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The Good Question Podcast
Smart Scaling For Sustainable Growth Natalia Zacharin On Profit, Cash Flow & Strategic Expansion
00:40:05
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- [00:01]
A
You're listening to the Good Question podcast with Richard Jacobs. Our goal is to make each of our guests exclaim, hmm, that's a good question. I don't know the answer. Because when that happens, it means you, the listener, may be inspired to learn more beyond the interview and to ask great questions yourself that lead to new insights. In this podcast, we cover historical and current anthropology, comparative religion and history. Welcome. And let's get started.
- [00:36]
B
Hello, this is Richard Jacobs with the Good Question podcast. My guest today is Natalia Zakarin. She's a founder, entrepreneur, and financial coach. We're going to talk about smart scaling, building momentum, funding growth without sacrificing profitability. Natalia is the founder of Zakarin Consulting, which is an elite accounting firm that helps business owners gain control over their financial health and build more resilient businesses. She launched Zakarin Consulting in 2019, has been working with firms for many years and probably pulling her hair out the whole time. We're going to talk about, you know, her wisdom to help businesses survive and thrive. So welcome. Thanks for coming.
- [01:09]
C
Thank you so much, Richard, for having me. I appreciate it.
- [01:11]
B
Yeah. Tell me about your, your consulting with businesses over the years. What, what led you to form your own firm?
- [01:17]
C
So completely unconventional. Start. I've been a Single mom since 2012. Was working for another company. I actually was working in a field that I had never worked in before. I used to be in sales a very long time ago, was a stay at home mom. When I got back into the workplace, I found a, an invoicing clerk. So that was my first experience with the financial world. And while I was there, I'd been there for six years. Towards the last year and a half or so, I saw the writing on the wall that I wasn't going to not only not go anywhere up in the organization, but I also was actually demoted mostly to, I think it was,
- [01:58]
B
you probably did too good a job. Usually what happens, I've heard consultants is like, if they do a really, really good job for the company they work for, you're threatened by it and they fire them.
- [02:07]
C
I think there was definitely a person there that was very, and by me and I think she was talking behind my back. But also it was, you know, they pigeonhole you in corporate, they, they hire you and they only see you in that position. They don't anything else. And then I was also a single mom. I was getting close to the age of 50 and it was getting expensive to have employees that were over the age of 45. Um, so I believe they were Just like pushing some people out because the insurance was getting just too expensive. So, yeah, it was. I. I started the business, so. So I knew this was happening. I was trying to get another job at the same time. No one was biting. I couldn't get an interview. It wasn't, I guess it wasn't like a really good market. And so my then boyfriend, now fiance mentioned to me, why don't you start your own business in bookkeeping? And I thought, well, I don't know how to do bookkeeping, but this sounds good because I could do that on the side and I can make some extra cash. So this all started as a side gig. I had no experience, prior experience, and I just started it as something on the side to make a little bit of extra money back in 2019. And now we are 15 employees in and on the Inc. 5000, which I think is crazy.
- [03:17]
B
Wow. To make it a terrible joke, you started accruing knowledge and bookkeeping.
- [03:22]
C
That is perfect. That is true.
- [03:24]
B
Okay, so are you guys bookkeepers now? Are you CFOs? Like, what, what kind of royals do you work in with businesses?
- [03:30]
C
Yes. So all of it morphed into CFO pretty early on in the journey because I was doing all of my own sales. I still do a lot of sales because I love it. The constant question was, that's great. I really want to have good financials. But after I do, I have no idea what to do with them. And so in January 2021, I rolled out fractional CFO services, which was very different than it is today. Today it is a true fractional cfo. Very highly experienced people that have decades of CFO specific experience and a very high technical knowledge.
- [04:05]
B
So.
- [04:05]
C
But we started with analyzing, like, what's happening to improve situations. And apparently it was something. It's a learnable skill. But most business owners don't have the time or the focus or even know where to start. So since this was really something that I wanted to help people, that was like the opportunity to really help. I really started learning very rapidly and dramatically to figure out what I needed to do to help improve people's situations. And so we still do bookkeeping. That is the foundation. And we can't do our CFO services without the bookkeeping. And then we've also added payroll services. And. And everybody is very specialized in what they do because payroll is different from bookkeeping and bookkeeping is not cfo.
- [04:46]
B
Yeah. What are the reasons people come to you? Is it like they were denied a line of credit or loan or they want to sell their business. They want a good valuation for it. What are they. Or they're in trouble. Like, what happened?
