It's Marketing's Fault

Jon Morris [0:00 - 0:34]: So I'll give you kind of the numbers. If your gross margin is below 40%, you will most likely be losing money. If your gross margin is between 40 and 50%, you generally have to choose between investing in your business or making money. If your gross margin is between 50 and 60%, you can be really profitable and invest in the business. And if your gross margin is above 60%, most likely your employees or your clients are getting screwed unless you have some secret sauce or technology or something that allows you to have that higher risk margin.

Eric Rutherford [0:34 - 0:36]: So, really, it's that 50% to 60%.

Jon Morris [0:36 - 0:38]: Is the perfect sweet spot.

Eric Rutherford [0:38 - 1:03]: Welcome to it's Marketing's Fault podcast, where we discuss how to do marketing the right way. I'm your host, Eric Rutherford, and I am thrilled today because I have with me John Morris. He is the founder and CEO of Fiscal Advocate, which provides tech enabled financial planning and bookkeeping services for professional service firms. John, welcome to the show.

Jon Morris [1:04 - 1:06]: Great to be here, Eric. Thanks so much for having me on the show.

Eric Rutherford [1:06 - 1:25]: It is my pleasure. I was excited to get you on the show, excited to have this conversation. So let me just start with where do. And I'll say marketing agencies, but really, professional service firms in general, where do they go wrong when it comes to their financial planning and strategy?

Jon Morris [1:26 - 2:07]: So, the first thing I think they go wrong is they don't realize how important of a component it is to actually scaling their business. And so, generally, when I talk to any professional service company, it's focused on, I got to keep my clients or I got to go win new clients. But if you understand the financial numbers really well, you can free up money to actually spend more on sales and marketing or spend more on research and development, which allows you to keep your clients or win more clients. And so, just understanding the numbers and understanding that this is really important will allow you to spend your time and your money much more intelligently.

Eric Rutherford [2:07 - 2:21]: Wow. So, just being aware of the numbers and how they work and the financials in general, it sounds like, then frees up your time instead of just taking up more time. Is that what I'm hearing?

Jon Morris [2:22 - 2:23]: I'll give you a real good example.

Eric Rutherford [2:23 - 2:23]: Yeah.

Jon Morris [2:23 - 3:39]: Imagine you're, you know, you own, let's say, a marketing agency. It's 5 million in revenue. I'd say 95% of the companies I talk to do not know what their gross margin is. They do not know how to calculate it. They do not know why it's important. And so, in order to calculate your gross margin, what you need to do is understand all of your costs as it relates to servicing your customers. And that includes people, freelancers, technology, client gifts, travel and entertainment. And so if you have a 30% gross margin, meaning 70% of your cost is focusing on delivering for your customers, you only have $1.5 million left over for all the rest of your business, the sales, the marketing, the operations, the finance and your profit, what you're going to put in your pocket. But if you have a 50% gross margin now you have two and a half million dollars to go invest in your business. And so just that one metric, understanding how profitably you serve your customers, will really help you invest more in the business. I typically want people between a 50 and a 60% gross margin.

Eric Rutherford [3:39 - 4:04]: Wow. So gross margin seems like let's just go deeper into gross margin. So when you're looking at gross margin in that respect from a marketing or service agency type of situation, do you then calculate that on like a monthly basis? Where here's all my fixed costs, here's the cost, my operational costs in order to create services customer, do you do it on a yearly basis? How does that look?

Jon Morris [4:04 - 5:25]: So monthly, quarterly and yearly. So when you think about your finances, there are two different types of numbers. There are the numbers that your accounting platform has that you record that are all in the past, right? So you close the month of July, it's August 20 right now. And you can see how do you do in July. You can see how you did year to date, but it doesnt predict the future. And so you need to have a really rigorous budgeting and forecasting system to see what does your gross margin look like between August 20, 20th and December 31 of this year. And so by doing that monthly, but what youll do is youll create a quarterly forecast. So every quarter you update your budget to reflect. And then I'll give an example. I was looking at a company just yesterday where their gross margin in November and December is going to be too low. And the reason why is because they planned on adding a bunch of new hires. And so I have to have a conversation with them that they're going to have to delay some of those hires to make sure that they stay profitable or within the profit guidelines that I want them to be on from a gross margin standpoint. So your hiring schedule becomes really important in terms of what you plan on doing as well.

