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Two Fractional CFOs Chat: How Purpose Drives Fractional CFOs with Jim Emerich · Built by Margin with Laurie Chen

• 0:04
  Welcome to Built by Margin, the podcast where strategy meets the spreadsheet. I'm your host, Laurie Chen, fractional CFO and tax strategist, here to help you make smarter financial decisions, build a profitable business, and keep more of what you earn. Let's dive into the numbers that actually move the needle. Today, we have Jim Emerich joining us. Jim is the founder of Backbone CFO, a fractional CFO firm transforming financial complexity into a strategic advantage for contractors, construction firms, manufacturers and restoration companies.
• 0:44
  Jim is based in the Philadelphia area. Jim, welcome to the Yeah, really excited to have you on. Tell us more about what inspired you to start Backbone CFO. When did you open the Uh, so what, what inspired me to start a company, um, back in, so I, this is, I was just telling it before we started the recording. Um, this is our fourth year in business. So we started in January of 2022, or I did full time at least. Um, and what really inspired me to get to that point of, of launching out and starting my own business was really.
• 1:25
  I would say a decade-long experience and journey of getting to that point where I realized, man, I really want to be an entrepreneur. At the end of the day, it's really what I want to do. I want to take the risk.
• 1:35
  I want to jump out and do something on my own. I had, for years, helped other people build their enterprise, their business, which was amazing. I have no regrets doing it. Learned a ton, built amazing relationships, got a ton of perspective, developed my leadership, all the right kind of foundational components to what I thought I needed. But at a certain point, you just get to that point where it's like, hey, the next step is the one that you ultimately got to take. And it's it's the it's the one where you just kind of jump off the ledge. And that was that was Backbone CFO.
• 2:07
  So that was twenty twenty two. And really, it was also a combination of that. And I'm a person of faith. I'm a Christian. And I felt like this was like real opportunity for me to trust God and exercise my faith. Combine those That's amazing. And so how fast is your firm growing? We talked about you're looking to hire two more fractional CFOs.
• 2:36
  Yeah, I mean, I guess that's relative to anything else, but the firm has grown. And this, I think, is good and helpful context. When I started the company, I really didn't even know what the term fractional CFO was, to be quite honest. That wasn't what it was back in the day. Kind of just did everything. We did a little bit of bookkeeping, a little bit of advisory, a little bit of tax. I think we were talking very much like you started, and it very much took the evolving and progressing over time to really narrow our niche down into fractional CFO services only. Today, the team is myself and we have four full-time fractional CFOs, couple admin staff. So I think our team right now is about seven or eight people total. And Lord willing, we can hire a couple more in the next couple months to continue the capacity that we need really Yeah. So are there any particular industries or clients that you're serving?
• 3:39
  Yes. So we have niched down into working with construction, restoration and manufacturing at this point. So think of restoration being like a surf pro franchise or the privately owned or privately held version of those things, which are all over the country. So that's been a bit of a niche that we've found ourselves excelling in.
