The Modern CPA Success Show: Episode 22

We are starting a new trend on the podcast, where we sit down with some of our clients to talk about their experiences with CFOs and their business knowledge. Today, we are sitting down with Matt Westgate, CEO, and co-founder of Lullabot. Matt was one of our first CFO clients, so we are going to talk about his experience. We also speak about his experience working with a distributed team in his business.

Jamie Nau: Hello everybody, welcome to today's podcast. We're really excited to start a new trend on our podcast, which is bringing some of our clients on to talk through both their experience with VCFOs, as well as their industry experience and any knowledge they have about small businesses. So today we're starting with one of our first clients, or at least our first VCFO client. So we have Matt Westgate, who's the CEO and co-founder of the Drupal Digital Agency, Lullabot and Tugboat.qa, which is Lullabot’s sister company that provides deployment previews for every poll result. Matt has been part of the Drupal community from the beginning. And is credited with over 600 commits. He also co-authored The Pro Drupal Development. He is recognized as one of the 50 best CEOs among small, and midsize businesses. Matt has built Lullabot’s unique culture on trust and open collaboration, which is the driving force behind Lullabot’s continued success. So Matt, we really appreciate you joining us today, and welcome to the show.

Matt Westgate: Thanks, Jamie. Great to be here.

Jamie Nau: Awesome. So I would love for you to start us off, and I want you and Jody to go through this together, because I've heard the story from Jody many times, but I want to hear from both directions here. So as I mentioned, you're one of our first VCFO clients. So can you talk about what brought you to Summit, how you got connected? And I'll let Jody jump in as you as you go through the story.

Matt Westgate: Sure. Yeah. Are you fact checking Jody? Is that what this is about?

Jody Grunden: Pretty much.

All: Laughing [in audible]

Matt Westgate: No, it was many, many years ago. I don't know which year in particular, but I'm thinking 2000, gosh, I don't even know. Maybe 2012.

Jody Grunden: I'd have to look back and it was e a long time ago.

Matt Westgate: Yeah. Lullabot was maybe 20 or so people, maybe a little bit larger than that. We are at about 55 people now, and the person that was doing our finances was leaving the company. And my business partner at the time, Jeff Robbins, neither of us had business degrees. We got into the field that we did because we loved it. We had a passion for it. So we didn't know the finance 101 kinds of things that most people perhaps would know. And so when that person left, we looked at each other and we had a spreadsheet, that was about it. We didn’t know how to read it but we know we need it. And the thing about Lullabot is we started in 2006 and we started as a completely distributed company. I know now that's less of a distinguishing characteristic because you have companies like Shopify that are 7,000 people, a publicly traded company that just decided in March to get rid of all of their offices all over the world and be a remote company. But back in 2006, it was a fairly novel idea. And so when we were looking for resources, it's like, well, I don't know where I'm going to be living. I could be in Iowa, could be in Oregon. And the previous accounting relationships I had were because I could walk from my house to their office. But now when you're a group of 20 people all over the world that location matters less. And so I just started searching for CFOs, remote CFOs, distributed companies, you know, and I found Jody. Your SEO was working for you.

Jody Grunden: I did that myself, by the way. Thank you.

Jamie Nau: So far the stories are matching up to Jody doing the SEO himself.

All: Laughing [in audible]

Matt Westgate: And we got to talking, and what we wanted was basically a company that could meet us where we were on the technology level. So being able to do video conferences, because if you don't operate that way, trying to do that is like pulling teeth, you know. And so we found Summit CPA and it was great. And I think we figured out a number of processes together too, of what was working and wasn't working. But Jody had that intent and understood the opportunity there. And we very much leaned into it. How did I do on the story Jody?

Jody Grunden: Oh that was about identical other than you thought I was cool and wore cool shirts. Other than that completely accurate.

Matt Westgate: It was all those Hawaiian shirts.