- [04:57]
C
Yeah, all of those and more. So typically, what we see is people are. Their businesses are growing, and they're like. And they're making a profit, as it shows on their profit and loss. And they have no cash in the bank. That is. They're like, we're having all my cash. I don't know. That's a very common problem. Or they can't make payroll because they. They've seen the cash dwindling, but they don't know why it's dwindling. And they've got a team, and they suddenly can't pay their team. Another one is that they just don't have any bookkeeping at all. That. No, I just. Actually, right before I got on call with you, I just dropped off with a pretty large business. They're a $5 million business, so they're not a small business. And no one's been able to correct their bookkeeping for the last two years, so they're kind of flying blind. That's weird. That's not uncommon. Yeah. And so we're finding that there's a combination of bookkeepers not keeping up with the work. Anyone with a computer can say they're a bookkeeper, and they do. And so bookkeeping is much more complicated and much more important than what everybody's saying that it is. So there's a misinterpretation, I think, for most people about what it actually found.
- [06:04]
B
That, you know, I guess I'll just call it laziness. But it's hard. Whenever you do a transaction, you got to make a note what it is, you know? And so I bugged my bookkeeper for a while. I said, you know, don't. Don't ask me three months from now. I have no idea what it is. I want you to ask me, like, weekly, because then I have a chance of remembering. And that took a lot of effort. And finally, that. That's a lot better. But ideally, it would be some kind of mechanism. Like, anytime there's a transaction, you get a notification. Like, what's. What was this about? Who is it to? Who is it from? Why? Blah, blah, blah, blah. So that if you just put notes in at the time, everything happens, you don't have to be like, o was this for? And scramble. Like, how do you guys handle that?
- [06:39]
C
Yeah, we have really. I feel like we've really perfected on how to work with the busy entrepreneur, and so we don't need Your receipts. And we don't want to have a lot of information unless it's necessary. Most transactions are behavioral and habitual in a business. So like a lot of them, you'll know. This is the software you pay for your quickbook subscription, right? You're paying for your, your email subscription. Recording payroll. The time that it really makes sense to make notes. And this is, and this is how we do it is when you're having meal or travel, you're really supposed to put more information on it so that if you ever get into an audit that you know exactly what it was for. Because meals can be personal, they can be business related. So what we tell people is as you're signing that check, right as you're signing the receipt and putting down the tip, write down what that was for. It was that a, you know, business meal. Who did you meet with? What did you talk about? Like just like a little note, take a picture of it on your phone or even better yet, have the QuickBooks app on your phone and snap the receipt and that goes directly into your QuickBooks account and then it's connected to that transaction. So we do everything electronically. The only time where we need a lot more information is if there's projects like project costing and job costing. So we know which job it's for. So we've got ways where we can collaborate and communicate with clients so that we don't have to call them every single week. The majority of them we just connect with to review every once in a while. And we've got like a system, a really good system going where it's, it's just automatic, it's just a, it's a great system. But we touch every single transaction. We don't do anything on automated.
- [08:16]
B
Well, that's good. How many transactions a week is a lot, you know, for most businesses. What's, what's. I know it depends, but what's like what are some ranges?
- [08:24]
C
Oh my gosh. We have. So we work with businesses from startup all the way upwards of 35 million in sales. And it's funny because not necessarily the ones that are have, you know, big sales have a lot of volume. It really depends on the business. There was, there's one business that we were with, I think they had 800 hundred transactions a day. They're in the oil industry. And so they, it's just if someone, so actually when that staff accountant is on vacation, someone else is covering because by the time they get back from vacation it's like doing a huge cleanup because that's a lot of transactions. We have some that have just a handful every day, like, you know, 5, 10, 20. And then we have like some. Someone. Some that are upwards of 800 to over a thousand a day. So it just, it really depends on the business and what they do. But I would say that one thing that really gets away from a lot of business owners is they start losing track of what they're spending on. And so they really should have up to date financials, and then they really should be reviewing them every single month, if not, if not sooner.
- [09:28]
B
Yeah, most of the time. Like the accountants and stuff I worked with, you know, the end of the year, they're like, all right, give me this stuff. You owe this, blah, blah, blah. And I've asked them about planning, and a lot of them just have fobbed it off. It's hard to find someone that wants to plan with you, wants to go over the stuff with you. It helps, too. And, you know, also going over financials is like stepping on the scale. You don't want to look. Sometimes you feel embarrassed, like, oh, I see you spend a lot at Starbucks. You know, it's like, shut up. Just do my books and don't, don't complain about stuff like that. You know, I think those elements affect maybe client willingness to work with their, their bookkeepers or other people.