Eric Rutherford [5:25 - 5:59]: Okay. So, and that makes sense from that monthly, quarterly, annual, looking backward, but also looking ahead to make sure your, your profit is going to be there going forward. That, I mean that so many questions pop into my head with that and I will get to them. Let me just jump back to fiscal advocate because I know that is, that is the company that you, that you have founded, that you are running. What was the impetus for starting that? Like, what was that moment? Or like, oh my word, we need to do this.

Jon Morris [5:59 - 6:40]: So I'm four years into fiscal advocate. Prior to that, I actually was in the marketing agency space. So I founded an agency called Rise Interactive. I grew it from just me to 250 employees and just under 40 million in revenue before selling it. And so I know the professional service space really well. And our secret to scaling was our finance department and the way we looked at the numbers, the way we budgeted, the way we spent our time and money based on what the numbers said. And so when I was thinking about what do I want to do next, I thought it would be really fun to help other companies scale by creating this data driven approach to decision making.

Eric Rutherford [6:40 - 7:11]: I love that you just took, and it's fascinating that you said the, the finance area was the key to understanding how to scale because I don't think most companies would put that as like, this is how we scale. Right. That seems to be a little bit of a underappreciated, under respected area. Was that, did you have to learn that as you went, or did that kind of come? Was that obvious from the get go?

Jon Morris [7:11 - 8:48]: It was. You know, this was my second agency, so my first agency failed. And when I look at why it failed, it was really my HR practices and my finance practices and people don't. People underestimate the importance of your back office to building a scalable organization. But I'll just give you something that I said at rise all the time. Something I say at fiscal advocate all the time, which is everyone has a strategic plan, whether they know it or not. It's what they spend their time and their money on. And so when it comes to budgeting and forecasting, if you come to me and say, hey, John, I really want to grow faster, I'm always going to ask the following question, awesome. What percent of your revenue do you spend on sales and marketing? I would say the vast majority of the people will answer that as I don't spend anything on sales and marketing. It's all word of mouth. I was like, well, then you don't really want to grow because if you wanted to grow, you would spend money on sales and marketing. And a typical agency, the average of their revenue spent on sales and marketing is 8%. So if you're spending 4% of your revenue on sales and marketing, and your competition is spending 8%. What do you think is going to happen? Who do you think is going to grow faster? I want to figure out, how do we get you to spend 12% of your revenue on sales and marketing, and how do we do it where you don't have to sacrifice profits so we can look at all the other buckets, from your gross margin to what you spend in operations and finance, to what you spend in your executive team to free up money to invest in growth.

Eric Rutherford [8:48 - 9:00]: So does it come down to really just understanding the levers, so to speak, and then tweaking them accordingly in order to get the growth that you want in terms of what you're doing with.

Jon Morris [9:00 - 12:15]: Your budget and having the discipline, and I would also say the courage to live within those numbers. So I'll give you an example. The hardest part of any professional service company is that our inventory, our people, that's what we sell, is their time. But they're not just people. They're people that we've been in the trenches with. We know them. We love them. We know their families. And so the hardest part of this job is we have to manage our expenses. And what managing expenses means is oftentimes we have to let those people go. And so that's where the courage comes in. And I always tell people, no matter what job you take, identify the worst part of the job and make sure you can do it. If you think about being president of the United States, I would say the worst part of the job is pressing that red button, right? You're sending missiles and bombs and killing people, and that's part of the job. I personally couldn't do that job. I don't want to do that job. I'll let someone else handle that. It's more responsibility than I can handle, because you can't get that wrong. Where the vast majority of the people, when you let someone go, they're able to find another job. It's not like their livelihood has been ruined for life. It's still a very hard part. It's very emotional. But that's one big aspect, is understanding what decisions to make. Then the next part, I'll just give you real live examples. In order to optimize gross margin, you need to get more granular. So what you want to do is look at your gross margin by line of business. I had a client with a 60% gross margin, which sounds great, but then when we dug deeper, it turns out that their paid search gross margin was at 74%. And not even that, but it was their enterprise group had this really high gross margin, and their small business group had an okay gross margin, but their social media practice was at a negative gross margin, and their programmatic practice was at a negative gross margin. So what's happening is one service was actually subsidizing the rest of the organization. And by the way, if you're at 70% gross margin, that's software related gross margin. So what that tells me is that someone's getting screwed. You're either burning out your team or you're under delivering for your customer. And so we developed a strategy of how you're going to improve the gross margin. Now, the second thing is, I have found professional service owners, when I tell them that their gross margin is too low is it is really hard for them to figure out how to fix that problem. Generally, the problems are the same. You might have too many senior people who are doing junior people work. You don't have enough direct reports. You have too many people on the bench, and your utilization is not correct. You know, you might have a pricing issue, and you didn't price the problem. You know things, right? There's only like five things you need to fix. So it's helping them understand what are those things and what are those levers to improve upon? And then you could optimize from there.

