Episode #030 Repositioning Yourself As A Small Business Advisor With Kathy Gregory

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Amy Hooke: All right. Good morning, everybody. Welcome to The Bookkeepers' Voice podcast. Today, I have a very special guest with us today, so I have Kathy Gregory with us. She's going to be talking to us about advisory, repositioning yourself into advisory and how to make the journey to go from the recorder of bookkeeping accounts, bookkeeping data, to being a collaborator with the business owner. Thank you for joining me today, Kathy.

Kathy Gregory: My pleasure. Really excited to be here.

Amy Hooke: Me too. Yeah, so I've really been actually looking forward to this, because … how I came across Kathy was I've been working with a program called Live Plan. I got in touch with Kathy to talk about how to use various online tools for getting into advisory service. Kathy, you actually referred me to this US-based CPE website, where accountants and bookkeepers go to get SAP points up.

Amy Hooke: I've never heard of this website before, but you sent me across to there. I listened to you talk about this method that obviously we're going to talk about today, that you're very passionate about. I guess I could really sense the passion that you had for the industry and I really connected with that.

Amy Hooke: I feel in a way that that was one of the experiences that I've had in my journey that has launched what I do at Savvy. It's actually triggered obviously, for our listeners, you've probably heard me mention business planning once or twice, or maybe like a thousand times, because I tend to go on about business planning all the time and how important a business plan is in a person's business, and how I really felt that that was something missing in the bookkeeping industry.

Amy Hooke: Yeah. To have you to come along today is actually a real privilege, because obviously, you wouldn't know this, but you have actually played one of those parts in my journey into what we actually do at Savvy with the bookkeepers.

Kathy Gregory: That's great to hear. That is really cool to hear. Obviously, I know you and I remember talking to you over a year ago when I first introduced Live Plan method to you and we had a phone conversation about it and the whole thing. I didn't realise that you had listened to that recording and I didn't realise how it affected you.

Kathy Gregory: It really makes me feel good. Especially because it is true … I'm glad it came through, because I am so passionate about this topic for the accounting industry. Because the accounting industry, worldwide, is in this really cool place of metamorphosis. They are adding a new service type and a new way … not just to be profitable and make revenue, and of course that's true, but a new way to affect their clients.

Kathy Gregory: Actually, and this sounds really cheesy, but it's not, it's true, a new way to affect the small business economy, which is at the root of everything, right? To be able to bring my background, which is in business process design and systems, to be able to have an effect on that, I'm so passionate about that. Because I believe that that is at the root of this. This ability to perform advisory, know what advisory is, deliver advisory. It's about the right systems. I'm certain of that.

Amy Hooke: Yeah. That's right, that's right. I mean, a lot of the bookkeepers who will be listening in right now will be in that place where, obviously, everyone's at a different stage in their business, but a lot of bookkeepers are looking for … they understand that they help the client improve their bookkeeping systems and processes. A lot of bookkeepers realise that they can actually move into a space of looking at the entire process of the business.

Amy Hooke: Because a lot of bookkeepers talk about wanting to help their client to understand that they can do more than just the bookkeeping area, but they're able to deal with the bookkeeping as it kind of fits into the bigger, more holistic picture of what's actually going on in the business.

Amy Hooke: Yeah. Actually, just before we went live, you actually mentioned something that I'd love you to talk about a little bit more. You actually said that bookkeepers are special, because they know the transactions and what's actually going on in the business. Their journey into advisory actually looks different to what an accountant's journey is. I guess, for our listeners, we will actually go into talking about what advisory actually means, but now we're just going to talk a little bit about what the bigger picture is, what's happening in the industry, and why bookkeepers are in that special position.

Kathy Gregory: Yeah. Bookkeepers are special. I don't want to leapfrog into what … it's hard not to talk about it without explaining to understand why they're special. In a nutshell, if you're doing advisory, you have to be able to communicate financials. Not just communicate financials, but be able to tie financial trends and other metrics back to what's going on in the operation. To be able to do that, you need to understand the data really, really well.

Kathy Gregory: The reason bookkeepers are special is because they already know it. They are interacting with every transaction, even if that's automated. They're still interacting with it, they're still improving it, they're deep in those weeds. Most bookkeepers, 99.9% of the ones I've ever met, if you ask them what the problems are with the businesses they're working with, they know. They will rattle off every problem.

Kathy Gregory: They know what the cashflow is. They know what the problems are. They would know now what is going to happen next month with that business, because it's in their soul, it's in their gut. They just know, because they know the trends. They don't have to analyse the trends, because they see the trends every month. It's just there. That's what's so cool about bookkeepers, is that the further up … or, I don't know if it's up, but the further away from the data that you get, then you … if you're in that place in accounting, if you're the CFO and you want to have a meeting like that with the client, you actually have to spend time getting familiar with the data.

Kathy Gregory: Bookkeepers don't have to do that. Take advantage. You are in this place of extreme knowledge. The other reason is that most small businesses, when they outsource their accounting … so first of all, when they grow from nothing, the first thing they want to outsource is their financials, their accounting, because it's the least thing they know about. When they grow from zero or nothing, the first thing is accounting. They want to outsource that, and they're super happy to do it.

Kathy Gregory: When they do it, whether or not they tell you as the bookkeeper, I promise you this is true, in their mind, you're already doing it. They hired you to do it, whether or not they say to you, “Great, you're doing advisory services for me now, and I can't wait to talk about my growth projections.” They don't know those words. What they know is, “Great. You're doing it, awesome. I'm going to go back and do my trade or my skill …” you know, whatever it is … “and you got it.You'll tell me. You're going to tell me, right, when things go wrong?”

Kathy Gregory: That's what's happening. All you have to do as a bookkeeper is price it right, communicate about it right, and position yourself in that. Don't come back to them the first month or the second month or the third month and say, “Oh, I'm just here to be the recorder, and deliver you whatever.” No. Position yourself in that, because they expect it already. They expect it.

Amy Hooke: Yup, exactly. Yeah, I love it. I love what you said about … like for me, I have a similar feeling towards bookkeepers being in that special role, because I feel that bookkeeping, it's actually a position of privilege. I feel that not everybody has the business owner's personal mobile number. Not every person in the business can walk straight into the business owner's office, pretty much without knocking, and just go straight in and talk to them about one of the most sensitive, sometimes private topics, which is the person's money and the person's financials.

