cool because we deposit like I don't know, hundred grand in the bank every Monday, which is kind of a neat thing. You know whereas before you know that would have been nonexistent. We would've been like still checking the mail in an hour.

Adam Hale: I remember always going to Jody and saying, I have this number in my head. I always remember being like, dude if we could just get to thirty thousand dollars a month, like borderline ready to retire, 30 grand a month we're good. So not only did our pricing and services evolved but so did our clients. I mean they just expected more out of us. They like you said our systems became a little more sophisticated but so did our clients. You know the average client size in terms of their place in the marketplace and revenue and everything also grew as we grew.

It's not that we necessarily targeted we turn people away or only we'd go after certain people of certain size, but we positioned our services to where it attracted those people. And we've been able to stay in that wheelhouse for a long time.

Jamie Nau: And I’ll tell you coming to Summit CPA there's a lot of unique things I learned about what Summit did, but that was one of the most unique. I was, I was skeptical. I was like, how in the world are we invoicing these clients every week and it doesn't hurt our sales process? And I'll tell you what, I've been doing sales for Summit for a little while and not once has a client come back to me and said that's the reason we're going to say no. It's never come up. And then also from my standpoint, it was a lot of my job is dealing with clients that are upset, or dealing with clients to their issues and things like that. And what's nice is I never have to come to a client and say, oh by the way before we have this conversation you owe me thirty thousand dollars. You know. Like that when I was in public accounting I was having that conversation every month with two or three of my clients, and it really hurt that client relationship.

That's one of my favorite things about Summit is I never have to have those conversations. And also it's a great exercise and you never know it's going to work. Going into any CPA firm or even talking to our clients about trying to do this everybody is like, there's no way people are just going to pay us every week and not have a problem with it and it's worked out really well. So definitely a great thing.

Jody Grunden: And really the only way you can do that is if you flat fee a client, right? Meaning if you're billing hourly you can't do that unless you want to hit a retainer every month and then make it up once a month as an invoice or a little harder to do you know because the invoice is unknown. So it's like all those things we didn't want to hit a client up to $250 a week. And then all of a sudden hit with a six or seven hundred dollar fee at the end of the month. And then find out the next discussion, hey why is your fee so big? What did we do? You know we didn't want that issue at all. And so really to do the flat fee, and do the ACH every Monday. You know it really is how we made it work. I think it is the flat fee that enables that.

Adam Hale: Yeah and the way to be able to do that too, is like you know, it's one of those things that if the client just came to us with just a project or something. Those, I mean don't get me wrong, we still value build those as well right now, but those are a little harder. But most of our clients were doing repetitive recurring things like we set our processes and our services intentionally around delivering something that we could gain efficiencies on. So even though we value bill and we charge double our fee for the first eight weeks during onboarding, a lot of times if you look at that realization it's a little bit lower. But the long term relationship. So some clients are like, oh yeah you probably get hit hard it early on but I bet you make really good. No, it's like, we price it the right way. We take a little bit of a hit upfront although the doubling definitely helps because we bring on more resources, it's about the long term relationship the annuity that it creates that really drives the value.

Jody Grunden: We don't plan to do a project really if it's just a one or two-month deal. I mean that's we'll do it if it's a right fit or if there's a promise of futures you know future additions to it, but for the most part, we want that long term relationship. We want our clients to be with us for years not, months, or days you know, paying that fee every single week for six years, seven years, eight years. It is kind of the ideal, and that's the idea of the subscription-based model that's why it works for us.

Adam Hale: Well and that's why the VCFO service is so strong. Right? So a lot, almost every web site you go on to for CPA firms now they like fractional CFO, and if you read through those descriptions a lot of times they sound like everything that happens there comes with an expiration date. So it's like, hey we'll come in and we'll solve for a temporary outage, or we'll come in and solve an issue for you. Like we're there to fix the banking relationship, or there to do this that or the other. So true, totally buffet of everything VCFO on the fractional side.

But what we do is different. We're not there to solve a problem. Of course if you have them you know we're going to work on focus on those first, but we're in it for the long haul, and we feel like our job is to help our clients clarify direction, and in order to do that again we're not coming with a silver bullet and saying, Hey you've screwed up all these years, all you have to do is do this. It's like, no you've got a, you know with us in place, if we can get all of your systems and processes getting your information fast and accurate we can help you make those decisions on the fly. And so we do that through forecasting and other things. But again that's the key difference that I see whenever I talk to other people or I see other websites where I see fractional CFO versus like a true what we consider to be VCFO.