Eric Rutherford [12:15 - 12:49]: Wow. Now that makes sense. And the subsidization by my area is fascinating when you really get down to it, when you get that granular, when you're talking about negative gross margin in some areas in this one example, and then incredible gross margin in another. Wow. That makes you pause. I'm sure as you were talking with, with that company, did, like, I don't know, did light bulbs go off for them? They're like, oh, my word, I can't believe we're doing this. Or was it like, what was kind of their response?

Jon Morris [12:49 - 13:36]: So, first of all, it was incredibly eye opening, but that allowed us to have much more strategic conversations. So the question then was, how important are these other channels towards your long term business? Like, do you want to just focus on your profitable channels? Are there ways that we could consolidate leaders to reduce the cost so that you could be at least gross margin profitable? They were smaller departments. They were very important strategically for the future. So what we laid out a plan was, let's get you to gross margin profitable right away, but then let's develop a two year strategy to invest in those areas, to grow them, to get the gross margin and the revenue up so that they could stand on their own. 2ft.

Eric Rutherford [13:36 - 14:15]: Wow. Okay. So it really was, it was eye opening. That was like, okay, what do we need to do? We need to ask questions. We don't just need to just start shopping or just do a massive reorganization. It was like, let's evaluate and see the importance of each piece so that we could make the best decision for the company. Yep, that's huge. And you talk about gross margin in that respect. And you say a lot of times it sounds like a lot of time. Gross margin is, is low in a lot of just service provider areas. Is there like a number you're shooting for is like a minimum?

Jon Morris [14:16 - 14:52]: Yeah. So I'll give you kind of the numbers. If your gross margin is below 40%, you will most likely be losing money. If your gross margin is between 40 and 50%, you generally have to choose between investing in your business or making money. If your gross margin is between 50 and 60%, you can be really profitable and invest in the business. And if your gross margin is above 60%, most likely your employees or your clients are getting screwed. Unless you have some secret sauce or technology or something that allows you to have that higher gross margin.

Eric Rutherford [14:52 - 15:00]: Wow, I love that description and that scale. So really it's that 50% to 60%.

Jon Morris [15:00 - 15:02]: Is the perfect sweet spot.

Eric Rutherford [15:02 - 15:09]: It's the sweet spot that you're looking for. I gotta believe that most companies don't know that.

Jon Morris [15:10 - 16:11]: Well, not only that know it, but you know, there's something called your chart of accounts, like in your accounting platform, every single transaction. So from a revenue side or an expense side, those transactions can be categorized, and they're categorized in these things called your chart of accounts. Platforms default to one line for your entire payroll. And so if your inventory are people, you have to know that you need to unbundle your payroll and move all of your employees to the areas that they're doing the work. So if you have a salesperson, you're going to put them in the sales group. If you have a head of marketing, you're going to put them in the head of marketing. And if you have a bunch of people who are doing client work, you're going to put them in the group that does client work. And so most people don't know their gross margin. Because of that, unbundling has not happened yet with their payroll. And so we help them reorganize their chart of accounts so that they can get insights.

Eric Rutherford [16:11 - 16:24]: Wow. So it could be even where they are today, their organization, their accounting structure may not be set up, ideally for them in order to get the best views into their own finances.

Jon Morris [16:24 - 17:20]: Yep. So when you think about closing the books, which is another thing that people don't understand, how important it is when you close the books. The faster you close the books, the faster you can get insights. But there are three things you want to do when you close the books. The first one is make sure that you do it fast. The second one is that you want to make sure that it's accurate so that when you're looking at the data, it actually is put in the right categories. The dollar amounts are all correct. Then the third one is that you've organized the transactions and the data to make decisions. And so you need to know what questions you're supposed to ask, such as, what is my gross margin? If you don't know to ask that question, then you're not looking at your income statement to answer that specific question. And so that, to me, is one of the most important questions that people have to ask or be able to answer. You can't do it unless you organize your finances properly.

