FYE 53 | Fractional CPA Industry

 

What is financial transformation? How can you find investors in capital building and make sure you’re well-known? Just how important really is a good CFO for a business? These and more are the questions that we will be answering with Sara Dickinson for today’s episode. Sara Dickinson is a CPA with well-rounded experience in corporate governance, executive-level operational management, and scaling businesses for growth and profitability. She is also the founder, CEO, and CFO advisor of Continuous Scale, the one-stop shop fractional team model that offers next-level, technology-based, reliable bookkeeping services. Join us and learn how the company that took the fractional CPA industry by storm was formed, how it still thrives in the market to this day, and all the valuable insights and accounting definitions in between.

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CFOs, Capital Building, And Financial Transformation: How Continuous Scale Took The Fractional CPA Industry By Storm With Sara Dickinson

Every week, I introduce great friends of mine and great guests, and every one of them has valuable golden nuggets that I refer to in my book, Exit Rich, to share with my audience. I’m so excited because I’m not going to disappoint you, and she’s not going to disappoint you. Her name is Sara Dickinson. We met because she started buying my book, Exit Rich, to include in welcome baskets for new clients when they would sign up for her.

She and I are building quite a relationship. I thought I need her on the show because what she is doing is amazing. It’s mind-boggling too that she’s on my show because she’s on maternity leave. She had a baby boy named Beckham. Sara Dickinson is a CFO/CPA with well-rounded experience in corporate governance and compliance, executive-level operational management, and scaling businesses for growth and profitability, so we have a lot in common.

I cut her bio basically in half, but she began her career with the Big Four at KPMG, and both her corporate and consultant clients’ work history includes IPOs, IPO readiness, post-M&A integration, new market expansions, international reporting and restructuring, corporate financing, strategic transformations, financial productions modeling, SEC reporting, system implementation, tech stack optimization, and business process automation.

She founded her company, Continuous Scale, which creates more informed, empowered, and connected organizations. One of the biggest things I love is how she has started this company called Continuous Scale with fractional CPAs, and it’s all virtual. She’s taken the accounting and fractional CPA industry by storm.

I love to welcome and have everyone welcome Sara Dickinson to the show.

Thank you. That was a great introduction. I’m happy to be here.

Tell us a little bit about you. You have quite the background. As I said, I cut out half of your bio, but feel free to fill in the gaps because there is a lot to unpack here. Tell me a little bit about how you got started. What was Sara like as a little girl, and how did you get started down the path of finance?

As a little girl, I grew up with my dad as a business owner himself. Fun fact, he had me do his accounting as a little girl. I think I was destined to become a CPA one day, but I’m more of a CFO these days. I’m a CPA turned CFO that led the back-office finance and accounting operations for hypergrowth startups after I left KPMG. Anywhere from seed to IPO, lots of M&A in between, and a few turnarounds.

Over time, I’d like to say that I learned a lot about what not to do in scaling businesses, building systems, and systems that process. Also, your people involved in making sure that you integrate all three of those concepts closely. I started my business during the global pandemic in 2020. It kicked off that process right before we went on pandemic lockdown in early 2020.

Your timing is impeccable.

Yes, it was. People thought I was crazy for still pursuing that jumping ship from the corporate grind, but it ended up working out well for us. We found immediate traction with working with entrepreneurs that, all of a sudden, were in a position to need to extend their cash runways, find creative financing, and create access to capital. That was in a very volatile and different market that the world had not been in for at least a very long time. It all started there with our CFO advisory and quickly scaled because we learned that the CFO advisory practice was only so effective as the books under the hood.

We spent a lot of time doing cleanup and getting companies on track with their accounting. That has transformed fast forward to now and to more of a comprehensive service offering. We call it finance as a service. That’s a single point of accountability and a one-stop shop for all of our client’s financial management and their needs. We do some finance transformation and transaction advisory on the side as well.

In my understanding, you have fractional CFOs. Where do you do business? Is it all over the United States?

We do have some international clients as well including a team that’s in New Zealand and Canada. Traveling the world, we have a couple of nomads. We have been a virtual office since day one and embraced that as a part of our culture that we are passionate about.

Everyone is virtual, correct?

Yes.

What makes your firm so unique and different from all the other accounting firms out there? I remember you said something about financial transformation. Let’s talk a little bit about that.

We are big technology nerds in addition to our retired CPAs and finance experience. The kickoff of any client engagement starts with a full tech stock evaluation. Sometimes, that’s tearing it apart and putting it back together if you have existing tech that isn’t working well for you or if we are helping you identify gaps and implement new systems.

We specialize in NetSuite. A lot of our clients will start on QuickBooks, and we’ll help them migrate to NetSuite or untangle messy NetSuite projects and do basic automation, experts, and side projects in that world. The power of automating the basic stuff and the ordinary is huge in our model because you hear about bookkeeping and accounting being automated as a profession.

