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#80: What is the ERC and Do I Qualify? Featuring Randy Crabtree of Tri-Merit

#80: What is the ERC and Do I Qualify? Featuring Randy Crabtree of Tri-Merit

The Employee Retention Credit, or ERC, saw significant expansion in 2021. But, do you qualify for the ERC? Can you still get the ERC if you got a PPP loan? We have a special guest, Randy Crabtree, of Tri-Merit Specialty Tax Professionals, on this episode to talk about various ways for businesses to qualify for the credit, how much benefit you can receive, and how the credit interplays with other available credits, including the Paycheck Protection Program (PPP) and the Work Opportunity Tax Credit (WOTC). 

What we cover in this episode: 

  • 03:23 – Who is Randy Crabtree?
  • 06:42 – What is the Employee Retention Credit (ERC)?
  • 09:13 – Is your business eligible for the ERC?
  • 12:34 – ERC for the legal, restaurant and healthcare industries
  • 20:12 – Why is the ERC being refundable important?
  • 22:41 – How the ERC works
  • 33:21 – Special Offer from Tri-Merit

Who is Randy Crabtree? 

As the co-founder and partner of Tri-Merit Speciality Tax Professionals, our guest is uniquely qualified to speak about the ERC and help us better understand how it works. A widely followed author, lecturer and podcast host for the accounting profession, we are happy to welcome Randy Crabtree to the show! He holds a CPA license and he has been in public accounting for many years. He has been working on specialty taxes solely for almost 15 years, meaning he is very familiar with the complexities of ERC and other specialty tax situations. Tri-Merit has many resources you can take advantage of to learn more about the ERC. Visit to access on demand webinars, check if you’re eligible for the ERC, and receive a free, no risk, no obligation consultation as well.

Randy Crabtree

What is the Employee Retention Credit (ERC)?

The ERC was defined in the CARES Act in March of 2020, and it created another incentive for businesses to keep employees on their payroll. The ERC is a fully refundable tax credit for a percentage of the qualified wages you pay your employees. It’s applied to your federal payroll tax liability, and any excess credit amount is refundable. 

This tax credit applies to businesses whose operations have been impacted by government executive orders or are experiencing a remarkable decline in revenue. Also defined in the CARES Act at the same time was the PPP loan program. The CARES Act legislation originally stated that if you took a PPP loan, you could not take an employee retention credit – they were mutually exclusive and you could not take both.

A big change occurred with the passing of The Consolidated Appropriations Act, 2021 (CCA) in December 2020, by increasing the credit amount and allowing businesses to reap the benefits of both the ERC and the PPP program. This CCA also allows some changes to be retroactive to the passing of the CARES Act in March 2020. Then additional legislation passed in March 2021 – the American Rescue Plan of 2021 – and extends the credit to December 31, 2021. The ERC provides up to $5,000 per employee during 2020 and up to $7,000 per employee per quarter during 2021. That’s up to $33,000 per employee for qualifying businesses.

Randy stated, “This could be a very big benefit. So if there are any businesses out there that had looked at some of the rules and thought they didn’t qualify or had an advisor say they didn’t qualify, it’s definitely something that you want to go back and make sure of.” We do recommend speaking to an advisor, as the landscape keeps changing, and your situation and ability to take advantage of these changes can be a big benefit. 

Is your business eligible for the ERC?

Any business or tax-exempt organization operating in any calendar quarter of 2020 or 2021 can claim this credit, with the exception of governmental employers and self-employed individuals, and there are two ways to qualify for the ERC.

The first way is a safe harbor rule, and the rules do change from 2020 to 2021, but the bottom line is that you can qualify if you’ve experienced a significant decline in gross receipts during a calendar quarter in 2020 or 2021. You compare the gross receipt for a particular quarter in 2020 or 2021 to the same quarter in 2019. “In the year 2020, if I can show a 50% percent reduction in revenue in any quarter in 2020 compared to 2019, then I meet the safe harbor rule and I qualify for the employee retention credit. Then in 2021, it got even easier. If I show a 20% reduction in revenue in any quarter in 2021, compared again to 2019, I meet the safe harbor rule”, stated Randy.  