Eric Rutherford [17:21 - 17:49]: That makes sense. I had not thought of the questions to ask in terms of the closing of the books and what to look for. Now, what of these benchmarks do service providers really need to know in order for their business? I'll say both to survive sort of initially, but ideally to thrive. So what are those? What are the handful that are most important?

Jon Morris [17:49 - 19:33]: So, a couple of things before I answer that question, I want to talk about who I think your ultimate boss is as a professional service company. Okay. So a lot of people might think if you're the CEO of a company, it's the owners of the organization that have hired you to run the company. And by the way, even if you're the CEO and the owner of the company, the CEO reports to the owner of the company. But in my opinion, the ultimate boss is the income statement and the balance sheet. Because it is a very objective boss. You are either increasing top line revenue, increased profitability, increasing cash, or you're not. And so if you hold yourself accountable to improvements of the income statement and improvements to the balance sheet, then you can be rewarded or not rewarded in terms of your performance. So that's going to help me answer the benchmarking numbers. So I already shared one of them, which was the gross margin. But there are really three major numbers that I believe are the most important numbers for any professional service company. The first one is how much cash you have relative to your monthly overhead. I want, in a savings account, two times your monthly overhead at a minimum. So if you spend $100,000 a month, I want you to have $200,000 of cash in that savings account. Now, the reason why I focus a lot on cash is that if you have a lot of cash, you get to do really fun, cool, strategic things. And I'll just give you a really good example. Microsoft bought LinkedIn for $26.2 billion in an all cash deal. So that's what happens when you have a lot of cash.

Eric Rutherford [19:33 - 19:36]: Wow, that's mind blowing.

Jon Morris [19:36 - 21:21]: Yep. But most people don't think about the cash. Number one reason I see that my clients don't have a lot of cash is owners distributions. The cash comes into the company, the cash comes out to the owners, and so I have a strategic conversation with them. Where can we leave some of it? In the bank. And what I explained to them is I'm not expecting a light switch. Meaning if you have half a month's overhead in the bank, and I want you to get to two times monthly overhead, I'm not saying next month you have to get there. It might take twelve months, it might take 24 months. But the idea is that every month you're building up your cash, you also might have debt. And so you might have to clear up that debt before you can start building up your cash. So those. That's one aspect that I look at. The second major KPI is your profit margin, and I want you to have a 20% of your revenue. Should be for EBITDA. EBITDA is a fancy term for profit, meaning earnings or profit before any interest on debt, taxes, depreciation, or amortization. I did not create that number. Like, if you go talk to the majority, the major acquirers of professional service companies, whether it's marketing agencies, law firms, management consultants, they all want you to have about 20%, even though the third major benchmark is year over year revenue growth. And the holy grail number is 20%. If you can consistently grow at 20% year over year, you're going to build an amazing business. Sorry.

Eric Rutherford [21:21 - 21:46]: No, I was just. I love those numbers, and I love the breakdown, both from the cash perspective. Two months of operating expenses just set aside in the bank in cash to cover everything. The EBITDA 20% now is. That's the target. So is less than or more than, is one of those detrimental, or do you just want to keep working to try and hit that 20%?

Jon Morris [21:47 - 24:24]: So that's a great question. So the answer is a strategic question. So let's just start with if you are less than, let's just say you're at 10% EBITDA. In order to get to that 20%, you have to be at the 50% gross margin. And then there's something called SG and A, which is all of your expenses that do not relate to client work. So it's your sales and marketing, your back office, HR, legal, corporate, it, general administrative expenses, and your executive team. If you're doing any R and DA, you get 30% for that number. So 50% of your budget goes, or your revenue goes towards serving customers, 30% goes towards taking care of the business. Now, if you are at a 10% EBItda, I want to know why. Is it because you are spending rather than 8% of your revenue on sales and marketing, you're spending 18%, and we see that your growth rate is going from 20% to 60%, then I would say then that is a really good use of your capital and your funds. If it is because you are spending an extra 10% on delivering for your customers and you have a 40% gross margin, I would say that we got to start figuring out how we can service your customers more profitably because that's not allowing you to scale and grow. It becomes a strategic question in that regard. On the flip side, let's just say you have a 30% EBITdA as opposed to a 20% EBITdA. Then it really comes down to what's important to the business owner. They're most likely really, really under investing in their infrastructure of a company. And so you want to make sure, like, if they want to scale and grow, then I'd probably want them to lower their target if they're okay with that. And they're like, you know what? I have a great lifestyle business. I'm doing 4 million in revenue, and I have 1.2 million that I put in my pocket every year. And I just okay with that. There's nothing wrong with that, but you just have to understand the impetus of that. Now, if it's because you have way too high of a gross margin, then what I want to do is make sure that you don't have a churn problem so that 30% might turn into a much smaller number. If the reason why is because you are really profitable in terms of the revenue you're generating, but it's because you're not delivering for your customers.