• 4:05
  And then sub-trades, subcontractors, HVAC, roofing, electrical, GCs. And then we have some manufacturing as well. So think of like machine shop or automation controls, So you mentioned niching down into fractional CFO services because when you're starting out, you're offering a whole gamut of services, controller, tax, bookkeeping work. But the fractional CFO service is much more specialized and a different type of service. What is your playbook when it comes to working with your clients? Do you offer a set amount of services and scope? Is it all similar across all So we, yes and no. The framework at which we use to deliver the service to all of our clients is to the best of our ability the same. So we go through a particular financial control framework, we call it. So we talk about cash, profit, people, systems, and position. And we really coach our clients in those five areas of their business. on a continuous basis. Now, what becomes unique is every client has their own challenges and opportunities and issues that they're solving, right? So in that way, every client engagement can be a little bit different because the CFO is solving different problems, helping the client tackle different opportunities, but we're using the same framework, the same process to Got it. And then how involved are you with your clients? Because you have fractional CFOs servicing them. Are you involved in any of the meetings with the clients? Do you only get involved when there's specific issues? Like how much Sure, so our company runs on EOS, which is the Entrepreneurial Operating System, which I think is a unique aspect of Backbone CFO as a company. With that being said, and using that as context, my role and function is the visionary or the CEO of the company at this point. I don't work directly with clients after the sale, so my function is the head of sales, if you will. I mean, I own the company, so I'm kind of everything in between, right? And the janitor. But at this point, we do not, or I do not get involved in the delivery. So once the sale happens, we do a handoff to our operations team. And that operations team is led by our vice president of client services, Melissa Zinni. So she and whoever the fractional CFO is for the client will take And how long did it take you to get to that point? Because when you're first starting out a firm, you kind of have to do everything. Even now you're doing a lot, right? You're doing a lot of janitor work. But when you first start out and you don't have those fractional CFOs, you don't have that revenue yet, you're kind of doing everything, right? So how long did it take you to get to that point where you're like, I'm the CEO of the company and I have fractional CFOs working with the clients So I spent the first two years of, when I launched the company, so 2022, 2023, primarily fully in this, well, doing everything, sales to delivery and everything in between. It wasn't really until 2024 that I started to make significant headway in getting out of client service, which was really a product or a result of going out and hiring, starting to hire team to obviously take on the workload. So the last client that I served was, I stopped serving, I should say, was back in December of 2024, so almost a year ago. And even at that point, I was only down to, I think, one client for quite some time. So it's been a while since I've been in the seat, so to speak, as the CFO. But right now, my primary Okay, that's great. What about TechStack?
• 8:26
  What does your firm use? I'm sure if you have a bunch of fractional CFOs on your team, you've got an operations team, you've got a VP, what are some of the systems that you implement into your company from a TechStack standpoint?
• 8:41
  And also, AI has really changed how we function as CFO, firm owners, and just even with our clients, it changes what tech stack we use. So tell me more about what you're doing Sure. Well, on the client side, it really depends on what the client's using. Most of our clients, being that we're in the construction, restoration niche, they have unique project management software to those industries, right? So it could be, if you're working with a construction client who's maybe a GC, we might be working with a system called Foundations or Procore. If we're working with more of a contractor, subcontractors, you know, trade, you know, there's so many out there. It could be like a Service Titan or a Dash or a PSA. I mean, there's Java, there's just so many. And then from the accounting side, I would say still primarily QuickBooks Online, although we're seeing a deviation now to either Microsoft Dynamics or NetSuite or again, some of these construction specific accounting and ERP systems like a foundation or foundation. So it really depends on the client. It's driven by the client and not only driven by the client, it's driven by the industry. From a firm standpoint, our firm, internally we're using, you know, it's basic. It's Microsoft Excel for reporting and then whatever the client's accounting system is. Laurie, to be honest with you, we really try to stay away from overcomplicating tech stack because most of the value that we bring to our clients is not in FP&A or financial reporting or any crazy thing like that. It's really perspective, leadership, accountability. So yes, we need to deliver financial models and a forecast and financial projections, but it doesn't need to be overly complicated. And in fact, If it becomes overly complicated, Yeah, absolutely. And you also really have to assess what the client's needs are, right? Because, you know, most construction manufacturing companies are not very tech savvy. You know, it's very different if you're working with like a software AI company, right? They might want a little bit more sophisticated system. But for my clients, it really depends on who they are, how tech-savvy are they. Are they fine with just Google Sheets or are they fine with Excel or a little bit more of a Cloud FP&A system like Causal or Giraffe? I find it really varies depending on who the founder is and what they're expecting.