Jody Grunden: This is kind of a Hawaiian shirt but not really. But it was kind of interesting, to piggyback off of that, when they did drop an email, because at that point Slack and stuff like that really wasn't a thing, and there was really email was the one way of communication, your email for some reason, you guys were in my SPAM. And it was one of those coincidental things. I never, ever at that time, looked through my junk email. And so I saw your email there and you had this really long email written out, and I was trying to identify what you had in mind, and what you're looking for. And the whole time I thought you were trying to sell us on a website. And so it was one of those things where I brought in Adam and I go, are they looking to hire us, or do they want to sell to us? And he's like, I don't know. I can't tell. And so we were going through it and then were like, let's just call. And that's when we called. And I remember the conversation. That was pretty awesome. Actually, you guys were pretty laid back. It was really cool. And one of the questions that you asked, or maybe it wasn’t you but Jeff, but you asked, would you have to actually come out and see us? And that was like the aha moment because at that time we had done virtual CFO, but we've only done it locally. You know, people can actually come to our office, or we could go to their office. It was one hundred percent done this way. And I asked the question back I go, do you guys want me to come out there? And you were like, no. And then I was like, no I don’t have to come out to see you. It was at that point where I was like okay, this would be a pretty cool relationship. And then once I found out more and more about what you guys did, and how you guys did it, it was one of those things like wow, this is a cool company. I go, if I wasn’t running a CPA firm I'd love to be involved in this company. It was that cool, and a lot of great ideas. And one of the ideas that I piggybacked off, and wanted to learn from you guys the most was how do you do it without an office? Because at that time we had an office. We were probably close to 18 people. We had a brick and mortar office. We did everything in there. And you guys kind of brought a lot of light. So how we helped you with the financial aspect of your business, you really helped us become what we are today as a distributed company, and we greatly appreciate that. And so like to kind of dovetail now to the distributed model, and kind of talk about, why did you guys decide to go distributed? Did you have a brick and mortar company beforehand? Did you ever decide partway through maybe this isn't a good idea? Tell us a little bit about that. I am real curious on your story from a distributed point. Again, distributed means working 100% from home.

Matt Westgate: Yeah. Yeah. No central office. Yeah. The story isn't as glamorous as people think. It came from a point of stubbornness. I'll back up a little bit. So Lullabot is heavily involved with the Drupal community, Drupal’s open source software for building websites. So the software world, you can live anywhere you want, you just need an internet connection and you can have a community. And the Drupal community, this is about 2001, 2002, it was started by a guy that lived in Antwerp halfway across the world. And so I was interacting with all these people from Germany, and other places all the time. And we would just email back and forth. We had a chat server. We would talk and we would build this software together that the world was using. So I was already working from home in that model and it worked very well. You can make your own schedules, all of that. And so when we decided to start Lullabot, my business partner was in Massachusetts and I was in Iowa and neither one of us wanted to move. So if we were unwilling to move we needed another option to start the company. And so I said, you know, this Drupal thing's working for everybody. Why don't we just take the same spirit of that and apply it to our business? You know, it should work. And it was great. You know, it's probably one of the best decisions that I ever made, because it's hard to understand from the outside like, if you don't see people, how can you manage them? But if you're, like, really intent on your business, you can have really clear expectations. You can be results oriented. It can really like take away your bad habits around micromanaging and all of that, and really allow people to shine. So for instance in our relationship, Jody, you know about not wanting to see you in person, it wasn’t that we didn't want to see you, it's that the idea of taking time for you to jump on a plane and to come and all of that overhead doesn't just to have a meeting doesn't seem like it would be a worthwhile way to spend our time. So instead we opted for something that's very common in distributed companies, which is proactive deliberate communication. Instead of needing to visit let's talk about cadence and expectations, let's talk about deliverables each week and on a monthly basis, let's talk about what the expectations are going to be, what the timelines are going to be. What's that email that we're going to receive every Friday? That's the cash flow summary. And we replaced all of that uncertainty with deliberateness, and that works really well. So instead of going to the office once every six months, we were meeting once every week. and more tapped in I would argue.

Jody Grunden: For sure know. And we kind of talked about that in a previous podcast, that the cadence is huge. But what a lot of accounting firms out there they're in the same boat. They bill hourly. You guys bill hourly. They manage their people. They want to make sure their people are highly utilized. And you guys manage your people and want to make sure they're highly utilized, all those different things. But with an accounting firm, a lot of times they think well, I've got to be able to see them. And so how did you guys get over the not having to see them? I know you mentioned that being deliberate with your conversations, being deliberate with your meetings. But if you don't see somebody, aren't they just kind of lounging around the couch? Not really doing anything, or is that not true?