The answer is that, on the bookkeeping side, about 80% of it can be, but creating more powerful business operations through strategic finance partners is the goal. We operate as extensions of our client teams and gauge our success based on their feedback that they don’t even realize we are not a part of their internal teams.

I work with a lot of business owners and a lot of them don’t have the right tech. They are not tech-savvy. Some of them don’t even use accounting software. Give me an example of a client who you took over, who did your check analysis, and who implemented tech. Give some examples of some of those technologies and how did it transform that client’s business. Are you able to provide an example?

I will start with a classic tech company Series B stage in terms of financing and had already significantly outgrown all of their systems.

For readers that might not have ever raised capital or have no interest in raising capital, what is Series B?

Series B is you are now in your second official round of fundraising. You can be a seed angel in early-stage rounds that aren’t necessarily priced rounds. Your first priced round is a Series A and then Series B is a little more serious. The expectation is that you’ll probably quickly ramp up to a Series C after that and you are generally on an exit track through some public transaction, but the markets have changed a little bit in more recent times. Is that a helpful example to give?

Yes. When I’m on a show, people are like, “What’s EBITDA? What’s this and that?” I’m going to break it down so everybody can understand. Back to your example. I didn’t mean to interrupt that.

This example applies to the majority of businesses. You are implementing your front-to-end quote-to-cash process where it’s your customer side and customer-facing processes that start as early as your contract management and lead generation with your sales team. It’s all the way through to closing a deal, capturing that deal from an accounting perspective for revenue recognition, and then subsequent invoice payments and tracking that whole process front to end.

That can get extremely messy for startups, whether they are operating in Salesforce or maybe they don’t have Salesforce yet. This company did not have Salesforce yet so we helped them implement Salesforce and integrate it with their existing accounting software. Stand up an HRIS at the same time to help with their rapidly scaling headcount. We create a strategy of connected integrated systems that all talk in the way they are supposed to talk and eliminate the need for human intervention where there’s a lot of risk for manual error and process management.

This company you are talking about incorporated all of this. What did it do for their business end result?

It allows their sales teams to sell in an enabled way and understand how to track their customers and lead generation. It’s streamlining the process between finance and accounting. It’s so valuable. There’s technical guidance that has been released. This is a little nerdy, but the accounting for ASC 606, revenue recognition and contracts with customers, was Armageddon for accountants, but also sales teams. To see the ability to know in real-time what should be included in my commission and what-if analysis. It’s about enabling sales teams and then accounting to be able to ingest that data accurately and automatically wherever possible to process orders.

The equivalent of hiring a small army to maintain both of those systems is the equivalent of cost savings. They were able to not hire additional accountants. A sales operations type role is typically necessary to manage that CRM side of it. We help them build out a solid source to target table mapping for key fields being used in Salesforce. It either makes them required or very clear, this needs to be filled out or automatically populated as you select a product SKU and create downstream prompts that enable a rep to get through that process faster and close those deals.

FYE 53 | Fractional CPA Industry

Fractional CPA Industry: Hiring a small army to maintain your systems is the equivalent of cost savings.

 

When Sara talks about startups, my definition of a startup is somebody who’s starting a business from scratch and doesn’t have the infrastructure or getting started on the infrastructure and getting started on her team. Building out what I call the 6 Ps in Exit Rich. Sara’s definition was quite different from mine. Hers is somebody can be in business for ten years and they are starting up implementing new systems and things they have never done before. That was our difference in understanding of what’s our perception of what a startup is.

I have worked for a lot of companies that have been in business for years that are operating very much like a startup, even a public company that is operating like a startup. That term was important to align on. We also work with a lot of solo entrepreneurs that have bootstrapped their businesses and might be seeking capital raising through bank financing or debt financing. That’s an option for them that have established longer banking relationships and lines of credit and that sort of thing. All of their operations can be automated and there is a cohesive tech stack that typically works for the most part across industries that we help them deploy.

What is a good fractional CFO do? There are so many businesses that are on the verge like they need a CFO but maybe they can’t afford a full-time CFO, and you are not quite there yet. What does a good CFO do and what can a client expect?

A good CFO is going to help you manage the full cycle financial close and oversee it at the highest level. If you have a fractional team or accountants in place, they would be the leader of that organization, but they are typically producing a monthly financial package. They are coming to you or helping you define leading KPIs and financial reporting that makes sense for your business.

If you are working with our business, you are going to build those KPIs in a dashboard that you can understand in real-time as your numbers are updated in the accounting systems. Establishing budgets, forecasting and helping you prepare for capital like raising capital. Navigating the complexities of certain transactions or strategic initiatives like expanding internationally or planning for chaos is what we always say and helping you be prepared for that chaos.

How many CPAs and fractional CFOs do you have?

We have an internal team of seven that’s full-time working with us. We have a very deep bench of partners that we work with on a part-time or a subcontract basis that’s very transparent with our clients. It’s by offering the best service we possibly can. It’s plugging in where our direct services maybe don’t cover certain gaps. We don’t file tax returns, for example, but we have great partners that do that and we’ll help you with the tax strategy leading up to that. We’ll partner with that tax filing return company and match you up with the best overall team.