Amy Hooke: It can be a very sensitive topic, and I feel that … I mean, all bookkeepers will tell you that their clients will tell them things that they wouldn't tell their best friend or their spouse, or their other employees. They are actually in a position where they receive a lot of knowledge and information about the business owner, some bookkeepers will say maybe too much information. They do know everything that's going on, not just in the data but also within the actual business owner themself. What the business owner struggles with or what their actual pain points are.

Amy Hooke: They're actually spending time with that business owner, hearing the business owner … a lot of bookkeepers are in a place where when the business owner has nobody to talk to, they'll pick up the phone and call their bookkeeper. Some bookkeepers say, “Sometimes I feel like I'm sort of like a semi-bookkeeper slash counselor,” or they're sort of in that role where they're really hearing what's going on.

Kathy Gregory: Yeah. I would add to that, I agree with all of that, and what I would add to that is maybe say it this way. It's not just the most personal thing, it actually is their personal life. Because if you're working with businesses that are small enough, it is their life. It's not like they have a staff of C-level executives that are doing things. They're doing all the things. They are the C-level.

Kathy Gregory: You can't divorce their personal goals from their business goals. It's all one and the same. In fact, unfortunately, right, some people even have their banking set up incorrectly, like it really literally is tied. Even if it's set up correctly, their personal goals directly affect their business goals. It's not like a big company where …

Amy Hooke: Yeah.

Kathy Gregory: Right, it's separate. This is, in fact, personal.

Amy Hooke: Yeah. Yeah, absolutely. Even that comment that you made about sometimes the business and personal transactions are blended in, even when a bookkeeper can look at that and say, “Okay, actually, best practice is to have two separate bank accounts, and it does complicate the process.” Even that is a form of advisory.

Amy Hooke: You're giving advice to the client to be able to give them ideas on how they can optimise what's happening in their business. Because, I guess, every business … I mean, I don't know if I can say every business owner's goal. I know for me as a business owner, my goal is … and when I go to people who are in that advisory role, for me, my goal is to be able to reposition myself in the business so I don't have to be that person who does every single thing.

Amy Hooke: I think for many bookkeepers who are already running businesses, whether they have teams or not yet, often, they'll also be in that position where they're looking for, “How can I become that person in the business who leads the business, but doesn't have to be the person doing everything? How do you even make the transition from being everybody to being … actually having your own job description, kind of thing.

Amy Hooke: I think bookkeepers can relate with that goal and they can identify with what the business owner is probably going through, and why they need the information that they need to get out of where they're at and move to where they want to be.

Kathy Gregory: That's a really good example. I hadn't thought of that before and it's really a way to make it tangible and concrete.

Amy Hooke: Yup. Yeah, that's right. A lot of business owners are great technicians and sometimes they just want to free themself up. Sometimes, it goes both ways. Sometimes, they want to free themself up from doing the technician work, so they can become the business operator. Some of them want to go the other way. They want someone to just run the business for them, so that they can be a great technician and just do what they love to do.

Kathy Gregory: Yeah. Yeah, but either way.

Amy Hooke: Either way.

Kathy Gregory: Either way, they need the same level of service or type of service from their bookkeeper.

Amy Hooke: Exactly. Exactly, yeah. Obviously, you've spotted that same potential in the bookkeeping industry, because there's a lot of people who are wanting to work with accountants and help them to offer an advisory service. For people who are specifically, I think, it tends to be that bookkeeping and bookkeepers just get tacked onto the end of accountants.

Amy Hooke: It's accountants and then it's sort of like, “We're here working with accountants, so we may as well just kind of start working with bookkeepers too.” I love the fact that you see bookkeepers as a unique entity. I think the structure of your industry may be a little bit different to ours, but in a way, even though the bookkeeping industry is a part of the broader accounting industry, we're sort of an industry in our own right.

Amy Hooke: We actually have a whole industry that's kind of like a complete industry in and of itself as well.

Kathy Gregory: Yeah. Oh, for sure. Yeah, yeah. What I know is that the bookkeepers are the source of all of it for advisory, because CPA, in the US anyway, a traditional CPA, they're not going to be able to offer the kind of advisory services that I'm talking about and the kind that are necessary, without the data, without the good data, and you don't get that without good bookkeeping.

Kathy Gregory: Bookkeepers really hold the key to all of this. I think if I'm a bookkeeper, the choice is either I want to offer advisory myself and I'm going to position myself to do that and I'm going to set up a level of packages and services that start with nothing and work up to something that's more advanced. Then, offer that to my clients. Or, I'm going to pair myself up with a CPA, or whatever is the equivalent outside of the US, and I'm going to do the pure bookkeeping for that person and charge that person. Either way, I'm going to be involved, and you have to be.

Amy Hooke: Yeah, that's right. That's right. I guess now we can sort of start to clarify a little bit what advisory is, because advisory has been … it's been a little bit of a buzzword in our industry here in Australia. You've kind of got the for-advisory people and the against-advisory people. Then, you've got the other people in the middle who are like, “I don't know what's going on here.”

Amy Hooke: Yeah, what is advisory? When you talk about advisory, what's your definition, or what do you mean?

Kathy Gregory: Yeah. I guess I should start by saying, I think, it's fair to say that first of all, advisory is just a word. It has a definition, so it's okay to define it for yourself however that makes sense for your firm. What I will say, and where we've landed, is advisory is about strategic planning. At the root of it, it's really about strategic planning.

Kathy Gregory: Understanding what your client's goals are and helping them translate those goals into really a financial forecast. If you get right down to it, that's what it is, a financial forecast. If that scares you, if that's hard, then don't worry about that. Just think about it in terms of representing the business owner's goals with numbers in production. You have to be able to plan out the goals.

Kathy Gregory: I'll make it really concrete. If you are going to take a vacation, let's say, you're going to take a big vacation. You're going to leave your country. A big one, something that you have to plan for, you have to have a budget for. You know it's six months out, the vacation is six months out. Do you set about a plan for that and sort of put a budget together and do that from a monetary standpoint as well as … not just the financial piece.