• 11:33
  But it really goes back to you have to adjust for who your client is and what they're expecting out of their financial Yeah, I for sure. And I think for us, we don't allow the client to dictate how we how we produce our deliverables, if that makes sense. It's really we keep it simple. Like I said, Microsoft Excel, maybe Google Sheets. And that's it. I mean, really, when I say that's it. That's it. There is literally nothing else. And we won't do anything else. We won't we won't get involved in anything else. And the reason for that is, well, it's a couple of things. Number one, the scalability and quality control from a firm, our internal firm perspective becomes very difficult when you have a lot of different options. for reporting, right? So then you have to have expertise in many things.
• 12:29
  We'd rather have expertise in one or two and go pretty deep on that. And in addition to that, I think the deliverable being simple and easy for the client to consume is critical because the information is only as good as the leadership that comes with it and the perspective that you're able to provide.
• 12:47
  So if you get really caught up in fancy reporting or graphs or very detailed FP&A, in my opinion, when we're working with clients under $50 million in sales, There's just purely not enough data to warrant spending any significant time in anything other than very simple, straightforward financial projections that have to have rationale and logic behind them. But if you need another system entirely to be able to communicate that rationale or Yeah, good point. Give us a recent client story, no names, where your firm made a measurable difference or impact with your financial strategy or reporting or So, I mean, so many, but one that I like to illustrate I think often is, you know, working with a restoration contractor who had been in business for a few years before working with us, had scaled up their operations to five or six million in revenue and a visionary leader, right?
• 14:04
  Ideal for us to work with and had really great plans, but had a gap in that, He couldn't really– he had the vision in his head, but he wasn't able to demonstrate or articulate that vision in a financial manner.
• 14:18
  There's no financial roadmap that would connect his vision to some operational reality, right?
• 14:26
  It was just all in the head. So when we started working together, our firm and him and his company, we were able to very quickly identify, OK, this is the path forward to 5X revenue. And not just 5X revenue, but that's just a math equation, right? What are the operational levers that have to be pulled in order to get there and get there with the degree of profitability that he wanted? It was creating that roadmap, understanding what the revenue model needs to look like to get in there, what kind of gross profit or cost of goods sold structure was going to be adequate to produce the profitability he needed on the service level. But then also, how do you staff that? So we came up with a staffing plan in order to make sure that he was able to facilitate or deliver on said revenue projections.
• 15:22
  And then on top of that, Well, revenue just doesn't come out of the blue, right? As much as we like to think about it or think that it does, what we need to actually do is put a business development plan in place or a marketing plan in place to help facilitate that additional revenue that we expect. So we put all these things, you know, I'm giving the high level, but you can kind of see how one thing builds on the next. And then we're helping him think through all the variables multiple years out. And it was a beautiful plan. And we're now two or three years into that plan, and it's working very well. Not to say that it's perfect because plans change, but the roadmap is established. And when we're off track, and this is the absolute key to having a plan, when we're off track, we can see. Now we know. Now it's not just, oh my gosh, revenue's down or profitability's down. It's, well, against what?
• 16:13
  Relative to what? What should it have been? And now that we know that we're off, why? We can ask better questions.
• 16:19
  We can become curious, and we can dive into, why was gross profit? expected to be 55%, but now it's dropping down to 48%. What happened? Was it a cost of goods sold issue? Was it a budgeting issue? Was it an estimating issue? Was it a top line revenue issue? What was the causality of that?