Matt Westgate: No that's what I do.

All: Laughing [in audible]

Matt Westgate: No it’s funny because the same rules still apply. At Lullabot we have time tracking software because we do charge by the hour. So we need to know the hours that we do. And then we have reports that tell us how many hours people are putting in so that we can write the invoices and stuff. I'd also argue if we're using that as the metric to see if people are working the conversations are probably happening too late, right? That’s sort of the ultimate tally at the end, is that kind of thing. But otherwise, you just set expectations in your company culture like we have, we’ve probably talked about this, the idea of submarine of like if a person is starting to go dark, they're not responding to emails. They're not showing up on the calls that they need to be on. That is a emergency. That is like hey, something's happening. We need to reach out to this person, get them on the phone, do a video chat. Are you okay? What's going on? Because again, you are sort of responsible for yourself. And so you have to be accountable to communicate what's going on, what your needs are, as opposed to like me the manager just walking by a cubicle saying hey, how's everything going? Oh okay. And then I am thinking oh, was that like a good okay? Should I ask about their family, you know. But it's much more like hey, this is what I need, some stuff came up and I'm not meeting my deadlines.

Jamie Nau: I'd love for you to dig a little bit more into the culture. I think obviously whenever you interview at an actual office or talk to a company that has an office they are say our office culture is great. But I think the culture in a distributed company is just as important, if not more important. And I'd kind of like to hear about how you foster that, because I know it's key for us here at Summit since we are distributed, but I'm interested in how you guys do it there as well.

Matt Westgate: Yeah, I'd love to hear how you all do it too, because what I find is that you have to write everything down. Like, that's kind of what it comes down to, is there isn't this like there's not this aural exchange of like what the culture is. It actually again, is much more in the deliberate like let's try to codify what we mean when we say culture, what the expectations are, what the values are that drive our decision making and actually sort of have the policies in place. So we've got a very long handbook that we ask people to read before they join on their on their first week when they when they become a Lullabot. And it's just all about like, I don't know, here's what your first day is going to look like. Here's the communication tools. Here's what you do when you start to feel overwhelmed. Here's what to do if you want to quit, here's what to do, and just sort of put it all out there. And we have a team weekly that works on that handbook to keep it up to date. And I don't mean that that's the only thing that we do, because all the other rules apply to, leading by example, practice what you preach, all of that kind of stuff. But there is a very sort of thinking about process and rules. And like when you're at work, we need you to be in this Slack channel that shows that like, hey, I'm available, I'm present. And when you're not say that you're not available.

Jamie Nau: I think hiring is key to there, especially when you're distributed. I think if you hire someone that likes to keep to themselves, that isn't going to ask questions and stuff like that, like they won't necessarily participate to the culture, where you have people that are naturally interested in people. The easiest thing to do is to go about your business and not talk to anybody within an office all day. Obviously that's not great for culture. And so the people we tend to hire and what we really try to emphasize on is once you are in my office we're going to talk for 5 - 10 minutes about family, about different things. Going down that road before we actually get into things. We want people who are actually interested in that, not just doing it for the sake of doing it. And I think that's been important for in the hiring stage. And so you asked what we do, to me that's the number one thing. I'm not sure, Jody, if you have anything to add?