What I love about what you are doing is you are helping the business to be sustainable because, without these systems, technology, and internal or fractional CFO, you are not building a sustainable, scalable, and sellable asset. It’s imperative to know your KPI. I can even begin to tell you when I’m working with my clients on Exit Rich or selling their company, many of them don’t know their numbers. They don’t know their key performance indicators and they are completely lost when it comes to their financials.

What Sara was saying that I like is that they are not overseeing your financials but they are helping you with budgeting which is financials and they are also helping you plan. Should you go international? What does that look like? Should you have that global presence? A lot of internal CFOs never do any of that.

To add on to that, the consulting CFO or a fractional CFO can supplement your internal CFOs. We oftentimes give ourselves a different title so no one feels threatened or we are coming in to replace jobs. Amplifying the skillsets that you either don’t have or adding bandwidth to your team on demand is extremely valuable.

That fractional CFO that comes in, whether it’s augmenting your existing team or creating a team for you can be custom fit to be right-sized for your business with right-sized fees as well. That is an example of exactly what you need now versus hiring a full-time staff that might have some downtime. Your required benefits, training, and all of the overhead costs that go along with hiring employees, we can scale up and down as you go.

What are some of the quick and easy tech that you know every company should have and should incorporate? I know you do the tech stack assessment, but what tech do you feel everybody should have? They should have accounting software, right?

If you are not using accounting software, call us now because you should be you and it’s not that hard to set up. The most well-known accounting software out there is QuickBooks Online and a strong competitor is Xero depending on your preferences. The Asia Pacific region of the world tends to like Xero and the US tends to be very pro-QuickBooks, but you can start a free trial of both and decide what works best for you.

It’s not about having the accounting software but setting it upright. Building a chart of accounts that what QuickBooks call categories that are meaningful to you and tracking cost categories that meet two expectations. One, at a minimum, needs to be the tax team that files your tax returns are helping you take advantage of easy and obvious deductions that you would otherwise be missing.

Use vendor tagging and setting up automation rules if you have recurring transactions that come in, no need to do that manually every single time. You can set up rules that make sense for that and set up the right features and whatnot. There is a lot you can DIY. Your accounting software is a minimum. If you have employees, you need payroll software. Whether you outsource the payroll or keep the payroll in-house, payroll software is necessary.

To businesses, having accounting software is a minimum. If you have employees, you need payroll software, whether outsourcing or keeping the payroll in-house. Share on X

Our preferred solution provider is Gusto. We put all of our clients on Gusto. That’s an easy integration partner with QuickBooks that in a case where you have all salaried employees where things aren’t changing often, you can even set it up to automatically process your payroll on a certain cadence. It’s payroll and accounting software at a minimum. Depending on how big your team is, you might have expense reimbursement software, vendor payable processing, CRM, and an HRIS. Those are your full tech stack.

HRIS stands for?

Human Resources Information System. It’s basically an HR system that tracks your employees and also a place for them to go and understand their paychecks, profile, different jobs, and compensation. It’s tracking your headcount roster in an automated fashion before your headcount gets to a scale that it’s difficult to track. Roles are changing and you are having turnover in your business. Being able to track that is important, especially from a budgeting and financial management perspective.

I can’t agree with you enough about the chart of accounts because I will partner with a company that had their setup and QuickBooks. It’s a nightmare to go back and change it.

It is. We have a quick test where we’ll know within the first maybe 15 to 20 minutes of reviewing a new client account if we are going to go down the path of fixing it or throw out the old and reimplement the new thing.

That’s what we ended up doing because it was too time intensive and cost-prohibited to go back and fix this so we started a new one.

The next big one is understanding what should be tracked and going against your margins and the cost of the quick sold section. Your margins tell us how well we are developing our product and building our product, whatever that is, and the operating expenses are how efficient we are running our business. Those are two very different metrics. Your margins will also help you understand how much fundraising you might need to raise down the road.

That’s a perfect transition right there. How much fundraising you’ll need to do down the road because now we are going to get into Sara’s passion. I believe this is your passion and a big part of your business is fundraising. Let’s switch gears and talk a little bit about the fundraising process. I know that you’ve worked with many different companies and startups. I think you’ve done a lot in the tech space, but tell us what you’ve done in fundraising.

There’s not a day that goes by. I don’t have a client that calls me that says, “I need funds. How do I get funds?” We are working with quite a few startups as well where we become an equity partner. We take them through the Road to Exit Rich Program and build their business to sell for millions and billions. The big thing is always the biggest roadblock, which is, “I need the money.” Let’s switch gears a little bit and talk about that. Where would you like to start, Sara?

First, I will clarify my passion for capital raising. It started during the global pandemic when I had firsthand visibility and awareness and the inequality of access to capital. My passion is about putting capital in the hands of women and women in businesses and empowering them. Not just putting capital in their hands, but cost-effective and fair capital.