Kathy Gregory: What do you want to do on your vacation? What do you want to accomplish? What do you want to see? Why are you going? What's the purpose? Do you do that or do you wait six months out and just leave that day and plan your vacation? I know that sounds kind of funny, but really that's the same thing I'm talking about. That's all I'm talking about. I'm talking about saying, this is a very important thing, and so you're going to put a plan in place.

Kathy Gregory: It's really no different, the skills to do this are no different than the skills that you employ in your everyday world of running your own life the right way. You just have to learn a few trade skills about how you do some financial modelling and how that works. There are products that can help get you thing. That's what I mean. I mean understanding the business owner's goals from the outset, translating those goals into achievable chunks of things, and then representing those things in terms of financial projections.

Kathy Gregory: Sometimes, those projections start as simply as just a sales forecast. You don't even have to go deeper than that. You just say, “What do you want to sell? What is our sales goal for the next six months?” You think back there. That's actually a really good way to start and many businesses do just that. They survive that way for a year before they start to kind of go deeper and get into cost of goods, and other expenses and things like that. They just project sales.

Kathy Gregory: Anyway, so you have that. Then, once you have that and you understand it and you feel good about it. Then, every month you report on the comparison between your plan and your actuals. What you wanted to do versus what you actually did. All you do is measure each basic financial metric. It doesn't have to get fancy. It doesn't have to be … people love the phrase key performance indicators. I was probably using that phrase before most of the people on this call. It's been around a long time.

Kathy Gregory: You don't have to get fancy. It's just simply the regular metrics that fall off of your typical income statement, balance sheet and cashflow. Just revenues, expenses, net profit, gross margin, AR and AP days, those are important. Those basic financial metrics, each one of those metrics ties back to something in the operation that's performing. It's either performing well or not well enough.

Kathy Gregory: Your job as the adviser is to help that client see, for every metric, draw the line between the metric and the operational thing that's going on and how is that operational thing performing? If it's sales, it's about that. If it's AR and AP days,then you're looking at your vendor relationships or your contracts or your collections. All of that is the operation as a whole and the financial metrics are just a window into the performance of the operation. That's what advisory is.

Kathy Gregory: You sit down with your client and you pick the metrics and you talk about those metrics. The other job that you have as an adviser … I'm rambling on and on, aren't I? I'm going to stop a minute.

Amy Hooke: Oh, no. It's great.

Kathy Gregory: The other job of an adviser is to break it down into measurable chunks so that you don't overwhelm your client. You pick just the metrics that matter the most at the beginning, and you focus on those, and you get little wins as you go. Just like with anybody you're trying to bring along and teach something to, chunk it down and say, “All right, we're just going to,” and really, actually, your job becomes just as hard in doing that as in doing the actual advice.

Kathy Gregory: It's like focusing them and deciding what it is you're going to meet about at what time. You do that and you bring them along over time and that's what the work is. I promise you that every big company, every public company, every Fortune 500 company, that's how they manage themselves. That's how they do it. That's how they report to their shareholders and their board every month. There's no reason why small businesses shouldn't be doing the same thing.

Amy Hooke: Yeah, that's right. That's right. Yeah, I love it. It's just so clear when you break it down like that. I remember when I had no idea what … so for example, I didn't know what all the words meant. Obviously, I would have learned about them when I did my accounting degree at uni. You sort of forget all of that. Then, so when I was thinking, “Oh, what actually is a forecast?” It was from listening to you talk about it that I was like, “Oh my gosh, this is.”

Amy Hooke: When you said about financial modelling, then, I thought, “Wow, that was like one of my best subjects at uni.” I thought, “Ah, this is easy. I know how to do this.” It's really quite funny, but all the information that I'd learned over the years was all coming together, and I thought, “Ah.”

Amy Hooke: I think sometimes when the accounting lingo comes into the picture, especially if bookkeepers haven't done a degree, they might not have the lingo, but they know what it is when they see it. They're like, “Oh, I've been doing.” Some of them might think, “Oh, I've been doing this for years.” I mean, financial modelling, I've been doing that, I don't know, for the last 10 or 15 years kind of thing. It's just, when you join the dots between, oh, when they say that word, it means this thing here and so that all starts to makes sense.

Kathy Gregory: It's not so big and scary, like a financial forecast doesn't have to … it's just planning out what your goals are. You honestly do that whether or not you write it down, most people are doing that in their everyday life. Aren't you planning your budget for your own payroll? Aren't you planning your income, you're thinking about your expenses, and you're thinking maybe a few months out?

Kathy Gregory: People are doing it. They might not be putting pen to paper or keyboards and spreadsheet, but they're doing it. It's not rocket science.

Amy Hooke: Yeah. Yeah, that's true.

Kathy Gregory: The method of it is, I'll tell you what is the work of it, is deciding, okay, great. If I buy all of that, I get it, and I'm going to do that. Then, how do I be profitable at that? That's forecasting and how do I make sure? Because advisory is such a wide open scope that you run chasing your clients around in circles doing custom work for them every month, and then not ever making money.

Kathy Gregory: That's the challenge, I think, to the accounting industry or bookkeeping industry, is what's my system going to be? That's why I set about and wrote a pretty darn structured system, with tasks down to like the five-minute level, like really specific, so that you can chunk that out and decide, okay, I'm going to do this, but I'm not going to do this. I'm going to do it in this order. That helps you be systematised and sort of manage yourself.

Amy Hooke: Yup, that's right. That's right. Yeah, so I was actually thinking about obviously there's advisory, but there's also consulting. Is there a difference between advisory and consulting in your book?

Kathy Gregory: Here's the way I think about that. Some of it's in the way, I think, that you set up your pricing and how you go about selling. If I'm a consultant and I'm going to sell what I do to my customer, then my sales process is going to be verbal. I'm going to have brochure, I might have paper and things, or I might even have a website. Every, I guess, sale or contract is going to be unique.

Kathy Gregory: I can still have standardised work, but I'm going to negotiate that contract with the client individually. I'm going to see what they need and it's going to be very consultative and they're going to get their thing, whatever it is. That's being a consultant. Then I can offer advisory and I can do pieces and parts and packages however I want and that's being a consultant to my clients.

Kathy Gregory: If I am setting my business up, I don't know what word I would use, maybe with packages, I guess, you can have that be transparent on your website. You can do a different version where you say, “I'm super productised. I'm going to treat my advisory services like a straight-up product. It's going to be super transparent and clients can come to my website and just pick the thing they want and my prices are there.” I mean, you can do either. You can offer them either way, whatever feels the best for you, is the best for your area.