• 16:37
  And that's enabled this business owner and his leadership team to be more informed, make better decisions when something's off track to That's great. How often are you communicating with your clients or your team is? Are you working with them on a weekly basis or a monthly basis? Because, you know, a lot of CFO firms, they offer, you know, monthly monthly reporting and monthly review. Are So our standard engagement comes with three meetings per month, one strategy session where we're going through a full financial projection, financial statement review, and then we do what we call biweekly sync calls. And so in between those monthly strategy sessions, we're having these sync calls where it's a little bit more tactical. we're going through more ground level operational issues such as, let's say accounting, revenue recognition, maybe sales forecasting, just to get, I would say to deploy and hold accountable the actions that come out of that monthly strategy session. So it might be, hey, we have a cashflow issue, right? And we see that in the monthly strategy session, we capture that and we all agree this is a challenge over the next several months, we gotta figure this out, but we can't just, disappear for a month, peace out, we'll talk to you next month, hopefully it gets better. There's got to be some action around that to correct it. So it might be a pricing issue. Okay, well, if it's a pricing issue, then we got to make some change around pricing. How are we going to do that? Well, we might have to review your last set of estimates, we might have to understand what your current overhead application is, maybe come up with a new one based on where our projections are and what our costs are today versus what they were six months ago, right? So like, we need those couple extra meetings per month to make sure that we have boots on ground, so to speak, making changes required to That's a great strategy. I mean, three, basically three meetings a month. That's almost weekly, but not quite weekly. So that's perfect. You know, that's, you know, you have that monthly call and then you have the two biweekly sync. So I think that's perfect from just from my experience, like in terms of cadence of touch points Yeah, yeah. Well, what do you do with yours? Is that with your clients? Is Yeah, very similar, but mine's more weekly. It's generally a weekly call, right? Okay. So yeah, I do provide level of service to my clients where I'm touching base with them weekly, and I'm also connected with them on Slack. And so, you know, if they have a quick question, they'll just shoot it over. You know, they don't really abuse it, fortunately. I have had clients in the past, like when I first started, were a little bit more like, hey, I need you, like, on call for my questions. But I think my current set of clients that I work with are very respectful of boundaries and time.
• 19:29
  And so even with seeing them on Slack, it's like, oh, it's just a quick question here and there. And so, yeah, it's worked out Yeah, so you talked a little bit about your faith. I'm a Christian myself, and so I love talking with other business owners where their faith really informs their business, how they do business, why they started business, their purpose. So can you talk a little bit more about how being a faith-filled person has shaped how Sure. Yeah. So, I mean, as I mentioned, a big reason why I started the business was I really believe that, you know, it's a real call in my life. And there's a lot of purpose well beyond the business itself in starting a business. And I think one of the cool things that I've seen be true in the last four years is that business is such a great conduit for connecting to people. And when we talk about making an impact in business, what the heck does that mean? Well, let me be very specific about what I mean. And that to me is, how can I create or create an opportunity for life change within business? And like any business, we have the opportunity to have employees. We can treat them well. We can treat them and their families well, pay them well, provide benefits, provide them an opportunity to reach their God given potential to do the thing that they've been called to do. So that's been a huge I've seen that now numerous times over the last four years just become true. And I hope that that continues to to reach new levels.
• 21:15
  And I'm really excited about what that looks like. Then also from a client standpoint, I think what we do is awesome, right? As a fractional CFO, we get to serve people at the end of the day. In fact, our mission statement or purpose statement is so this is more of an internal statement than anything else, not necessarily for marketing purposes, but it's to experience the reward of helping people succeed both in life and business. So which is kind of neat, right?
• 21:43
  Like we get this we get this unique opportunity as a fractional CFO to when a business owner wins, they win at business, they win personally, they win relationally, they're better positioned to be a husband or wife to their spouse, a better father or mother to their children, a better employer to their employees. Our ability to make an impact is absolutely awesome. And the bigger the business gets, the more that web of impact grows.
