We’re Making Good Money. I’m Not Sure How.

Introduction:

This week, Jay Goltz, Jennifer Kerhin, and Liz Picarazzi discuss their efforts to get a better grasp of what drives their profits. They ask how much of their finances they should manage themselves. And how much should they rely on an accountant or a fractional CFO? When does delegation become abdication? Jennifer says she’s benefitted from hiring a fractional CFO who has taken an active leadership role, including setting up a database that helps Jennifer see in real time whether the fees she’s charging cover the labor she’s deploying. “Whatever she’s charging me,” says Jennifer of her CFO, “it’s absolutely worth it.” Liz, meanwhile, thinks she should be doing more herself. And Jay says he was paying big bucks for a full-time CFO until late last year. “And it was a complete waste of money,” he says, which is why he’s decided not to replace her. Plus: Liz reveals her secret strategy for marketing directly to municipal government officials, some of whom have started to use the term “Citibin” generically. And the owners respond to a question from the head of a cost-reduction service who wonders why she’s struggling so much to get business owners to try her risk-free service.

— Loren Feldman

Guests:

Jennifer Kerhin is CEO of SB Expos and Events.

Liz Picarazzi is CEO of Citibin.

Jay Goltz is CEO of The Goltz Group.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Jay, Jennifer, and Liz. It’s great to have you here. I asked this with last week’s group and got a surprise answer. So I’m going to try again. Did any of you make New Year’s resolutions this year? Anybody?

Jennifer Kerhin:
I made goals. Is that the same? Goals, rather than resolutions?

Loren Feldman:
It’s related.

Jennifer Kerhin:
As part of my Vistage group, which was a couple days ago, we had to present our four top business goals and our four top personal goals. And you had to do it in front of everybody with slides and accountability. And it was an important part of my late December planning. So yeah.

Loren Feldman:
Can you give us a couple of those goals?

Jennifer Kerhin:
Sure. One is, this year’s focus is on management. We have hired some amazing people, but I need to develop our inexperienced managers into strong managers—so, focus on training and development of management. Second is, implement a content marketing strategy. We have an entire content marketing strategy this year.

My third one is to actually have a good format and be prepared for my monthly meetings with my CFO. I have a fractional CFO and have not done a great job. And my final one is to… Ugh, I don’t remember my final one. Shoot. And then three personal goals. Yeah, three personal goals. One is, my 30th wedding anniversary this year. And so we are taking a two-week vacation to Spain—so to plan that, so that we have a lovely time.

Loren Feldman:
That’s right up your alley: event planning.

Jennifer Kerhin:
Yeah, absolutely. And then, redecorate my living room. Because I’ve hated it and ignored it for years. And then my final one is, I’m not doing dieting. I hate dieting goals. I hate weight loss as a metric. It’s more: be more active. So every day, I’m committing to 15 minutes of activity, whatever it is. Treadmill, walk down the stairs. I will commit to 15 minutes every single day. For those people who are athletes, they’re probably disgusted right now at this. But for someone who sits in a chair 12 hours a day, 15 minutes of solid activity is a big step for me.

Loren Feldman:
There’s a lot of good stuff in there. I want to come back to some of that. But real quick, Liz, did you set any resolutions this year?

Liz Picarazzi:
I didn’t set any formal resolutions, but I kind of looked at things that I want to make sure have happened or do happen. One is, I have a 17-year-old who is going to be going to college next year. So I want to just spend as much time as possible with her. I’m definitely starting to feel worried about that.

Another one with work, at least, is to really be looking for people I might want to hire. I do expect growth this year, and I don’t feel like I’m in a great place. I want to know who I’m going to hire once I need to. And I feel like it’s a pretty vulnerable position that I’m not there yet. And in terms of personal exercise, I don’t. I go on walks every once in a while.

Loren Feldman:
That’s exercise.

Liz Picarazzi:
I’ll go on more walks, but I’m not going to quantify it. [Laughter]

Loren Feldman:
Jay, how about you?

Jay Goltz:
Liz, if I can give you some—wait, I have to tell you, as someone who sent three kids off to college and remember the moment where they’re walking away from the car and you want to vomit, and you think, “Oh my god, did I spend enough time with them? Blah blah blah.” I tell this to everyone that’s been through that: You need to smile and remind yourself that there are lots of people who wish they were sending their kid off to college—to a college they want to go to. You have to remember that, because how fortunate are we and they that the kids grew up, and they’re okay, and they’re going to college?

Liz Picarazzi:
Right. Well, also, I need to not catastrophize her going to college. It’s a natural thing. But we were on vacation recently as a family. And I’m walking the Great Wall with Frank and Lydia. We’re having a great time. And all I have in my head is: This is the last time I’m going to do something like this with her. Which is not true. But in the moment when I think: Am I ever gonna do that with her again? You know what, I could, if I make it happen. But I definitely have this worry that this sort of style of spending time together as a family is going to change.

Jay Goltz:
Stop worrying. That’s the New Year’s resolution. Stop worrying. Write that one down.

Loren Feldman:
Is that your resolution, Jay?

