Build to Enough

In the first of a four-part series, Keila discusses strategies for accounting firm owners to turn the second half of their year into a success. She focuses on financial health as the foundation, covering essential benchmarks like KPIs and strategies to maintain and improve a firm's financial standing. Keila emphasizes the importance of analyzing monthly recurring revenue, churn rates, and client satisfaction scores, while also reviewing profit margins and service packaging. This episode provides valuable insights for professional service firm owners looking to make intentional and focused improvements in their business.

Thank you to our sponsor, Ignition 
  • (00:00) - Introduction to the Series
  • (01:40) - Focus on Financial Health
  • (02:11) - Key Financial Benchmarks and KPIs
  • (06:37) - Understanding Profit Margins and Business Strategy
  • (10:11) - Pricing and Service Packaging Review
  • (12:42) - Conclusion and Sponsor Message

Connect with Keila!
LinkedIn - www.linkedin.com/in/keilahilltrawick
Website - www.krht.co

RESOURCES:
Learn more about Little Fish’s suite of services and sign up for our newsletter at www.littlefishaccounting.com
Follow Little Fish Accounting at instagram.com/littlefishaccounting

Creators & Guests

Host
Keila Hill-Trawick, CPA, MBA
Helping entrepreneurs create and maintain the business they want | Building to Enough | LinkedIn Top Voice | Intuit Partner Council | Accounting Firm Owner

What is Build to Enough ?

Little Fish Accounting presents Build To Enough. The pursuit of endless growth and scaling can leave entrepreneurs feeling burned out and unfulfilled. This podcast explores how to build sustainable, purpose-driven businesses that align with your lifestyle and values, rather than defined by rapid expansion alone. On this show, we’ll reframe definitions of success, provide strategies for structuring companies around desired lifestyles, and share stories of entrepreneurs finding deeper fulfillment by focusing on “enough.” Join us as we discuss moving off the hamster wheel and building businesses with balance and meaning.

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Keila Hill-Trawick: Hello. You're listening to Build to Enough, a podcast for entrepreneurs who want to scale at their own pace. I'm your host, Keyla Hill Traywick, and I'll be your chief storyteller and cheerleader in a world that glorifies endless expansion, we're tuning out the noise and discussing the beauty of enough. Each episode will dive into inspiring stories, practical insights, and strategies to cultivate sustainable success on your [00:00:30] own terms. So whether you're a solopreneur or small business owner or aspiring entrepreneur, get ready for a refreshing take on the entrepreneurial journey. This is build to enough.

Keila Hill-Trawick: Hello and welcome back to the Build to Enough podcast. So you are in for a treat, because this is the first in a series of four about turning the second half of your year into success. So this is specifically talking to accounting firm owners. But I really think that this is information that is beneficial [00:01:00] for anyone who runs a professional service firm or agency, because we run really similarly. Each episode is going to focus on a critical component of business success, and there will be some combinations of one or more into each show. So we're going to talk about revenue growth, financial health, um, profit margins, business strategy, pricing and service packaging. All of this just really leaning into the first half of the year is gone. How can we make sure that the second half [00:01:30] is really intentional and focused on making the most profitable and the most professionally and personally, you know, sustainable business that we can build today we're going to focus on financial health, and that is the foundation upon which every other thing that we're going to talk about stands.

Keila Hill-Trawick: And so we're going to cover essential benchmarks like KPIs and also strategies to maintain and improve your firm's financial health. So that is where we're getting started today. Let's dive in. Okay, [00:02:00] so while we are talking about this for the second half of the year, these are really strategies that you can implement at any point throughout the year when you want to get a check in on the financial health of your business. And we'll start with those benchmarks and KPIs that are really going to be helpful for you to start looking at, to see how is my business actually doing? The first is monthly recurring revenue, and this differs depending on the types of services that you offer, the packages that you're giving to clients. But really, we want [00:02:30] to see how much of our revenue can we expect to keep coming back on a regular cadence, and how much of this is kind of one off or project based? Now I want to stop here and say there is no right answer. Some firms really enjoy the one off project based work or the short term projects. Maybe three months, six months. The things that like clients are going to roll on, you're going to take really good care of them and then they're going to roll off Other firms like ours really want to lean into a hybrid of both.