The second way to qualify is a bit more complex, with just a little more interpretation that needs to go into the determination if you qualify. This way per the IRS rule, is that you qualify if you’ve fully or partially suspended business operations for any calendar quarter in 2020 or 2021 due to governmental orders limiting commerce, travel, or group meetings due to COVID-19. This way does seem to cause confusion as it’s a little more vague than the first way. The math is easy to calculate in the first way, but you have to dig deeper and assess your business in this second way to see if you qualify. 

Many people may say that 100 percent of people were impacted because of the pandemic, but you really need to look at the actual restrictions, and if they really impacted your ability to do business. Randy stated, “There’s definitely more in there. So, I can say I was under restriction because there was a mask mandate, and everybody had to wear masks to come in. That didn’t really affect my business, that there was a mandate out there. There wasn’t a government order. But did that really reduce my ability to conduct my business? Probably not.”

ERC for the legal, restaurant and healthcare industries

Now, we asked Randy to provide a few examples for us in some service-based businesses to help illustrate the complexities of the ways to qualify. More specifically, we discuss the restaurant, legal and healthcare industries to give a few examples. Please note that every business is different and there could be a variety of qualifications even within these industries. 

In the case of the restaurant industry, when the government imposed restrictions stating no indoor dining was allowed, that definitely affected businesses. You couldn’t have indoor dining, but you could still do curbside pickup, and perhaps outdoor dining was still an option for your business, and maybe you could do delivery. The suspension rules or restrictions were never static, and perhaps changed over a period of time  from 25% capacity to 50%, then eventually back to 100% capacity, but you had to have your tables 6 feet apart. In all these cases, the restrictions effectively reduce your ability to have full capacity in your restaurant, and you can claim you were affected. The government restrictions don’t have to have been direct to affect your business though, and if you look at the imposed restrictions from the viewpoint of the supplier for that restaurant business, you can be affected indirectly and may qualify. 

The IRS has given out a few examples of things that qualify, but we encourage you to reach out to your advisor, or reach out to Tri-Merit so they can get the details of your specific business and really dig into your unique situation and see if you qualify for the ERC. 

Healthcare is also an industry that is interesting to look at as an example of the second way to qualify for the ERC because healthcare all around the country was affected in some way. A majority of them were affected by not being able to have elective procedures. “That was a number one thing that happened right off the bat”, stated Randy. When the restriction went into effect, many doctors were unable to perform surgeries, which meant, no knee replacements, no ligament replacements, etc…, and thus they were affected. This happened in a lot of cases throughout the medical, and dental industry as well, and a very large percentage of them can qualify and claim the ERC.

Many service-based businesses were affected as well. Randy stated, “I had an example of a client that is in the legal field, and I know they were impacted. Not necessarily from the gross receipts reduction and meeting that test, but they were definitely impacted by the courts being shut down.” The social distancing restrictions, and the ability to meet clients face to face, or in group settings, affected a lot of service-based businesses. The restriction rule is pretty broad, and the main point is to know that it is available to service-based businesses, and use this knowledge to have discussions with your advisor about your situation, what restrictions your business faced to see if you can qualify for the ERC. 

The ERC is refundable. Why is that important?

The fact that this credit is refundable is a big deal because refundable credits are very rare when it comes to taxes. You can use it to offset some taxes, or at least reduce your current tax bill, and “the value of the credit is the value of the check you get sent,” stated Randy. You receive the credit when you file your Form 941, or most likely an amended Form 941-X, for your payroll taxes. There are some stipulations on if you are a large or small employer, and the qualified wage percentages change from 2020 and 2021, but as long as you qualify, the calculation can be significant. Bottom line is you may actually get a refund! 

How the ERC works

For 2020, the Employee Retention Credit is 50% of all qualified wages you paid employees between March 12, 2020, and Dec. 31, 2020. It is limited to $10,000 in wages per employee for all quarters. Therefore, you could claim a maximum credit of $5,000 for each employee. 

For 2021, the credit is 70% of all qualified wages you pay employees from Jan. 1, 2021, through Dec. 31, 2021. It’s limited to $10,000 in wages per employee for any quarter. Therefore, you can claim $7,000 for each employee in every quarter. That means, the maximum credit is $28,000 per employee! Generally, qualified wages are compensation you pay to employees, including qualified health plan expenses. But, the definition also depends on your average number of full-time employees in 2019.  If your business wasn’t in existence in 2019, you’ll use the average number of full-time employees in 2020. 

