Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / Episode 243 What You Need to Know About Fractional CFOs with Carla Titus

Transcript

Episode 243 What You Need to Know About Fractional CFOs with Carla Titus · Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love

• 0:01
  Intro: Welcome to the Wealthy Woman Lawyer Podcast. What
• 0:05
  Carla: if
• 0:05
  Intro: you could hang out with successful women lawyers, ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more. Then take an insight or two to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve, and will pay you on time, and create a profitable, sustainable firm you love. Devina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams. Now here's to Vina.
• 0:51
  Davina: Hi, everyone, and welcome back to the Wealthy Woman Lawyer Podcast. I'm your host, Vina Frederick, and my guest today is Carla Titus, founder and CEO of Wealth and Worth Within. Carla is a fractional CFO who provides financial consulting and advisory services to business owners. She's a finance expert with more than seventeen years of combined corporate financial planning, analysis, strategy, and established business consulting experience. Her priorities for her clients range from growing profits, having cash in the bank, and paying themselves so well that they can build personal wealth.
• 1:26
  So please join me in welcoming Carla. So hi, Carla. Welcome. It's good to have you here.
• 1:31
  Carla: Thank you for having me. I'm excited for today's conversation.
• 1:34
  Davina: Oh, me too. So I love to talk business and I love to talk unlike most lawyers, I love to talk numbers. So I'm really glad you're here because you are a fractional, CFO. Right?
• 1:46
  Carla: That's correct.
• 1:47
  Davina: All right. So why don't you tell us what that is? Because some people may not know exactly what that is. So why don't you tell us?
• 1:54
  Carla: Yeah. I forget sometimes living in the world of finance for so long that most people maybe have no idea what we do or who we are. So CFO stands for chief financial officer. And a lot of the big companies out there, as you know, have the role of the CEO, the Chief Executive Officer, and a companion to that is the Chief Financial Officer role where their job is to ensure that we're looking at the financial health of the business, monitoring performance from a financial perspective, maybe helping with pricing strategy and launch of new products, making sure that the margins on offers are accurate and correct for the type of profitability they're trying to hit, And, making sure that, you know, the owner is compensated fairly. A lot of things that fall into the forward looking and financial planning side of a business.
• 2:40
  And I think often what happens is a lot of the small businesses don't even know that this is accessible or a role available to them at a fraction of the cost. And that's where the fractional piece of this comes into play, is you get to work with a expert CFO at the right level with all the knowledge, but you don't get to pay for their full salary and benefits because that would be very expensive. And you do not need someone full time, right? Your business is growing. You might need access to the expertise without the price tag that comes along with it.
• 3:11
  And also there's not enough scope for a full time person to be in the role anyway. So you just need them. You need them available. You need them on retainer. Just like when you need a lawyer and you need to call them because things happen in life.
• 3:21
  Well, when in business, you know, money questions will come. So you need to be able to call someone. And times your bookkeeper accountant are not interested in providing that service at that level. Maybe they don't have the expertise. Therefore, that CFO role exists to help you with some of those questions.
• 3:36
  Davina: Good. Good. So I think I wanna go a little bit deeper into that, which is I think a lot of people might say, well, I have a bookkeeper or I have a CPA, particularly CPA. Do I need a fractional CFO if I have those people on my team already and maybe a personal financial adviser? It kind of it don't go a little deeper into the differences between those roles.
• 4:01
  Carla: Yeah. So your bookkeeper is in charge of making sure that the transactions you have in your business are categorized correctly so you can have the financial foundation to understand what's happening in the business, its current and past. Your accountant is gonna take some of that information and turn it into a tax return and make sure that your tax are compliant and that you're following the rules and paying what you need to pay in this. Ideally, if they're a little bit, you know, more proactive at their job, they might be doing some tax planning for you to make sure that you're optimizing for tax savings and other things that you might take advantage of legally in your business. But they're not the ones that are going to put a financial plan in place or a budget or help you allocate the resources of your business in the right places by making those decisions ahead of time.
• 4:48
  And what I mean by that is business owners mostly will use their gut or their intuition or their past experience maybe to make decisions in their business. They're not looking at the data. They have, you know, maybe some thoughts that they wanna experiment with things and try it out and see if it works. Instead, what we're saying is, as a CFO, the role that we play is to rein in the financial analysis, go through the scenario planning, and look at the options before you make a decision so that when you do make the decision, you know what are the intended consequences, maybe some unintended consequences, some risk, some opportunities that you can, you know, bring to the surface when making that decision, again, before it happens so that you don't get caught after the fact dealing with whatever the repercussions of your decision aware, which is a lot of business owners out there. That's the place they operate at, which is fine.