Jay Goltz:
No, I’m not a big worrier. My New Year’s resolution is, after 45 years in business, you’d think I figured it all out or maybe most of it. But I have been through a tremendous transformation in the last 30-60 days that I need to make sure my managers are all getting good numbers so that they can manage the company better, including getting the inventory under control. And I wasn’t paying enough attention—if any attention—to it. So, I’ve only got that one thing. And if I get that—not if—when I get that going right, everything will be glorious.

Loren Feldman:
We’ll all look forward to that. There’s a lot to talk about there. Jennifer, let’s go back: The hiring of a fractional CFO, I think, is a new thing for you, right?

Jennifer Kerhin:
Well, I’ve had her for years. But to be honest, she was more—not behind the scenes—but she more took her direction from me. And to be honest, I would say up until about June of last year, she played more of a role of an accounting consultant. She really wasn’t what I would call a fractional CFO. And last spring, I was talking to her and she said, “You know what, Jennifer? Your growth is too fast, too much, for me to sit back and have you just ask me questions.” Because that’s really what she was, more like a consultant where she would sit, we’d meet—I don’t know, once a quarter, once every two and a half months—and I’d ask her some questions.

She’s like, “Unless you say no, I’m gonna take a firmer role and be the fractional CFO that I’m supposed to be and really be more involved and make decisions. Obviously, you have to approve them. But rather than sitting back and being passive, taking an active role in what this company needs from financial—and I don’t mean just reports, but analysis. And give me thoughts.” And since then, it’s been fantastic, the things that she’s done. And so understanding, I think, that consultant versus fractional CFO, the differences—and I’m so thankful she took that leap to tell me that. And what she’s doing now for me in the company is tremendous.

Jay Goltz:
I know exactly what she’s talking about. And I know what you’re talking about. She’s talking about putting in a dashboard that you can keep an eye on what’s going on, and as the company grows quickly, you’re gonna have some different financial needs. And it’s about monitoring those, and then about watching cash flow. That all makes perfect sense.

Jennifer Kerhin:
It does, Jay. And the company is now at the size of—she’s like, “It’s still a small company, but it’s a company that needs to have that analysis, that strategic oversight, that dashboard,” like you said, Jay, on the finances. And then she’s saying, “Here it is. Let’s look at it. Do you understand this? Watch that.” She told me in September the same thing: “Watch your receivables. They’re getting too far back.” I had $400,000 in receivables. She’s like, “Get on top of this.” It’s been a transformational time and a good one.

Jay Goltz:
You’re also blazing a new trail. It’s not like there’s a quote-unquote standard in the industry that you can follow. And I’ve been chasing that thing for 30 years, because no one ever got to my size. Therefore, I had no metric to look at. “Oh, your direct labor should be running X percent.” I’ve had to figure it out on my own, and it’s costly to do that. So I think you’re in a similar situation that you need to figure out.

Loren Feldman:
Jennifer, how big a fraction is your fractional CFO?

Jennifer Kerhin:
So I would say she’s now 10 percent. We used to meet, let’s say, every quarter, and she would spend a couple hours in preparation, and we’d talk. But now she’s probably working, I don’t know, 10 hours a week, maybe less. Maybe eight hours a week.

Loren Feldman:
And has that been a comfortable fit for you, in terms of affording what you have to pay her?

Jennifer Kerhin:
Yeah. Financially, it’s fine. She doesn’t work eight hours a week. What she does is more project-based. So she set up this dashboard. One of the things she did in the fall is we created our hours-utilization database. She did it. We’ve tracked hours for years, but I stopped looking at them in 2019, because COVID hit. And I just couldn’t look.

So, now she created this database. At a glance, any manager can go in, and they can look at ABC client, and they can say, “For this year, we scoped 200 hours, and we are already at 150. Let’s break it down. Where are those hours at? Are we going over hours? Why did we go over hours? Oh, well, we had two inexperienced staff on it. Okay, so this other person was training.”

We have this database that she created with our admin that’s fantastic. So one, it’s going to have us have management oversight into what’s happening in an easy way. Two, did I underscope it? What we do is, I don’t bill by hour, Jay. I bill by s scope. So, “Oh my God, did I scope 40 hours and it took us 100 hours? Did somebody we put on it scope-creep? Did the client say to them, and they just did it? And they shouldn’t have?”

Jay Goltz:
Or, this isn’t your fault. Maybe you figured it out, and you just have a needy client that’s calling you too much.

Jennifer Kerhin:
Yes! Yes!

Jay Goltz:
You can’t predict that. You know, you paint the house, you can figure it out. It’s going to take 73 hours to paint a house. You get a needy client, they could be calling you every day about everything. And you can’t predict that.

Jennifer Kerhin:
No, but this is giving us management oversight. When we did it in 2019, the CFO had set up a post event. So let’s say the conference was in September. In November, she would say, “Okay, you had scoped 100 hours; you spent 98.” Well, this time, it’s real time. And so, to go back, Loren, to your question, it’s not like I’m paying her eight hours a week. We agreed on this project. She took it on. So she worked really hard for like a month, and then she took off for, you know, three weeks of the holidays or whatever. But now, she’s introducing it, and she’s training my managers. She’s taking an active role in leadership, so that she can figure out, financially, how we’re making profit, because we don’t have a firm handle. We’re making good money. How? Where’s it coming from? Which clients? We don’t have a good handle on this yet.

Jay Goltz:
The key is, you don’t have the background to do that.