Kathy Gregory: Maybe your area is just used to doing it a certain way. However, whichever way it works, you can still do advisory.

Amy Hooke: Yeah, that's right. I think one of the roadblocks for bookkeepers here in Australia is because bookkeepers who are registered BAS agents. A registered BAS agent is somebody who's … they're certified by the Tax Practitioners Board to do certain tasks related to preparing and lodging a BAS statement, which is the GST, the goods and sales tax return.

Amy Hooke: Whereas there's another registration, which is the tax agent registration. Obviously, there's a higher level of requirement there. There's a lot more years of experience that you have to prove before you get to that level, but there are two kind of levels there. Obviously, within the criteria of the BAS agent registration, bookkeepers are not allowed to … firstly, they're not allowed to give tax advice. There are certain things that they're not allowed to do, whereas a tax agent is allowed to give tax advice.

Amy Hooke: The other kind of registration or formal recognition in Australia, is more to do with financial planning and financial advice, where you're actually advising people on making investments and things like that. I think what happens for some bookkeepers is they hear the word advisory and they think, “Oh, but I'm not allowed to give financial advice.”

Kathy Gregory: Yes, and that happens here too. For all varied reasons, accountants get wrapped around the notion that they can't provide forecasts, because they're not allowed to do certain things. I think we should strip all of those words out of it and just say, I have come to like the phrase better, and I don't know how it resonates in Australia, but managerial accounting. That's really what we're talking about, is managerial accounting. That's what it is.

Kathy Gregory: If you are a staff accountant in a company that has an accounting department, that kind of work would be really normal. There would be a bookkeeper that would be doing the books and there would be maybe a controller. They call it whatever they call it, but some sort of other accountant who would be looking at month end. They would be working with managers in the company, either the CEO, depending on how many managers there are, to show performance.

Kathy Gregory: Each manager would come in or maybe there's only one, but my point is each sort of thing going on in the business, each department, would be looking at the financial metric to try to monitor its own performance. That's all we're talking about. We're talking about outsourcing that and having a bookkeeper do that or having an accountant do that. We're definitely not talking about investment advice. We're not really talking about, although you could if you wanted to, but we're not even talking about valuation either.

Kathy Gregory: We could, because if you had a full … if you had a really good proforma, which is what you call it at that point, you could work with the client on valuation, because there's not much difference. If you have a really good financial forecast, then you're just helping the client determine if they're at one times revenue or less than one times revenue, or whatever that is. We're not talking about that. We're just talking really about managerial accounting, but don't think that is boring or not important.

Kathy Gregory: That's the nut of what makes the whole business perform. The business owner's not going to be able to grow or reach any of their goals without this stuff. They're just not.

Amy Hooke: Absolutely, that's right. It's not necessarily even about, I'm not going to go to a business owner and tell them, “I made this spreadsheet and now I'm going to tell you how you should run your business.” What I'm doing is I'm putting the data together and I'm presenting it to them. A lot of the times, when the business owner sees it, because they understand their business, they have a look at it and they can actually look at that data and see, “Wow. I can actually see that this product here, it costs a lot more for us to promote and sell this product. It's not generating that much revenue, whereas this product over here.”

Amy Hooke: They might see that maybe there's two income streams, and one is performing a lot better. Then that business owner, I mean, I could say to them, “Look, this one's performing better, so therefore you should focus on this one.” They can probably see that for themselves. I show them the numbers presented in a particular way and then they can say, “Wow. That one really does sell a lot better.” Then, they can make the decision. They might say, “This one that doesn't sell as well or costs more to promote, it does help us engage clients and it does help people to kind of connect with the business. Even though that one's not as profitable, we can still focus on that.”

Amy Hooke: It's good to sort of bring that awareness. Often I find is, I sit with the person and I help them break things down into … and exploring with them as they look at it. They then will say, “Okay. Can we work out.” Seeing the data broken down like that will give them ideas of what else they might like to see. You're not really telling anyone what to do, but you're allowing them a different perspective on the information so they can start to say, “Wow.”

Amy Hooke: Because business owners often don't know what questions to ask. You're just giving them another set of way to look at things, which gives them a whole new set of questions. They go, “Wow. I've never actually thought about it like that. Now that I can see that, I have this question, this question, this question.” Then, they can ask you, “Can you please provide this information?” We can kind of go back to the drawing board.

Kathy Gregory: Yeah. I don't think that can be emphasised enough. I think people should rewind … do that thing where you just go back 30 seconds a couple of times and just listen to Amy say that again. Because that really is so true. I would double down on that and say, the fact is, the accountant isn't going to know. They're not going to know the answers. Of course, you're not. You're not there every day, they're there every day.

Kathy Gregory: It's such a cool relationship, be it a bookkeeper or any spectrum of accountant that's doing this work with the business owner because neither of you on your own have the whole picture. You just don't. Together, you figure this out, and that's why it's a collaborator. That's why I said at the beginning, it's really about being a collaborator. I like that word better for this than even adviser.

Kathy Gregory: You're elevating information. You're bringing the evidence. You're like an investigator. You've uncovered all of the clues and you know them to be true. They're good clues, they're clean ones and they're accurate. Then you're bringing that to the person and you're saying, “Here are these clues I found, and I'm pretty sure about these things.” Then, the business owner immediately, yes, will say,” whatever the metric is you're focused on, they will usually know some bit of an answer and then you work together.

Kathy Gregory: Then, other things that I think happens is when the relationship is new to both of you and you haven't progressed very far in it, it's usually a little bit more the accountant coming up with the metrics to start with. You usually say, “Okay, if you're a product-based business then I'm going to focus on margin.”

Kathy Gregory: If I'm not a produce-based business maybe then I'll focus on pure net income. If I have a lot of AR and AP than obviously I'm going to focus on AR and AP days, whatever. The accountant is figuring out the metrics that kind of are going to really matter the most to the business. After two or three months of that, it takes on a life of its own. It's as you said, the business centre comes in with their … they add so much to the conversation that by the end of that meeting, you've both come up with the next steps. That sets the agenda for the next meeting and then it just progresses.

Amy Hooke: Yeah.