Jody Grunden: 100%. I think transparency is huge. I mean, we're transparent in all ways from you know, salaries, schedules, finances really everything. I think that's really huge because it develops a lot of trust, and people understand that. I think the meetings are important. Now we have a weekly meeting that's about 30 minutes long with 55 people in it. And we're just basically talking, there’s a joke of the day, then it goes from there to fun facts. And then it goes into a topic that someone's supposed to bring to the meeting. And the topics are usually pretty fun and we spin a wheel or people volunteer. Very rarely do we have a chance to spin the wheel because people are volunteering to give their recommendations, or suggestions. That kind of gives an atmosphere that you really never get at a brick and mortar company. I can't imagine having a meeting where the only purpose is to chat and talk, and get to know each other. That type of thing would never, never happen. That's just part of what we do. It’s every Monday and everybody attends, and people have fun giving the joke the day. You know, it's just a fun thing and fun topics, I think that kind of builds into it. And then the other thing is we really harp on our core values, A lot of times when people start a company, they list their five core values. And then after that, you just never hear about them ever again. You know, with us we've got a kudos channel in Slack that we're constantly praising people for doing something that's involved with our core values. We emphasize that all the time. You know, in our reviews we are constantly talking about meeting each of these core values and giving everybody a chance to really talk about them and emphasize, you know, why they're important, why they're part of the culture in the company. And then outside of the actual virtual meetings, just kind of getting together, you know, because we have, even with a virtual company, you really have to touch each other at some point. I don't mean in the physical sense, but actually being in the same room. Going out to a bar, having a drink together, whatever that might be. And that's where our team retreats came into play. Having a team retreat every year, having everybody on the team present at the at the retreat with no spouses, you get a chance to hang out with each other. And the funny thing about the team retreat, which I never really kind of thought would happen until it actually happened, and Matt I'd love to hear your point of view on this. Typically when you have a retreat you have these workshops that everybody goes to. We do the same thing, maybe one workshop is on finance, or whatever the topic is. After the workshops are done, and let's say we start at 10am and end at 5pm or whatever, at most of the companies I worked for in the past everybody couldn’t wait to get out of the workshops, and then you wouldn’t see everyone until the next day. What I found is people don't want to part. They are asking, what are guys doing now? They hang out with each other all night long, which is really cool. And then the next day they're ready to go back to the workshops, and it's a rinse and repeat type of thing. They just don't want to be apart from each other. So I'm curious Matt, similar type of situation?

Matt Westgate: Yeah, I think that comes from like you know, I'm not bringing my tuna sandwich into the office every day. And those daily annoyances aren't there that they are in a physical company. So like that kind of builds up over time. You know, you want to do you work and then you want to go home because you had to put up with each other all day. What happens is instead of that being the thing of like okay, I don't want to spend any more time with my employees. I think the thing that happens that we have to look out for is actually isolation. You know, that's the thing, it's the opposite of like instead of the daily annoyances, it's not having enough of that social interaction and stimulation. You know, instead of starting the meeting with like okay, let's start the agenda, remembering to be like, how are you? What's going on? To intentionally foster serendipity in a distributed company will help keep isolation at bay, and isolation is one of the things that can really undermine. So that's why I think the physical retreats of getting together and it's like people want to hang out and want to have fun because you don't go to the bars after work. You don't go to your employee soccer game for their kids. Like that stuff doesn't happen. So you really need to be intentional about the time spent together.

Jamie Nau: And intentional to about telling employees to make sure that they have those outlets as well. Because it's really easy if you're working from home just to spend, you know, 10 hours in your office, go upstairs and come back down and go to your office again. And that's the only thing you do. I talk with our employees all the time about what extra time do you have? Like what other things are you doing? Are you making sure you go to the gym, or are you volunteering, or just doing those things that honestly, when you work in an office you don't necessarily have time for, right? I worked in an office prior to this job. Like I was lucky if I worked out. Now I play basketball almost every day and I have time for that. So I make sure to talk to my employees and ask, what are you spending time on outside of this? I want to change direction here a little bit off of this topic just because I think it's really important because I think a lot of our listeners are wanting to take their company where you are. I want to talk about some of the changes you made along the way, especially among your leadership team. So that's one of the questions I want to make sure we talk through. So can you kind of talk about the evolution of your leadership team and from where you started to where you're at now, and kind of the steps along the way?