Jennifer Kerhin:
No. Not at all.

Jay Goltz:
Which is why it’s so valuable to have someone like this, because she’s done this, hopefully, at 30 other companies and has an idea on it.

Jennifer Kerhin:
Well, and this fractional concept is, in the past, she said to me, she goes Jen, “You’ve been treating me like a consultant that comes in once a quarter.” She goes, “I’m a fractional CFO. I should be ingrained.” So we got her into all of our systems. She’s on Slack. She now sees our files. She’s like, “I can help you make high-level business decisions that you were just feeding me information.”

And now I have her talking to my leaders. And she did a presentation in August to my senior leaders. She’s becoming an important aspect of the company, just on a fractional basis, because I couldn’t afford her. My company is too small to afford her full-time. Nor does she want a full-time job. But now I’m not treating her as, hey, a couple hours a month. She’s an important aspect on a part-time basis for the company’s leadership.

Jay Goltz:
And does she work for a firm? Or is she on her own?

Jennifer Kerhin:
It’s her firm and she has three accountants who work for her who do reconciliation and stuff. And then she’s the fractional CFO.

Jay Goltz:
And I looked into that just a month or two ago. My accountant goes, “Oh, maybe you should hire one.” And it was like $300 an hour, which doesn’t take long before, at my size, I might as well just have a full-time employee. Can you tell us, what does that cost?

Jennifer Kerhin:
So let me pull it up. A lot of the reports and stuff, she goes to the—I say accountants, but they’re really bookkeepers. She puts it to the much lower rate of the bookkeeper. But let me pull up her bill and tell you exactly how much I pay. I don’t really remember off the top of my head, but it’s been worth it. Whatever she’s charging me, it’s absolutely worth it.

Jay Goltz:
While you’re looking, let’s just set a baseline. If you were to hire a full-time CFO, at a company your size, maybe that’s $150,000 divided by 2,000 hours. So a full-time person would cost you $75 an hour. So I would expect—

Loren Feldman:
Although a company of Jennifer’s size normally doesn’t hire a CFO.

Jay Goltz:
No, no, for sure. I’m just saying to use it as a baseline. It’s obviously going to cost more per hour. But if for instance, if she was hiring her for 20 hours a week, she’d be better off just going and hiring a full-time person, but she doesn’t need someone 20 hours a week.

Liz Picarazzi:
Well, then I think a CFO would be a lot more than $150k per year. I would guess it would be up there, more like $200k to $225k.

Jay Goltz:
You know, if you’re not borrowing a lot of money, I don’t know that. Because that is the world I’m in. If you’re not borrowing a lot of money, and there’s not a lot of insurance stuff to oversee, I don’t know that. You’re right. It certainly is in that range, but—

Loren Feldman:
Jay, you recently told us you parted ways with your CFO. You were paying your CFO good money, weren’t you?

Jay Goltz:
And it was a complete waste of money, as it turns out.

Liz Picarazzi:
Wow.

Jay Goltz:
Yeah. Wow is right. I have now, believe it or not—

Loren Feldman:
Well, you told us that you thought you hired the wrong person. It wasn’t a good fit.

Jay Goltz:
I did.

Loren Feldman:
And she thought so, too.

Jay Goltz:
Yes, and the fact of the matter is, I’m not replacing her.

Jennifer Kerhin:
It’s $190 an hour. And then her assistants charge me at $85 an hour.

Jay Goltz:
You know what, that seems very reasonable.

Jennifer Kerhin:
And I’m telling you, the transformation… I’ve always valued her advice, for years. But what she has done since June, to become ingrained in the company for the amount of hours. So for the past month, in December, she spent 10 hours and her assistant, or bookkeeper, spent six. So it’s about 60. And it’s worth every single penny.

Loren Feldman:
I probably shouldn’t admit this, but I’m not familiar with the term “utilization database.” It sounds like something that’s been transforming for you, Jennifer. Is it just me? Do lots of businesses have utilization databases? Anybody?

Jennifer Kerhin:
I took this term from a branding agency that’s part of my Vistage group. And so, I don’t know if it’s out there, Loren. I just stole the term from her. It was “utilization rates.” So they say a standard employee should be working about 85 percent of the time. And so I’m trying to figure out, how much are my employees working on clients? How much are they training? And with hours database that the CFO did, so I can have insight into scope and pricing for clients, but then also staffing spending. I mean, did I hire a new person, and they’re spending all this time with a client, and then half their time they’re spending on training because they don’t know what they’re doing? So I don’t even know if this is a business term. I just stole it from somebody else in my Vistage group.

Jay Goltz:
You know, it’s funny you say that number, because I just went through an analysis of my direct labor. I do classes at the frame show, so I help people with their pricing. So I did this partially to be able to tell them, and the fact is, between vacation time, holiday pay, sick days, that’s 10 percent right there.

Jennifer Kerhin:
Yes, yes.

Jay Goltz:
And then I took another eight percent off just for breaks and meetings. So it’s funny, my number—and I came up with it myself—was that I’ve got about 82 percent. And I’m arguing that you’re getting 82 percent out of every dollar. So yours was right in line with mine. So I do think that the yield is clearly not 100 percent.

