The 'Secret Sauce' Every Agency Needs to Grow ft. Stacey Borrow (Profit by Design)

Speaker A: So welcome to, uh, another episode of the new F Word. And it's great to be joined today, um, by Stacy Borrow, somebody, uh, who we've worked with a lot in the last, ah, well, number of years I presume, but more, more closely with in the last 12 months I think. Um, and Stacey, it'd be great. It's great to have you. I'd love to. Why don't you tell us a little bit about, uh, yourself, what you do, how you got into this line of work. Um. Go for it.

Speaker B: Hi. Thank you. Um, okay, so Basically, um, in 2016, my brother set up an agency. Um, at the time I was off with small children. I had a background in management accounts and he said, oh, could you, you know, help me out with some of the finance bits? Sure, not a problem. Um, and off we went. I did a few hours here and there and it continued like that for a while and, and then he started talking to other agency owners about finance and things and said, oh, don't you, you know, don't you have someone who does that for you? And um, apparently they did not. So what we thought was a normal arrangement for small agencies, we realized that actually that wasn't the case. And he started talking about the work that we'd done together and introduced me to some other people that I might be able to help. Basically it spiraled from there and now I do agency finance full time. Um, so what was a couple of hours here and there is now a full time job for me.

Speaker A: Wow. And when you say you had background experience in management accounts, what do you mean by that? What would that look like?

Speaker B: So I worked in businesses in the accounts department. So, um, I've worked for manufacturers, um, X ray machines. I've worked for um, a holiday park with restaurants. So basically not, you know, not top level, um, chartered accounts in a practice, but more day to day business accounting for businesses that uh, have their own accounts team in house.

Speaker A: Yeah. And how did you find your way into that? Did you do a qualification? Did you do uni or did you learn teach yourself or how did you get into that?

Speaker B: Well, maths is my subject. Um, I didn't go to university because I would have done maths. And the only reason really for a maths degree is if you're going to go into teaching. Um, which I was, I wasn't. Um, so I got a job and I did the um, SEMA cert ba which is like a business accounting certificate, um, which has different modules but basically I taught myself with it. I got the books I was working in an accounts department at the time, um, and I did that learning alongside it called um up a local university to do the exams because you have to do them somewhere. And they said, oh yeah, that's fine, you know, pay us the money, you can come and do the exams with our guys. So I did that. Um, and then from that point it's just learning, you know, everything else is learned on the job basically. Yeah, because that's how I like to learn, you know, I like to learn by doing. So yeah, that's what I would prefer to do.

Speaker A: And do you still maintain that seema like um, accreditation or have you. Was it just useful for getting the exam?

Speaker B: It was useful for getting the exam. Um, I have considered whether I should go back to more formal learning but I'm, I struggle with that these days, shall we say? Um, yeah, you know, so whilst I obviously do learning myself, like to sit back in a classroom, I'm not sure I'd manage it.

Speaker A: Yeah, yeah, absolutely. No, I think there's. I was chatting to somebody else who, you know, has an accreditation with uh, one of the industry bodies and just kind of questioning, you know, is it still relevant? Is it still. Is that way of doing things still something that, you know, we need to keep up with? It's certainly when you're helping smaller businesses and you're in that element and you're, you know, you're constantly learning and keeping up with things yourself. But do, do you need the accreditation and uh, at what level do you need the accreditation? And yeah, it's a really interesting. Yeah, I'm subject because like, I'm sure most of your clients aren't asking for it or you know, have never been said.

Speaker B: Most of my clients are referrals, word of mouth, they've seen work that I've done or they've spoken to other people who work with me, um, and therefore they're interested in that. No one asks to see a cv. Um, I do obviously keep up um, compliance, um, level. So anti money laundering, that style of thing, those have to be kept up and they have to be registered with HMRC, etc. Um, so that legal side I maintain, but from the formal kind of accounting side for the work that I do, I've not found it to be relevant. Mhm.

Speaker A: Yeah, yeah, no, super interesting. I think it's an ongoing conversation. Uh, but a lot of people, you know, they've been paying for their certification for years and it seemed weird to let it go. And uh, and yet, you know, is there is a Room for something. Something more. Something, uh, lighter. Something that just. Yeah, for. But. Or do we need anything at all? I. I mean, again, like, certainly. Yeah, it's not something that we would look for if we were hiring somebody. It's more based on track record. Uh, and, you know, are they doing the. Are they delivering the work that we need?