One important thing to note is if those wages were used to get a forgivable PPP loan, you can not also use them for the employee retention credit. One of the largest questions we’ve had relates to smaller companies, companies that have a business owner or one or two employees, and if they also can qualify for the ERC. The IRS has put out some recent guidance in early August of 2021, and it comes down to percentage of ownership in the business, and if you have relatives that also are owners of the business. The rule is following the current tax codes, and in reality the majority owner of the business and family members can not be used in the calculation of the credit. There can be a lot of paperwork to do to claim the credit, such as amending payroll tax returns, and we really can’t stress this enough, but it’s best to talk to an advisor to make sure you are calculating the credits properly, and taking the ERC only if you qualify. 

The IRS does allow for amending payroll tax returns, but there is a statute of limitations on how far you can go back. Typically the limit is 3 years, but the IRS did announce they are extending this to 5 years, so it gives business enough time to go back and make corrections and make sure calculations are done correctly.

More about Tri-Merit

There is an abundance of information to absorb, and the bottom line is this ERC is available to help businesses. You just want to make sure that you’re consulting the right professionals to make sure that you’re covering your bases. Tri-Merit has many resources you can take advantage of to learn more. Visit to access on demand webinars, and you’ll actually find a link where you’re able to check if you’re eligible for the ERC and receive a free, no risk, no obligation consultation as well.


Today, we talked to Randy Crabtree of Tri-Merit Special Tax Professionals. We talked about various ways to qualify, provided industry examples, covered the amounts you may qualify for and why this all matters! There are many resources available to you to better understand the ever-changing landscape of taxes. Please take a moment to look at what may be available to help your business. 

If you’re working with a CPA or CFO, talk to them, and the bottom line is go look at this program and the ERC because it’s available to help you and your business.  We know business owners may not have the time to keep up to date on this topic, and spend their time running a business, but we want you to know we are here to help. We are spending a lot of time to stay up-to-date on all of this information, so you can come to us with questions and see if you qualify for the ERC. 

Links mentioned in this episode:



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#79: Navigation Legislation (Section 139, PTE, & Child Tax Credit)

#79: Navigation Legislation (Section 139, PTE, & Child Tax Credit)

There have been quite a few changes to tax laws and legislation over the past two years, and in order to help you stay up-to-date, we’re focusing this episode on a few important changes and highlighting the most recent ones that can impact you and your business. More specifically, we want to give you some high-level information on Section 139, PTE (Pass-Through Entity tax), and the child tax credit. We are speaking today with Katina Peters, Partner at PJS & Co. CPAs, and getting her valuable insights on these important legislative changes. Because these changes will impact everyone differently, we highly suggest speaking with your advisors to fully understand the full effects.

What we cover in this episode: 

  • 03:50 – Section 139
  • 10:31 – PTE (Pass-Through Entity Tax)
  • 14:37 – Child Tax Credit

Section 139

When we say Section 139, we are referring to the IRS Code Section 139, which is a section of the tax code that provides tax breaks for “qualified disaster relief payments,” including most recently payments on account of COVID-19, which was declared a federal disaster in the spring of 2020. Section 139 allows for employers to pay employees, including themselves, for reimbursement of reasonable and necessary personal and family expenses with regards to a qualified disaster. So this may differ from what most business owners are used to, where they typically pay only for valid expenses that are related to the business. This section allows for a much more broad definition of a business expense, and you just need to be able to support that it’s related to the qualified disaster. These payments are deductible by the company but do not have to be included in income or compensation to the individual receiving the funds.

There are some nuances that you should be aware of, but this is a way for the government to help businesses, and help their people without creating an additional tax burden for them. If you are working with a payroll company, you want to make sure the payments are coded correctly so they are not taxable to the recipient. But we actually recommend that you treat these payments like an expense reimbursement check since they are not payroll-related. 