Jennifer Kerhin:
No, not at all. It can’t be. There’s no way it could be. But understanding that, too, when you’re pricing. Look, you have employees. These aren’t contractors, like you said earlier, that you’re just marking up. Every dollar is not billed to the client.

Loren Feldman:
Jennifer, it’s not that you bought a piece of software called the utilization database, and started filling it up. It’s that she is now keeping track. I guess your employees all fill out some kind of form that indicates how they’re spending their time. And then she compiles it and analyzes it?

Jennifer Kerhin:
Yes, my employees put their hours into ADP. And they assign it by client and by year, and then by department. So if you work in the sales department, you work on the client for 2024. And then if you’re in the operations department, your department’s operations, and the client and the year. And so she made a pivot table. It’s not like an access database. It’s a pivot table in Excel. She downloads the data from ADP, and she made this incredible interface so quickly. Within two buttons, I can see, on a client, how many hours they spent that month, who worked on it—I mean, it’s just fantastic.

Jay Goltz:
So when you quote a client a price, do you put some parameters? Do you say to them, “Okay, we’re figuring this is based upon giving you 300 hours a year.” I mean, so that you can call later and go, “Listen, you’ve used up all your retainer,” or whatever. Or is it open-ended?

Jennifer Kerhin:
It’s not hours. We do it by tasks. So let’s say, for trade-show operations, there are probably 20 different tasks. And so we’ll say, “Okay, this task, we’re going to do these four bullet points to accomplish this outcome. We expect it’ll take 50 hours.” I don’t go back and say, “You’re at 52 hours.” But I say, “Look, you’re asking us to do something outside of scope. We’re not going to do it.” Or, “Hey, what you’re asking for is so far past what we thought.”

It’s a little loosey-goosey—too much. Jay, what we do, there is a large component of independent meeting players that just charge by hour. And what I say is, you’re getting a company with a lot of backup, with different people and skill-sets. And we’re gonna do it by scope. I don’t know if it’s the right way.

Jay Goltz:
I mean, my only question is, if they turn out to be somebody who’s just using way too much time, I mean, how do you address that? “This has taken more time than…” I mean, I’m trying to see if there’s—

Jennifer Kerhin:
We do change orders. We do send a lot of change orders.

Jay Goltz:
Oh, good.

Loren Feldman:
Liz, I’m curious. I guess, two questions: One, have you hired fractionally at Citibin at all? And two, have you done this kind of analysis of your finances and your work that Jennifer’s describing?

Liz Picarazzi:
So in 2024, definitely everything with financial literacy and being on top of things is a huge priority for me and Frank. Both of us are really behind on where we need to be, and that ended up coming into focus at the end of last year, because—

Loren Feldman:
If I can interrupt—Frank, being your husband and COO.

Liz Picarazzi:
Yes, Frank is my husband and COO, and he’s a little bit more financially illiterate than me. [Laughter]

Jay Goltz:
But he’s not a fractional husband?

Liz Picarazzi:
Well, Jay, you never know. That’s my private life. [Laughter] We definitely need someone like that. As I listened to Jennifer, I think that this is something we can look for. I have a lot of other business owner friends who have fractional CFOs. So I think if I put it out to my EO group, I could get some recommendations. I think that I also would be looking for someone who would have an eye on valuation. I think I’ve mentioned I don’t plan on selling anytime soon, but from now on, I want to know my value. And I want to just have regular valuations done. So if I can find someone who kind of has an eye on that, and also has connections in those communities…

Jennifer Kerhin:
That might be two different people, Liz.

Liz Picarazzi:
Yeah, I thought it might be. I did hear that one person I know has that person who does both. But what’s your perspective on it?

Jennifer Kerhin:
So I wanted to do a valuation. And when I talked about it with my fractional CFO, and she’s like, “That is a very special niche thing, because it takes into account so many factors.” She goes, “I’m looking at actual numbers, and giving you analysis, and how to build for the future.” The valuation, it’s like art and science. So she pointed me in the direction of other people to do it. I think it’d be hard to have both.

Jay Goltz:
I think the problem is, with those people, it’s like having a dog watch your butcher shop. [Laughter] I don’t think you’re gonna have one of those people come in and not start salivating on, “Oooh, I think I can find you a buyer!” And then they do the math in their head. They’re gonna get a $300,000 commission on it. I don’t think they can stop themselves.

Loren Feldman:
Liz, were you thinking that the fractional CFO would actually do the valuation his or herself? Or were you thinking that would be the person who would lead the project and find the right person?

Liz Picarazzi:
More likely the project. What do these finances need to look like to be ready to get a valuation?

Jennifer Kerhin:
Oh, I think they could do that actually, Liz. I thought you were saying do the valuation. I misunderstood. I think they could do that.

Liz Picarazzi:
Yeah, I think so. And you know, one thing, if I look back on this past year, while I don’t have these great financial skills, and we don’t have a fractional CFO, there were some huge expenses mid-year that we really realized that were there. One of them was warehousing. One of them was labor, which relates to Jennifer. And we made pretty immediate changes on both. And that saved us a ton of money.

