John Corcoran 5:49
Yeah. So you said when you were in college, that you went for the most stable thing you could find. And then you get to this point where you can decide between stable job offer and the less reliable thing. What chose you to choose the the more riskier path those years later?
Nikole Mackenzie 6:10
I think it’s funny, because I’m super risky. Now, I think at that point in my life, I didn’t have the confidence. But it was just me really wanting to do something different and better when I think about, I didn’t know it at the time when I was in it. But traditional accounting firms are just so not my personality. And when I was in that work environment, I was that and then as I exited that, and started my own business, I started to build confidence. And I started to realize that there was a better way to provide an amazing client experience that accountants just weren’t doing and ways to be creative that accountants just weren’t doing. And so for me, it just represented a, a way to take more risk and a way to build something better, and not have to follow the way that things that always the way that things have always been done, because that’s the way that had been done. Because when I was at that firm, I was constantly always questioning things. And the partners will always stifle that creativity. And so I was just really, I think, wanted to do something different.
John Corcoran 7:14
You know, you mentioned the billable hour, which was something that I experienced when I was practicing law. That tension, not a lot of fun to have to bill, especially when you’re charging a lot for the hourly rate, because then the clients really, you know, look closely at what you’re charging. What I want to know is how much of your frustration was related to that. And how much of it was other things related to just kind of structurally the way that the, you know, old school accounting, function and operated was funny.
Nikole Mackenzie 7:49
So I just wrote a rap about this. I love LinkedIn. LinkedIn is like my playground, if you want to ever go to my profile, you can see all the stupid stuff that I spent many hours posting. But the rap that I wrote, it talks about how the billable hour is just a broken model and how that the problem with the billable hour is it doesn’t make you create value for your client. The client does not care how much time that you spent servicing them. They want to, they care about outcomes. And as funny I don’t know if you saw there was on Twitter, viral posts, about Chewy. Chewy is the dog food online. Yeah, for pets, right. And Chewy, I remember, was my cat’s birthday, and they sent a handwritten birthday card to my cat Louie. And so there’s a line in there about Chewy. And anyway, my point is with that is Chewy, retains their their churn is super, super low. And they have a recurring revenue business model, right. But what they’ve done is they’ve created this client experience that keeps people coming back. And they actually have people in house that do handwrite these birthday cards and they send paintings when people’s pets die and they send flowers when people’s pets die. And that creates this customer loyalty. And so I would say like with Momentum, V1 Momentum was very much about fulfilling a need in the market was which was this gap of good accounting for small businesses. But V2 is more about creating a really, really awesome customer experience. And that’s what I’m working on right now.
John Corcoran 9:35
That’s great. You know, you said that when you graduated from college, there wasn’t really this outsourced accounting option. It was kind of big for traditional CPA audit tax. You said those are kind of the areas where you could go into and now there’s this kind of this outsource accounting model that a lot of especially smaller businesses can leverage in order to get better understanding of their numbers. So talk a bit about what that change looks like and what the world is like for for, especially for small businesses now compared to the way it has been traditionally.