COVID-19 Examples That Could be Included

A few quick examples of things that can be included in regards to the COVID-19 pandemic are doctor visit co-pays, nonprescription drugs, or critical care for COVID-19 treatment. Other expenses that can be incurred and are included are the cost of masks, hand sanitizer, disinfectant cleaning products, and grocery delivery services. In addition, if there were to be an employee or family member who passed away due to COVID-19, funeral expenses can be covered. Equipment or services needed to work remotely, such as computers, printers, and internet service can be included in these reimbursements, as well as new or increased expenses for children as a result of virtual learning requirements or school closings. As you can see, this is a pretty expansive list and can cover many different types of expenses. You’ll want to make sure again though, that you have the documentation you need to justify the reimbursements to your payees. The one thing you must not include in these payments are things that would normally be considered compensation, such as sick pay, vacation time, or anything payroll-related, etc… There should be a clear delineation between these types of reimbursements, as they are not included in the covered items for reimbursement under Section 139. 

Implement Best Practices

We encourage our clients to utilize some best practices when implementing this process, including implementing this prior to the end of the year and consulting with their tax preparer and/or financial advisor. You should adopt a formal plan, make sure you have a comprehensive way to track any reimbursements you plan to make (including receipts to validate the amounts), and you should also have, and keep on file, the acknowledgments of the person or persons receiving the payments and that they are reimbursements and not compensation.  

PTE (Pass-Through Entity Tax)

The next item we want to discuss is the PTE (Pass-Through Entity Tax). This applies to you if you’re in a pass-through entity, for example, a partnership where you collect a K-1 at the end of the year. Let’s go over a bit of background on this topic to make it a bit easier to understand. The Tax Cuts and Jobs Act (TCJA) that was passed in 2017 limits the amount of state and local taxes that individuals can deduct for federal income tax purposes to not more than $10,000 ($5000 in the case of a married individual filing a separate return). This creates quite a problem for individuals with pass-through entities in high taxing jurisdictions because they lost the ability to itemize and deduct large amounts of state taxes on their individual federal returns. People in these high taxation states may have a large state income tax liability. It could have been as high as $40,000 to $50,000 and having this deduction capped at $10,000 with the TCJA makes a big difference in tax liability. Since the passage of the TCJA, states have been working on a way to help their constituencies that have been affected by this, and many have been passing what now is being called the PTE tax.

What some states are doing is allowing their taxpayers with pass-through entities to elect to pay their tax that is related to their pass-through income at the corporate level rather than the individual level. This shift makes that tax a deductible business expense on the books and lowers the federal income pass-through. This also results in your K-1 having less income flowing through to you personally, so you are paying less personal tax.

This sounds simple in theory, but in practice, you have to remember that every state is different, and can have different rules surrounding this PTE tax. Some states are simpler than others, and some can be very complicated. For instance, there are situations where some states require all of the partners or all of the other shareholders in a pass-through entity to agree, but each partner has the opportunity to decide what is best for themselves and make their own elections. This can provide an advantageous tax planning tool, but it needs to be carefully considered.

It’s very important that you speak with your advisor and tax professional to help navigate this PTE tax, because at this time, the PTE tax is not a national tax. The current count is at 18 states that have passed legislation to this effect, but there are more states that have this legislation either drafted or pending. 

Child Tax Credit

This last topic we want to discuss today is the new Child Tax Credit payments program that kicked off in July 2020, and it has also had some confusion surrounding it when it was announced. This again will affect everyone differently because it’s not the same for everyone, and not everyone qualifies. We want to reiterate that you should speak to an advisor or your CPA to answer any direct questions on how this program may affect you and your family.

The IRS began disbursing payments (direct deposits and paper checks) to eligible families on July 15, 2021, under this program, and these are payments to eligible families with children ages 17 or younger. Basically, for every child under the age of 6, families will get up to $3,600 under the expansion, or $300 per month. For every child ages 6-17, the amount is $3,000, or $250 per month. These amounts are increases from your normal annual child tax credit on your tax return of $2,000 per year, and they are basically prepaying you for the child tax credit at this point.

The expansion boosts the credit from $2,000 to $3,600 for each child under the age of 6, or $3,000 for children from ages 6 – 17. This also makes the child tax credit (CTC) “refundable” – which means people can get it even if they don’t owe federal income tax, which increases the number of low-income households that qualify for the payments. 