Like, if that’s the sort of thing that a fractional CFO would do, I don’t know if I’d want to pay for that. Because that’s really us being like, “Where is all this money going? And let’s look deeper into the financials.” And like, with us, at least, we were kind of benchmarking our installers against what installers did a couple of years ago—like their speed—and realized that we were paying two and a half times what we used to pay for the same work. And that was due to a sort of cultural shift that happened, a little bit of a management thing. But you know, if we can be smarter, I probably would want to do that before I hired a fractional CFO.

Jay Goltz:
You just hit on the heart of what my situation is. I delegated it all away, and I shouldn’t have. It was my job. It was my job. I should have been looking at pricing for the last 20 years. And I just had the same person here who was doing a good job for 20-some years, and I just gave it up. A lot of what you’re talking about is the job of the CEO, I believe. That’s what our job is. We can’t go hire someone from the outside and have them start—they certainly can help get us some numbers. But part of this is what the CEO is supposed to be doing, is figuring out what to charge and costs.

And one number you’re missing in between the valuation and just doing the accounting. What I’ve learned is: in the beginning, its growth. Then you figure its profits. Then you figure out its cash flow. Ultimately? Return on investment. Everybody should know—and I didn’t do it myself—what your ROI is. And the fact is, I have way too much inventory. And as a result, my return on investment is not great. And I’m gonna fix it this year. And if your return on investment is good, then your valuation is going to be good. Most people who own businesses, their return on investment should be 20, 30, to 40 percent. It certainly shouldn’t be 14 percent. It doesn’t make any sense to run a business and have a 12- to 14-percent return on investment with all the grief that we put up with. You’re better off—

Jennifer Kerhin:
Jay, I’m going to push back, though, a little bit on you.

Jay Goltz:
Go ahead.

Jennifer Kerhin:
I think the CEO’s job is setting the vision and the strategy. When you’re a small business person, you’re doing everything, right? That’s the obvious name that Loren came out with the 21 Hats, and the concept of taking them off. But I don’t think, if you look at Fortune 100 companies, those CEOs are setting prices.

Jay Goltz:
No, those people have CFOs who are making $3 million dollars a year.

Jennifer Kerhin:
Well, that’s what I’m saying.

Loren Feldman:
But your company is at a different stage, Jay. Obviously your company is much more mature than Jennifer’s or Liz’s.

Jennifer Kerhin:
No, but I’m saying to Jay: Earlier, you said you didn’t have your eye on it. I think the difference is delegating versus abdicating. If I’m hearing correctly, you didn’t delegate; you abdicated.

Jay Goltz:
Absolutely. No, absolutely. That’s what I’m saying.

Jennifer Kerhin:
A CFO should be able to—a fractional or regular CFO—should help you. And you just need to have your eyes on it.

Jay Goltz:
Or be involved with it. For sure. I’m not suggesting you should be doing all the CFO work. I’m just suggesting, I was not involved. All it would have taken is a few hours, an hour a month. I could have had—should have had—regular meetings going over the numbers, seeing where the margins were slipping. And I didn’t. I absolutely abdicated. That’s what I do.

I mean, that’s partly how I ended up with this size business, because I’m the opposite of a control freak to a bad degree. I’ve gone too far to the other side. You know, a control freak will never grow it, because they can’t let it go. I completely let it go. But I’m paying the price for it now a little bit. So I’m taking a little of it back.

Jennifer Kerhin:
My big theme this year is about management. I said: In some areas, I have abdicated oversight, and that wasn’t good. I sort of trusted them to set up structure. And what I realized is, the managers I hired are really good technical experts, but they don’t know how to set up the structure of a new service. They don’t know how to do this, and I abdicated my role to them. And I shouldn’t have.

So I’m in the same boat, Jay, on a smaller scale. And I told them, “I’m taking the reins back of oversight and helping you set up structure. Your job is going to be managing the day to day. And I need to get you training to help, so that in two years, you can manage for tomorrow and set up structure, things like that.” But I’ve abdicated a lot, too.

Loren Feldman:
So, Liz, hearing all this, do you still feel as though you should be the one to dig in and figure out what was happening with those cost issues, as opposed to getting a fractional CFO to help you with it?

Liz Picarazzi:
So I think that I do need to get involved—more involved—partly because of some of the confusion with our finances at the end of last year. And they were actually positive changes, but there were some that we found unexpected. But it’s interesting, about 30 seconds before you just asked me that question, I put on my to-do list, “research finding a fractional CFO.”

So even though you guys have said there are some downsides to it, I think it would be at least good to inquire. This is the sort of thing I probably would be very thorough about, because if I hired someone, and they didn’t do a good job—which I have kind of a history of doing—I’m going to be really pissed.

Jennifer Kerhin:
Start slow, Liz. I started six years ago, meeting quarterly for like two hours. That’s all I did. I said, “What about this?” It was more like an advisor/consultant who I ran ideas off of, who understood finances. So I started really slow, very slow. And then she only took an active role six months ago. I think a fractional CFO can mean it’s a 2-percent fraction, or it’s 98. I think you can decide how much and go slow.

Jay Goltz:
Well, just to be clear, it’ll never be more than 40 percent. Because at that point, you’re better off just hiring a person full-time. It’d be cheaper. There’s a point to where the math doesn’t work, but I would say this, for sure: This is why we do 21 Hats. One of the great fallacies of business is, “Oh, you start a business, and you’re good at whatever you’re doing. And hire a good CPA firm.”