It’s amazing how I could take us down a dark and twisty path on this, but creating equal access to capital has been a huge focus of mine. There are so many options out there, especially for women-owned businesses. Minority businesses, in general, is free money that you can apply for that a lot of people don’t know about.

Why is it so difficult for women to get finances so much more difficult than men? Why is that?

It shouldn’t be. I don’t know why. If you look at the statistics, it’s male obviously. If it’s not women, it’s men CEOs. There are also less startups that have reached beyond that $10 million valuation or revenue that hasn’t already either hired or diluted that female-led percentage. They are less than 50% female-run or they have sold their businesses.

There’s less out there and it’s a statistic I refuse to accept. Majority of our clients in the space, we have built a strong team of clients. Women and inspiring entrepreneurs will change the world one day if they haven’t already. Sometimes, putting a little bit of financing in their hands at the right type of financing for their business is a make or break. I don’t know why.

FYE 53 | Fractional CPA Industry

Fractional CPA Industry: Sometimes just putting a little bit of financing in an entrepreneur’s hands with the right type of financing for their business is a make or break.

 

Tell us about the fundraising process. How does it work? It’s like we don’t know anything about it.

The fundraising process is a great mini training wheel exercise to potentially sell your business one day. Building a business plan, pitch deck, or financial model that captures that potential market at your TAM, Total Addressable Market, and go meeting with investors. It’s a lot of relationship building which is difficult and time intensive. Also, it’s not the most enjoyable task you’ll hear from most founders that have gone through the traditional routes of venture capital ending with the term sheets and due diligence process.

This is the equity path if you are looking for venture capital or angel investors. Crowdfunding is an option as well. The other path would be bank financing, which is a little more crisp on your historical financials and building a strong reputation. In a lot of companies, unless you have a lot of history, relationships, and good credit with your bankers, the dollars might not be significant enough to make a difference. For the front-end process, that’s where you start.

You have a lot of tips for fundraising and we’ll get into some more of those. I have sat on Pitch Tank and different wannabe Shark Tank shows on different masterminds and events. Pitch Tank was pretty big and I have seen a lot of bad pitches. You’ve already talked a little bit about the process, but what do you do before you start pitching investors?

I will bucket my prep into three different areas. First, it’s to know your data. Get your data room in order. The moment you start that process, there’s a baseline expectation from any investor that you are going to be able to quickly turn around something that should be readily available. It’s amazing how time-intensive and not quick turnaround it takes for startups to get that up and running. Building your data room and being term sheet ready at all times is important.

We manage data rooms for due diligence for our clients when we are closing on the sale of the business. What all goes into that data room?

It’s very similar at the level of how robust that data room is will vary and increase in terms of rigor as the amount of capital you are raising increases. It’s bare bones. It’s all of your legal formation documents, your articles of incorporation, any board resolutions, and amendments. Also, your people agreements, leases, and financial package, which will include anything that could be an off-balance sheet of commitments, contingencies, financial statements, budgets, forecasts, and research that has gone into building your fundraising, projections, and plan. That’s a starter list but it gets more granular depending on who your investors are and how much you are trying to raise.

We have a data room that we are using to sell a $60 million company and there are several thousand documents in there. It’s very comprehensive and you got to make sure somebody is managing that for you. That’s one bucket of getting things ready before you pitch investors. What were the other two?

Know who the right investor is for your business. As an angel investor myself, there are amount of pitch decks I get from all different email blasts of a non-targeted process. I instantly feel bad for whoever that person is, but most investors will ignore that cold call. Be deliberate about finding a targeted list. Know your investor first, understand the different types of investors, and pick the type that aligns best with your business.

Sometimes, the amount of fundraising you are asking for in general will dictate what type of investors are going to be interested in your business and then build that target list. There’s no clear, one answer, or science to building your target list, but I recommend having that list be no less than 30 identified target profiles that you’ve researched and that you believe fit into that investor profile that’s right for your business.

It’s your job to put yourself in a position to start interacting with these humans as early as possible. 6 to 12 months before you need a fundraise is not a bad idea depending on how well connected, who’s in your network, and what types of introductions you can leverage. The least effective reach out to investors is the cold call method. It’s not impossible. The cold call is not the position you want to be in especially when you already run out of capital or you are getting too close to running out of capital.

It’s relationship capital. It’s about who you know or who can introduce you to degrees of separation.

Relationship capital in business is about who you know or who can introduce you to six degrees of separation. Share on X

On the relationship note, have your investor CRM. It’s not a bad idea even if you are not sure if you’ll ever need to fundraise or be interested in fundraising. If you are one of those lucky business owners or industries, you are getting unsolicited reach from investors. Even if you don’t have time to engage or figure out who they are, add them to a CRM tracker and start understanding who the key players are in your industry. Your CRM from this list of a minimum of 30 people, you should be tracking all interactions front to end.