Speaker B: And I think a lot of the agency world is like that, from what I understand. You know, they want people who they can see will do a good job. They're not necessarily concerned about what their paperwork says, um, because they want the right people for the role, which you only get by seeing them day to day and seeing what they can do or having a referral from someone else who's seen what they can do. A piece of paper doesn't tell them anything.

Speaker A: Yeah, absolutely. And there's so many other factors, like you say that, you know, people want to consider when they're employing somebody or bring somebody in that kind of advisory role. Um, interestingly. So you've niched into the agency world because that's where you started. What, working. Um, have you ever been tempted to look beyond that or have you decided very clearly that you want to stay in that. In that agency?

Speaker B: I like the agency niche. Um, so for now I'm, I'm happy here. Um, a lot of my work involves educating people on what can and should be done, um, from a finance point of view in their businesses. And I love that. I love working with owners of businesses directly, um, because it's theirs. They can do whatever they like. Um, so, you know, whereas if you're working in a different industry, you know, as part of a department, you have a lot less control over things. So I like being able to speak to people who make the decisions every day.

Speaker A: M. Makes sense. And so, yeah, what, what's the typical, uh, I'm sure you've had this a lot where you've been brought in. What's the typical kind of story when you're, when you're brought into for the first time? Like, how do you approach it? Uh, what state of the books? And, uh, what are the big challenges? Is it always different or. There are lots. Are there typical things that seem to

Speaker B: jump on two ways it goes? One is that it's all gone horribly wrong. You know, it's been a terrible year. We were always fine and now we're not and don't know what to do because they've never really had to pay attention to the figures because they've always been fine. They've made a decent Profit. They've taken the dividends they require and off you go. And then you have one bad year and suddenly the retained profit has decreased and you don't know if you've got enough money to take the dividends you need. Um, it's a, a, a bigger issue if you have more than one director or more than one shareholder. Um, for small agencies with three or four directors, a bad year can mean that they literally do not have enough money to pay the dividends that year. Um, so it's, they're hitting that point. It's nearly year end and there's a panic. That's when they call someone like me to see what can be done and to see how bad the picture is. Because it's often they know it's bad, but they don't really know how bad. Um, and the other side is almost the exact opposite. Things are going well. They have money, um, in the bank, but they're not really sure what to do with it. You know, what am I running my business in the best way that I can? Is there a better way to use the money that we've got here? You know, should I be looking at growth? Should I be taking on someone else? Should I be pushing harder for sales or should I be making the projects that I've got more efficient and therefore making more money that way? So it's almost either side of the coin, um, leads them to the same point. I should bring someone else in to help me. Look at this.

Speaker A: Mm, mhm. Yes, absolutely. And yes, I mean when you are explaining to somebody what, what are the things that. I mean, is it the classic, you know, we've got profit but we've got no cash. We've got, you know, why can we not, we've got cash, why can we not pay dividends? Uh, you know what, what do you typically find is the things that you have to kind of. Where do you see the penny drop moments for businesses when you start to, you know.

Speaker B: Yeah, so there's a couple, I suppose, um, costs where, where they're spending their money essentially. So you know, I know that they can go into Xero, they can go into free agent and see that, but do they. Not necessarily. Especially if they have a bookkeeper or someone else who does the books for them. Um, so displaying how much money they spend on admin and indirect costs versus how much they're spending on their billable team, that can be a revelation because when you point out that the people who earning the money for the business are only 40% of your costs. What are you doing with that other 60%? You know, that isn't a good use of your money. Um, so the cost split is a. Is one that can hit hard. The other side, as you talk about, like, profitability and cash flow. So either, you know, you've got. You look at each project and the profitability and you've got one that's faster. Fantastic. And everything else is just draining from that. So overall, the business makes money, but actually, if you had three of those good projects and you got rid of those ones that are really not making you any money, you'd have a lot more profit to take your dividends from. Um, and on the cash flow side, it is a, uh. Oh, we invoice loads. Yeah, but you never chase for payment. So your books say you made loads of money this year, but actually there's no cash in the bank because, you know, half of those invoices are still outstanding.