In order to qualify and receive the full enhanced child tax credit, single taxpayers must earn less than $75,000 per year, and joint filers must earn less than $150,000 per year, with payments reduced by $50 for every $1,000 of income above those limits, and are phased out for single taxpayers earning $95,000 per year, and joint filers earning $170,000 per year. Most households that earn above these amounts per year will still qualify for the regular $2,000 per child tax credit. There of course are nuances, and exceptions, but these are the basic qualifications.

So what does this mean for you and your family? It can be confusing, and we encourage you to reach out to your financial advisor or CPA to get specific details for your situation. The biggest questions – or unknowns – we’ve heard from most people seem to center around how accepting these payments now will affect their year-end taxes. The IRS automatically opts you into this new program based on your prior year’s return, and you do have to opt out if you choose not to receive the prepayments. Depending on how many children you have within these ages, it may mean a sizable difference than what you are expecting as a refund, or as owing at the end of the year on your annual return. We’ve also heard people believing that these child tax credits are the same as the previously disbursed stimulus check, which is incorrect, and definitely not treated the same way at the end of the year.


Our goal in this episode was to give you some high level of information so you can be prepared to ask the right questions when you meet with your advisor. We want you to have the information for your personal situation and be armed with enough knowledge to avoid surprises come tax time. The latest legislative changes to Section 139, PTE and Child Tax Credits may be hard to navigate on your own, and we encourage you to reach out to your advisor or tax professional to help you with questions and concerns around these new programs and how they affect your personal situation. When legislative changes happen, we keep up to date here at PJS & Co CPAs and want you to feel free to reach out and contact us with your questions. If you found this episode helpful, please subscribe, rate and review.


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#78: Are You Referring to Me?

#78: Are You Referring to Me?

This episode of the Cultivating Business Growth Podcast is about referrals, and how they are one of the most economical ways to grow your business. How do you get referrals that will grow revenue? Why are they so effective in growing your business, and what do you need to do in your business to get the best results with referrals? The co-hosts for our discussion today are Megan Spicer, Marketing and Business Development Manager, and Katina Peters, Partner, at PJS & Co. CPAs. 

What we cover in this episode: 

      • 01:17 – Why are referrals so effective?
      • 07:35 – What do you do for referrals to work?
      • 14:38 – Make it easy for people to refer your company
      • 17:17 – Act on feedback from customers
      • 19:26 – Create opportunities for customers to advocate for you
      • 21:30 – Reciprocate prudently
      • 25:33 – Reward your referrers

Why are referrals so effective?

A business referral is when someone in your network recommends your business to a potential new customer. One of the most important reasons that you should be trying to get referrals is that those prospects are coming to you with more trust than any other lead source. Charlie Cook, a marketing expert, estimates in a 2018 Forbes article that cold calling is successful 2 percent of the time; qualified leads convert 20 percent of the time, he says, while referrals convert 50% of the time. Why are those stats so impactful? The answer is in how much effort and time it takes to convert your leads into paying customers. 

You may be curious about what the difference is in a “cold” vs. a “qualified” lead. In the sales process, a “cold” lead is someone who hasn’t heard of your company or services, but you may be reaching out to initiate a conversation. This could be through a phone call, email, regular mail, etc. You then have “warm” or “qualified” leads who have come to you and you have done the work to discuss services, began building a relationship and have gotten them ready to buy. A well-run and established business will also qualify that person or company to be sure they are the right fit for the services offered. Are they the right customer for you? Are they the type of customer you can work with? That qualified lead does take time and effort to convert, and they are more ready to buy at a 20 percent conversion rate than a cold call prospect at just 2 percent. The difference between a qualified lead prospect at 20 percent, vs. a referral prospect at 50 percent conversion rate can be a game changer for a business.  

When you are thinking about finding a reliable service or product, you may start with Google or Yelp and read reviews and testimonials. We spoke about the importance of reviews and testimonials in our recent podcast, Episode #76: Tapping into Testimonials. What those reviews and testimonials cannot provide for a prospect is the personal experience that a trusted colleague can provide via a referral. A referral from a source that has worked with you, a trusted past – or present – customer, means they’ve had a relationship with you and have the ability to judge your company in the same capacity that they are looking for as a prospect for your business. 