Matt Westgate: Oh, man. Yeah, that's a good question. We've been very much into, I get inspired when I can amplify what other people do. That's really exciting. And I think Jody feels the same way. And so, you know, when you surround yourself with really smart, talented, amazing people, you just spend a good chunk of the day saying, how can I increase their awesomeness? They've got these qualities, I want to amplify it. And so we've done well. I'm not going to pat myself on the back, but I've tried to create those opportunities at Lullabot. And so you know, we've given ownership. We've given leadership roles. Any time that I find myself doing a thing over and over again, I try to think like, is this really what I need to be doing now? Is this the most essential thing? There was a point early on where I was doing sales and I was doing project management, and I'd be like a holding phone, trying to do multiple calls at once. And so I hired two people to replace what I was doing and I wasn't sure what I was going to do next. I had an uncertainty of like, am I out of a job? And I quickly found other things in the business to work on. I think sometimes for founders there is a certain leap of faith that happens of like, I do know that I need to let go of this because I can hire someone that can be totally focused on this. And instead of half-assing it they can haul ass the entire way. And so I think there's a constant of doing that over and over again, that only a founder can sort of jump into. That fear of uncertainty and lift people up around them.

Jody Grunden: Sure. And you're right. It is the hardest thing to do because you think you're the most important person in the room all the time as an owner. I think it's kind of natural because basically you started here by yourself. And now you've got fifteen, twenty people in the room with you, and you still think boy, this company couldn't survive without me. And so when you give something away, you're thinking, oh my gosh, am I doing the right thing? Is my company going to go in the wrong direction now that I've done that, do I need to jump back in? Do I need to rescue that person? Because they're going to obviously fail because I'm the owner. It’s how do you get to the point where you realize I'm not the best person in the room? Actually, somebody can do this job better than me. And how do you get to that point? Because I know with me it wasn't as big of a struggle as I thought it would be. But for my partner it was a big struggle. He will admit it was tough to give away his role with certain clients and that sort of thing, because of course, he's the best and smartest. And he is. But a junior person can come in, or another senior person can come in and take over that role. And whether that's in finance, or whether that's in marketing, or whether but it doesn't make any difference what that role is or could you simply be managing certain people. How do you get there? Or I guess, what have you done to get there? Because you've done a great job with it. You've developed a really strong team. How did you get to that point?

Matt Westgate: Maybe a couple of things. I've got an anecdote to that, I'm actually going through this right now so I can share some of it. You probably heard, the common story at Lullabot, there was a time, and you remember this Jody, where Lullabot was running out of money. We had a financial downturn and we did a number of things. The first thing that we did long before that was when we came on board, I realized that you were saying things that I had no idea what they meant. KPIs and cash flow, P&Ls, like that was a whole world that I didn't grow up with. And there a tension between us because you were trying to teach us things that we didn't have a fundamental understanding to even have that conversation with you. I believe there was a phone call that was like, you know what? It's time for some education. Do you remember this?

Jody Grunden: I remember the conversation, yes.

Matt Westgate: My leadership team, because it wasn't just you talking to me. It was you talking to the team that I talked to, the four or five of us that were there at the time. We ended up taking a class I think it was Coursera. It was a finance 101 class, and it was awesome. And it was like a six week class. And we would all do our homework together. And then we would come ask you if we got it right. And then we would try it out like Jody, you know, we're going to need to see the cash flow. And it was awesome, illuminating, you know. And I think part of how you get there is being willing to say don't know how this works, and I'm going to bring everyone I can along with me on that journey to find out. Now, we also had a time where we did run out of money. We were looking at the paycheck to paycheck cycle, and I had watched an Oprah Winfrey episode, and it was these interventions about people that were going bankrupt, or wanting to quit smoking, or something like that, or all of that. And the first thing you do is you say like, I've got a problem. I haven't told you about this, but here's what's going on and I need to tell you because I need everybody supporting me in this. And so at our team retreat, I got up in front of the room and was like, we are living paycheck to paycheck and I don't want to live like this ever again. And I fully expected people to walk out.

All: Laughing [in audible]

Matt Westgate: And instead, what we did is I think we worked with you and we got some presentations together, like accounting 101 and said here's how things work. Here's how it works. And we made a goal as a team to get that cash reserve that you were always talking about built up. We did that within a year. We built that up. But that's because we got everybody on board.

Jody Grunden: From zero to a year basically.