• 5:38
  Like, there's nothing wrong with that, but that's gotten you this far. And then maybe going forward, you want a little bit more insight and let the data do the hard work for you. And then layer in your intuition, your experience, and best, you know, knowledge to make that decision much stronger.
• 5:53
  Davina: Right. Right. I I've speak with a lot of women law firm owners on a regular basis because of the nature of what I do. And I know for a lot of business owners, not just law firm owners, that money is, dealing with the money piece of the business is very uncomfortable. And a lot of times it's because we bring our personal money stories into our business and we sort of create recreate trauma for ourselves in our business.
• 6:23
  And sometimes that shows up in avoidance where we avoid looking at the numbers because we don't really understand what we're doing or that kind of thing. What what do you do to help business owners sort of overcome that fear and avoidance around looking at their money? Because I think sometimes they just think, well, I just won't think about it and it will come and I won't have to worry about it. And I get my bookkeeper to do it. Then I get my accountant to do my taxes.
• 6:52
  What do you think advantage do you bring in sort of helping them overcome that?
• 6:58
  Carla: Well, there's a lot of aspects here at play. One is acknowledging the fact that we do bring our personal money management beliefs or traumas from our personal life into our business. So however you can handle your personal finances, it's most likely how you're handling your business finances. Whether it's good or bad, doesn't matter. It's just how it is, right?
• 7:15
  And so acknowledging the fact that that happens is, you know, part of the work we do and like not judging our clients for where they're at. Most of them come to us because they know they shy away from the numbers because they tend to be more on the letter side of things and they really don't like numbers. And that's totally okay because that's why we're here is because we like the numbers and we know numbers. Now the way we help our clients kinda overcome some of those issues is by presenting the numbers in a way that really resonate with them, and that could be a visual, you know, representation. It could be we narrate for them what the numbers are telling us in a storytelling format.
• 7:51
  So now we're making sense of what's happening in the business in a way that they can understand it. And now we feel like they're much more engaged in the conversation because we're just talking about their business and what's happening and the trends we're seeing. And now they're like, oh, yeah. Let me tell you all about this, and I have this issue. And we get them engaged in just talking about it to get started.
• 8:10
  Then we acknowledge the traumas, work through some of them. Sometimes we have to reframe some of the traumas we had or some of the issues we've had with money in the past to create a different way of thinking about it going forward. And just having a gentle approach with that, because I find that a lot of people don't really get that these are deep seated issues that maybe people have had with money that really shape, you know, the way that they think about it. Maybe they hoard it. Maybe they just spend it all the time.
• 8:36
  And not knowing where those come from is not gonna help a client make any progress. So just being gentle with like, hey, we understand. We've been here. We've helped clients with it. And then here's another way we can start to think about it and then just gently leading them through what that reframe might be, helping them understand what's possible.
• 8:54
  I find that when we go to the forecasting or possibility thinking of their business, they get really excited. They're like, Oh, I know exactly what I want my business to be in three years or five years or even like a year from now. And I have these goals and dreams, but I'm not sure how to even talk about them or achieve them. And that's where the financial plan really comes into play to give that clarity, to give you the right direction to be able to then achieve those goals. And so it it's a gentle reframe, and we get them there through the financial clarity plan that we help them put together.
• 9:21
  Davina: Yeah. Yeah. Because I think there's a lot sometimes there's embarrassment that people have. They don't want people to see their messy financial life or their messy books. They're, just in general, I've talked to people that they don't wanna bring another lawyer in because they don't want them to see their messy systems or whatever.
• 9:38
  So people really judge themselves harshly, and they don't realize the role of other people is to help them, not to judge them. And if they open themselves up to that, you know, it can be it can make a huge difference. I wanna you mentioned, sort of storytelling. And I think that's a really interesting concept because I'm always saying our financial our financials are like a GPS. They're the thing that gives us that information that guides us to the destination that we wanna have.
• 10:08
  And I think most people struggle to read and interpret because nobody's taught us to do that. You know, you come out of law school, nobody taught you how to run a business. And so unless you have a background in that in accounting and your undergrad or something, you wouldn't sort of know how to interpret financials. Tell me some of the stories that financials can tell us about our business.
