I learned many years ago that there are two words you never use with a start-up founder. Those two words are, “You should.” If you have never thought about this, in time, you’ll come to agree with this sage advice.
This applies to the question about a tax expert becoming a part-time CFO. I have opinions and a couple of ideas, but no suggestions. Later in this discussion, I’ll use Brian Habermehl as an example. He’s a real person and one of the greatest strategic and tactical tax minds I have ever met. He only worked a few years in public accounting, and for the majority of his career, he ran the tax department for a large family-owned business. Brian provides the greatest insights, in my opinion.
The Duane Gravely Business Models
In some old AICPA Journal ads, Duane was once touted as the million-dollar man. Duane started his career in the Big Eight accounting world. He loved bookkeeping and thought his firm should provide outsourced bookkeeping services for small businesses. He believed the work was easy, easy to staff, and easy to enjoy the recurring revenue streams at a time when no firm was doing this.
His fellow partners disagreed, so Duane started a small bookkeeping practice in Minnesota circa the mid-1980s. He ultimately built a million-dollar practice within seven years. I agree about the easy money because I have some of his old P&Ls, and the margins are phenomenal.
I met Duane in 2006 in Florida, and I’ll never forget his line about business models. “Mark, there are two ways to make money. Either charge a small amount for a reoccurring and necessary service or charge a lot of money for special projects.”
You can guess the path I chose, and I have no regrets whatsoever.
For the tax person who is contemplating becoming a CFO consultant for a small handful of clients. Duane’s message is insightful.
If you choose to leave your tax work, you are leaving a dedicated and loyal cash flow stream. And I’m assuming you love the work. Are you sure you want to leave this type of financial security?
Many so-called experts teach consultants what they should and shouldn’t do. Those experts might suggest doing both. Really? I’m available to my clients 24x7x365. That includes holidays and vacations. I’m guessing there are three to four months you couldn’t be a true CFO to clients during tax busy season. That’s going to be a problem with your clients.
While my opinion may come across as black-and-white with no shades of grey, I’m of the ilk that you need to decide what you want to do–do taxes or do consulting. And I mean all-in for either. Duane knew exactly what he wanted to do. He could have picked his ten biggest clients and been their part-time CFO generating an additional $300,000 or more annually. That’s an entirely different business model, and he said ‘no’ to it.
The Brian Habermehl Decision
I’m struggling with a good heading for this section. Brian never had the decision to make. He’s the best tax expert I’ve ever met. However, Brian is one of those rare tax people who could easily make the leap to being an operator.
Let me define that. He gets marketing, He knows sales, and he knows operations. He could probably run any small business with the right team while building a great culture.
Brian’s decision is that he never had to make one. He loves tax (or at least he claims he does). He’s great at it. The people he serves love him. And I even haven’t started on the intangibles, such as likeability, humility, and servitude.
If you are thinking about becoming a part-time CFO, is it because you believe you can offer more value to others than by doing tax planning and compliance work? If so, that’s great. Just make sure you can do the work adequately. I’d go so far as suggesting you become a CFO first in a W-2 position, maybe for an existing client. Good luck with that because when I hire CFOs, I’ll look for people who have held that title for at least ten years and preferably with more than one company.
If you make the leap, know your ‘why’ and do enough self-diligence to ensure you can provide this type of consulting work to others.
Another Option for Tax Experts
I’m not sure when the switch was flipped. It seems like every person with a finance background who does freelance work is a fractional or part-time CFO. When I check out the backgrounds of some of these young people, it appears they have never been a CFO in a W-2 position, nor have they worked for one for five to ten years. That means we have a lot of title inflation going on based on my non-statistical sample size.
The greatest CFO firm on the planet is B2B CFO(R), and I know a handful of their partners. I’m also friends with many partners who have left. In all cases, their backgrounds are similar to Steve Cakebread’s (one of the coolest CFOs I’ve ever met).
I mention this firm to help justify my reasoning that a part-time CFO needs lots of seasoning and grooming before jumping into this business. Experience, experience, experience is the best way to be successful in this work. And most of the young people reading this article may not have the comparable experience of the partners at B2B CFO(R).
What’s the Alternative?
Become a business coach. There are many coaching firms in existence. Most have certifications that can be completed along with marketing and sales training. Plus, you access their branding.
Is this the best option? Only if a) you are done with taxes and, b) you lack CFO experience.
I will break my rule of never using the term, “You should.”
You should think carefully about what I’m suggesting above.