Speaker A: M. Yeah, it's hard to believe sometimes, but what, um. Um, what. What's your. What role do you typically play, then? Are you doing everything financial? Are you the bookkeeper? Are you the controller? Are you the CFO on the accountant? Like, where do you sit and what's your ideal. Like, what's your ideal team? If you were going to have a dream team that you'd be part of,

Speaker B: for that, I would sit. Um, you'd have your accountant who does the compliance side. And they are very good and they're communicative and they are fabulous. You would have a bookkeeper who is equally fabulous, keeps everything up to date, um, and knows the business. And I would sit between the two. Um, so I would be able to, you know, raise the odd invoice if you need it, or, um, help the bookkeeper in a busy time or if they're away. Um, I can speak to the accountants, I can pass on messages. Um, you know, because sometimes it's easier to go through someone else who's involved with the finance, who can then pass it to the director in the correct language. Um, or can have a meeting about it and explain the different options, because accountants don't always have the time for that. But I would, because that would be my role. Um, so I. I would see myself as the person who liaises between all the different teams, between the ops team and the biz dev team, and I can help them all work together to build a better business. Um, and you don't. You don't often have someone in that role because each department has their own job. And yes, I'm sure They do work together, but they don't always understand how the work that each of them does brings together into the whole business, making a, you know, a decent profit and growing as they want to. Um, so my ideal role is kind of that mid section where I get to speak to everyone in the business and I get to help them see how each of the things that they do builds towards a better business at the end of the day.

Speaker A: M. Yeah. And, um, is it a case of you can get a business to a point and then, you know, they don't need you anymore? Or is there always kind of a role for you or would you bring somebody? Would they end up bringing in some. Somebody more full time? Or have you seen, have you seen that? Are you still working with most of your clients that you start working with or you kind of work yourself out of a job?

Speaker B: Essentially, the amount of work that I do goes up and down because it really does depend on, you know, what they need at the time. And the work that I do is flexible. I don't say to someone, oh, you have to have this amount of time each month, because at the start it might be that they need loads of hours, you know, but once things are in place and they've got a better understanding of everything. M, it's a check in that you need. And that's absolutely fine for me because I want them to come to me when they need me, but I don't want them unnecessarily paying for my services because from a finance point of view, that's bonkers. Um, but some people, it is just a case of getting them set up on a path and sending them off and saying, come back to me if you have problems. Yes. So they might be fairly savvy about the finances. They just need some help on how to record the information. You know, what sort of things should we be tracking? Where do we get that? And once that's set up, they can take that and go. And then it might be, you know, every six months we get back together, we review where you are, you can ask some questions. We might reforecast for the next six months together and then they go again. Um, but a lot of people, it is a, it is a monthly thing. You know, we catch up every month, we make sure, you know, if, if there's issues during the month, they'll drop me an email and say, oh, can we jump on a call and talk about this? Or this new project's come in. I've done these bits, but I think something's missing. Can you review the figures for me? So the majority of my clients is an ongoing relationship. Um, but the amount of time that they need, month on month, may change.

Speaker A: Yeah, makes sense. And I guess there's a question, as in how do you charge for that? Because I think one of the, you know, we, we speak to a lot of businesses and we know that they're not getting this service from their accountants. Um, and yet we know there's a lot of amazing accountants out there who can offer this service. Um, and you know, we've got there, there are customers and they, you know, they get annoyed at me for saying that accountants aren't doing this job. But the reality is 90% of the businesses we speak to, their accountants are not doing this job. I don't know if you've got any thoughts about why, why that is. Why is there only 10% of accountants that are offering those kind of services? Is, is it that they don't know how to charge for that or they're, they're not, they don't feel like it's their job or they don't want to. Have you got any thoughts on why more firms aren't bringing the services that you're bringing? Maybe they don't want, they could bring as well.

Speaker B: I don't really enjoy compliance accounting, so it stands to reason that someone who does compliance accounting maybe doesn't like the stuff that I do because they are very different. Um, also compliance accounting is a full time job, like keeping up with everything that HMRC changes all the time. Uh, you know, even the national insurance rates have changed twice this year. Yeah, yeah. So even that little basic thing has changed twice in four months. So you know, those things that they do and that they've worked hard for to get the qualifications for, that's a full time role, you know, and that's what they enjoy, presumably because that's the job that they've chosen. So although they could, they probably do have the skill set to do the other stuff. Maybe they don't like that, maybe that doesn't bring them joy. So why do it? You know, um, I think the roles really are very different. I don't think compliance accounting and you know, in house fractional support are anything alike. They're two very different jobs. Um, so it stands to reason that you wouldn't get them from the same person.