- [10:00]
C
Yeah, there's. Unfortunately, the industry is rife with people that make you feel bad that people that, you know, talk down to you. I've had clients where their tax person was yelling at them. I'm like, that's your. You're their client. How don't like that is not acceptable. That person just where they're the energy and for yelling at you like, they need to go, there's better people out there. It's time that business owners aren't afraid of that and are afraid to ask if someone's shaming you because you spent too much on Starbucks. They have a scarcity mindset themselves. And I would be concerned on how can they tell you how to run your business when they don't have a good relationship with money. Now, if you are severely in debt and you're not making any money and you're spending a ton, there's definitely a way to have that conversation and to start encouraging someone to budget. But hey, if you're going to Starbucks every day and that brings you joy and it inspires you and you're making a million dollars in profit, then go do your Starbucks. And you know, at the same time, buy yourself a Bentley because that's totally fine if that's what inspires you.
- [11:05]
B
Gotcha. There's a number of transactions a day. I remember asking my dad many years ago, I think we were talking about Microsoft and he was like, Microsoft probably does its taxes every single day. And I was like, what? He said, how many, how many transactions do you think they do a day? Tens of thousands, hundreds of thousands. Like if you were to think about the businesses that do the most transactions, like Apple or who knows, what do you think it's like to do their books and their taxes like al. Yeah, just, just for fun, like how crazy would it be?
- [11:31]
C
So they're split up probably into departments and so there's going to be multiple book bookkeepers on that one account. So for Apple, obviously they're going to have an in house accounting people and they're going to have bookkeepers in house, they're going to have accounts receivable people, they're going to have accounts payable people, they're going to have payroll. So these are entire departments and then they probably outsource their, you know, to file their taxes and to get tax strategy. But they also probably have a tax person in house as well to file, you know, sales tax, franchise tax, like whatever, whatever. Those little taxes are local taxes that happen throughout the year as well. But this is all split up in departments and with multiple, multiple people. We do still have, you know, one dedicated staff accountant on all of our accounts, but we always have more than one person working on it. So for instance, if they're doing, if they're, if we're running their payroll, that's another person. We have an automated in house controller type of engagement. So anybody that works with us has a controller that reviews everything. That's just a fancy way of saying that we have a high level, high technical person, usually CPA level that is reviewing everything for every single client, all of the financials before they go out to the client every single month. And I don't think a lot of people do that. We take that extra step and that extra cost because it's really important to have that second set of eyes because things can get missed. It's, there's a lot going on and I think that's what like Apple or those big companies do. They've got multiple, multiple people and then they've got controllers and managers and people overseeing things and multiple sets of eyes on everything.
- [13:05]
B
So what are the different jobs? You have bookkeeper, you have accountants, you may have a controller, you may have a fractional cfo. Like what if you don't mind restating, what are the jobs? Are all these people in order of, like I say, lowest. The highest. Yeah, yeah, may to be.