This can be as simple as a fancy spreadsheet. There are plenty of templates online. You can use other tools like Notion or Airtable that will offer out-of-the-box starter templates for you. Track those interactions and track what you’ve shared with them when you met with them. Any research you do, you’ll do endless research in this process and it’s easy to forget.

In the process, don’t forget that investors are people too so that personal touch doesn’t hurt. If there’s anything that you connected with that person on or you have helpful information for an investor that you can reach out and not ask for anything but offer first, those are great ways to start building a reputation or at least a name that they recognize.

I think that was so important in what you said. Start asking what you can help them with versus saying, “What you need.” I go to a lot of speaking events that I speak at and Masterminds. I started going cringing when somebody walks in and go, “I’m so and so and I own this company. I’m trying to raise capital for my startup.” No for poor building, how can I get to know you, and how can I serve you? It’s all about that person. That’s a huge lesson for people reading.

You can deepen those. I’m expanding into how you find those investors in the first place. Finding them, making sure that you are making yourself well-known, and you are showing up to community events or participating in forums. We are signing up for lists like AngelList and Crunchbase and making profiles online so that if you are reaching out to investors, the first thing they are going to do is look you up quickly if you pass that initial cold call screen. Having a profile online that’s professional and speaks to what you are trying to do and what you are building is important.

Kenny says, “It’s very true. Always lead with value.” Where do we find those investors? To me, all is done for me. I’m going to come to you. Always choose the dumb for me program or the dumb for me option, but where would somebody go to find those investors?

There are a ton of platforms out there that are specifically for finding investors. Some of it are more reputable or well-known ones. I named two of them already, but AngelList and Crunchbase. Crunchbase is used for investors and companies, but it’s a great way also to understand how you match up against other competing companies. Those are probably my two biggest networks.

To make sure that we cover all the bases on what you should do before pitching investors, we talked about getting your data room in order, building a list of 30, and making sure you have a CRM to keep track of.

I put the CRM in the know who you are targeting in general before you get started and get your raising buttons. How much are you raising and why right now? That’ll all lead to how to build an effective pitch deck that tells your story that’s authentic and unique to you. Those are the three areas.

John said, “Foundersuite is a good one too.”

I agree with that. There are a whole bunch of them out there. Google is your best friend. Reach out to your peers as well. LinkedIn is great. I use LinkedIn for a lot of my research and getting to know who people are from a professional background perspective which you should absolutely be. Research your investors before you meet with them.

Let’s give some tips on creating a PitchBook because I have seen good ones and I have seen bad ones. What are the three steps or the biggest tips to create a great PitchBook that we’ll get notice and get investors’ attention?

My tips might not be the most popular advice, but I believe it’s practical. It might not be the number one on others people’s list, but design matters. Create a beautiful pitch deck, but don’t reinvent the wheel. There are so many templates out there that are starter kits. It should not be 30-plus pages long that people’s eyes are rolling behind their heads before they even get past the fifth page. A ten-slide deck, in most cases, will completely communicate exactly what you are trying to pitch.

It will enable you to tell a clear and concise message. Don’t have overly loaded word slides. Your investors should be able to look at each slide and know exactly what the purpose is of that slide and what you are trying to tell them. I’d say get to the point quickly on how much you are raising, how you are going to use those funds, what the vision is, and why it’s important that this dollar amount makes sense. The design and the get to the point quickly are probably the two areas. You have your first 30 seconds of meeting somebody to keep and captivate their attention. You’ll lose their attention very quickly if you don’t get to that point. Also, start with your elevator pitch.

The elevator pitch will take up how many floors. It should be 30 seconds.

Have your elevator pitch on lockdown. Be authentic when you are delivering it. There are a lot of pitch decks there. I said to start with templates but that doesn’t mean start with somebody else’s pitch deck and replace it with your business name. It’s starting with the template in terms of the structure, how should it flow, and what’s important to include at a minimum. Rewrite it five times over. Have it unique and authentic to your own message. That’s the only way to be memorable to these investors that are receiving hundreds of pitches every year.

You said there are some great resources for templates. Can you name a few?

BaseTemplates is my favorite. I love standard YC templates. This tends to be more for early-stage venture or venture capital startups, but they offer a lot of links to additional blogs that you’ll find. It can be a great resource.

Kenny said, “Investors are everywhere. I found one at the local YMCA playing pickup basketball. Make good connections and conversations about what you do.” It can be a value to others.

Finding capital is not the hard part. Finding the right capital for your business can be a little bit harder but sounds like YMCA is a great place to pick up some investors.

FYE 53 | Fractional CPA Industry

Fractional CPA Industry: Finding capital is not the hard part. Finding the right capital for your business is the harder part.

 

John commented, “It’s valuable for people wanting to pitch to attend pitch events and observe the structure of a good pitch.” That’s great information.