Speaker A: Mhm.

Speaker B: Because generally you go to a specialist. Don't you like to get that job

Speaker A: that you want to do? And I think yeah, absolutely. And it's interesting though, I think there are Some people that almost have set up firms that are doing more of what you're doing, and they're almost doing the compliance stuff because they have to, uh, and they, so they want to do more of the advisory stuff. But they're, they're almost like, it's one of those things that the compliance stuff is a, is a, is also something that they're like, oh, guess we have to do this bit as well. And, um, But I do. One of the things I think is often a sticking point is when you get a customer for the first time, like you say, it might be a few years before the business realizes that they need someone like you. So you're starting off from that compliance point and it's not maybe sold in at the same time. Like, how do you. If somebody is watching this and they're thinking of either adding it as a service in their accounting practice, or they're thinking about moving into more like fractional advisory, CFO type role. Um, like what? One of the questions I think people have is, how do you charge for it? Is it a day rate? Is it, uh, a project based thing? Is it an hourly rate? What have you found?

Speaker B: Works. So I would charge, um, a fixed fee for kind of like an audit. So if it's someone who's just coming to me, they want to know where they stand. Um, they're not necessarily looking for an ongoing relationship, but they would like you to review where they are and set them on a course going forwards. That would be a fixed fee. And I, I usually call it like a financial audit. Um, and that may lead to an ongoing relationship once they've seen what's in there, or it may be that they're like, cool, we can take that information and we can go with that. Now, um, most of my work is hourly rate Bitcoin because it is so flexible. You know, I'm. Someone can come to me and say, can I take a couple of hours of your time? Yes, of course. Um, you know, someone else might need a couple of hours a day in that period. And again, that's absolutely fine. Um, and given that I track all my time anyway, it's not a big issue for me. I just invoice at the end of the month the amount of time that they've used. I do have some retainer clients who pay a fixed fee each month, and that's because the work that I do with them is fairly fixed. So we know how much of my time will be spent, they know how much it will cost. Um, so we go with that and if it doesn't work for either party at some point, then we speak to each other. You know, I don't, I don't do this work to screw people over on the cost. You know, if I'm only spending three hours a month, I'm not going to be charging you for 10, you know, because I wouldn't want someone to do that to me. Um, but yeah, I think if you don't know how much work is involved, charging by hour is easier to start with. And if it is consistent then you can look at a retainer model for that. Mhm.

Speaker A: Yeah. Brilliant. It's really helpful. And yeah, I mean just closing up on cash flow, like what again? We find that this is relatively uh, new thing for a lot of businesses have never had a cash flow forecast or if they did, they had it done once at the beginning of their business plan or at the start of the year. What do you see? How do you typically do cash flow for business?

Speaker B: Software, um, which you obviously know. Uh, Flow App is my preferred software. There are others available, I'm sure. Um, but it's just, it's too hard to do on a spreadsheet, um, even for someone who's very good at spreadsheets because the figures change so often. So get a specialist software, things like Flow App that connect directly to Free Agent or to Xero. Um, they are ideal because the numbers are accurate because you're not guessing whether it's been paid. You can see whether it's been paid. Um, the only thing I would say is that they have to be kept up to date. So if you're using cash flow software for budgets and scenario planning, the budgets in there have to be accurate, otherwise there is no point because you will be basing your decisions off incorrect information. So usually I might help someone set it up. Yeah, um, to get it going because the initial setup is generally the most time intensive. Um, but then it becomes part of their monthly routine. So on the 1st of the month you go in and you check the figures, you see what you spent last month, you see if any budgets need changing. Um, if you take on a new employee, part of your routine is you go into your software and you change those figures and then that it just becomes part of life. Um, and for people that can make that part of their routine, that cash flow software is amazing. Um, they can see what they've got, they can see what's coming in, they can see any low points. Um, and a lot of the guys that I work with that use Flow App Love the scenarios. You know, they'll show me. I had a call with someone yesterday afternoon. He's got his, this is what's definitely coming in scenario and he's got his, oh well, I think this one should come in. Um, and then he's got a third scenario of, you know, this is stuff in the pipeline that may or may not come in and he can show me that which just speeds everything up because I can see it straight on the screen what we think the business will look like in the next three to six months.