Jody Grunden: And I'd say also the other thing is a lot of those websites they're really talking about accounting, meaning that they're talking about paying bills reconciling the accounts doing the bookkeeping type stuff. Our service is way more than that. You know that's a very small fractional part of our service. If we even do it you know ours is the big part of the strategy. Speaking with the clients weekly making sure they've got enough cash the bank to survive the next eight weeks the next 12 months you know all the different stats that we look for with our clients to make sure that we're on top of it.

Adam Hale: Jamie you and I talked about that. I mean you know again it's sometimes it's the VCFO side and they come in as heavy hitters they solve those problems. They're super expensive but they are very good. And that's a great. And sometimes those are the sole prop folks and that's all they do and then other CPA firms can kind of manage that too. And then Jody to your point it's the back office solution. So that's the other. So we have those two different ones. But nobody kind of playing that middle ground where they're both at the same time recurring all the time and that's the space we live in which there's not too many of us out there that do that.And that's really the big differentiator from day one is the strategy part. We've done that from day one and that's really why clients that's why we've grown so fast that's why clients love it because they need somebody next beside them to help them out they need somebody to bounce an idea off of here get this crazy idea I can't tell my team because I don't want them to get the wrong idea here. What do you think about us doing this? We can look at and say, no and here's why, or, hey that's a great idea let's work really well with other firms. Here's what here's how we can actually make it. Here's how I can present it to your team to help to help deliver the message. You know we could do that kind of stuff where most of the other firms out there that when you see that that's not what they do.

Jody Grunden: Actually even the tax service, as you know we have we can bundle that in there as well. So we're not a you know a bookkeeping firm. We're not an accounting firm that doesn't offer CPA type stuff know we can do the taxes. We can do a lot of other things help with profit sharing, you know the things that you know you wouldn't really see in a typical firm or they would charge additional for it. We don't do that at all. Everything is under our value based flat fee system so that's the kind of the cool thing about it.

Jamie Nau: And oftentimes I think well I clients are looking for in a lot of small businesses looking for is just someone with a finance background to talk to. And I think that's really what we're there for is like we have the numbers we have the data we help them make their decisions with finances involved and so I think that's a lot of what the virtual CFO is just getting those conversations started and using the numbers to get this conversation started.

Jamie Nau: So obviously this podcast is for creative agencies, and we're going to spend a whole episode talking through how we got into creative agencies and why we do creative agencies. But Jody, if you just wanted to do  a real quick introduction into our background of creative agency. Kind of a preview of what we'll talk about next time?

Jody Grunden: Yeah sure. Just a real quick two minute thing. We work with about 100 companies little over a hundred companies right now all throughout the United States. We're distributed companies so our team is also spread throughout the US. So the cool thing is that everything is done completely virtual. Creative agencies really liked that idea and are used to that idea because a lot of them are doing the exact same thing themselves. So our main focus is I would say probably two thirds to three quarters of our clients are from the creative agency space and I would say out of the last probably three years 90 percent of new clients that we've picked up have been just in that space alone.

So it's something we focus on. We know the vernacular we understand the issues. It's just one of those things that I had a marketing background when we started and our first client was a creative agency and it just was our first virtual CFO client, true virtual CFO client was a creative agency, and was one of those things that it just was a good fit and we liked it. We did well with it. They recommended other clients and then you just kind of grew up. It became our main focus and as it is and will be for a long time.

Adam Hale: But it was also a total cheat because there service based model. And so it operates very, very similar to how we operate. So we were able to kind of like transform a lot of our metrics and processes. Likewise we learned a ton from that space. I mean they are like project management gurus. So we were able to kinda take some of the tools that they were using. So it's been mutually beneficial. They're super open minded group. So they know what they know and they trust that we know what we know. And so having a client and a partner like that that you can bounce ideas back and forth on is pretty cool. And so yeah that's why we definitely stayed within the vertical and push hard to work with those folks.

Jamie Nau: Yeah it makes for easy training. I know when I came to the Summit, you know, I had a public accounting background and the stuff we're talking about for our clients was the same things I was talking about with my firm: realization, utilization, average build rate. And so it was pretty easy transition for me to make to say, OK this is basically what I've been doing for the last five years with my public accounting firm. So I definitely agree with that sentiment. So that's it for today's episode. Like I said next time we meet we will be talking about our creative agency background kind of the story there and also on why we like working with them a little bit more so we will dive into that topic. But we plan on doing this podcast every other week. So listen for our next podcast, and stay tuned. Thanks Jody and Adam.

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