• 10:32
  Carla: So I'll just go back to a point you made really quick, and that is the messier, the better. We love it. We just thrive in, like, making organization happen out of chaos when it comes to numbers because it's so much easier for us. Right? So what we're good at.
• 10:46
  And then to your point around business owners not necessarily knowing how to run a business or being good at this, nobody taught you. So how should you know? Right? So if will you be a lawyer without a lawyer degree? No.
• 10:57
  Like, without a law degree, like, that wouldn't happen. So the expectation is unrealistic. And just because you're a lawyer doesn't mean you know how to run a business. So there's that. To answer your question around storytelling, the trends in the data are telling a story.
• 11:11
  And so what we're trying to do is we can see it in the numbers. And so we're pulling those trends to say, hey, you know, last year, your marketing budget was half as much as this year, and then this year, you're on track to do double revenue. Why is that? Because the marketing budget is double what it was before. And, you know, we can we are able to make some of those connections.
• 11:29
  And a little bit of it is also just talking to the business owner about what's happening and what we're seeing. They're like, well, my revenue is not growing or I haven't gotten any more clients. And we look at the marketing allocation and it's half of what it was last year. We're like, I wonder why that is. And then we can tell them, well, we notice there is, you know, the wrong allocation happening and therefore you can expect the results to be less than they were before.
• 11:52
  So we're able to point things like that that are, again, neutral. It's not about judging it. It's just about understanding what is happening and where are some of the pain points and where we can refer to the data to tell us, oh, we see the issue. Now we know how to fix it. And it's all about making progress.
• 12:06
  Like you said, people don't always love their numbers because maybe it's not as great as they want it to be, or maybe they're not making as much money as they want to be making. But if you don't understand your starting point, how would you know if you're making progress? So it's not about the judging part, it's about what progress are we making? What is our start point? What is our next milestone to the next mark?
• 12:27
  Davina: Yeah. And I think it's really about interpreting the data that's there because I think certainly we see this in something like SEO or Google or Google, whatever, there's all this data. And then we hire people to run our ads. And then we look at the data and we don't know what it means. And unless somebody's there to interpret for us and help us see what it means, then that can be okay.
• 12:51
  And and you need somebody to interpret that for you. You can't it's not something that you would know how to interpret unless you understand it. And so I think that's really when I think of financials, I think a lot of people don't they understand these are my numbers. Like, people business owners are notorious for saying, oh, I need to cut out these expenses because these expenses but looking at the whole picture and saying, well, if we pour more into this, we're gonna get more out of this and looking at return on investment as opposed to that. And so you guys really help provide a, you're there as interpreters, right, in in their with their financials and telling them about the health of their business based on what you're seeing.
• 13:33
  Carla: Yeah. Sometimes we even become the liaison between the accountant and the client because we can speak both accountant and English, and we're able to help them, you know, kind of accomplish the same goal of like making sure that they're working on the right things and really understanding what the client's needs are. But yeah, the data and the analytics, not everybody's good at that. Nobody should expect to be good at it if this is not their career. And if we can augment the team by bringing in a layer of insights that are not there today.
• 14:01
  But then what you said around the allocation. Sometimes what I see business owners doing is they say, well, I have to cut costs. So they go cut costs, and then what they unintentional impact to their revenue because they didn't re really understand the connection between what they were, you know, allocating money to and that outcome, which was revenue. And so they end up cutting their business. The revenue goes down and they're wondering what happened?
• 14:22
  Why did this, you know, go that way? I that wasn't the intention. And so we wanna analyze some of those decisions before made so that we know, oh, that actually has revenue impact. We might not want to cut that one. We might want to go pick a different category or go see how do we become more efficient or save some time or save money in other ways rather than cutting.
• 14:43
  And like I'm all for like the let's just make more money camp. A lot of things get solved in life by making more money. So why don't we just focus on that and see what we could do by pushing it rather than trying to nickel and dime our way to profit? There's only so much to go around. If you're not thinking about growing, most likely, you will be behind every single year.
• 15:01
  And even if it's a small amount of growth, you always should be striving for some growth in your company even to just, you know, stay status quo.