Keila Hill-Trawick: We want [00:03:00] to be able to take care of clients who are on with us for a specified period of time, but we also want to be really clear about what we're getting in on a recurring basis, so that we can make sure that we can regularly cover our expenses without relying on those one time hits. And the reason that this is so important is because you want to get a good gauge of how much of your money you can expect to keep coming in on a regular basis. And so looking at your monthly recurring revenue, you want to see a couple of things. How much is it. So [00:03:30] how much money is coming in on monthly recurring revenue. What are those project terms. Is the expectation that it's just ongoing indefinitely? Are you going to send renewals at the end of six months or at the end of a year? Because again, remember that you could have monthly recurring revenue that still has an end date. And then the third part of that is a percentage base. How much are you getting from that area or that type of revenue versus the rest of types of revenue that you get? It helps you to make decisions [00:04:00] on budgets. So how much can I afford to incur in terms of expenses for the business and forecast? What do I think is actually coming in in terms of money, based on the types of revenue that we're taking in from clients? The second thing that I would say to track in terms of KPIs is churn rate.

Keila Hill-Trawick: How often are clients leaving us? And that is both not renewing. So they have the opportunity to come back and they just choose not to or leaving in the middle. This can [00:04:30] really be an indicator of a lot of different things. It could be service. It could be that the pricing change, it could be that it turns out that they weren't a good fit, even though you expected them to be, but you want to have some numbers to indicate what does it look like in terms of your client staying power? Remember, it is way more expensive to get a new client than it is to keep a current client, especially if they're a good one that you know you can do good work for and you really enjoy working with The extent to which you keep them is up to you, but you at [00:05:00] least want to know how many people are leaving us versus how many people are ultimately staying within our service. And then you want to look at client and employee net promoter scores. One of the things that I'll reemphasize here is that at Little Fish, we think that it's important that it is easy to work with. And for us, we prioritize what employees think about working here the same way that we prioritize feedback from clients.

Keila Hill-Trawick: And so this is a good time of year to check in and say, how are y'all feeling? [00:05:30] How is the client work going? How are all of those changes or goals that we implemented at the beginning of the year, really translating into making your job easier and your ability to service clients with excellence that much better. So you want to not only look at how you've done this year, but you want to compare those prior year metrics to the same period this year so that you can determine the impact of new processes. So, for example, did you make a goal to bring on more monthly recurring revenue [00:06:00] clients? Did that work? Like what does that look like this year versus last year? Did you implement a new pricing structure. And so you were expecting churn to go up a little bit. Did that meet your expectations? And then finally, when you're looking at your revenue per client, does it match up with the feedback that you're getting? Are you seeing a lot of complaints from maybe lower paying clients who aren't getting what they need, but it's offered in a higher tier that may be an opportunity for you to either upsell them or reassess [00:06:30] and reiterate what is included in their service package so that everybody's on the same page in terms of expectations. The next thing that we'll want to look at are profit margins and business strategy. And these are really strategies for growth regardless of how big you want to get.

Keila Hill-Trawick: You hear me talk all the time about growth and scaling and this idea that like you could grow to small building to enough is about figuring out what kind of life you want, what kind of business you want to run, and then building in the strategies that [00:07:00] help you get there. So in terms of analysis, to help you prepare for those strategies, review your profit margins so that you can see areas for improvement. Remember revenue is not profit. So the amount of money that you bring in, if you realize that you're bringing in significantly more than last year, but your expenses increased at the same rate, you may want to analyze whether that was the right fit. Again, not necessarily a right or wrong answer, but was that the goal? Did you know that you were burning out [00:07:30] last year? And so yes, you're spending more in expenses, but it feels better to do so. Or did you expect that those new hires or new expenses would give you more room to generate more revenue? And that's not necessarily happening yet. Look at both gross and net profit margins so you get a comprehensive view of financial health. You want to see the difference between those expenses that you're incurring as cost of sales. So you're only having them because you are doing the work. And those operating fixed and variable expenses that are just baseline [00:08:00] what it costs to run the business.

Keila Hill-Trawick: Next, make strategic adjustments. So make sure you're diversifying your revenue streams, optimizing operations or exploring new markets. When you are thinking about scaling and growing, it may not be headcount or revenue. It may be within a specific vertical or a specific type of work. Make sure that you're using the information that you have to say, do I want the second half of the year to be serving the same clients in the same ways that I did in the first half? Now [00:08:30] it is important to focus on the entire business. You have to look beyond billable work because there are ways that you're investing in efficiencies, whether that is AI and automations or additional employees like we talked about with hiring an ops person that aren't going to go directly to client deliverables, you have to evaluate the effectiveness of your business model based on those decisions, and figure out whether there are opportunities for you to build more scalable products and services. [00:09:00] But for that to happen, you got to have room to think about it, right? Like you can't get so mired in the client work that you don't have space to say, what other things could I be doing to make this more valuable or more efficient than I'm currently doing it for the year? And then I would say, just recognize the need for investment years. We have a lot of conversations about profit. And what I really want you to do is understand what it's telling you.