Kathy Gregory: It's got a life of its own and it progresses on its own, I guess, velocity or whatever is the right way to say that.

Amy Hooke: Yeah, that's right. Yeah, I love it. I guess that kind of naturally leads us to the next bit which is because we're talking … We've already started to touch on how … This is what I loved about what you teach because it showed me how to instead of having to tell a business owner that I can help them, I simply follow what you were talking about which is to show them. You actually show them how to do that.

Amy Hooke: Obviously, we're going to have bookkeepers who are … they've reached the point. Some haven't decided whether they're interested in advisory or not. You've got ones that are but they say, “Okay, cool. I've reached the point where I want to do it. Then I can see this far off in the distance picture of myself being an adviser to my clients.” What are the steps in between that's kind of like this blank space. What goes in that space?

Kathy Gregory: Yeah. That's part of the process that we wrote. When I set about to do this, I realised, okay, the accounting industry hasn't defined for itself what advisory is. I want to do that. For what? For Live Plan and for what we do. I did that. When I first wrote it, it was about more the delivery, like the advisory meeting.

Kathy Gregory: Then, it became pretty evident pretty quickly that you have to be able to convert sales or get from point A to point B, right, the thing you just said. I know I want to do this. How do I start?

Kathy Gregory: I added to the method and it starts really at the point of consultative sale to say, “Okay. I either have a new client that is interested and I think this is a good fit for,” or, “I have an existing client that I want to maybe convert to this.” How do I do that?

Kathy Gregory: The thing is, when you offer compliance-based services, pure bookkeeping for tax or if you're doing audit, that is a type of service to clients know they need. They're not super excited about it. You can sit literally back and just wait for them to come to you. Because they have to do it. It's mandatory.

Kathy Gregory: With advisory, they don't necessarily need it. They should but they don't necessarily know. You have to lean forward and you have to … It's a different type of sale. The type of sale it is, is not a sale. Don't sell it just show it. You just do it. We call a kickoff meeting, that's how I chose to label it, but you don't have to call it kickoff meeting. I'll tell you why though, there's a reason we call it kickoff meeting.

Kathy Gregory: Let's assume you're not going to do it, you should assume you're already doing, just do it.

Amy Hooke: Yeah.

Kathy Gregory: The way I wrote the business process is to offer the kickoff meeting for free, you don't have to, not all accounting firms do. If you can and if you can set your business up to do that, if you've got enough margin on other work. If you've got enough runaway of your cash and you can do stuff like that, I really do think you should but you don't have to.

Kathy Gregory: The work at the kickoff meeting is to have about a half an hour, a 45-minute meeting with your client, frame the work that you're doing. Make sure they understand what is it and what isn't, what they're going to get, what they're not going to get. Set their expectations. Explain to them what you're going to expect of them and what they can expect of you. You're going to make some promises and then hook them. The way you hook them is you just simply do it.

Kathy Gregory: You, with Live Plan, you go ahead and connect the software and you let it pull in the accounting data and it does that very quickly. You can set yourself up in about 10 minutes to have a populated account for them. Then, you just show them a couple of metrics, pick one or two. Just at a certain point, I have a whole script with words you can use and things that get you through this meeting.

Kathy Gregory: At a certain point in the meeting you kind of turn and say, “Let me show you this.” You flash, let me back up a minute. You start the meeting and you say, “I want to just get to know you. I want to understand what it is that you love about this business and what your big goals are? Just what's your big goal? Why do you get up out of bed every day and run this business?” You really do have that conversation.

Kathy Gregory: At a certain point 10 minutes maybe in, you want to pivot them to talking about financials because maybe they aren't yet. They're probably not. They're probably talking about their passions, whatever it is.

Amy Hooke: Yeah.

Kathy Gregory: Then, you kind of want to nudge them and say, “Okay, that's really very interesting. Do you have financial goals? Do you have any?” Can you get them to talk about numbers at all? You do this for a couple because you want to see if they even know how to talk about it?

Amy Hooke: Yup.

Kathy Gregory: What does it sound like? When you asked them that, what they season on and how did they talk about their numbers? That will teach you a lot about how they think. Because your mind to connect with that, you got to connect with wherever … You have to meet them where they are.

Amy Hooke: Yeah.

Kathy Gregory: You do that. Then, once they start talking about some financial goal sometimes, they will actually say, “I want to make certain amount in sales, or I want to make this profit.” Sometimes they won't because they don't even think that way. They will just say, “I need to give myself a raise. I really like to make more money for myself,” like pay, they are taking payroll.

Amy Hooke: Yup.

Kathy Gregory: They might even say, “I really am just trying to save up enough money to send my kid to college. That's my big worry right now.” That's fine. That's a business goal. It really is because it means they need to make more money. However they think about that, connect with them on that, then you pivot to, let me show you this thing that I have.

Kathy Gregory: You have to be open but it does have to be whatever the tangible thing is that you're going to be working with them on every time when they meet with you, show that to them. Let me show you this, now you're going to start to hook them. Whatever the candy is that you have to offer, offer it now. Do it now. Show them and get them hooked on that now. Don't talk them about what you will do. Just do it, just model it, show it to them now. Let them feel it now, feel what that is.

Kathy Gregory: Because I promise you, if you can get them to feel it now and see it now you're going to hook them. That's when you close and that's when you move forward. Then, you come out of that meeting and you just say, “Great. The next step is we schedule a planning meeting. That's what we're going to do. Let's schedule that planning meeting, get it done.” Then, you can begin charging them for that.

Amy Hooke: Yeah. That's great. Yeah. I love that because it hadn't really occurred to me how much more effective it is to just get someone along to a meeting and to come and explore what they really care about and show them. During that process, you're getting a little bit of an opportunity to actually impress them a bit with your skills. It helps them to see, “Wow. I didn't even know you knew this kind of stuff.”

Amy Hooke: Automatically, you're repositioning them by showing them we've got a lot of … I just find a comment that I hear in the industry like very, very often is bookkeepers will say, “Business owners aren't interested in their numbers. They're not interested in their financial reports.” Is that something that you here often in your …

Kathy Gregory: Yeah, of course. You know what, they're not. They don't want to talk about it. They do not want you to present them with an income statement and show it to them. Don't stop doing that. If you're doing that just stop.

Amy Hooke: Stop it. Yup.