Eric Rutherford [24:24 - 24:41]: Okay, that makes sense. So the EBITDa number, the 20, is the target. It can be above or below the 20% if the reasoning behind it lines up with the business goals. And it's not just accidental or happenstance.

Jon Morris [24:42 - 25:24]: Yep. So I'll just give an example. When I was at rise, I actually had a 5% target for many, many years, and I used that extra 15% to invest in sales and marketing and R and D. And the company went from 1 million to 2 million to 4 million to 8 million to 12 million to 13 to 19 to 24 to 30 to 37 and a half when I exited. And so towards the end, I was much more focused on EBITDA than I was the earlier years. But I looked at those investments paid off. I was getting a good return off of them, so it was worthwhile to do. Had the growth not occurred, then I would have dialed back and I would have just been like, let's just take the profits.

Eric Rutherford [25:24 - 25:41]: That makes sense. You were investing in sales and marketing. You kept your EBITDA much lower, but the results, then you saw the growth far, I mean, equal to or exceeding your expectations based on the money you were putting into it.

Jon Morris [25:41 - 26:02]: Exactly. It was, I was getting more than that 20% growth, you know, for many, many years. And, you know, I was, by the end, I was almost every year incrementally increasing the company by $6 million in top line revenue. Wow. And so that, to me, was solid investments in time by focusing on that.

Eric Rutherford [26:03 - 26:36]: Absolutely. And then let's just talk about that 20% growth number as well. When you say that's the target or that's ideal, in terms of growth is higher or lower, how does that play into it? Obviously, you had a higher growth percentage, which was your goal. How does that play into it? On the flip side, what happens if it's less than that? Do you need to tweak some numbers? I'd love to get more info on that.

Jon Morris [26:36 - 28:25]: So a couple of things. One of the greatest ways, when you sell your company, you're going to get a multiple of your profit or your EBITDA, and you want that multiple be as high as possible. And probably the number one indicator in terms of that multiple expansion is your growth rate. And so by having a high growth rate, you can put more money in your pocket. Now, the other part is when you get to certain milestones, when you get to a million in EBITDA, when you get over 10 million in revenue, when you get over 25 million revenue, all these things equal multiple expansion. And what you have to understand is the buyer. The buyer generally has to put a lot of money to work. And so if they can go buy $100 million in revenue in one transaction, as opposed to $101 million transactions, if they have a billion dollars they have to put to work, that helps them quite a bit. They're willing to pay premium because of the scale and the size by having this high growth rate. The other part is it's just a sign of you're doing something right. There was a private equity guy. I'm going to talk about me for a second. I don't like the fact that it was about me, but the comment was really, you know, eye opening was he's like, there always seems to be like one business in a sector that has, like, that it factor that is able to grow at a much faster rate than its peer set. And it's sometimes really hard to pinpoint what that one thing is. And oftentimes it's not one thing. It's, you know, a multitude of things. But, you know, if you have that it factor for your business, there's people going to pay a premium for that it factor.

Eric Rutherford [28:25 - 28:51]: That makes sense. So suddenly you make it easier for people. Honestly, you make it easier for people to make money because there's less transactions, there's less headache. They can look and say, if I don't touch it, we're growing. If I don't mess with anything, we're going in a right direction versus I need to come in and do a massive overhaul.

Jon Morris [28:51 - 29:21]: Exactly. And there are people who specialize in that also, where, you know, they'll buy a cleanup job. You know what I mean? Where they'll be like, I can buy this for a lot less because they're a mess. But, you know, the company, I forget the exact words, but the company that bought me that, the guy that was in charge of the m and a, he's like, I don't try to catch falling knives, you know, and so they didn't want to buy something that was a cleanup job. They wanted to buy something that was already doing really well.