Practice makes perfect. For a good fractional CFO, makes sure that before you hire one if you don’t have these skills in-house, you ask them what their capital raising experience has been. Even give you examples of redacted versions of pitch decks they have built in the past so you can see how beautiful their design is in financial models and whatnot.

They can help coach you and groom you going into those conversations. They will give you that confidence if you don’t have that financial background, are not sure how to talk about your own valuation, or why certain metrics matter and you know your company best. That’s what a fractional CFO can do and the process of going and getting out there and pitching investors. Your first one might not be your most favorite and memorable one. Don’t target your lead or your top ideal investor for your very first pitch because that person should come after. You’ve had a couple of practices and can get work out the kinks.

One of the big things you said is valuation. I’m sure most people have watched Shark Tank at some point. One of the things that we do is help business owners get their businesses ready to go on Shark Tank and we help with valuations because one of the biggest ways to lose an investor is to overvalue your business.

Most startups are always doing that. They have totally unrealistic unfounded valuations. Business owners do it too. One of our biggest challenges, when selling companies is getting them ready to sell, which is the huge valuation gap between what the owner thinks their business is worth and what the reality is. As I always say, you always think your baby is the prettiest then your baby is the prettiest. My job is to tell my clients, “Your baby is not as pretty as you think it is.”

I can’t tell you how many times I have had that same conversation.

You have to get that coaching when it comes to evaluation and hire a financial expert M&A advisor like us or hire Sara’s team to do that, but you want to make sure you know your numbers. The other big thing is I have sat in front of a lot of pitches like John recommended, go watch other pitches. I can’t begin to tell you, “I will listen to a ten-minute pitch.” It shouldn’t even be that long. If I will listen to 10, 15, or 20-minute pitches, I’m like, “What do they do?”

Get all the important stuff right up front. Assuming that everybody has the attention span of a goldfish and you only have 30 seconds to hook them.

John has a question. What would Sara say about fundraisers that want to charge upfront fees?

When you say fundraiser, what kind of fundraiser?

John, can you clarify that question? While he’s doing that, I know one of the other things you wanted to talk about was how to pitch investors for funding. We have been talking a little bit about that, but what are your tips surrounding that?

Everything we have been talking about speaks to the broader package. This is me coming from a finance background so I might be a little bit skewed here. I know if it takes you a long time to deliver an investor-ready financial statement package and a data room that operationally speaking, you have a lot of work to do under the hood. It’s term sheet investor-ready financials on demand, refining your pitch, and understanding how to communicate what it is you do clearly and concisely.

Practice your pitch. Make sure your audience is understanding what it is that you do, why you are trying to raise capital, who you serve, and what value you bring.

You can sign up for an hour with me to give you constructive feedback. Some people don’t take feedback very well but expect that if you are signing up for a strong CFO service, you are paying to deliver hard feedback to you that you will get constructive feedback.

If you can’t take constructive feedback, you shouldn’t be in the game of entrepreneurship raising capital. John is clarifying his question. He says, “People raising money for a private equity company specifically because there are a lot of people out there that claim they can raise money, but want anywhere from $10,000 to $250,000 from a company before they will engage without any type of success guarantee.”

If you can't take constructive feedback, you shouldn't be in the game of entrepreneurship. Share on X

There’s a high risk of signing up for bogus service provider offers. I can’t tell you how often. In fact, in most cases, I can only think of a handful of scenarios. This wasn’t the case where I came in and there was this random financial model. They paid a small fortune for billable hours that clearly were focused on the money versus the people in all cases.

Make sure that you understand the goals and who they have helped before. If they are qualified to be charging that fee, you can ask to speak with customer referrals depending on what companies you are talking about. John Raymond, I give you full permission to reach out to me personally on LinkedIn or however you can find me after this. I’m happy to give you my free professional recommendation or opinion on the company whether the dollar size is up.

Every fractional CFO service has a different model. It doesn’t hurt to follow the same concept of finding the right investor that aligns with your investor and your business strategy and goals. Also, consider your CFO one of the most important people you’ll have on your team. Even if you are only planning on having them temporarily, a strong CFO that has your best interest in mind that will love and understand your business as if it were their own is so beyond valuable that you’ll create a long-term relationship regardless of how frequently you use them going forward. Choose your service provider team wisely.

Do people who raise capital make any guarantees? I would assume they don’t.

I have seen some guarantees out there. There are some services that I have seen out there. They will give you instant access to a list of X amount of companies. Every style is different. For me, personally, I sometimes will take equity. If I’m working with you to raise capital and you are out of money, I’m choosing to work with you to help you through a position where I know I might not get paid. There’s a liquidity concern in this whole process.

Oftentimes, I will structure my payment with a successful close of around that I believe also aligns with my motives too. I’m as motivated as you are to close that round but delaying and not paying an expensive CFO upfront simply wouldn’t make sense for you. That’s my style and other companies probably follow a similar model. It will depend.

It is the same with us in my M&A firm. We can’t make guarantees, but we are not charging retainer fees. If we don’t sell, we don’t get paid. I like it when advisors have some skin in the game.