Kathy Gregory: Please, because they don't understand it. I'm telling you, I sit on a non-profit board too and we are loaded up with people who should understand that, anchor on our nonprofit work. They don't understand that. They don't care. Then, what happens is and I guarantee this happens to small business owners to. Because they don't understand it, they will start asking questions just to make it seem like they know or make it seem like they're using their time the right way and it's all nonsense.

Amy Hooke: Yeah.

Kathy Gregory: Read that and pair these numbers down, just focus on one metric at a time just talk about sales, only that. That will translate, that's revenue, that's a financial metric. It comes right in the income statement, but don't talk about it on the income statement, just show them their revenue and talk about how they're doing their sales. Because what business owners do want to talk about is their business. They'll talk to you all day long about their business.

Amy Hooke: Yeah.

Kathy Gregory: They don't want to talk about their financial statements because they don't … it doesn't fit to them. They don't understand what to do with that. Who cares?

Amy Hooke: Yeah. Yeah, that's right. Because I comment out here a lot from business owners will be, who cares about the profit and loss? What really matters is how much money there is in the bank. That's a super common comment.

Kathy Gregory: Yeah, or another favourite is well, wait, if this was my profit why …

Amy Hooke: Where's the money?

Kathy Gregory: Exactly. They don't see the connection. Obviously, the financial statements aren't doing their job.

Amy Hooke: No.

Kathy Gregory: Because they don't understand them. Just get rid of that and you can file that away or whatever. It's pretty. Yeah, I think so many accountants, and I totally get it and I appreciate that there are people in the world who really get jazzed about transactions and about making the right transaction and about applying the right rule to book the right transaction and keeping it clean. We need that, we absolutely need that.

Amy Hooke: Yup.

Kathy Gregory: The fact is, it's a means to an end. The end is this great conversation that you can have with your client to affect their goals and their dreams and their life. It sounds cheesy, but it's true.

Amy Hooke: Yeah, that's right. That's right. I think the only time, often, the only time a business owner has ever thought about planning the salary that they're going to pay themselves has been a result of their accountant's tax planning.

Amy Hooke: A lot of people will base the salary they pay themselves from the business because the accountant says, “This is the best salary to pay yourself for tax purposes, to make you pay the least amount of tax possible.” I find not a lot of people actually think about, one of the things I often ask my clients very early on is, do you have a home budget? Have you ever looked at your personal spending?

Amy Hooke: How much do you actually need to, if you are an employee, how much would you need to get paid for you to be able to comfortably live inside of what you now spend and the other things that you don't yet spend because you don't have the money? What does that look like? I think what happens, I think, sometimes people are scared. I think sometimes that people don't like to see their financials is because they're a bit afraid to see.

Amy Hooke: It's like when you think, oh my gosh, I don't want to get on the scales. I'm a bit scared to get on the scale, so I just prefer not to know how much I weigh for example. That's a really, I guess, a really simple analogy. They might think, “I know I need to know but I sort of don't want to know,” because I think sometimes people get a sense that something's not quite right. That they're a bit afraid to confront what it actually is because it can be very overwhelming.

Kathy Gregory: That's a really good point. That's a great point. It's another example of why paring it down into just tiny metric …

Amy Hooke: Tiny, yeah.

Kathy Gregory: … events only, we're just going to focus on this. There's two other things I want to say, but let me say this one anecdote now. I've been a year and a half, well two years actually, working for this engineering firm that had 12 offices around the nation and this is before Cloud, I'm dating myself. Before there were Cloud tools available to do this, for this company and it was policy. It had been public but it wasn't public at the time.

Kathy Gregory: Not that big. It's what we did to manage ourselves. Each individual business unit was not looking at the full financial statement. I was pairing things down into these metrics AR days, AP days, total sales, total revenue, gross margin and net income, I think. I can't remember that one. Sending out individual metrics to the offices and then the offices would post them on the wall. That's how old we were.

Amy Hooke: Yup.

Kathy Gregory: That's how they understood how to measure themselves. What was so beautiful and pure about it is each individual person could focus on their individual goals. The AP clerk for instance, all she cared about was AP days. She was honing like a laser on AP. Then, the sales people were focused in like a laser on revenue. That is how we affected the business. We didn't try to hit it with everything. We hit it with each of these individual metrics.

Kathy Gregory: If you do that, even though there's still one business owner looking probably at four or five or six of those metrics, when you pair them down that way they can hone in like a laser and get it. They can get it. It becomes more real. It becomes more concrete and tangible to understand how that one metric is being derived and how it ties back to their operation, right?

Amy Hooke: Yeah. That's right.

Kathy Gregory: Another thing I want to say, when you talked about cash and connect all business owners in that way. I wanted to kind of come back a little and say, it's not that financial statements don't matter and it's not that they're not useful. It's just that they can't always connect. To your point of it scares them. I agree because, so now I'm finally looping back. The other thing I want to say is that small business owners aren't always problem aware.

Kathy Gregory: You can't necessarily hit them with, “Hey, we're going to do strategic planning.” They don't necessarily know that that's going to help them. They do know that they are spending decisions to make. One, spending decision on how much they're going to pay themselves. There are other spending decisions, like they have to purchase capital equipment or they have to … they want to hire an employee. Can they hire an employee?

Kathy Gregory: They're faced every day with spending decisions and cash problems. Sometimes, it's really good most of the time, it's really good to meet them there at their cash need and start there and understanding how to be able to make spending decisions and cash decisions. Eventually, work with them to understand that it's about the full financial forecast that will help them get there, right?

Amy Hooke: Yeah.

Kathy Gregory: If you can get your cash under control, you can be able to make spending decisions and put out some fires and just feel a little more comfortable. Then, the bigger financial planning, the bigger strategic planning will help you before cash becomes a crisis.

Kathy Gregory: The reason I'm saying this now is I hear more and more bubbling up the talk in the industry about just simply cash management. Let's just manage cash and have that be what advisory is.

Amy Hooke: Yeah.

Kathy Gregory: It's a fine place to meet a business owner because I know it's where their fire is. Cash management is not a way to grow a business only, you can't do that.

Amy Hooke: Yeah.

Kathy Gregory: You have to get bigger than that. I do understand that usually, when you start out the small business that's their fire. That's their biggest problem. Fine meet them there.