Most CPAs—most, many, whatever number you want to use—they do tax returns. I’ve got a 45-year history of dealing with three or four different accounting firms, and some of them were big-time, paying big money. I can’t tell you that they came into my business and said, “Hey, Jay, wait. You’d better pay more attention to this.” They haven’t done anything, except do the tax returns. So there is a difference between a fractional CFO and hiring your accounting firm. They’re not the same thing. They could be the same thing.

Jennifer Kerhin:
I absolutely agree. I went to my CPA a couple years ago—well, my previous CPA. And this was before COVID, I think in 2019. And I said, “Hey, it says on your website that you offer business strategy and fractional CFO stuff. Can you help me?” And I met with her once. It was a disaster. She’s looking at it from accounting and tax issues, not from business strategy. And I heard a term recently that talked about financial accounting versus management accounting. And financial accounting is what she was doing, in terms of making sure your books are good, according to government compliance and tax. What my CFO helps me a lot with is the accounting so it helps you make management decisions.

Jay Goltz:
Completely different.

Jennifer Kerhin:
Yeah, completely different. And so the CPA was not a good fit for me at all. I agree with you Jay. Totally different: fractional CFO versus CPA.

Jay Goltz:
I paid a lot of money to learn that lesson. I was doubling in size for several years in a row. I was completely out of control. I hired my accounting firm to do a management audit: $12,000. Back in the day, everything was $12,000. So they send a 23-year-old to go do a little analysis. They give me the report, and they tell me, “Your receivables are out of control.”

Now, keep in mind, I’m mostly retail, so I didn’t have that many receivables. I go, “Really?” And I’m embarrassed to say that I didn’t know this. So I said to him, “Well, how many receivables do I have?” And he said quote-unquote, “That’s beyond the scope of this audit.”

$12,000! And they made the statement, “Your receivables are out of control,” but it was being outrageous for me to ask, “Really? How many receivables?” Couldn’t tell me the answer. I didn’t pay the bill. They wiped the bill, and I changed accounting firms. It sounds crazy, but this is still going on out there. Just because they say they do advisory doesn’t mean they do advisory. So, you know, be warned. You’ve got to check them out, as you did with the woman you had the meeting with. Some of them are helpful and some are not.

Loren Feldman:
Jennifer, I think when you told us your goals early on, was one of them about marketing?

Jennifer Kerhin:
It was. We have, for years, just relied—like a lot of small businesses—on word of mouth. And last year, one of my big goals was to get a brand new website. And this year, it’s content marketing. So we’ve always had references. And we’ve done a really poor job of turning those into case studies. And we’ve never had videos. And we’ve done, I would say, a C-plus job on LinkedIn for putting up information. So we’ve hired a firm to come up—well, I came up with the strategy; they’re executing it—with a content marketing strategy between blog posts, LinkedIn, eight videos, case studies, and an ebook. So we have a pretty aggressive content marketing plan this year, and I’m pretty excited about it.

Loren Feldman:
How did you come up with the strategy?

Jennifer Kerhin:
I have a very niche market of working with associations, trade and professional ones. So I don’t need a broad audience. I don’t need that type of marketing that does leads or e-blasts. What I need is to showcase our incredible work in very specific storytelling, and to get that out there in front of them. And we’ve not done a great job on it on a larger scale.

And as you grow in a business, you have to feed the beast, right? So when you’re smaller, the word-of-mouth marketing is okay. But as you get bigger, you’re like, “Oh, I’ve got a lot of salaries on my payroll now.” My role now is to constantly keep up with it. So our best marketing is when we tell the story of how we solved the problems or we executed incredible convention management for our clients. So I knew that, but it worked on a small scale before, but it’s not going to work on that. So we’re doing a big push, pretty significant dollars, for this year.

Loren Feldman:
And you’re spending those dollars with a firm that will actually produce the content, the videos, the blogs?

Jennifer Kerhin:
Absolutely, yeah.

Loren Feldman:
Can you give us a hint how much that costs?

Jennifer Kerhin:
Sure. I’m spending $58,000. And I speak a lot. I’m speaking in two weeks at a meeting in Fort Lauderdale. They have me on this panel, the closing keynote, and I’ve never tied that in with a case study and then communicated that. So one of the things we’re going to talk about is the monetization of hybrid conventions. And they’re creating a case study right now. They’re writing it. I’ve given them sort of the hook, but they’re writing it. They’re getting a quote from the client. They’re gonna put in a photograph.

I’ll have a blog post on LinkedIn the day before, like, “Hey, Jen’s speaking, blah, blah, blah.” And afterwards, I’m like, “Come hear this case study, more about what I spoke about.” We’ve never done that. We’ve never tied in that type of content across different communication platforms. I’m not a B2C. And I’m not a B2B. I have a very small market. My potential clients, when they see this, it’s going to resonate. Well, I hope it resonates. I don’t know.

Jay Goltz:
I think the key to the $58,000, which sounds like a lot, is that it’s not really for the year. I mean, you can get life out of that for two or three years, probably. So it’s really when you think about it, it’s 20 grand a year for three years.

Jennifer Kerhin:
Well, and they’re creating eight videos. So eight videos and an e-book. We’re creating a corporate video and eight videos of each of our services. So there’s a minute video, and then eight 15- to 30-second videos on our services. Then there’s an e-book and the case studies. There’s a lot to it.