I agree with that. Aligned the skin in the game.

When is a good time to get a CFO?

Most companies starting out don’t need an in-house CFO. An in-house CFO is extremely expensive. A good one is anywhere up to a fully loaded compensation package of around $400,000 a year and you simply don’t need a full-time CFO. You absolutely need stellar bookkeeping that’s up-to-date and current and is not having you guess where you are from a financial performance and position months down the road.

Hiring an earlier accounting and bookkeeping team is important. The next stage would be if you are thinking about capital raising and you don’t have a CFO, you absolutely need a fractional CFO. If you feel like you have no idea what’s going on with your business or you don’t have regular visibility into your financial statements, if you are doing your books yourself or trying to build a model for the future and doing any strategic planning that is not in your wheelhouse and also maybe not the best use of your time, that’s a great time to start building a relationship with a fractional CFO and concept.

A good fractional CFO and service in concept are not going to charge you for a big package upfront that isn’t bringing value to you. Through my business, and I’m not the only company that has a model like this, they will right size exactly what your needs are for now with the goal of creating a scalable framework that you can increase or decrease as complexities or uncharted territories arise. That was a long-winded way of saying if you need anything in your business that you are not getting from a financial perspective, it’s a great time to start engaging.

The bigger the company gets, the more that company needs an in-house CFO. We are selling a company right now in the $50 million to $60 million range. It’s brother and sister owned and the sister that has no accounting experience has been running the financials. As we are running the books, her brother was embezzled twice.

You hear those stories. 2 to 3 out of 5 businesses every year get embezzled so you could be very careful, but they need a CFO. We are a yearend to due diligence on a deal that we are closing. Due diligence should never ever last a year, but it’s because of the lack of a CFO. It’s been hurting the deal because it’s taking so much time and we all know time kills deals. Every company should at least have a fractional CFO.

This ties into why I believe a CFO that has an accounting background or a CPA and experience building effective and sound internal controls at a minimum that address significant segregation of duties risks. It’s a real thing. You want to believe in the best in people. I can’t tell you how many times you put somebody in a position to perpetrate the fraud triangle where they are in a position to pay themselves, manage the books, and also have custody of the cash. There’s too much opportunity in the process that shouldn’t be happening when you engage a business like an external CFO. You should ask them those questions like, “What are your approval workflows? How do you protect our cash, financials, and assets at the end of the day?”

How do you inspect and what do you expect? You say trust but verify. There are a few companies I’m working with right now and they have one person doing everything. I’m like, “Who’s checking this one person? Where are the checks and balances?

One of the early trainings I typically do for clients especially if we own a cash management process or have some responsibility with access to cash is a small business scam. The scams, volume, and creativity out there will send you a vendor bill that’s impersonating an existing vendor that doesn’t have a comma before the LLC versus a comma LLC. You’ll be paying lots of small business scams. That’s a whole other episode.

Sara is positioning to come back on the show. I had another question about fundraising. What are your thoughts on crowdfunding and all those different programs?

Crowdfunding is a popular option, especially for smaller amounts of quick capital raises. Be careful and proceed with caution. There’s a little more regulation around it, but essentially, crowdfunding for anyone who doesn’t know is you can create a campaign. Kickstarter is an example of a platform where you can build your crowdfunding campaign and create a profile. You pitch to anybody in the world who wants to invest in your startup.

FYE 53 | Fractional CPA Industry

Fractional CPA Industry: Crowdfunding is a popular option, especially for smaller amounts of quick capital raises, but be careful and proceed with caution.

 

You can have hundreds of potential investors with small equity contributions into the total amount that you are raising, but oftentimes, be successful in securing whatever that amount is you are fundraising for. It’s a great way for quick access to capital that is not something I would repeat often but also be very careful about how you manage it in your cap table. This would be a perfect time to engage or at least consult a fractional CFO that has experience implementing cap table software as well as how to manage that effectively. It get very messy very quickly.

We are wrapping it up here, but how do we go about choosing the right advisor to assist us with the capital raise? I’m sure you have a checklist.

Verified, qualified, and relevant experience is extremely important. Most CFOs, unless you have a very specialized industry that might require a very specialized skillset, can guide you through that process if they have experience. Having them, be specific. I would ask for case studies and get customer references.

If they are a smaller company, maybe a solo fractional CFO service. They are everywhere. There are a lot of options. You can come to Continuous Scale and ask us to see if we are a good fit for your services. We turn away probably 80% of businesses because we believe in finding the right fit and making sure that we can deliver the best service to you as your business. We’ll be honest and let you know. We have a long list of referral partners that we track. Depending on what your needs are for your business, your industry, and what you are trying to do, we can generally match you up with a good quality CFO.

A good box to check is if you are talking to an advisor like, “We’ll take you along. We’ll take everybody,” versus someone like Sara says, “We don’t take 80%.” That’s a huge qualifying factor.