Amy Hooke: Yeah.

Kathy Gregory: Help them learn over time that the cash problem started because you didn't have your income statement forecast in order. You didn't have your real P&L forecast in order.

Amy Hooke: Yeah. That's right. You sort of just basically come with the next question that I was going to ask. I guess what I wanted to ask you is that, if a business owner personally came to you or you were speaking to a business owner and they literally said to you, “The profit and loss doesn't mean anything. All that matters is that there's cash in the bank.”

Amy Hooke: Just commenting on that cash in the bank comment. I guess the reason I'm asking you this just because I feel that this is a great takeaway for the bookkeepers to know. Because they don't know how to respond to that comment. It's sort of feels like a bit of a closed door in the face. The bookkeepers don't know how to actually respond to that specific comment. How would you personally respond to that?

Kathy Gregory: Yeah, great. I love this question. The first thing I would ask them is why? Why do they think that?

Amy Hooke: Yeah.

Kathy Gregory: I would want to understand that answer. Because there's not a small business owner here in this example. I realized that can't be done. That's fundamental to understanding, because on anything you're trying to teach somebody, you're never going to be able to teach them unless you meet them where they are.

Kathy Gregory: Again, back to this meet them where they are. Try to understand why they think that way.

Amy Hooke: Yeah.

Kathy Gregory: I guess you could break it down into one or two things, either they're ignorant to the real answer which is fine, many people are. Or, they really don't care. Some small business owners do not care about the valuation of their business or growth. They really just, it's small enough. They're just paying themselves. They're generating cash and their net profit is equivalent to their cash almost. You know what I mean?

Amy Hooke: Yeah.

Kathy Gregory: Okay, so fine. That's why it's super important to ask them why because the two camps matter.

Amy Hooke: Yup.

Kathy Gregory: Right. If the answer is, all I ever care about is cash. I'm tiny. Then, you still can work with them and you can say to them, “Okay, but don't you want some security on that cash? Don't you want to make sure that six, nine months down the road it's safe? Don't you want a raise? Don't you want to ensure that you can pay yourself more over time? You probably are going to want to hire more employees. Even if you don't consider that growth, you're still going to logically have to make decisions down the road.

Amy Hooke: Yeah.

Kathy Gregory: We put some sort of a beginning forecast together for you to help you feel comfortable about your future. That's how I would answer that question.

Kathy Gregory: If a person truly is ignorant to the real answer, which is that there is a big difference between cash and the importance of the P&L. Then, you start to educate them around what is real growth in a business mean? What does valuation mean? What does it mean to have a business that has value to it?

Kathy Gregory: Does succession planning matter to them? Do they want to grow something so that they can turn it over to a family member or they can … are they trying to grow really big? It really depends on what the business is in the long-term. If this is a business that is looking at any type of growth like that, then you got to have a presentation about growth and you have to explain the difference between cash and the income statement and what it means to forecast an income statement.

Kathy Gregory: Because now, you're talking about really being able to understand and plan where your profitability comes from. Are you making profit on the thing that you sell? If you're not, that's a problem. You aren't, right?

Amy Hooke: Yes.

Kathy Gregory: This is only looking at the full net profit and they're not focused on gross margin. They have no clue that they're making money on the thing that they're selling. They're complaining all of that stuff. The P&L is the only place you're going to be able to understand where you're making your profit, what the potential for more profit is and your potential for growth.

Kathy Gregory: You're always going to have a cash fire if you're not getting your P&L halves in order …

Amy Hooke: Yes.

Kathy Gregory: … for that.

Amy Hooke: Yeah, that's right. Yeah, and I like that. I like the fact that it starts with your first response was question.

Kathy Gregory: Yeah.

Amy Hooke: Rather than trying to defend what they've said. You're asking them what do they mean by that. Because they could be something underlying that and they might mean different things. You said that they're either ignorant to what the answer is or they don't care. What I was thinking is in the people of the camp of don't care, you've got people who are potentially … I think to myself, why don't they care? Maybe at this point in time, that is not affecting them because they always have more money in the bank than what they need to spend.

Amy Hooke: Maybe they've been in a season where the sales or the income coming into the bank maintains a level. Let's say their cash balance, their bank account balance tends to kind of fluctuate around the same amount. They just go, “Okay, well, there's nothing else to really worry about.”

Kathy Gregory: Yeah, but then do they want to reinvest that money? That's just an asset. Cash in the bank is an asset.

Amy Hooke: That's right.

Kathy Gregory: That asset, do they want to reinvest it back in their business and do something with it? Do they want to … and either answer is fine.

Amy Hooke: Yes, that's right. They might just say, “No, I'm happy with the level.”

Kathy Gregory: Right.

Amy Hooke: Yeah.

Kathy Gregory: Give yourself a raise. There's all kinds of … The business has all these levers and drivers that you can press to make a thing happen. If you don't want to grow it, then that's fine too.

Amy Hooke: That's right.

Kathy Gregory: You're aware of what the drivers are.

Amy Hooke: Yeah, that's right. I love that because this is what I always think. I think if you hear a common phrase said repeatedly by people and it's always said word for word. It's always the profit and loss statement doesn't mean anything. It's about how much cash is the bank. You hear that phrase, it's word for word, it's always the same phrase.

Amy Hooke: When I hear word for word always the same phrase what I assume is happening is that, let's say, I'm talking to Joe. Joe heard his friend Fred say that. He just says what his friend said, he's not actually saying something based on what he actually necessarily believes but it could be a common thing that's said in that industry. It could be a common thing that's said amongst friends who are business owners.

Amy Hooke: It's not, I think, responding to that with that question to kind of uncover what's under that is, I think, that's really important because they might not actually believe that. They just think they do because that's what everybody says.

Kathy Gregory: Yeah, yeah. This is fascinating to me. It's funny because in my background, I didn't care about the cash. I didn't care. I am so interested in that P&L. Because the P&L is the DNA of the business. It 100% is.

Amy Hooke: Yeah.

Kathy Gregory: It's where all the potential is housed. It's where you can uncover where the business is, how it's structured correctly or not correctly because everything is there. To me, it's 100% completely about the P&L. If you get that P&L right, if you get that forecast, the P&L forecast right.

Amy Hooke: Yup.