Loren Feldman:
Liz, are you doing anything differently this year in marketing?

Liz Picarazzi:
So a couple of things that I’m going to do a little bit differently: Our focus, in terms of targets, has been kind of all over the map. But it became very clear last year that our biggest growth area is going to be in municipal and government. And so I’m going to be focusing a lot more on that, and we’re going to put residential kind of in the back seat. We are in a good position to be able to do that, because we have pretty strong brand recognition, especially in New York City.

So with residential, when people are walking through neighborhoods, and they see a nice trash container, and they see the branding plate Citibin on that, that’s my best advertising. And we’re all over New York City. So people see the brand all over. They see our trucks. I would say it’s passive marketing. And luckily, we’re able to have that—I don’t want to call it residual income—but there is some part where it’s not as much effort to get that revenue.

And then with regard to municipal, it’s about scaling what we’ve learned to work well. So, since launching in New York City, now we’re in about 10 other cities. Most of those other cities are pilots that could roll out. And so we’re working really hard on making those successful. But the sort of playbook we have for getting into a city and everything from direct mail, email, phone calls, social media, and even trade shows, that is a playbook that we kind of developed starting in New York. And one thing they always say about New York: If you can make it there, you can make it anywhere. Well, the sanitation situation in New York, I think, is definitely the most complicated in the whole country—and the most bureaucratic.

And that means that the other cities that we’ve worked with have felt a lot easier. They just moved faster, less bureaucracy. So that kind of ties into: Okay, New York is where we got our start. But if we focus too much on getting restaurants the ability to put trash enclosures in the streets—which was my obsession over the summer—I’m not gonna spend a second on that anymore, because it’s completely up to the city on how they want to handle the trash and restaurants. And if restaurants need trash enclosures, I’m here, but I’m not actively going to try to fight with the city on behalf of restaurants, which is one of the things I was doing before.

Jennifer Kerhin:
Liz, your focus now is B2G, right? Government?

Liz Picarazzi:
Yeah, I would say B2G, then B2B, and then B2C, the lowest. The B2B, we still have great potential, especially with property managers and with architects, especially as we go more nationwide. Like in Aspen, a lot of our connections are more B2B.

Jennifer Kerhin:
Do you have case studies?

Liz Picarazzi:
So, it’s funny you say case studies, because we have a ton of before-and-after little stories. But what I do is so visual that the more text I have, the less people are going to look at the trash transformations where we can show trash on a street corner that completely goes away the minute a Citibin is there—with a public official saying how much it’s benefited the beautification of her or his neighborhood.

Even a couple of weeks ago, we did a great installation in Brooklyn Heights in Brooklyn, and the local council member came out and praised the bins, and he used the word “Citibin” instead of the term “trash enclosure,” which is very similar to Kleenex. And it’s happened a couple of times. There was another one. It was at a very well attended press conference, and the politician said the word “Citibin” repeatedly, which I was like, over the moon about. And then a couple of weeks later, I heard from one of my contacts within government that one of my competitors had called and officially complained about these politicians saying the word Citibin.

Jennifer Kerhin:
Yeah, I was just thinking: Would you do a case study with a picture, and then that little quote from the politician?

Liz Picarazzi:
We already do that.

Jennifer Kerhin:
So you do them. They’re just not written ones. Got it.

Loren Feldman:
How do you market B2G? How do you reach a government official?

Liz Picarazzi:
All right, I’m glad you asked this question. It’s part of my secret sauce, but I’m gonna reveal it anyway. I have someone who works full-time just hand-creating lists. He’s a fractional assistant. He’s a virtual assistant, and he does other things. But all of the government lists that we have were hand-created by him. And some of the great success we’ve had with our direct mail and with our email is because I’m not purchasing a list, like I’ve done in the past. I mean, I’ve been in business for 12 years. I’ve purchased thousands of dollars of lists that never yielded a thing. But he manually goes, and he creates them. And he’s done it for a bunch of other segments as well. So, in terms of targeting, that’s been incredibly effective. And that’s one of the things that we’re going to continue doing. If we have a new segment that we want to get into, we hand-build those lists.

But then in terms of the direct mail, we have some really great—we call it a booklet. It’s a 12-page booklet. It’s square. And all it has is pictures of our trash enclosures in various cities and just little small quotes. So not like a testimonial or a case study, but this is just short and sweet. We mail that out. And that gives government people a potential answer to the difficulties that they’re having with trash, recycling, rats, you have it. So that’s kind of how we target. And it’s not just in the obvious departments like sanitation. It’s also in parks, libraries, other places where they’re dealing with trash, and we know that they probably have budget to take care of the trash problem.

Jennifer Kerhin:
Liz, how are trade shows for you, for the B2G market?

Liz Picarazzi:
They’re really good. And I have to say, the IDA one that I went to in Chicago in October was amazing. And we definitely got a very positive ROI on that, including in the city of Chicago. So while we were there, we did an estimate visit, and then we were able to sell some to them. But yeah, there are a bunch of trade shows that are in that space. I think there are also some that are generally for facilities management, or they’re sometimes called public works departments. There are procurement officers who are looking for great solutions. And we usually target them first by email, but we look at things like: Are they opening it or not? So God forbid Citibin sends you an email and you open it 57 times, I’m gonna see that.