Beware of the tax CPA pretending to be the full cycle accounting service and CFO advisor. There’s a lot of that in the industry right now because tax services are one time a year. There are a lot of companies that are overextending themselves and calling CFO services that are bookkeeping services with a bigger price tag on them. We have a lot of customers come to us that feel like they have been robbed almost because there’s no accountability in the bookkeeping profession, whereas a CPA has a state board that they need to adhere to rules for and whatnot.

My next question is a little self-serving. You read Exit Rich and you give Exit Rich to your clients. Why is that?

It’s because of the 6 P method. I couldn’t be a bigger fan of it and I believe to my core that regardless of whether you ever believe you’ll sell your business. If you are building a business from the very start as if you were going to exit or planning for your exit, at the very least, you will build a financially healthy and scalable business. Saving time, energy, and money upfront by planning for those things and putting those processes, people, platforms, and protections in place are so valuable.

Even if you don't plan on selling your business, building it as if you were going to exit or planning for your exit, you will build a financially healthy and scalable business. Share on X

I have a lot of fun talking about the Exit Rich book with my clients, even the ones that we are very stubborn and offended initially. If any of my clients are on this call, you know who you are. They are offended by the idea because it’s their baby and it’s not about taking the passion, purpose, and impact out of your business. It’s securing your future and planning for your future and a profitable one ideally.

Sara, any last-minute tips on working with you on hiring fractional CFOs and/or fundraising? Any last-minute words of wisdom?

I think that’s it. Unless anyone has any questions, reach out to me. This is the perfect time of year before you get to the end of year. Preparing for upcoming years through fundraising, whether you are forecasting, budgeting, or preparing for an audit. If your tax CPA hasn’t reached out to you about tax planning and strategy, then that would be a good reason to reach out to another service provider. I’m a resource.

How does everyone find you, Sara? Let’s give out your contact information.

You can find me at Sara@ContinuousScale.com. Also, on LinkedIn and through our website. You can also text me at (425) 444-0684.

Is that your cell phone?

Yes, it’s the business version of my cell phone. Trusted circle on this call.

You provide so many services, interim CFOs, fractional CFOs, full-time CFOs, and accounting. You have training classes and fundraising. Did I leave anything out?

You’ve covered most of them. We are doing a lot of technology system implementations.

It’s huge because we have a client who uses famous. I tell you they don’t know the cost per product, we have to go in and figure it out for them which takes us hours upon hours, days, and weeks. They don’t know. It should be out of glass where you get those KPIs so you know your profit margin on every single product.

We will help you rebuild your systems. We’ll require access to certain systems so that we can automate those ordinary processes and deliver a higher-impact service. Understanding your tech stack to the point of not even knowing how much your technology is costing you. A good CFO will be constantly helping you stay on track by identifying poorly negotiated contracts to no fault of anyone, but the sales rep overselling somebody in your business.

Renegotiating contracts as they are up for renewals or phasing out legacy software that’s either redundant or overlapping and streamlining the tech is huge, especially if you were in business during COVID. You had employees on at that time and you were allowing employees to make certain purchases on behalf of your company. We saw this huge jump across the board in everyone’s technology investment in these random software subscriptions. Bringing that in is a great time to do that if you are in that boat.

It’s one thing to invest in technology, but it’s a bigger thing to understand all the bells and whistles and set it up correctly so you do get those key KPIs. The first thing that the buyer said is, “How do you not know this? How do you not know your profit margins? How does the software system not keep up with that and provide those KPIs where you can add a push of a button and know what all of your numbers are?”

Sara, thank you so much for being on the program. You are a wonderful guest as I knew you would be. You are a wealth of information, extremely educated, and have a tremendous amount of experience. I encourage all of our readers that if you are looking to hire a fractional CFO and fundraising, contact Sara.

Sara, I want you to work with me on fundraising but I want to dumb for you. Contact Sara. Get in touch with her ASAP. She’s wonderful to work with. A big thank you to all of my guests for always tuning in and reading another episode of the show. I know you found this episode valuable. Please share it with your friends, coworkers, colleagues, and sphere of influencers.

Share it with your network because this is valuable information that everyone should know. It’s not what you know that gets you in trouble. It’s what you don’t know that gets you in trouble. Share that. Subscribe to the show. We’ll see you next time for another guest on the show. Thank you again so much, Sara.

Thank you for having me.

 

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About Sara Dickinson

FYE 53 | Fractional CPA IndustrySara Dickinson is a CFO/CPA with well-rounded experience in corporate governance and compliance, executive-level operational management, and scaling businesses for growth and profitability.

She began her career with the Big 4 at KPMG, and both her corporate and consultant clients work history includes initial (IPOs), IPO readiness, post-M&A integration, new market expansions, international reporting and restructuring, corporate financing, strategic transformations, financial projections and modeling, SEC reporting, system implementation and tech stack optimization, and business process automation.

She founded Continuous Scale in which to create more informed, empowered, and connected organizations.

 

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