Speaker A: Love it. And how many clients do you typically work with, Stacey, at the moment? Like what's just to get an idea. Is it a handful or is it

Speaker B: 10, 20, 20 and 30 at any one time? Um, although you know, some of that might be an hour a month catch up. Ah. Whereas some are definitely more involved. Um, but I will, I will happily talk to anyone who comes to me and asks about agency finance. So even if I can just point them in the right direction or give them the right questions to ask someone else, you know, that's absolutely fine. I think it is so important for agency owners to understand their finances themselves, you know, and some do. Some it comes naturally and they're in those figures all the time. For others it doesn't. And it may be that they need someone externally to be in those figures for them and to bring that information to them in a set way every week, every month. M. Um, so that they can understand it that way.

Speaker A: Mhm. And what sort of percentage of those do you think need to be running a cash flow, a regular cash flow forecast? Is it uh, is it like again, is it 10% or is it, you know, 90%?

Speaker B: Where do you almost certainly should be running cash flow? Um, because their income is erratic, sometimes their expenses are erratic depending on how they service their projects. So having cash flow to map that out is ideal. For retainer based businesses, it's less of an issue, um, because their income is fairly predictable. It's not necessarily set because they do change, but it's predictable. Um, so as long as they maintain the same net number of clients, then they're going to make a reasonably stable income each month. Um, for those guys, the cash flow is more about, um, growth planning. So if I was to take on new staff members at these points, what does that do to the cash flow? You know, if the income increases and therefore the bills increase, you know, what does that look like? Is there a tipping point where, you know, an increase of growth of this amount actually doesn't make us any more money. Um, because that is often the case if you needed to take on new team members to service that maybe it doesn't work at that point. Um, so the cash flow is more, more about that sort of planning. But for project based businesses, almost all of them could benefit from having cash flows and the scenarios that go with it.

Speaker A: Yeah, yeah, absolutely. That certainly resonates with our view as well. Um, and Stacey, look, it's been great chatting to you. I could chat to you for hours. But uh, in anything, as we finish off, anything you would say to somebody who's considering uh, moving in to the, that fractional CFO advisory, um, position like you, or a business that's thinking about potentially looking for bringing somebody in as a fractional person, what would you, um, say?

Speaker B: I'm working with very small businesses so they don't have massive amounts of cash to throw around, but they probably do have enough cash to take hour a week of my time. Yeah. So I can sell that to someone quite easily. You know, almost everyone that you speak to will happily give you four hours worth of money as it were, uh, to hear what you could do to improve their finances because that will pay back itself very, very quickly. Um, if you're, if you're looking to do this, you have to be the sort of person that is interested in, in the businesses that you work with. You know, this is not a, uh, once a year I will look at the numbers and that is it. This isn't every week, every month I will go into this business and I will talk to the people and I will know what is important to them. Because small businesses are run mainly m for the benefit of their owners. That's why they took on all the risk, therefore they should get the reward of it. Um, and what is right for one person may be very different to what is right for another person. So if I'm speaking to someone who is, they've just had a baby, they're running their business, they're time poor at the moment. The decisions that they may make will be very different to someone who is young, free, single, lots of time on their hands. You know, already owns a property in the family and therefore the risk there. They could spend lots of money, they could make a loss, wouldn't matter, they wouldn't be homeless. You know, someone who's relying on that income to support a family, um, and to pay their bills is not going to take the same risks. It's not going to need the same risks. So I need to know about that person and what they need from their business before I can advise them on the strategy that is right for them. Um, so this is not a hands off, just look at some numbers and hope for the best. This is a digging deep into what people want from their business and need from their businesses and using the numbers to help make the plans so that they can achieve what they need.

Speaker A: Brilliant. Love it. Stacy, thanks so much. Um, it's been great chatting to you. I, uh, look forward to hearing chatting more. And, uh, yeah, thanks for watching the new F Word podcast and we'll be back with more guests next week.