- [13:20]
C
Absolutely. Because there's a lot of misuse of those terms. I find customers that are prospects that talk to us and they're like, well, my. My controller does this. And I'm like. And the. And then the books are behind for five months. And I'm like, how do you have a controller and you don't have financials? So this is what the positions are. And when you have a small company, they try. They tend to misuse the terms and hire one person to oversee everything and call them a cfo. And they're really not. They're just a bookkeeper. So bookkeepers do the daily transactions of this expense happened. So they're going to record this as a meal and, you know, that was, you know, eaten at, I don't know, I can't think of anything. Arby's, for instance. And. And they're going to record that as a meal. This was payroll and it's going to be recorded. So they record all the revenue coming in and all the expenses going out. They record any assets, like any big vehicles or equipment that you purchase. They record all of your principal and interest on loans. So they're recording things daily or weekly. That's just bookkeeping. Another person is accounts payable. Accounts payable people will take all of the bills, they'll enter them in, and then they'll actually either pay them or send them in approval to be paid. So those are the people that pay your vendors. Then there's accounts receivable people. And these people will create your invoices so that you get paid and send them out and then do collections. So if someone doesn't pay, they. They contact the person, they resend the invoices, and they make sure that you get paid. Sometimes in a small organization, all three of those functions are one person. And we do all three of those functions also, but they are very separate functions. And then the bigger you get as an organization, the more separated they get. Payroll, completely different story. So a lot of bookkeepers will run payroll. And that's kind of scary because payroll has nothing to do with bookkeeping. Payroll is 100% law and compliance. And yes, you need to record the payroll, and the bookkeeper does that, but the bookkeeper doesn't typically run the payroll. And so what I see is the office managers or someone's wife or their bookkeeper will run payroll. And many, many, there's. There are inconsistencies or there's compliance issues, or there's labor law issues because they don't know labor laws. So I learned that the hard way. I went through four different people to run payroll. It kept falling back on me. I'm sure I didn't do it 100% correctly when I was doing it myself. And then I finally hired someone with decades of payroll only experience. And now I know it's a completely different function and it really shouldn't be left to someone who doesn't have payroll only experience. So those functions, when we start going up the ladder, then you have the controller. The controller oversees the accounting functions and makes sure that everything is correct, accurate. They review everything. They might do some more complicated accounting like intercompany transactions, if you have multiple companies, journal entries. So they're like the higher level and they oversee the bookkeeping. So they make sure that it's correct. They're Basically, they're not CFOs. They can't give you advice and they shouldn't give you advice. They can give you some advice, but they really are there to have a higher technical level of accuracy and to oversee everything and make sure it's done correctly. And so they're like a bookkeeper on steroids, I would say. And these are all paid very differently. So a controller could be a manager of the bookkeeping stuff possibly. And then the CFO is the visionary. So the controller, the bookkeepers, everybody else is, is someone that records something that happened in the past or happening presently. The CFO is taking all that information and making decisions and analyzing or helping to make decisions and analyzing what's going to happen in the future. So they're the visionary. They will take all that information, create forecasts and projections and see if we are trending in this direction. Where will we end up in six months. And so do you remember the Enron story?
- [17:18]
B
A bit of that. I read that they were, I don't know, they were playing all kinds of games with the books and booking revenue, you know, before they got it mark to market. I know, it was all crazy.
- [17:28]
C
Yeah. So I think what happened there, obviously there was fraud, but I think what happened there was there were all these little tweaks that no. And all these little trends that no one was really paying attention to. And so things were leaking and happening like gradually over time. And then suddenly they were like, oh shoot, this is a big problem. And that's what happens in a lot of businesses. You might not notice that your profit is just getting restricted a Little bit every month. So over time, you might be only losing 1%, but in 10 months, that's 10% that you've lost. And so it could be pretty significant over time. And in finance, it's not where you are now, it's where you're, where you're trending. And what the CFO does is they can see all of the trends. They, they see the relationships between the numbers, ratios, you know, client acquisition cost, labor ratios, efficiencies, how much cash do you need in think, you know, like, when should you pay things off? So they look, they're looking at all these trends and they're looking at cash flow, which is basically just the timing of money going in and money going out. And they're making decisions to keep improving what's happening in the business or to, to make sure that it doesn't go in the wrong direction.
- [18:38]
B
Okay. And when, when you, when you say you review the financials with somebody monthly, is that profit and loss, balance sheet, statement of cash flows, or there are other documents that are instrumental in that review.
- [18:49]
C
So if you're not working with a CFO at a min, you should understand at least how to read your cash flow, your balance sheet and your profit and loss at a minimum. And then I would look at all, I would look at the profit and loss on the balance sheet month by month to see any anomalies. That's kind of like how to catch if there's, if something really looks off and kind of see what's happening month to month. So that would be a minimum for the fractional CFO or for any cfo. They're going to take those reports and go way beyond that. They're going to create a cash flow statement that's a little bit different than what you can just pull out of QuickBooks or pull out of your software. It's going to be more, a little bit more customized and easier to read because there's a bunch of junk that's hard to read in QuickBooks on that statement. And then they're going to create projections, which is basically a forecast. So you know where, if you're planning, for instance, if you were at $2 million in gross revenue in 2025 and you want to make it to 4 million, how does that get planned out month to month? And what else is going to be affected? Like labor's probably going to go up, cost of goods sold might go up if you have it. We want to make sure profit is in a really good position. We want to make sure you have Enough cash. So we plan all that out. And then every month you meet, you look at what was projected, what actually happened, and if it didn't happen, why. And that's where you start having the conversations of like, why you know, what is actually happening here and why. And then we look at graphs, and I love graphs, because graphs are where you see what's actually happening in color. And that does something much, very different to your brain on making decisions when you see something in color than just black and white numbers.