Nikole Mackenzie 10:11
Yeah. So the old way of doing your accounting as a small business owner was you had somebody come to your office, it was all desktop. Typically, they were just paying bills and sending out invoices. But at the end of the day, when you actually were looking at your financial statements, that data didn’t tell you anything to help you run your business. And typically, small business owners come to us when they reach that high six figures getting approaching 1 million in revenue. And before working with us, they’re either trying to do the accounting themselves, they have a bookkeeper, that’s maybe not super sophisticated, they have a spouse doing it, or they have their CPA doing the bookkeeping. And if you’re doing, you know, 500,000 or less in revenue, that works. But when you start hiring people, there’s this inflection point where you’re, you’re responsible for other people more than just yourself, right? And so what when businesses come to us, they’re at that inflection point where they’re wondering how much cash can I take out of the business? Can I take on this new project? Here’s what I have in the pipeline, can I service that revenue. And what I see a lot, especially with agencies, which is one of our niches, is they’re growing really fast. But they don’t have the data to know if they can actually successfully execute and service that revenue. And you can get into a lot of trouble if you’re taking on too much revenue, and you can’t service it. And so to give you an example, we have one client that we’re working with that is two business partners. So one partner wanted to hire us, the other one was looking at how much money they had in the bank account. And he was like, I don’t think we can afford to hire them. Now he tells us, they did end up hiring us. And he says that he wished he would have hired us sooner. But they were just so on one hand, we have one partner that’s looking at the bank account and making decisions based on what’s in the bank account today. And then on the other hand, account balance accounting, right, yeah, that’s the gas tank accounting method. Yes, tank account. And then and then the other guy, he’s making sales, you know, he’s so he’s so and he just closed a $20,000 a month deal. And he’s like, Well, we need to hire somebody. And so they had, the one partner that was in the finance function was paying the bills, was sending out invoices, was doing the data entry in QBO. But at the end of the day, when the other partner said, Hey, how are we doing financially? Can we do this? Can we hired this person? He didn’t have the answers for that. And so when we came on, and we started working with them, the first thing we did was we removed the one partner who was doing the accounting from the accounting function, and clean up a lot of the mess. And then what we did was we build a forecast for them. So now what we what I do is I have a monthly meeting with them. And we can talk about, hey, what do you have in the pipeline? Who do you think you’re going to close this month? Who do you have on your team who you’re planning on hiring, and then help them be much more confident in that growth? And they’ve just been able to grow much faster now? Because they’re not stifled by that? Oh, I don’t know if we can hire this person. And that insecurity because I can help them look forward and see what their cash flow is going to look like in 12 months? If they do XYZ.
John Corcoran 13:27
Yeah, yeah. And with the growth and outsource accounting, there’s so many more tools. Now it’s almost debilitating how many tools there are out there. But you know, things like, I know you’re a big advocate of some of these different tools, like Gusto and things like that. So talk a little bit about those sorts of like, you know, new new wave, SAS based, you know, hiring, recruiting, outsource payroll, that sort of thing, tools that are out there. Does everyone loves talking about tools, right?
Nikole Mackenzie 13:54
Yeah, yeah, no, I love, I’ve, um, I test out probably a new app every week, I love finding new tools. But I mean, our core app stack is really Zero or QuickBooks Online. And then those are the, that’s the GL. And then on top of that, there’s 1000s of apps in the marketplace more and more popping up every day that integrate with those. So for example, with this client that’s on QuickBooks Online, I’ve got QuickBooks Online, linked into Google Sheets through a tool called Live flow. And it’s a direct sync of all the data into Google Sheets. So if you ever want to do anything in Google Sheets, it’s pretty awesome. And then I take that Google Sheets data, and I use race reporting, which is a data visualization tool. And that connects to the live Google Sheet data. And then I can refresh that. So let’s say we’re talking about we’re up, you know, like I said, looking at the pipeline, and they want to add a new client that they just closed, then I just added in the Google sheet and then I refresh it in breach reporting, and then they get a nice dashboard because agency owners like dashboard or visual people, right, so it’s pretty because they can see, and they can see how that affects their gross profit margin and the net profit margin and their take home as the business owner. And then we can also mess around with how much cash is. One question that business owners always want to know is like, how much cash do I need to keep the business? How much cash and you can measure, can I take this out, you know, my wife’s bugging me and asked me if I can take more money out of the business, but my other business partner doesn’t want to. And that’s always hard when you have multiple partners, but what I can do is I can remove the emotion from that decision, and then to show them the facts and say, Hey, here’s, here’s a good number that will make you unless agree on a number that makes you feel good. And then we can take out anything beyond that. And I can actually show you what that looks like moving forward, here’s your GAAP cash balance target that we agreed on. And now you’re above that. So like starting in September, you guys can increase your distributions by $10,000 a month each. And that just gives them a little more clarity. I think in terms of being on the same page. Yeah, partners go.
