The core job of a Fractional CFO is to help our clients' businesses grow.

Growth could take the form of increased revenue, increased profitability, increased cash flows, decreased debt, or a combination of all of these.

Each month, we analyze the financials, consider our client's goals, determine the roadblocks, and then formulate a plan highlighting EXACTLY what steps the client needs to take next...

Well, SOMETIMES the story goes that way...

But other times, we are confronted with the reality that it's nearly impossible for us to know the exact steps our clients need to take.

And that's NOT because of a lack of technical proficiency; it's because we aren't neck-deep in the business's day-to-day operations, so we can't know ALL the things!

This is even true for full-time CFOs in some cases!

Here's a real-life example:

• I had a client with a high 7-figure business.
• They're a service-based business that bills for labor and parts (think plumber, electrician, etc.). There are 9 technicians on staff.
• The client is operationally lean. Not much G&A to cut.
• Their gross margins are bad - well below the industry average.
• Markup on parts is fairly decent, meaning there is probably a labor issue.
• Getting their gross margins up to the industry average would result in a bottom-line difference of over $100,000.  This was a problem worth fixing.

I did some poking around at labor reports, time cards, and the CRM...

Based on the available data, I determined that 3 of the repair technicians' jobs were billed well above the company average (thus they have a great gross margin), 3 were mediocre at best, and the other 3 were weighing gross margins WAY down.

Despite the data, I couldn't determine the actual problem, much less what the client should do about it.

I was at a dead end.

I could have...
• Avoided the problem altogether and hoped it went away...
• Just told the client they need to fix gross margins and leave it at that...
• Spent another 5+ hours trying to poke around their systems, hoping to figure out what was happening... 

These options land somewhere between not ideal and completely unacceptable.

I had to do something...

THE ASK / CREATE / SUGGEST FRAMEWORK

I have found that the best way to serve the client in these cases may be to use the ASK / CREATE / SUGGEST framework.

Let's break down the framework and then I'll show you how I applied it to the case study above... 

ASK: 

Fractional CFOs put too much pressure on themselves to try to always know all the answers for our clients.

It's impossible and unrealistic!

Sometimes, we can best serve our clients by just asking really insightful questions. Then, lean on their knowledge of their business to find the answers. 

In the case study above, I pointed out what I learned from the data and simply asked the question, "What's different about these 3 techs compared to the other 6?"  

CREATE:

The question was worthy of an answer, so I did what you might have done: I emailed the client.

Their response came back quickly but was completely underwhelming.

"Great question. Not really sure..."

It was clear that they hadn't put nearly enough time or attention into answering a 6-figure question!

I got the impression that the CEO read and replied to the email from his iPhone while sitting in traffic at a red light.

I get it - our clients are busy! But this was super annoying because solving the gross profit problem had a bottom-line impact well into the 6 figures! 

Back to the dead end. 

I learned that I needed to create a space for them to brainstorm and ideate meaningful answers and to devote an appropriate level of attention to this literal six-figure problem.

The obvious solution (it wasn't obvious to me at the time) was to simply schedule a time for us to discuss the issue together 

I explained to them what I had found in the data, what was at stake, and suggested we block of an hour to brainstorm what might be going on and what to do about it.

They loved the idea and agreed immediately.

SUGGEST:

Armed with the data that I had previously collected, I got on a Zoom with the client (CEO) and his operations manager. 

I presented the data to them and said, "OK guys, what do you think?"

Awkward silence...

"Well, we don't know. We were hoping you'd know."

It was clear to me that I'd have to tee them up SOMETHING to get the ball rolling.

Me: Are they good employees? Good attitudes?
CEO: Absolutely. Great people.

Me: Is there something special about the kind of jobs they're assigned to? Are they only getting low ticket work? 
CEO: Nope.  It's all pretty standard stuff.

Things were NOT going well and then...

Me: Did these guys happen to get hired around the same time?
CEO: Hold up. That's it. Yes! Yes, they DID start working at the same time! And our training manager was on maternity leave when they started and I don't believe they ever got new hire training - which means they are probably NOT doing warranty and maintenance plan upsells (which they teach new technicians about during new hire training).  We can fix this problem with a little training!

And there it was.

Those three techs weren't pitching warranty and maintenance plans to customers. This was exactly why their booked revenue was so low, which was also why their gross margins were so low.

The techs had 2 lunch-and-learns with the training manager over the next couple of weeks.  30 days later, the employees were well above the company average, and the gross margin problem was eliminated.

✅ 1 question
✅ 1 meeting
✅ 3 suggestions
✅ 6 figures in net profit
✅ 0 answers and a very happy client

FINAL THOUGHTS

• As Fractional CFOs (and as human beings), we'll never know all the answers, so stop putting so much pressure on yourself to know everything.

• If you're anything like me, you want your clients to treat you as part of their team. But being part of a team means you must sometimes rely on the team to help you. Let your other team members (aka your client) help you!

• Your work matters. Keep it up.

Your coach,
Michael