• 15:09
  Davina: Yeah. You and I are totally on the same page with that. I'm I absolutely have the same beliefs. Tell me what your is there a a certain well, before we get to that, I wanna ask you about paying yourself. Do you see a lot of business owners who come to you and maybe they're not paying themselves or they're not paying themselves enough because they don't understand what's going on in their in their business financials?
• 15:37
  Carla: Is that something you encounter? Very common problem. No matter the size of business, by the way. This is just across the board. And we've worked with, you know, businesses from startup all the way to, like, multiple seven figures, eight figures, and it's still the same problem.
• 15:50
  And the reason that happens is because the habit or discipline of paying yourself wasn't there to start with. And also you weren't making sure that you were a priority in your business. And this happens. It's often the case that business owners are trying to reinvest back. They're trying to drive growth.
• 16:04
  And in that, they overinvest in the business, leaving not much left them to be compensated. And, you know, you get to make those decisions. It is your business. But our recommendation is that we gotta get you to a market rate. And that might not happen right away.
• 16:18
  It might take some time. But if you're doing this job and you left a good paying lawyer job behind, my thought is that you should also be compensated the same way in your business. And if you're not now, let's put a plan in place to figure out when that is possible, when the numbers tell us that that is going to be supported. And that is not something that puts you in an upside down position in your business either, because you know, that business can only give you as much as it generates. But having a plan and the clarity on making progress towards getting to that market rate, it's gonna be key because you don't become resentful of your business if you pay yourself well.
• 16:53
  You also wanna put in the time and effort it takes to because you know, oh, I at least I get paid. So this is great. And again, just getting started, you know, we've all been through it. Right? We we were not all a market rate.
• 17:03
  And then eventually we had a plan that said, yep, we're there now and we can do that. But it has to be intentional. And I think what I see often with business owners is they put themselves last. They created a job where they pay everyone else but themselves. And then they're resentful and they just wanna quit and, like, close it all down and move on.
• 17:18
  Because, you know, you're doing all this work, all these hours, for what? And I'm a big believer that businesses should be fueling your personal wealth building goals. And if it's not, we need to go do something different and adjust the plan to make sure that you are included in that so that you can, you know, get what you need. And I'm not talking just compensation pay only, like bonuses, health insurance benefits, like a Dividends. Total comp Profit.
• 17:43
  Dividend. Exactly. All the things that make it a very appealing package, you know, complete package for you to take away from your business as a benefit for all the work and effort you're putting in.
• 17:54
  Davina: Right. Right. What I see a lot of business owners do is, take money out. Just take money out of the business for personal things and not in an organized way or in a in a in a proper way of sort of, like, paying yourself a paycheck or paying yourself a structured draw or bonus. Do you see that as I see you're smiling, so I do you see that as well?
• 18:15
  Carla: Of your business, let's just say, like, $5,000 every month. They're like, what? And they seem shocked. And I'm like, but you withdraw the thing. So, like, how how is this not you know?
• 18:26
  And they didn't realize, like, how much they were taking. And it's not that the business couldn't support it, but it was just more I did the math and showed them what it was. And they're like, oh. And so we say, why don't we just put you on a $5,000 a month payment or a $10,000 a month payment so that we don't have to nickel and dime the business for every little expense you have? But instead, we do it in a structured way where it's budgeted for, it's anticipated.
• 18:49
  We know the business can support it. And then over time, the idea is to grow it as well. So, like, making sure that that number continues to be adjusted.
• 18:56
  Davina: And your accountant will like you better and the IRS will like that better. And there's a lot of things that will come out of that. Tell me what you you teach your a a five step framework in in use growing your firm using proper financial practices. Can you share a little bit? What can you tell us about that framework?
• 19:21
  Carla: What's Yeah. We developed this over the years. We don't have a sexy name for it yet. I definitely take in recommendations. So if anyone listening to this has a recommendation, let me know.
• 19:31
  But what we find is in going back to seeing the results we've gotten for clients in the past, we realized that there was a very concrete set of steps that we were taking with them to get clarity on their financial situation and make progress towards achieving their goals. It starts with cash because if you don't have cash, you don't have a business. And we have to be very honest about this because I think sometimes, you know, it's great to have dreams and aspirations, but if cash is not coming through the door into your bank account, you won't be here long. So making sure that that's happening. Right?
• 20:00
  The cash flow you have a cash flow forecast that maybe you understand. Are payments actually being collected? This is a big one that kind of shocks people. They're like, but I made $20,000 this month. And like, do you have $20,000 in the bank?