John Corcoran 16:02
Amazing. When I, you know, I, I’ve been an entrepreneur for 11 years now, when I started my business, you know, I immediately outsourced bookkeeping, but I hired someone, I can’t remember the first person was, but I had a, I had a couple of people. But it was always like on there. There. There was virtual remote. And it was on their desktop version of QuickBooks. And they would send me reports like really, like once a quarter, maybe I didn’t even look at them. I didn’t even know you know, it was all bank account balance, you know, gas tank accounting, like you said.
Nikole Mackenzie 16:31
Yeah, and that’s and that’s, I mean, when you’re small, that’s works fine. If you want to have your CPA do it, but they’re going to be doing the bookkeeping in a way that makes it easy for them to file the taxes. A cash basis, bookkeeping is a lot different than true accrual basis, which is matching your revenue with your expenses so that you can actually pull out those, you know, what is my gross profit margin? What should my gross profit margin be, and, and then look at that trend over time, and it’s okay, if it dips, or you know, is higher or lower than you anticipated, but you need as the CEO, you need to be able to explain why that is. And as an example, we had a client that $10 million business and they had some family drama, and one family was member was stealing from the business. So there was some turnover here in ownership. And they let their accounting go for a year in when we finally recreated the financials are looking at the gross profit margin, and it’s just like declining, declining, declining, declining, like what happened. So we started digging into some of the costs. And we realized that they had not off boarded, they had no HR like competent HR person. And so when the employees were leaving, nobody was taking them off of the health insurance. They had like two years, $15,000 a month or two years are paying people that no longer like people that were dead, that didn’t work at the company. And because they didn’t have financial statements where you’re if you’re tracking your gross profit margin, you can see that declining and then then the financials are really there to tell a story about your business. And then it’s up to you as a CEO to say, “Why is this happening?” and then go figure it out, correct it. And so it’s really a guiding light a beacon of light to guide you in the right direction so that you can adjust. And if your financial statements aren’t giving you that information, then it could be that you’re not working with the right person. You’re gonna ask him the right questions.
John Corcoran 18:24
Yeah, that’s a great overview. Thank you. I want to ask you about your involvement with EO. So we were joking beforehand, I asked if there was like, a lot of times EOers mentioned that there’s some big breaking point or drama or crisis or something that brings them to you. For you. It wasn’t anything like that. It was Lael Sturm who is, we both know, is an EO accelerator member and a big advocate for EO. And he told me about it.
Nikole Mackenzie 18:51
Yeah, him and then some other person was telling you about I kept hearing about it, you know, once you hear about something, and then you hear about it everywhere. So Lael was just raving about it. And for me, as a small business owner that works with other small business owner as my job I just love entrepreneurship and small businesses. So in my mind, I was like, oh, it’s cool. I get to hang out with other business owners and like learn from each other. So that sounded interesting to me. I ended up joining EO directly rather than doing the accelerator because I was right at that million dollar mark, when, when I joined, but actually now John, and I think I might go back and do accelerator because I missed that more, I guess more, because EO is more about self development, where if like, EO accelerator is more about being in the trenches as a business owner and being with other people that are also in the trenches and learning from each other. So I kind of feel like I missed that fun part of it. So I might go back and do that.
John Corcoran 19:51
Well, I’m a huge advocate of both accelerator. I did it for about three years. It’s an amazing program. I think every EO member should go through it. To because it is just such a great foundational curriculum. I call it like the MBA that I never got. But it’s yes, it’s so such a great program.
Nikole Mackenzie 20:09
I was also thinking that it would be a good, there’s some good frameworks. And then when I did the EO learning day, pulled out some things that I could actually use with my clients, like the org structure and the culture and the values when we onboard it. We do also do payroll, right. So we are looking at people and org structure. So it’d be really easy just to template that out and have that be something that we do during as part of our consulting.
John Corcoran 20:33
Yeah, yes. Super valuable. Yeah. Nikole, this has been great. Where can people go to learn more about you, connect with you, and ask you any follow up questions?
Nikole Mackenzie 20:39
Yeah, the best place to find me is on LinkedIn. Nikole, N-I-K-O-L-E Mackenzie.
John Corcoran 20:44
Thanks so much. Thanks for listening to the rising entrepreneurs podcast. This episode is powered by Rise25. Please subscribe and check out future episodes.