Eric Rutherford [29:21 - 30:08]: That makes sense. Let me ask, because it sounds like you're working with a lot of different service providers that are at various stages. If somebody's looking to say, okay, I want to build my own service provider company, starting from the ground up, they don't have the history, they don't have the levers in place to really do the machination, so to speak, of what you're doing, where you're working with people with a track record and history, what are one or two things that you would say, you need to make sure this is in order or make sure you're hitting these numbers. And if you do, this puts you in a good place for year one.

Jon Morris [30:09 - 32:17]: It's a little bit of a loaded question, because there could be people that are okay operating at a loss because they want to invest in sales and marketing to grow it. There could be people that want to take more of a bootstrapped approach, but let's just use the bootstrapped approach. The only thing worse than going bankrupt is being a business of the living dead. And what that means is that you make just enough money to never make any money. And so what I would generally recommend is create milestones for yourself and say, you know what? On year one, I need to do $100,000 in revenue. In year two, I needed 200,000 in revenue or whatever that number is. And if you're not hitting those numbers, really pause and determine, am I going down a path of being a business of the living debt? And I'll give you an example. I did 12,000 sales my first year. I did 80,000 sales my second year. I did 350,000 sales my third year, I did 750,000 sales my fourth year at rise. And a lot of people, all they saw was this tiny little company. And they're like, I mean, you can feel it, like most people, when you tell them you're going to start your own business, think you're kind of nuts, and you can have those conversations with people in terms of what you're doing, and you can just feel their negativity. And so from my standpoint, going from twelve to 80, I'm moving in the right direction. Moving from 80 to 350, I'm moving in the right direction. Now, you can't make a living off of $350,000 in top line revenue and then staff to service the business and all those different things. It's not like it's a sustainable business yet, but the MOmentum was moving in the right direction. That to me, is the conversations that I would give anybody who's starting out is, first of all, you're going to have your naysayers ignore them, turn them into believers down the road, but just make sure that you keep momentum going on a year by year basis.

Eric Rutherford [32:18 - 32:56]: I like that because that seems manageable. So as you're looking ahead, it's like, okay, here's my year one number, whatever that is, and it just needs to be moving in the right direction. It sounds like at a certain point, then you can really go deeper on the numbers that you have and say, okay, now that we're at a million in revenue, let's start looking at that deeper. Is there a number that you need to reach in top line revenue before the other numbers really can make an impact. Or I'm just curious.

Jon Morris [32:56 - 34:49]: I mean, it also depends on your situation. Like, do you have a family? Do you have a mortgage? Do you have savings? Are you willing to go into those savings? If you do 12,000 in sales, you're not paying yourself a salary, right. And if you're doing 80,000 in sales, you know, like, when I did this, I was in business school at the time and I didn't have a job. So to me, anything I made was just gravy because I didn't have a job. But when I did the 350,000, and that was my first year not being in business school, so I didn't have to take classes and grow the business at the same time. But, you know, so to me, there's no necessarily, like, guaranteed minimum of what you need to see. I think it's very situational to the individual. Are they right out of school and they have really low overhead and no family? Are they just, you know, do they have a family and they got a mortgage and they have to support that, you know, minimum overhead. So those are kind of some of the deciding factors that go into it. I'd also say, I'd also say one more thing. When you go to business school, or at least at University of Chicago, where I went to business school, they kind of mold you into, like, you go raise money from VC's, you scale the company for five to seven years, and then you have this big exit. And my recommendation is don't focus on the exit. Don't focus on, like, raising money is sometimes necessary, but that's not success. It's something to be proud of because it's really hard to raise money. But I like to focus in 20 year timeframes. Build a great business, really focus on creating a wonderful place for employees to come to every day, and build a business where you're really delivering value for your clients. Still make sure you know the benchmarks from the financial standpoint. But if you build a great business, the exit will take care of itself.

Eric Rutherford [34:49 - 35:27]: I appreciate that, and I think that's an excellent point, is build an excellent business that serves customers well, that serves the people who work there well, and the rest of it will. That is really the fruit of the underlying decisions and the underlying framework. So let me circle back on one thing, because you also talk about the base decision making framework. Would you just kind of run through that or give us a high level view? Because I think some of that will also play into it.