• 20:12
  And they're like, no. I'm not sure why that is. And it's because, well, people owe you money. They haven't paid you. They were late.
• 20:18
  I you know, whatever situation. So reconciling that is key, and that will show in your bookkeeping work, of course. Then making sure that you have capacity planning. How many clients can you serve? And if you haven't thought about your hiring plan for how do you expand capacity, if you're doing all the marketing things that are bringing leads, when do you know you're full?
• 20:36
  When do you know you're 80% before you need to go hire someone else? If that is not, you know, clear clear, then it's gonna be really hard for you to scale beyond yourself. And then if you, start thinking about, planning, that's the next piece. Right? We need to have goals.
• 20:52
  We need to know where we're heading, that GPS that you talked about, Davinis, exactly right. We don't have a GPS, yeah, you'll eventually get to wherever your destination is, but you probably have a lot of rooks along the way. You might run out of gas. Your tire might go flat. You might have to call someone to, you know, get you there.
• 21:08
  Like, we don't want that. We want a leisure ride all the way to the destination point, whatever that is, because you have a solid plan and directions and good markers to tell you, oh, we're good. We got gas. The tires are not going flat anytime soon. Just listen to your music and then go in your leisurely ride.
• 21:24
  That's what financial planning does for your business. And then also lets you adjust it. You know, if the road is closed, you wanna take a right turn to get around it, you can too, because we know what the plan is. And then we focus on pay, like what we just were talking about. Right?
• 21:38
  Business owners getting paid the right wage, Everyone getting compensated fairly as well for the work that they're doing for their business. As you continue to hire, this will be a very, critical decision you'll need to be making on how much you're paying people that you're bringing on. How much can you afford to pay people? And that's a big one. We get asked that question all the time.
• 21:55
  And then last but not least, and the most important one is profit. And I think this is the one that doesn't get talked about often. Everybody's like, oh, I make this much in revenue, top line, top line, everything. And I have a question for those people. How much do you get to keep?
• 22:09
  What is your profit margin? Because they probably will answer, oh, it's a breakeven business. I don't make any money off of this. I make a million to spend a million. And, like, I don't want that business.
• 22:19
  Thank you, but not thank you. I'd rather have a business that's way smaller or larger, but that is making a profit. So a profit percentage is always key for us to make sure that our clients have something left after they pay themselves, after they pay their team and all their expenses. And they're either pocketing that or reinvesting in the business or taking it out as a dividend, whatever they decide to do with that, it it's like our wiggle room too. So if anything goes sideways in the business, we have room for error.
• 22:47
  And that's the thing that people don't realize that striving for profit and not always having a loss, it's going to give you that breathing room and, you know, I ideally, some wiggle room to make some mistakes because we know mistakes happen, and things happen all the time in business. And if you're not prepared with a good cash runway, because we've built that over time, point number one, then it's gonna be harder, to be in business long term.
• 23:10
  Davina: I wanna ask you some percentages, and I know this is different for everybody. So this I know this is a general kind of thing, but are the kind of things that people often ask will ask me is, like, what is a good percentage for a marketing budget? For example, do you have Yeah. Guidelines like that for people when you're looking at things?
• 23:31
  Carla: We do roughly give some recommendations. Obviously, it's very industry dependent. It's very much, size of business dependent. What we see often is an allocation between 25% of revenue going towards marketing. And how you spend those marketing dollars and what you're doing, it's going to be very specific to your business needs and it needs to be very strategically thought through.
• 23:54
  That's where we don't get involved in what those are, but we do bring experts to help us figure that out for clients to make sure it's the right strategy. Because I think there's a lot of business spending, a lot of money on marketing, not getting the ROI back to your point, Davina, on, like, return on investment because they can't measure it or they're not seeing the results and they're too shy to change anything or hold people accountable for results. And their problem is the world, but then nothing happens. Right? And so that's where we gotta go back to the data analytics again to understand.
• 24:20
  And if not, do we need to change it? And what else are we willing to try and making sure that that allocation goes to good use? Because ideally, it should be growing your revenue. And if it's not, we have a different problem we need to Now go growing businesses might be investing up to 12 to 15% in marketing. I've seen those allocations for explosive growth and it has served the business well, But, you know, that is potentially temporary.