Matt Westgate: Yeah. I couldn't have done that alone. Not possible. No. Everybody needed to know the piece that they played in order to make that happen. That led to the great game of business. That led to the just sharing everything about the people so they could be adults and make their own decisions.

Jamie Nau: The funny thing about you Matt, is when I first started at Summit, obviously I was looking for a job and I was interested in doing what Summit did. I looked over Summit’s website over and over and over again as I was applying, and as I was talking to Jody I remember a quote from Lullabot, I think it was you I'm not sure exactly. But I remember a quote from Lullabot, and it was exactly what you just talked about. If you plan on working with Summit, it's not a sit back and watch type relationship. You have to be invested, and you have to really have the willingness to learn and the willingness to do what we do. And for some reason, that quote always stuck with me as I've worked with other clients, as I worked in this role. Is that like we often do run into those clients that are like, sweet so now my job is done. When I talk to new clients I'm always like you admitted that you need help with finance. Now you have to invest in it and you have to listen to what we're saying and you have to come to the meetings with questions and stuff like that. So I think that is super important. And again, it's interesting, that always stuck with me since even before I was working at Summit. That quote our website from you guys. So I appreciate you bringing that up because that. Or a problem could be is just I'm pulled into many different directions right now, I'm doing too much. Like you said, you're answering two phones at once and doing two other things. That's the problem you might have, that you're not putting full investment into something that probably could use a full time person on it.

Jody Grunden: I think that investment comes not only in you know, it wasn't like it was the Jody show every time we got on a call. Yeah I would talk, but you guys asked as many questions as I asked of you guys. I think that was a big part of it because it really showed the curiosity. I think that was the cool part about your entire team. They're very curious on how everything impacted what they were doing and the importance of having you know, I could throw all the metrics out there in the world and they don't mean anything by themselves until you actually put context by it. I think that was the cool thing about your team, they were always curious about why did that fall? It's like, we will dig in and try to figure out why we are not hitting our mark there, or why how did we blow it out? I didn't think it was going to be that way, you know, and then we would look into that. I think that was a big part of it. I think that's probably not only takes it from what I experienced during our calls, to everything else in the firm. Every project you know, from marketing, to your biz dev, to your design, to everything in your company. And I can only imagine that same curiosity carries forward in all those areas. I think curiosity is one of the biggest parts of being successful. You have to have curiosity. You can't take things for what it says. You've got to look into it and find out. Why does it say that? I don't want to do it just because we did it last year, you know, that's a stupid way of looking at it. What benefits us the most right now? Why did it go so well last year? What can we do to change it, or why didn’t it go well this year? Why do we miss our forecasts and our numbers? You know, it just wasn't happenstance. You know, there's some curiosity there.

Matt Westgate: And not every culture supports that. Not every boss supports that either. I didn't know the name for it at that time. That kind of like, how do I foster curiosity? But I believe the name for it now is psychological safety. It's this concept, just like physical safety, but it's this concept that says you will not be punished or humiliated or retaliated against for speaking up with ideas, questions or concerns, and that is a fundamental part of our culture, and that is why it's okay to be curious here. That is why it's okay for us to have these larger conversations. And if there's, like the elephant in the room, like everybody's pretending like they know or everybody's pretending like they're going to meet the deadline to be the one that raises their hand and calls yes on it. We need those people. Otherwise it’s all just a dream.

Jamie Nau: That’s a great term. I've not heard that before. I've definitely learned something in this podcast. So we are right at time here. Actually a little bit over, but I really appreciate you joining us Matt. I think the interesting thing is I have like five or six more topics I've written down that I'm hoping to go through with you. We will have to call you up again and get you on this podcast. I appreciate you joining us. And any final thoughts Jody or Matt for the listeners?

Jody Grunden: I just appreciate you being a client, a great friend over the past years. You've really helped us craft why we're here today, and I guarantee we'd still be a very small shop, it wasn't for you. So I really appreciate that tremendously.

Matt Westgate: Oh thanks Jody. Thanks for putting up with us for all these years. We've definitely learned way more about finance than I ever imagined. And it had made us a strong organization for it.

Jamie Nau: Awesome. Thanks again Jody and Matt. Like I said, maybe we'll get you on here again soon.