Jon Morris [35:27 - 36:44]: So it's a framework I created. It's an acronym. So base stands for business planning, alignment, scorecard and execution. And what it is, is it's 14 rituals that I believe that if you conduct these 14 rituals, you are putting yourself on a really good path to scaling and growing your business. And so some of those rituals are investing in budgeting and forecasting, having a really strong month end close, having a detailed month end analysis document that allows you to make decisions. Some of those things are the things you wouldn't necessarily think about as we talked about earlier. Other ones are having a quarterly sales and marketing, having a scorecard that really focuses on those three major KPI's, cash, relative monthly overhead, profit margin, and year over year revenue growth that allows you to make decisions to improve in those three specific areas. One of them is also having a quarterly state of the company meeting. So in order to have alignment with everyone in your organization, you need to communicate what your goals are on a regular basis. So it's really understanding those 14 rituals. And you don't have to be great at all of them, like in year one. But the idea is that every year you get better and better at those rituals.

Eric Rutherford [36:44 - 37:04]: I like that. And those don't sound, just from your description, those don't sound like overwhelming or onerous, honestly. Sorry about that. Honestly sounds like, really, if you put the structure in place, it's just sort.

Jon Morris [37:04 - 37:44]: Of the, it's a time prioritization system. So what it's doing is it's basically saying, you know, you'll hear me repeatedly say all you have is time and money, and how you spend that time and money is going to determine the outcome. It's actually my favorite part of business. Okay. We have all this gray information coming at us and we have to make black or white decisions, and the outcome is black or whatever. And so how we spend our time and money is going to really help determine those outcomes. And so these 14 rituals really give people a guideline of how they should spend their time and money as intelligently, as effectively as possible.

Eric Rutherford [37:44 - 38:05]: I like that, the time and money, because that makes it, well, I mean, that is at its core what we have. Right? It's not more complicated than that. I mean, that's it. Well, let me just ask one last question. What's one takeaway that you would like to leave the audience with?

Jon Morris [38:05 - 38:48]: So the one takeaway is, I'm going to go back to that build a great business comment. And at rise, we used to have a saying that our salespeople were the promise makers and the people who delivered for them were the promise keepers. And really make sure that what you build is a world class product and offering. If you can make sure that the promise keepers deliver a better experience and better results than what the salesperson or the promise maker said, you're going to build a great business. And so your number one sales goal is never lose a client due to performance. And so really focusing on that quality of the product, I think is a crucial thing to do.

Eric Rutherford [38:48 - 39:21]: I love that goal. Never losing a client because of the quality of the product. I don't think I've heard that put in such a succinct manner, but oh my word, I'm just thinking of all the companies that are out there, companies I've worked for, where the cause of churn was just that, where it was just like there was a product issue, there was a service issue. If that's one of your ideas and what are your goals, that's huge.

Jon Morris [39:21 - 39:37]: I mean, think about it. At the end of the day, it's hard to be a salesperson. Let's make it as easy for them as possible and get them something great to sell. Because if you sell garbage, it's just going to be hard to scale and grow.

Eric Rutherford [39:38 - 39:51]: Yeah. And it's kind of demoralizing for everybody as well because especially on the sales front, if they know they're selling a subpar product, it's. I know as a salesperson for me, that makes it hard to get up in the morning.

Jon Morris [39:51 - 39:54]: Yep. And you hope that that's how your salesperson feels.

Eric Rutherford [39:54 - 40:09]: Yeah, absolutely. That's an excellent point, too. It's like you hope they're not excited about getting up. So, yeah, it's about making an excellent company with excellent services so that, yes, you're really taking care of customers and your people as well.

Jon Morris [40:09 - 40:10]: Yep.

Eric Rutherford [40:10 - 40:19]: I love it. So, John, if people want to know more about you, they want to know more about fiscal advocate. Where would you like them to go?

Jon Morris [40:19 - 40:28]: So they can go to fiscaladvocate.com, to our website. You can connect with me with LinkedIn, and you can also email me@joniscaladvocate.com.

Eric Rutherford [40:28 - 41:00]: Dot excellent. So we will drop all of those links in the show notes. Make sure to reach out to John, connect with him, get more information. This was just a masterclass in the finances and the underpinnings of what professional service firms need to think through. So if that's where you're at, if those are the questions you have, make sure to reach out to John. John, this has been a blast I've learned.

Jon Morris [41:00 - 41:01]: Thank you so much, Eric.

Eric Rutherford [41:01 - 41:02]: Appreciate it.