• 24:44
  We don't wanna consistently be there unless you're consistently growing and seeing the results and scaling and it's, you know, working. But it's, you know, it's gotta serve a purpose. And the purpose is to generate new leads, to generate more revenue for you and consistently be doing the work for you. And if that is not happening, then I'd be very hesitant to wanna invest at that level.
• 25:04
  Davina: Yeah. I I tell people 10% usually is kind of like, because most of the time when I'm working with women law firm owners, they're not spending near enough on marketing. They're because they don't really have a good marketing strategy. To your point, I do think that you have to have the right strategy. Certainly the the issue with marketing marketing is a little bit of a gamble because you have to try something.
• 25:29
  And there's a lot of different options out there, and it's not always going to pay off. But, you know, you can't shrink back and not do anything. You have to try some things. But that's where the data piece comes in and look at it. What what return are we getting on this and really paying attention to that?
• 25:45
  The other one is profit. So what percentage for a healthy business, what is like the minimum percentage of profit you wanna see in a healthy business?
• 25:57
  Carla: Good question. And I'll just do one more point on marketing really quick. Okay. You gotta have to know how to differentiate between short term marketing strategies and long term marketing strategies. Because I think people are investing in the long term thinking it's gonna work for them today and not realizing that is a long term, long play that requires some time for it to work.
• 26:14
  Davina: And patience,
• 26:16
  Carla: And patience, yes. But we always measure results regardless. To your question on profit, what I see often is we try to strive between 515% profit, and this is off of revenue. So when you're doing the math, you know, whatever profit number you have divided by your revenue, that's what you're trying to aim for. And the reason we do that, because that is what a sustainable long term business will be able to generate.
• 26:39
  The risk gets reinvested back in the business. Now, if you're already a sustainable business and you're trying to get yourself paid more, we want you to aim for a much higher profit. For service based businesses that maybe only have a few paralegals and maybe a few attorneys, you can be as high as a 40 to 50% profit in your service business because you have low overhead and, and maybe you don't have an office yet, maybe you do. Just depends on some variables.
• 27:06
  Davina: So lot of people work virtually now.
• 27:08
  Carla: Yeah. When you don't have an office and you're fully virtual, that might actually lower your cost to a point where you can afford to make that higher profit. But again, it's all intentional decision making and it's crafting a plan around the profits that you want to see. But, know, more established law firms obviously have a building that they're paying for and they're renting offices and there's like staff besides the paralegals, there's maybe some admin staff and then also a few more attorneys that, you know, are commanding higher rates. And at times it's just hard to find the room for, more profit.
• 27:39
  But again, sustainable businesses can do it long term with five to 15% profit. And then, you know, businesses that don't have that extra overhead can be as high as 40 to 50%, which what we've seen, you know, clients be able to shift to if they decide that virtual was the right approach for them. Yeah. Right. Right.
• 27:59
  Davina: Yeah. I I always, I focus when I'm, in my marketing on revenue. And the reason I focus on revenue is because like you, I'm a big believer, the more cash we have coming in the business, the more we're gonna be able to reinvest in the business and build a profitable, sustainable long term business. So I focus on revenue because I, a lot of times when I'm meeting law firm owners, they don't, they haven't gotten their revenue where it needs to be to make the investments they need to make to create the capacity to grow. And so I focus on revenue is because I think you have to have cash in your business to be able to grow your business, to invest in creating a capacity.
• 28:37
  So when I'm marketing my services and I'm talking about growing your law firm, I focus on revenue. But behind the scenes, we're also looking at profits and profitability. But one of the things I tell people is that your profits may vary based on your personal goals or your tax strategy or something like that. So going by profit, it's such an individualized thing because you may say, you know, some accountants are very aggressive and say, we don't wanna show profit. And so we want to spend through the business in any way that we can and and and we do the tax deferred things.
• 29:14
  And then other people are like, I want more profits because I'm planning on buying a house this year and I need my books to show that I have more pro so I do think profit is a very individualized thing. It's hard to sort of nail down exactly, you know, what's a good profit, bad profit. A lot of that depends on your personal goals. You see that with your clients as well?
• 29:32
  Carla: Yeah, definitely. And we take the tax piece into account, of course, because, you know, we have some unique situations with certain clients that we have to layer in some of the tax strategy. That's why I kind of brought that up at the beginning is that we're very aware of the tax situation our clients are in, how can we help them? And if there's reasons why we don't want to show profit or we do want to show profit. And the biggest thing I see is that people pretend like profit is not important and they want to call like reinvesting back in their business as the main priority.