Kathy Gregory: Or just even the one model, just what do we sell, what's kind of the basic cost of it? What are my chances, just the one month budget or whatever, if you get that one line right.

Amy Hooke: Yeah.

Kathy Gregory: Boy, you've got everything and you should be continually questioning it, evolving it, challenge it, all the time. Because if you get that right, then you're not having cash issues. Cash is taken care of. That in combination with the timing of collections and …

Amy Hooke: Yes, that's right.

Kathy Gregory: Then, your cash is fine. I wonder if that's said so much because there's just a lack of understanding about the potential of what would happen if you dive into that and treat it like your, I don't know, like your monthly thing to do.

Amy Hooke: Yeah. Yeah, that's right. That's right.

Kathy Gregory: I know that business owners, small business owners are super tuned to cash. I always took it to assume that it's because they have constant spending decisions to make. They're always faced with the spending decision whether or not that's payroll.

Kathy Gregory: I mean gosh, I'm going to think about this to make sure I'm right. Yeah. I've never personally been responsible for somebody else's payroll. Gosh, I bet that has to be stressful. That's the most stressful thing.

Amy Hooke: Yeah. Yeah.

Kathy Gregory: If that's what they're face with and I'm sure that's why cash is always on their mind. That first and then, “Oh, I have to make a capital purchase or I want to hire somebody or I want to,” whatever it is. I always assume that's why cash was thought about that way.

Amy Hooke: Yeah, yeah, that's right. Yeah, I just think this whole topic is so fascinating and just to be able to listen to you break it down like that is yeah, I think, this is definitely what we need to hear. To hear someone who's able to talk about it in a way that's kind of broken down in to steps, even into that kind of granular, step by step way of doing things, which I think, will keep this love that sort of stuff. They love the granular of things, one struggle that bookkeepers have had is around their pricing, how to price their services.

Amy Hooke: You gave an example of how, having everything transparent and productised, so I'm very big on that style of doing things of actually turning everything that we do as bookkeepers into a little mini product. You're imagining there's like a shelf of products and you go, what do you need? You just pick it off the shelf and it's not personal, if they say, no to it, it's not about … It's just like the same as if you work in a shop and you had items on your shelves.

Amy Hooke: People look at it and they either want to buy it or they don't. They either like the price or they don't and it doesn't really matter. You can bundle things together. That's the other thing that I liked about your process where it actually … it makes it so easy to price. It makes it easy to understand and you were talking about earlier before we got online about how when it comes to repositioning yourself, the pricing is actually an important aspect.

Kathy Gregory: Yeah. Yeah. I set the system up to be to support productisation because I believe in that. Not only do I believe in that, it doesn't matter where I believe in, but it is important.

Amy Hooke: Yeah.

Kathy Gregory: We sell about 90% of our sales are direct to small business clients, and we also work with accountants and other people who act as advisers to those clients. We know a lot about what small businesses want and need. Our nurturing site see about two million unique visitors a month. It's a lot of small businesses and we survey them from time to time and we also just hear from them.

Kathy Gregory: We know that price transparency matters. What they really want to see is just what is the price? Also, you don't even have to survey small businesses, just look to what the ecosystem is like? Just what people expect, everything is on an app. Everything is exposed. Everything is there for you to know.

Kathy Gregory: Yeah, so I really believe in that. I built the Live Plan method process to support productisation. Once you have your tasks all broken down and then you decide what of that you want to do? It's really easy to piecemeal that apart and make it discreet products and then offer whatever those products are to your clients.

Kathy Gregory: I think for bookkeepers, the spectrum being like just a super light automated reporting. Set yourself up with a system that will just hum behind the scenes and develop these discreet metrics for you every month and you can offer those and report to your client with just a simple quick narrative. Maybe take 20 minutes to put that together and just send that to them. That's probably the lowest package.

Kathy Gregory: I tell you, I've done a lot of analysis on that, on looking at would the margins can be on that work? In some ways, if you get really efficient that there's more margin in that, almost.

Amy Hooke: Yeah.

Kathy Gregory: The higher up the food chain you go then the more time you're spending. That's a really slick way to do it, at [inaudible 01:00:43] and then just adding more services as you go.

Kathy Gregory: I think the next thing to offer would be a sales only forecast. You can say, “All right, I'm going to work with you on just your sales and see if you hit those targets.” Then, as a client gets comfortable with that over time, you can build the rest of the forecast and then have a bigger package that offers that.

Kathy Gregory: You can also chunk it out into monthly meetings versus maybe quarterly. I think you have to at least meet once a quarter. If you're not doing that you're not going to be able to have enough touch points, but you could break it that way. Various way of doing productisation.

Amy Hooke: Yeah, I love it. It's great and it's just been great to have you along today. What I would like to do is, we'll connect once we jump offline and I'll grab a couple of resources perhaps that we could share. I normally share some resources in the notes of the podcast, in the transcript. I'll grab a couple of things off you.

Amy Hooke: I'm thinking maybe definitely one of your webinars, like hearing about the actual method I think is beneficial. Anything else that you think that would be helpful for our bookkeepers to have a look at to?

Kathy Gregory: Yeah. I keep referring to it as process. We offer four resource guides on our website.

Amy Hooke: Yeah, great.

Kathy Gregory: We'll make sure that you know that link for the people …

Amy Hooke: Yeah, cool.

Kathy Gregory: … website and people can get them. Then, depending on how deep they want to go with training, we have an online training portal people can join if they wanted to go deep with training or they can just use the resource guide.

Kathy Gregory: Also, our help centre has a really nice online help. There's lots of ways to do this just depending on how people like to learn.

Amy Hooke: Yes. That's right. That's right. Thank you so much for your time. Thank you for everything that I've learned from you over the last year or so since I discovered you. Yeah, just to have you come along and speak to our audience and clients and everything is just, yeah, to be privileged. The knowledge that you've brought is just, yeah, it's incredible. Thank you.

Kathy Gregory: I think this industry is so special. It really is a cool worldwide. It's so odd how obviously big it is, but yet small at the same time.

Amy Hooke: Yes.

Kathy Gregory: Anyway, it's been my pleasure. Thank you for having me.

Amy Hooke: Yup. You're welcome. All right, everybody, well, anyway, I'll see you next week. Thanks for tuning in again. I'll see you then. Bye.