- [20:16]
B
So how can it be that a business would be profitable on paper, but there's no money in the bank? Like, is there a common reason that happens? Or it could be a bunch of reasons.
- [20:24]
C
There's a few common reasons. I love that question because people. I've actually had that on a reel. And the comments are so interesting where someone, someone said, well, cash and profit are obviously the same thing. They are not the same thing. That is incorrect. If you have a very simple business, it might be the same thing. But most businesses are not that simple. And especially if you're scaling and growing, your business is not going to be simple. It's going to be more and more complex in scope. So what happens is, let's say you have a business and you had $300,000 in profit and you've got like 50,000 in the bank, what might have happened? So the first thing is ch. Make sure the bookkeeping is correct, because what if something's wrong? I've seen that happen before where revenue was overstated and someone was making decisions on the wrong numbers. I've seen that happen. Another thing that can happen is if you have a lot of loans or old credit card debt, or if you're taking personal expenses or distributions, that's not coming out of your profit, that's coming out of the balance sheet, it's coming out of your cash. So you could have a $300,000 profit, but let's say you had to pay $50,000 in loans and old credit card debt, and then you another 200,000 out in personal distributions, you're gonna have $50,000 left. Right. So that's not obvious on the financials, but you just see, hey, I'm showing this huge profit, but I don't have any cash in the neck. And now I don't know how I'm gonna pay my tax. And it sounds really overly simplified, but most people don't realize that's what's happening because it happened gradually until I just ran out of cash.
- [21:54]
B
Yeah, I think because a lot of people go by the bank balance. I have many times if I've got a good bank balance balanced, I feel great, you know. And if it goes down, closes zero. I'm like an idiot.
- [22:03]
C
Yeah.
- [22:03]
B
You know, it's not a good way to go.
- [22:05]
C
Yeah. So it is important to, to watch your bank. I watch my bank every day. Just like stepping on the scale because you kind of just see. But the problem with watching the bank and not having reports is that you don't know what's coming. So if, if you are like a big client suddenly doesn't pay you, but a big bill comes in or a big expense goes out, goes out the door, you're suddenly out of cash and, and so not understanding what your profit profit what your profitability is per. By month and what cash needs to go out the door in addition to looking at your bank balance. So you kind of have to see what's happening. It's not quite enough to look at your bank balance and you can get in trouble.
- [22:39]
B
So I know it's just audio and it's like spur of the moment. But what would a monthly review, the skeleton of it look like? You know, if you may make up a client, ABC Corp that sells widgets like what would this monthly review look like? What would you say?
- [22:53]
C
Yeah, so a lot of times when someone comes to us, they have a problem and the people that stay with us and that have been doing this, I've, I've clients that have been doing CFO services since we started in 2021 and, and continue to do them because you cause things change constantly and you need support constantly. So we had a client that came to us and they went from quarter of a million dollars in sales in 2024 to over a million dollars in sales in 2025. Huge jump in revenue. That's great. They were like, we can't make payroll. We don't know what happened. So we started reviewing with them first. We, we make sure that everything is accurate. They didn't have any book, had been making all these decisions for months without any single financials. And their bookkeeper acted like it was normal. And that's the problem in the industry. If you're a CPA or your bookkeeper or whoever is doing your bookkeeping, if it's not up to date monthly, it's not on time, it's. And you can't make any decisions. So this was a typical old school bookkeeper. She finished the book for 2024 to file taxes in the beginning of 2025 and then didn't touch them. So they came to us in August. August. We got the old financials. We went ahead and updated everything, and then we could actually meet and make decisions. And what we found out was, as they were growing, they were spending more and more and more in labor, where the percentage of labor compared to their revenue had. Had increased dramatically. So all of the money that they were making that they were bringing in, it was just going right out the door. So for some reason, they started just spending a lot of money. And labor. Labor. This was a mental health practice.
- [24:32]
B
So I think as you get busier and you're like, you have money. You're like, all right, let's hire someone to take care of this. I'm busy. Things are going well. I don't want to deal with it. You do it, and then your costs go up like crazy.