Keila Hill-Trawick: Some years are not going to be as profitable. You know, we've had years. [00:09:30] Last year was one where we invested in all new systems. We revamped the team. We up leveled the access and the services and resources that our team had. And that's expensive, right? Like it costs money for us to be able to provide that. And as a result, I knew that our profit margins would be smaller. But that wasn't a bad thing because it put us in a position for this year to really be better off when it comes to what we're able to deliver to our clients and to our teams. So just keep that in mind. [00:10:00] Sometimes investing in technology, training or new markets can cut down your profit margin in the short run, but are really going to pay off in efficiencies and gains in the long run. Finally, it's really important at this time of year that you're doing a pricing and service packaging review. We have big dreams at the beginning of the year, right? We set up all we know exactly how we're going to serve people. We know how much it's going to cost. We might even introduce new service offerings to our clients. But then you get in and do the work and [00:10:30] you want to do an assessment mid-year to say, did I price that right? Does it take the amount of time that I was expecting it to? I have clients asked for new services that I hadn't considered that I may potentially be able to add as new included offerings or add ons that I didn't give before.

Keila Hill-Trawick: Make sure that you're looking at opportunities for you to potentially increase your revenue growth, without having to increase the number of clients or team members that you have to add. That may be a [00:11:00] necessary part of this plan, but first you need to know what's working and what's not. Next, identify any out of scope work. Is there any work that you can see over the past six months that you realize you're doing, but you're not really getting paid for? You need to figure out again, is this worth incorporating into your standard offerings? Should it have been something that was automatically included and you just weren't considering that? Or is this a reason for the price to go up because you see the value in it and weren't really accounting for that when you built out those packages? [00:11:30] The other thing is, identify and eliminate the things you don't want to do. We again set out with these big dreams of things that are going to be valuable to our audience and really exciting, and then you do them and you realize, yeah, I hate this. It takes more time. It takes more effort. It potentially is just something that's not in my wheelhouse the way that I expected it to. Make sure you don't keep that as something that you have to keep doing for renewing clients.

Keila Hill-Trawick: When you realize that it doesn't really make your heart sing. Lastly, [00:12:00] use this as an opportunity to update proposals. So as in software that allows for upsells, you've got time here to say, hey, the first six months, this is what we've been doing for you. But now I've seen that there are some things that you didn't ask for that I think would be valuable for you. Here are some proposal, um, upsells. Well, add ons that we can add for you in order to make sure that you're getting everything that you need, even when there are items that you didn't know that you should ask [00:12:30] for. It's up to the client to decide whether or not that's the value that they want to take advantage of. But I think it's important to tell them things that they might not be able to see for themselves. That's a way that you can serve and provide additional value. At the end of the day, we want to make sure that you are assessing your current financial status so that you can make informed decisions about what the latter half of the year looks like for you. It can be really easy to get caught up in. This is the way that I've done it. I will look at this at the top of the year, and then there's a [00:13:00] new busy season, regardless of what industry that you're in, that pushes you back from being able to really stop and think about what you're doing, why, and whether it contributes to your goals of what growth looks like for you.

Keila Hill-Trawick: So make sure that you're taking advantage of the opportunity to review your key benchmarks and performance indicators that you are looking at your profit margins and aligning them with your business strategy, and that you're looking at your pricing and service offerings to make sure that they line [00:13:30] up with the goals that you have for yourself and your business. This episode is sponsored by ignition, and we have been using Ignition at Little Fish for quite some time. Clients love how easy it is to get their proposals, sign their engagement letters, and we love how easy it is for us to get paid and get what we need in terms of client onboarding information from the beginning. Ignition is giving you the opportunity to try it for free, and you'll be able to take advantage of the pricing templates, [00:14:00] proposal, upsell features, and add ons which are new to the service. Take advantage of this opportunity by clicking the link in the show notes. Thank you for tuning in to another episode of Build to Enough. If you enjoyed today's episode, don't forget to subscribe, rate and share the love with your fellow entrepreneur friends, and make sure to sign up for the Build to Enough newsletter. The link is in the show notes. Stay tuned for more episodes as we continue to redefine success one intentional step at a time. [00:14:30]