Loren Feldman:
We’re almost out of time. Before we go, I want to deal with a letter I got from a business owner. This is a business owner who’s trying to sell something, a service, to other business owners, and not having success with it and trying to figure out why. I’ll read the letter real quick:

“I own a Schooley Mitchell franchise. We help businesses reduce their expenses in 15 categories. We negotiate with vendors, check for errors, and basically become an outsourced procurement team. Our average savings is about 30 percent. We don’t charge anything upfront. It takes 30 to 45 minutes for a call meeting to see if it makes sense for each business. If it does, we then sign an agreement. We do this for three or four years and share in the savings. All the clients that sign up and find savings are very happy. But it’s so hard to get people to take the 30 to 45 minutes to see if it makes sense, even though there is no cost and no risk.”

Anybody have any suggestions? One, why aren’t business owners interested? And two, how should this person go about marketing to business owners?

Jay Goltz:
This one’s too easy: She doesn’t understand what entrepreneurs deal with. Every single day, I get emails about how they’re gonna make me more money, and they’re gonna save me money, and they’re gonna blah, blah, blah, blah, blah. And the question is: Is it believable?

So my first question is, does it really take 40 minutes to find out whether this is a good match? It seems to me five minutes should do it. Do you do a lot of shipping? Because you see 40 minutes. Who wants to sit down and have a meeting for 40 minutes? That’s one.

Two, it would be very helpful to say, “We have the advantage of seeing what thousands of companies are buying. We can use economies of scale, and we can help you find the lowest price.” That makes perfect sense. But they don’t say that. And the website you go to is a cartoon that’s insulting.

Jennifer Kerhin:
One thing I would tell this person is, when I’m thinking about costs—I mean, I agree with Jay: 40 minutes is a long time. But also, the cost of something is not the only thing I have to consider. It’s training staff on a whole new workflow and process.

And I’ll give you an example. We use Salesforce. I know there are other CRMs that are a lot cheaper than Salesforce, but the amount of time to train my staff on something new and to move them over? That whole workflow, that’s considerable. And so I think sometimes when you think about procurement, it’s not just the cost of the item or the service. It’s the cost of getting your company to do that. And that’s pretty significant.

Liz Picarazzi:
Yeah, well, I’ve got some thoughts too. If I had a business where I was saving people significant money, that’s all I would talk about. That’s all. Or I’d have my customers talk about it. That is a quantifiable benefit that people who don’t have an easily quantifiable business can say.

So I don’t know how long they’ve been in business, but let’s say they’ve only been in business for two to five years. If you work on this full-time, you probably have dozens or hundreds of clients that you’ve saved millions of dollars. That’s all you need to say. Don’t tell me that I can have a 30-to-45-minute meeting with you. That’s not going to make me meet with you. Saving me a million dollars, or $10,000, whatever it may be, that will make me meet with them. And also, sending me to a website that isn’t that effective for a one-minute video, that’s not motivating. It’s very simple. I mean, they’ve got the ultimate customer type of testimonial, because it’s a hard number.

Jennifer Kerhin:
Oh, yeah, testimonial. You’re right, Liz—like a case study. If they sent me, “Hey, Jen, someone in your industry saved $42,000 a year by doing X. Do you have 10 minutes to talk about it?” That would grab my attention.

Jay Goltz:
It certainly should not take more than 10 minutes. Really, this just isn’t brain surgery. To tell someone upfront, “I want 40 minutes of your time.” It’s like, talk about a turn-off. And the fact of the matter is, it makes sense what they’re doing.

Loren Feldman:
Have any of you tried a service like this?

Liz Picarazzi:
No.

Jennifer Kerhin:
No.

Jay Goltz:
I had someone come out—somebody I went to high school with, actually, came out here and he bid it. And I don’t know why it never went anywhere. But I’ve gotta tell you, after thinking about it, I use a ton of shipping. I mean, I spend $600,000 to $700,000 a year on shipping. Between that, do they do things like the charge-card interchange thing? I always wonder. I spend hundreds of thousands of dollars a year with the Visa MasterCard expense. I always wonder: Do I have the best place for that? If they did that stuff, I’m probably a prime candidate for that.

Jennifer Kerhin:
So, Jay, if they sent you an email that said, “We worked with a furniture retailer in San Francisco, and we were able to save them $100,000 on shipping, can I have 10 minutes of your time to talk about how we might be able to help you?” Would that be of interest?

Jay Goltz:
Yes. But let me tell you the fun part, because I get these emails every day. That’s not what they do. You know what they say? They go, “We’ve worked with IBM, Apple,”—

Jennifer Kerhin:
Irrelevant!

Jay Goltz:
Right. And I say to myself, “Is no one thinking there? Do they think a small business owner is gonna go, ‘Oh, well, if they’re working with Apple, that’s who I want to be working with’”? I mean, no, you hit it on the head: “We worked with a small furniture manufacturer.”

Loren Feldman:
I think a Schooley Mitchell franchisee just got some very valuable information from a very good focus group. My thanks to Jay Goltz, Jennifer Kerhin, and Liz Picarazzi—and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com. Thanks, everybody.