- [24:42]
C
Yeah. So that's one of the things. You start spending a lot more when you see a lot of more money, and you're also busier. She had actually also. She wanted this to be an amazing place for her employees, which I agree with, and that's wonderful. But the business has to be healthy first. So she started paying people, and then somehow multiplying how she was paying people, and they were starting to get paid, like, for the same thing. It was, like, almost duplicated in some instances, because she was paying for this and that, and this was hourly, and this was that. And I was like, well, isn't that for the same hour? And so we. We really, like, dug into what was happening, and believe it or not, that was actually more common than I thought. I had worked with another chiropractic practice that were paying people for hours that weren't even being worked. And so I was like, you know, I told them that we need to revamp their structure and take a look at. And then also, you know, see what other expenses they have and make sure everything's extremely efficient. And we did that. And actually, she just messaged me this morning, and we've been working with them since September. And this morning was, for the first time, she said, I have a surplus in my bank. Yay. So sometimes it takes a little bit of time, because you can't make changes immediately, but sometimes you make changes really quickly, and it makes a difference. So everybody is a little bit different. Every business is different, and it's very customizable. And I feel like CFO services are a combination of strategy, understanding the numbers mindset, and therapy, to be honest.
- [26:08]
B
I mean, a lot of businesses look like they're doing really well from the outside. But no, you have no idea. What's the reality of it. Do you think a lot of businesses are like a week away from death, you know, money wise or how are they doing?
- [26:19]
C
I think they are. And there's a statistic out there that was, it was a big survey done by U.S. bank that 82% of all businesses fail because they run out of cash. Because it's cash that's important. You can keep. You can make a lot of mistakes if you have cash coming in. But if you don't have cash coming in and you're making mistakes and you're not being strategic, you're going to run out of cash. And as soon as you run out of cash, that is like a death sentence. There's, I think a very low.
- [26:47]
B
Tell people why. My guess is because payroll comes like every two weeks for a lot of people. So you literally don't have much time if you run out of cash. Like you may only have, I don't know, a week. And then if you're behind on payroll after that, I mean there's all kinds of problems you could have. People go crazy raising up money, you know. So I think it's the very short time window without cash that can kill you is the biggest problem. I don't know.
- [27:09]
C
It's not hiring correctly and not charging correctly. So no one should be hiring if their business is at a quarter million dollars. That is a sole proprietor. You shouldn't have anyone that you hire because you can't afford to. And I think that people start hiring too soon and then they're not building the top line to support that. So I noticed when I started my business, I was right around that mark, I was like at 250, $300,000. And I thought, oh my gosh, I'm so overworked. I definitely hire someone. And that's the mistake that most people make. People hire when they feel like they have the work. You shouldn't hire when there's work. You should hire when there's money. When there's cash coming in, that's a completely different decision. So I realized if I hired someone, I wouldn't be able to afford them because I wasn't at that ratio. And that's that 250,000 per full time employee ratio. You could even lower it a little bit to 200,000. But the lower that ratio goes, the more in trouble you're going to be. So we're looking at like 30% payroll to ratio, maybe in some instances a little bit higher. Like let's say it's a, you know, a doctor's office. So all the doctors make a ton of money. So that's going to be a little bit different because that's a higher service. But if there's something wrong with that ratio, that means there's either something wrong with how much money you're bringing in, you have too many people working for you, or your people aren't the right fit, or they're not efficient, they're, they're not productive enough. And you can tell right away that people just, that business owners just keep hiring and hiring and hiring because there's work to be done, but they're not looking at, well, maybe if I hired like one really good person here, these other two that aren't nearly as efficient and don't nearly have as much experience, maybe that One person at 80,000 can replace these other two at 60,000 each. And so you're saving 40,000 right there. And there's a lot of decisions that are made, but that's the most egregious mistake I see is that people hire before they can even afford to. And they need to look at their revenue. They need to look at sales, lead generation, like what's coming in, if there's any cost to get sold for like material, what is that and what is the gross profit? And then can you afford tire someone? And if you can't, then you need to do something with your top line. So it's always a couple. That's the reason why it's so hard is that there's like little levers like up and down and all these different little things that you can tweak to make things really good or really bad.
- [29:29]
B
Well, also too, when you have an expense, I think people equate revenue with available money. You know, if I need to pay someone, whatever, how much money, it's not based on the revenue, it's based on, on at some point after X amount of expenses come out, that's what I have left. I don't know if you base it just on, on profit as to whether you could afford to hire somebody, but certainly not revenue. Where do you peg it?