• 22:14
  So I think that's, like a real God Paul in my life to make sure that I'm leading the organization to do more and more of that, both internally with our own team, but then also with our clients and their their touch points. Yeah, so so I think my faith has impacted the purpose, like the why behind the what, so to speak. You know, we've had the opportunity to to continue to do that. I'm really fortunate to see it firsthand. I don't take it for granted. I always thought when I started the business, man, this thing could collapse at any point. It's just a business. Although we're years into it and much, much larger today than when we first started, it's still just something that could be gone tomorrow. And at this point, what I recognize is that God has been the provider, will continue to be the provider, and I'm just a conduit for Yeah, well said. I really like that. And I also like that you touched on how business connects people and it's really about serving people, right? Because we're in the client service business, you and I, as fractional CFOs. And also, you know, serving clients, but also serving our employees, our contractors, right? You know, giving them a source of income, giving them work. So it's really a very relational business And I like how you touched on like, you know, the faith really informs the purpose for why you started your firm and what you're currently doing and that, you know, like the business keeps going because God allows it to, right? I think that's a great way to look at it and just being like a messenger, a conduit of serving others in the business that you're in and helping them understand the finances. That's a God-given skill that we have that experience in.
• 24:17
  And also, it really reminds me of this book I read by Simon Sinek.
• 24:20
  Actually, I'm currently rereading it. It's called Start With Why. I'm sure you've heard of it. Simon's very famous. But I was just recently reading that book, and it really goes back into the purpose of why you do what you do. All companies, whether you're Apple, you're Walmart, or you're a small mom-and-pop shop, you have some kind of purpose, and you gotta start with that in order to get somewhere that's significant, or doing Yeah, so I mentioned earlier that I'm currently writing my book called Riskworthy, and it's about decision-making for entrepreneurs, athletes, businesses. It's giving you a new decision-making framework. And I'm curious what risks you've taken recently, or when you first started your business, that was like a huge risk.
• 25:23
  And then as a result of taking that risk and the decisions you made, how did that impact you and did it lead Well, obviously, the idea of starting, not just the idea, but taking action on the idea of starting the business was a huge risk. And in 2021, when I really made that decision, I was 31 years old. At the time, I had four children. married, you know, mortgage, the whole thing, right? You know, we're in the middle of like, financial insecurity is not necessarily something you want, right? So making the decision to start a business obviously throws a wrench into that whole plan. But I really felt like, again, going back from a faith standpoint, you know, I kept getting reminded of this verse in, you know, Proverbs 3, verse 6, it says that, Acknowledge God, and He'll make your path straight. I kept thinking, you know, the verse before that says, Lean not on your own understanding, but in all your ways acknowledge Him, or God, and He'll make your path straight. And I just really got a sense that if I kept professing the name of Jesus Christ as Lord, not only is that like salvation for me, but it's also God protecting me and God making my path straight. So, yes, it was risky inherently, right?
• 26:54
  The outcome was unknown, but I felt a real peace about pursuing that risk or taking that path because I felt like, man, if I actually just keep, if I keep the name of Jesus first, profess his name, Everything would be all right. God would provide a way. I didn't necessarily know what that meant. I didn't know what the outcome was going to be, obviously. So I would say that would be one risk that I took and maybe how some of the things I thought about as I was processing that risk.
• 27:25
  And then, you know, I think another one that is worth mentioning, you know, we're all talking about not just starting a business, but scaling it, which means when you start the business and even it's working, doesn't mean that the risk is over, right? Because the reality is in order to scale and grow, we have to reinvest profit and cashflow back into the business that we don't necessarily get to reap that reward necessarily today. We got to defer that gratification at some point in the future. And I can tell you, four years into this, that hasn't stopped yet. I don't know that it ever will as we continue to grow the business. So I would say that risk of reinvesting and reinvesting, and I just mentioned earlier in this podcast, we're going to hire two more CFOs. Well, we could not do that. And just that's a lot of capital to put at risk, right? We could take that out of the business. I could use it for X, Y, or Z, or we could do something safer. But I just feel like as an entrepreneur, and this is maybe more of the hard wiring of our brains, that I'm willing to put it on the line constantly. I feel like all the chips are always the center of the table. And at this point in my life, I'm not sure that I need to pull Great. Yeah, and I'm glad you also brought in a Bible verse into that, Proverbs 3, 5 to 6. That is a great verse, and I love that you brought it into this RISC conversation, right? Yeah. We're going to do a round of just questions just to understand more of who you are.