• 30:01
  So therefore they drain the profit and they show nothing for it. And one day something happens to them and they need to sell the business tomorrow and their financials look like terrible. Right? And so nobody wants to buy that business. They can't get out, something happens.
• 30:13
  So we just wanna make sure that we are doing the right financial metrics for the client's needs. And at the same time, weighing that with what is a sustainable long term, you know, business has to do in profit and making sure that they're optimized for the tax side of it, that they're optimized for their personal financial goals, and that the business is doing what they needed to do for them in their current situation. So a lot of the work that we do is very personalized to our clients' needs. Some of our clients are investing in buying a building instead of renting. We wanna make sure that the business can afford to do that and that they're able to finance that.
• 30:47
  And in order to do that, they need to show healthy financials for the business to be able to take a loan out for, you know, 1,000,000 for a building. So it's keeping that in mind and working to the plan to make sure it hits the mark is going to be a key aspect of what we do. So that's why we try to shy away from blind advice on just, here's the percentages, and this is what you should do.
• 31:05
  Davina: Like, you
• 31:06
  Carla: know, hear a lot about profit first, and I think a lot of people use that as a framework, but I don't think they're using it in the way that they should. And we tried to come and reframe some of that to say, okay. What are we trying to accomplish? Let's work with the end goal in mind and work backwards from that to really get a financial plan that really makes sense for you and your goals.
• 31:24
  Davina: Yeah. I have a whole beef with profit first there. So I like I understand his concept. I think there's some good things in it, but I but I don't think the structure is right, especially for pass through entities. And so that's another podcast for another day, but I definitely there's definitely some holes in the idea of taking a profit right when you start your business.
• 31:43
  It just really isn't. There isn't it's some they're false profits. They're not real profits. And that's my that's kind of my beef. But we'll we'll we'll leave that.
• 31:52
  We don't
• 31:52
  Carla: have to go down that rabbit hole, but next episode.
• 31:56
  Davina: What do you see is kind of the biggest mistake or biggest mistakes that you sort of see, small business owner, service based businesses like law firms, make with their financials in their business? What are some things that kind of jump out that you or common for you to see? Well, a big
• 32:17
  Carla: one is procrastination because we're all busy. We wanna go be lawyers. We don't wanna be accountants or finance people in our business. So bookkeeping is not a priority, but that is a foundation of everything we do. Right?
• 32:28
  I mean, it will come due at tax time. We don't wanna have to do twelve months worth of bookkeeping at a time. And we do provide that service because we see a lot of clients struggle with keeping up with it. They say, oh, I'll get to it. I'll there.
• 32:40
  A month goes by. Two months go by. Before they know it, they're twelve months, they have to figure out what they did in the business the last twelve months. And that is really painful. So let's avoid boogiebing cleanup bills.
• 32:49
  You know, outsource early. It's a cheap enough function. You as a lawyer have a higher billable rate than, you know, your bookkeeper does. Go do that. Let them handle what they're good at.
• 33:01
  Right? So outsource early, delegate that out. It's like a foundational piece in your business that is affordable. So go ahead and get rid of it. You're better off outside of QuickBooks.
• 33:10
  And trust me, we as professionals prefer that you do not touch it. So let us do our job, get you out of there, go build more hours. That's what you're good at. Let's have you do that. And then the procrastination piece just comes into play with everything.
• 33:23
  Right? I'll get to a budget. I'll figure it out. I'll do the pricing strategy. I'll get to the And they're busy business owners.
• 33:29
  Why should they have to make the time to sit down and do it? Now, we do a lot of that work for them and take carry the load of leading that. We're not letting them off the hook, but at least we're taking care of the work, which is what they don't have time for. And so when you get to a point in your law practice where you are just having so much work in demand for your services and you're not sure what you're doing, what goals you're trying to achieve, we can come in and help you craft those and take that off your place so you can go do more of those billable hours. Then stop the procrastination because that's just gonna get you farther behind.
• 34:00
  Then you're gonna spend hours with your accountant mad at you because you didn't do the work that you needed to do. You don't understand what your goals are for this year. They can't give you estimated taxes. They can't guide you or provide you that insight how to save for taxes if you don't even have numbers to give them. So this is a piece where, you know, we're all working together.