- [29:52]
C
So I do look at revenue as the ratio for hiring, but you're right, you also need to look at supplies and materials if that's the kind of business that you have or other things that will drive up your, you know, drive up or drive your profit. Drive your profit up or drive your profit down. Down. Normally the most expensive items in a business are cost of goods sold and labor, or labor, but usually and labor. So all of the other expenses are going to be not as expensive. They're like a lot of the operations costs. Unless you're really, really spending a ton of money on rent. Rent could also be an issue if you're spending like $10,000 a month on rent. But all of that should be driven by how much money is coming in and can it cover it. So advertising shouldn't be more than 10 to 12%. Maximum of the revenue pay should be for service based business, about 30 to 35%. For other businesses it could be lower. Like a restaurant. Payroll to revenue ratio should be like 10 to 15%. We have pharmacies that we work with, their payroll to revenue ratio is about 20% because all of their money comes in and then most of it goes right back out the door to pay for the drug. So it's a completely different ratio. So it is different for different industries. But everything is driven by that top line. Because if you're not building that top line, you're dying. And that's true because of Churn.
- [31:11]
B
What is the have instead of someone in the US you have an outsourced person. You know, let's say they're like half the cost. Do you see that people are more free with hiring like offshore talent because it's cheaper versus onshore. And is there, you know, the, the $250,000 to person metric, should that still be the same if you have an outsourced person?
- [31:30]
C
No, it's not the same because it's full time equivalent. So full time equivalent is about 80,000 in salary, you know, 60 to 80,000 or more. Now once they get to 100,000, I would consider that almost two people for offshore, if they're going to be significant, you might consider two full time equivalent, full time people as, as one full time equivalent in the United States. The problem that I see though, just like anywhere else, is that people are not holding managers and business owners aren't holding other people accountable and they're not looking at is this the best person of that position and are they the most efficient and productive? And if they're not, is it something that can be trained? Can we help them to train them up? Or maybe they're just not a good fit for that specific position. So even offshore, sure, I see people hiring a lot and then they're not holding that person as accountable because there are, they, they're less expensive. And anybody that should be working in your organization should be extremely efficient and productive.
- [32:26]
B
Oh, okay. I'm hearing in my head, you know, how much I pay you, you better be less. But yeah, they pay them less. So they really. They expect less.
- [32:34]
C
Yeah, they expect less. I see this happen. Every time we have a new employee come in, I warn them. I'm like, it's going to start a little slow because we're going to just give you a couple of accounts at first and then it's going to build and it's going to be, it's going to seem like a lot. And we move really, really fast because that's who we are. We move fast, we get clients in and we do an entire year's worth of cleanup in two weeks. Like that's the goal. All is also for each staff accountant to have about 30 clients, 30 accounts. When I talk to people and we do a lot of interviewings, I talk to a lot of accountants that are working for someone else. They usually have like 10 accounts they're working on. I just talked to someone this morning and I asked her and she said she had 10 accounts she's working on. I'm like, well, how 30 sound? Because that's what it's going to be like here. It's going to be 30.
- [33:16]
B
Well, you must have good systems, otherwise the people would blow up, right?
- [33:19]
C
Yes, we, we use technology, we use good systems. And then you just have to be on the ball. And, and that's the other. I think that's also why people don't really want. People want. Business owners want their people to be in the office because it's hard to hold them accountable when they're remote. And we like, if they're not working full time time, we don't expect them to work 60 hours a week, but they, they are expected to work 35 to 40 hours a week. And if they're not working their hours, we can tell because we know exactly who's efficient and who's not. And if they're not working their hours, that's a conversation. And if they continue not to do it, they can't stay.
- [33:52]
B
Yeah, it makes total sense.
- [33:54]
C
Yeah.
- [33:54]
B
So what kind of businesses are good for you to work with and which ones are like, oh my God, these people are such a pain in the ass. I'm not taking like, what do you look.
