037: Client Onboarding Case Study

Mar 24, 2023

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037: Client Onboarding Case Study

Mar 24, 2023

Read time: 4:23 minutes 

A few months ago, my firm onboarded a new client. This client had a few significant issues. In today's edition, I'm going to explain what those issues were and how my firm is tackling them.

Theory is great.
Best practices are important.
Processes and procedures are necessary.

But understanding real-world client problems and how to approach them can't be beat. Which is why I'm so excited to share this edition with you today. This is the real stuff. So take notes.

Let's get into the details:

• We'll call the company Acme, Inc.
• Acme is located in the United States.
• Most of Acme's revenue comes in the warmer months.
• Their industry has a high COS/COGS due physical labor.
• Acme is doing multi-7 figures and they're usually profitable MoM.

All new CFO clients have challenges.

During the sales process, the client identified a few fears and uncertainties:

  • Payroll: Every 2 weeks, he was losing sleep because he didn't know if he could cover the cash flow.
  • Profits vs Cash: The CEO was confused why he was tight on cash, despite being profitable.
  • Accounting uncertainty: The CEO didn't understand how to use financial statements to make decisions. He knew he should be but wasn't sure how.

Then my firm got into onboarding. A few more significant issues came to light:

  • Cash flows: The client did not have sufficient reserves to cover cash flows during slow season. Unfortunately, we started onboarding in the middle of said slow season. Triage would have to occur.
  • Gross Profit Margins: The client's GPMs are significantly below industry averages. 
  • Net Profit Margins: Despite being profitable on an annual basis, NPMs are super tight. This is due to lower-than-average GPM, but also due high SG&A.
  • Accounting dumpster fire: The accounting was suffering from the fatal 1-2 combo. They were both inaccurate and untimely. 

In summary: 
❌ Insufficient cash
Dangerous margins
Horrendous accounting

Here's our approach 👇

Step 1: Cash Flow Forecast

Getting a weekly cash flow forecast in place was our first priority. (We did this in parallel with Step 2 which I'll cover shortly.)

The weekly cash flow forecast is almost always the fist step in a triage situation. For this client, we decided on an 8-week cash flow forecast.

An 8-week forecast can be put together fast.
It answers questions about critical expenses (payroll).
A cash flow forecast works despite the accounting issues.
It shows what can/must be cut or deferred in the short term.

The results: 
We helped the client identify that cash flows were problematic. However, they weren't nearly as dire as the client originally suspected. We were also able to find a few low hanging fruits that could be cut for quick savings.

Step 2: What is even going on with the accounting? 

We realized that big upgrades needed to be made fast with the accounting. 

We pushed on this at the same time we were getting the cash flow forecast dialed in. This isn't usually an over night fix so we had to start early.

Our process here is simple: 
Analyze the books.
Identify URGENT issues that must be fixed.
Work with the bookkeeping team on implementation.

The goal in this moment isn't PERFECT books.
The immediate need is reports that are accurate enough
We need the bare minimum to continue the triage process.

We provided pretty specific feedback to the accounting firm. We let them know what needed to be fixed and in what order. They were very receptive. During the process, we paid close attention to their competency, communications, and timeliness. 

The results:
The books were significantly leveled up. But we were not impressed with the accounting firm. We found that they were lacking in terms of technical competency (even the basics were meh). Their comms were unacceptable and their timeliness didn't cut it. They were closing out the books 30+ days late. 

We communicated expectations with the firm but it didn't help. 

We kept our client in the loop each step of the way.

He decided to hire another accounting firm.

Step 3: Break even analysis

We wanted to give the client a short term, attainable, yet impactful goal to shoot for. We wanted the goal to address some of his concerns as well.

So we put together a monthly break even analysis. 

This quickly became a rally cry for his team, especially sales. Everyone knew what needed to be done and they quickly put together a plan to get there.

The result:
What gets measured gets managed.
The client's sales team put together a plan to make sure the necessary revenue levels were hit. The ops team made sure that SG&A didn't go over budget. Despite the slow season, their next month was profitable.

Step 4: Increased check in calls

The first few weeks with this client were tough. He was literally losing sleep over payroll and cash. He wasn't sure about the viability of his business. He realized his books were a hot mess.

So we made the decision to do weekly check in calls with the client. 

Typically, my firm provides one check in call per month and one CFO call per month. So the client ends up talking with us every other week or so.

But during difficult seasons, we will offer to increase the frequency of the check in calls. This gives the client the added support they need during hard times. It also helps to keep us more in touch of the day to day, which can be important in hard times. Why? It keeps us very up to date on cash flows.

We are clear with clients that the increased calls are temporary and we'll cut them back as the situation allows.

The results:
The client was grateful for the extra calls and support. We were able to provide him with some tactical advice that he needed. We were also able to get in front of some spending decisions that might not have been as essential as the client thought. 

It was a win win for everyone.

Step 5: Education

Finally, we have been very intentional about teaching the client. We've been showing him examples of how his decisions not only impact profit but also cash. 

We are VERY intentional about talking about both of these points whenever possible.

The results:
The client is now hyper aware of the difference between profit and cash. In fact, he regularly points out how ideas he's considering impact both. You can tell he's thinking through his decisions on a different level. NGL, it's kinda cool.

The onboarding and first steps with this client have been tough. We've made some progress but there's a long road ahead. 

My hope for you is that you recognize that new clients are usually tough. They all come with skeletons and challenges and headaches. 

It can feel like a lot. 
Hell, it IS a lot! 

But I can tell you this with 100% certainty:
There are fewer things more gratifying than looking back on a client's progress and see the impact you've made.

Your coach, 
Michael King

Your coach, 
Michael King

Whenever you are ready, here are 3 ways I can help you:

  1. Join us at The CFO Accelerator Live in Dallas, TX from May 15-17. 2024 and learn how to get more clients, increase your pricing, and close more sales! Get your ticket here.
  2. The Inner Circle - every month my team and I go live and share the most impactful lessons we've learned in our journey to start, scale, and optimize our own CFO firm (including live Q&A). Plus you'll get access to our private community of over 200 Fractional CFOs.
  3. If you'd like more amazing (and free!) content about starting, scaling, or optimizing your Fractional CFO firm check out The CFO Report.

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