• 29:06
  What is one habit that keeps you grounded in faith and I mean, it's a daily habit. It's just waking up and reading the Bible every day. It connects you, obviously, back to the Word of God and God himself. And I think it keeps you humble because you continuously realize the gap and you get appreciation for what sin you've been saved from. So I think that's powerful.
• 29:39
  So I would say every day, read the Bible. Easy. Give What is your favorite workout or movement that always gets you energized? I'm assuming you still have time to In fact, on my calendar, immediately following this podcast is an hour and a half workout. So, yeah, big proponent of resistance training for me. But favorite? Oh my gosh.
• 30:08
  I'll tell you, maybe a better way to answer this is my least favorite. I hate squatting. And I squat on Mondays intentionally because I feel like mentally if I cross that hurdle that I did my squat for the week, my squat routine, that everything else is easier. Like, I can deadlift, I can bench press, I can do my pulls, it doesn't matter. But if I got my squat out of the way, literally Okay. Do you have a gym that you go to every day, every Yeah, I thought about doing that, but you know, right now have members memberships to two different gyms in my neighborhood, which is just a five minute drive away. So I was like, OK, forget the home gym. I'm just going to go out, go out more because I work. I work from home. I have a home office and so I was like, I might as well just, One gym is Orange Theory Fitness, where they're more focused on high interval intensity training. I like it for the treadmill. It keeps me accountable on the treadmill. Because if I was working out at home, I might be very lazy, not really pushing myself. But because I'm surrounded by other people that are actually pushing themselves, and I have the coach behind me, it keeps me more accountable. Then the other gym I go to is Bar 3, which is more of a women's-focused gym. They're more of a low-impact workout, but it's still great. They also have resistance training, which I love those classes. They're actually next to each other on the same street. For me, it's good variety for me because it's like, okay, one's super intense with cardio treadmill and then the other one is a little bit Yeah. Okay, so I was going to ask you your favorite book, but you already mentioned that you read the Bible every day, so I'm going to assume that that's your favorite book. But if you had to pick a non-biblical Yeah, so the book that I'm reading right now that's really got my gears turning, and I'm not finished yet, I'm about three quarters of the way through, is The Okay. Yeah, fantastic book. I'm reading it slow because I'm really processing as I'm reading. Yeah.
• 32:42
  But the idea of like setting the floor or raising the floor, I should say, has really got my got my attention. And I'm actively evaluating how that needs to be true in my life. Like where where do I need to raise the floor and how how does that look? What does it translate to?
• 33:00
  So I would say that right now, I would say that's probably top top Okay, great. Yeah, I love Benjamin Hardy books, like I've read all of his books, I think, maybe except for maybe one of them. But every every one of them that he has, like very entrepreneurial, very future oriented.
• 33:18
  Yeah. And you know, he's an organizational psychologist. So he, he knows a lot about how to systematically approach your goals. Yes. And so yes, his books are awesome.
• 33:30
  Last question. As a resident I do, and they're not Philadelphia sports teams. So I'm a big baseball fan, and I'm a diehard New All right. Well, yeah, I just watched the World Series. Well, it was just this past weekend. Yeah. Amazing. Amazing series. Congratulations to the Dodgers. Yeah. But yeah, it was baseball is definitely a fun sport to All right, so how can people find you and your team Two ways, LinkedIn is always good and BackboneCFO.com.
• 34:20
  But if you search Backbone CFO in either, you'll find it some Awesome. Well, we're definitely going to link that into the show notes so that people can connect with you. Jim, thank you so much for your time and for being here, sharing your expertise. And thank you everyone for tuning in to another episode of Built by Margin.
• 34:39
  Don't forget to subscribe and share. Until next time, keep building your business with intention and margin. Thanks for tuning in to Built by Margin. If you're ready to turn insights into income, subscribe and join me each week as we break down the numbers behind smart business growth. I'm