- [34:01]
C
So first of all, we only work with nice people. I've been yelled at before. And you know, obviously business owners are, are stressed out. They're very high a type personalities. They want to get things done and we get that. And we. And money and taxes and all that is Very triggering. And we totally understand that and we support people, but if someone's rude, they can't. They don't work with us. And that's kind of rare. But we've had that about twice that we've had to get rid of. No, three times that we've gotten rid of clients. Otherwise we can work with almost every industry. We don't work with a lot of E commerce. I think it's because it's such a low margin, they don't typically hire anybody. We don't work a lot with manufacturing. Again, not, it's, it's not a specialty of ours. Although it's. I'm not saying that we won't do it. We just have, we don't have any manufacturing clients. And it's interesting, it's actually changing. It starts to make sense to hire a fractional CFO when you're at a million dollars in gross sales or even a little bit less, but you're scaling it definitely starting bookkeeping should start like that should be day one. You should have bookkeep bookkeeping almost immediately or within that first year that you're starting a business. It's never too soon to start bookkeeping, but for fraction of CFO it's probably closer to a million in sales. But what I'm seeing is companies that should be hiring in house, frac, in house CFOs or in house financial people are not. And I think they're having trouble hiring the right people. And so we're seeing companies come to us at 20 million, 30 million. So you know, we've got clients up to 35 million in sales that should technically have their own staff. But we know how to vet and hire. So and we've done it really, really well. So I think that's why more and more are coming to outsource that. And the other problem is that never know what you're getting when you're hiring someone because most business owners don't know how to read a financial statement. So they have no idea if their bookkeeping is correct.
- [35:55]
B
I see. Yeah. Okay. Oh, so you do mostly service business.
- [35:58]
C
It sounds like service everything. We have pharmacy. See, we do have a few restaurants. We have a lot of service based businesses, you know, like architects, engineers, marketing companies. We've got several construction businesses. A lot in the construction, remodeling, painting, like contractors, all the, like the home services. A lot of them we work with, we have pharmacies that we work with. Completely different business model. So we work with a lot of different ones. We don't specialize because if you're a real cfo, you don't need to specialize in a niche because you know how to read the numbers in any industry. And so we don't hire people and then train them up to be a cfo. We hire people that have been a CFO and have decades of experience.
- [36:41]
B
What if the business, I know you say you don't do E commerce, but what if the business like sales tax is on everything and they're in all 50 states versus one that's not, let's say a service business in one state or one that has like a lot of depreciable, you know, equipment and assets versus one that has none. You know, maybe a virtual like marketing company.
- [36:59]
C
Just so we, for sales tax we use software because there's no way to know like when Nexus happens and it's so complicated. So we have software that we recommend and then we manage that software. The one that we typically use is called taxjar. That works really well. We use a lot of technology so that's why we can handle so many clients. We don't automate things. We look at every single transaction because AI is not there yet for bookkeeping. It's not even close. It's actually, it makes it really messy and incorrect, but it speeds up. Where we don't have to have any manual entry or any data entry, it just speeds things up. And so we use a lot of software. Like if someone's writing a lot of checks, we usually sign them up for something like bill.com, if someone has a lot of sales tax, we sign them up for TaxJar. If someone is accepting payments on their website, we connect their stripe to quickbook. So there's like a lot of integrations and a of lot, a lot of streamlining that we do so we can create like an entire tech package for their, for their financial department and, and then run it. And that's why we can have someone that is looking at 800 transactions a day be on time and be able to do it.
- [38:11]
B
Yeah, that's crazy. Can you help people in all 50 states?
- [38:14]
C
Yes, we do. We have people anywhere, any US based business that we work with and anywhere from startup and up. The only thing is that we really do love QuickBooks online. That's what we specialize in. So when they come to us with a different software, we don't really, we prefer to work, work with QuickBooks online because that's where we can, where we can do our magic.
- [38:33]
B
Gotcha. Okay, so what's the for people interested that want to get your help, what's the best place they can go to?
- [38:38]
C
Yes, so we actually have a special page for your guests. You can find that on www.zacharyanconsulting.com. s as in Sam or as as. S as in speakeasy, A as in authority and M as in marketing. So, Sam, there's two free giveaways that they can download. One is seven ways to find more money in your business now. And the other one is the ultimate checklist for financial success. And then there's a calendar link there as well. And of course, we're all over social media as well. And I really hope that people do get those free resources because they're very helpful. And then we have a lot of other free resources on our website, the Profit Playbook, as well as a cash flow calculator and exercise.
- [39:20]
B
Okay, well, very good. You know, thanks for creating that link and, and thanks so much for coming on the podcast. It's been a really good call. I appreciate it.
- [39:26]
C
Yeah, thank you so much. I appreciate it, too.
- [39:28]
B
If you like this podcast, please click the link in the description to subscribe and review us on itunes.
- [39:35]
A
Thank you for listening to the Good Question podcast. Please email Support the GoodQuestion podcast.com if you have any referrals to great guests for us to interview. Visit the Good Question podcast to hear more interviews. And please help us spread the word by rating and reviewing us on Apple podcasts, iTunes, Spotify, YouTube, or wherever you listen to this podcast.