• 34:17
  We're managing maybe your bookkeeping team or your accounting team to help you also take that off your plate. If you don't enjoy managing those type of functions, you shouldn't have to. You can go do more of the things that you enjoy. And that's how our job is to get you back to doing the things that you're good at and that you enjoy in your business rather than the minutiae work that needs to get done for you.
• 34:36
  Davina: Right. Is there I know that you said you work with startups and you work with 7 and 8 figure businesses, but from a business growth standpoint, is there a certain, sort of tipping point where a business owner might it might be a good time to bring in fractional services, like fractional CFO or fractional marketing? Because I don't see that as a right out of the gate thing. I think there's a I think there's a period of time where business owners need to be focused on a lot of things, and hiring the bookkeeper is definitely something. But a CFO is a C suite executive.
• 35:16
  It's a different level. So what do you sort of what at what point do you think people should be in their business maybe revenue wise or size wise or something where this is something that they need to start thinking about?
• 35:28
  Carla: Yeah. And you touched on it. So we work with different levels in different ways. And so when you're just getting started and you don't even know what you're doing, how you're pricing, what are you offering, that's when you could engage as a one time project and for support to access the expertise without the ongoing cost because you just don't have it to have someone on retainer yet and you don't need it. Then at around the 6 figure mark is when we want you to outsource your bookkeeping because you're better off billing hours than doing your own.
• 35:54
  Or even at the beginning, if you're like, you know what? I just don't want to deal with this. Let someone come set it up for me. And we've done this for our law firm partners that just need the setup process and the monthly ongoing support, and they are just free from that and not have to worry about it. And then when we see them scaling to, like, half a million to a million, they really are gonna need some of that fractional marketing support because they're gonna need to know how to scale and how to continue to sell their services in the right way, strategically speaking.
• 36:20
  And they might come to us for, like, a one time plan per year where they're like, I need to know what my goals are. I need to project it out. I don't wanna do it. Can someone please help me? And we're able to engage with them on that one time project basis as well.
• 36:31
  And where we see the complexity that requires more of the ongoing CFO handholding in the business is around 7 figures and scaling to 8 because that's when there's more to manage. There's more moving pieces. There is a comprehensive financial picture that needs to be put together and aligned to the strategy of the business in order for you to be able to achieve the goals. And it might have superseded what you know about finance or accounting. If you even know any of those functions maybe through, you know, going through school or why not, or your own personal journey of educating yourself, that's when the expertise is really going to come in handy because we can save you a lot of pain, a lot of risk, and make sure that you are on track to meeting those goals and navigating your way through what are the issues the business is coming up with.
• 37:16
  And as you know, everything touches money, from hiring people to like making sure that work is delivered, like the, you know, the efficiency, the systems, everything is going to touch money and you're going to have a lot of questions. And we want you to have someone to go to on retainer like you would for your own services and your clients can call you and say, hey. I have this issue. How do I handle it?
• 37:36
  Davina: Right. Right. Alright. So if somebody wants to find out I wanna be clear to you. You offer CFO services, but you also offer bookkeeping services for anybody who didn't get that.
• 37:44
  So at an earlier stage, that may be the way to start the relationship with you is is look at you for bookkeeping services. So tell us how we can find out more about your company and connect with you if we wanna connect with you.
• 38:00
  Carla: Yeah. We would love for you to come check out our website at wealthworthwithin.com. We have a book a call now if you're ready to hire a fractional CFO. If you want to follow along with our CFO thought leadership, we're always dropping newsletter content around what we're talking to clients about and what are some of the issues we're not helping them navigate. In case you can get some good information to manage your law firm that way, sign up for our newsletter for that.
• 38:25
  And if you are looking for educational content and want to check out more of our previous podcast interviews, you're welcome to check out our podcast, page on our website or follow us on social media at wealthworthwithin.com or wealthworthwithin.
• 38:40
  Davina: Well worth it. Alright. Thanks so much, Carla. I appreciate it. I've learned so much, and I've enjoyed our conversation.
• 38:46
  I appreciate having you here and, and all the value that you shared today.
• 38:51
  Carla: Thanks so much for having me.
• 38:53
  Intro: If you're ready create more of what you truly desire in your business and your life, then you'll want to visit us at wealthywomanlawyer.com to learn more about how we help our clients create wealth generating law firms with ease.