Another reason why referrals are so effective is that your circle grows exponentially every time you gain a new client. Referrals do not have to come from just your clients, they can come from anyone in your network. Perhaps an IT company you’ve worked with, or any provider that may service your industry. Your circle is not just your clients, it’s anyone that you’re working with providing related services. You are expanding your opportunities when you expand your circle, and that’s another reason that referrals are so important and can be crucial for the growth of your business.

What do you do for referrals to work?

In order for referrals to work for you, you really have to take a step back first and think about the experience that your clients or customers are having when they are working with you. You have to be delivering that high-level extraordinary service that’s worth talking about! You have to go above and beyond to make that experience worthwhile for them to go out of on a limb and say “Hey, I have this really great company for you”, because they have to have trust in you that you’re going to take care of their friend or colleague or whomever they are recommending. There is another statistic we want to share with you from that shows 61 percent of millennial consumers are willing to pay more for a guaranteed good experience. If you are really stepping up and putting everything you have into delivering that out of the ballpark experience for your clients, people are willing to pay extra to know that they’ll be taken care of and prioritize good service over pricing. That old adage applies where “you get what you pay for.”

You also have to invest in building relationships with your client in order for referrals to work for you. It all comes back to trust, and building a rapport with your clients and with the partners in your industry who will be going out of their way to refer you. Even if you have a one time service that you delivered to a client, you should engage with them on an ongoing basis and reach out to follow up and make sure their needs were met. Putting in that extra effort to let your clients know that you care about them goes a long way, like the personal touches of acknowledging big life events such as weddings, having a baby or birthdays, are truly appreciated. If you are hands off, this process will be more difficult, and you will need to step up your game a bit in order to develop better relationships.

Make it easy for people to refer your company

Giving people the experience that’s worth sharing is how you make it easy for people to refer your company. I think we’ve all had experiences on both sides of the spectrum as far as a fantastic experience that we want to tell everybody about, and then a terrible experience that we want to tell everybody about, and we get passionate on both sides of those spectrums. You have to tap into that passion that you felt when you’ve received extraordinary services and deliver something that would make it worth talking about for your clients.

Another thing that can make it easier and simpler for clients to refer you is to put together a template that busy clients can follow when speaking with potential prospects and referrals. All business owners are busy, and having something in hand that they can refer to can help them explain what your company does and remind them of the many things you may be able to do for a new client. They may be clients of one service you offer, but may not remember that you also have other service offerings that may be of interest to a prospective client. You can provide them with some of your marketing materials, or a brief paragraph that they can send out to colleagues they have in mind that could benefit from your services, and you can also share with them the types of clients that work best with your firm. 

Act on feedback from customers

If you have no sense of how your clients feel about your services, and you haven’t asked them in any way, shape or form, it’s probably not a good point to start a conversation and ask for referrals. You want to take care of your clients, and proactively ask them how they’re feeling about your services before you begin the process of asking for referrals. While you may have a sense of their satisfaction levels, do you have an official process to ask? A survey process is a great way to keep tabs on client feedback and address any potential issues as they arise. It’s also a great way to know who is over the moon happy with your services, so you can potentially follow up. Once you have that positive feedback, then you can ask for those valuable referrals.

Create opportunities for people to advocate for you

As we spoke about in or previous podcast Episode #76 on Tapping into Testimonials, some business owners don’t get testimonials, or referrals in this case, because they simply do not ask. The request for a referral from a client does not have to be a long drawn out conversation that you might dread or have to work yourself up in order to do, but can be easy and simple if you create the opportunity and simply have a quick conversation. 

Be careful to always be respectful of your clients if they prefer not to refer your services. You can’t take it personally, and perhaps they just don’t have the time. There’s a million reasons that they could be saying, no, it’s not necessarily a reflection on the services that you’re providing. Always be gracious and give them space if you receive a “no” when asking.

Reciprocate prudently

When you are building your circle of influence, and building relationships with related businesses, be sure to look for a win-win situation when it comes to referrals.  It’s important to come at this process from a place of service to your client, because you don’t want to just build relationships with dollar signs in your eyes. You don’t want to have the mindset of “I’m going to get so many referrals because this person is so connected”, but you have to think, “are they delivering a great service that would benefit my clients too”, because part of building those business relationships for referrals is to reciprocate. It’s got to be a give and take relationship that you’re building with people, and at the heart of it is your client who is ideally helped further by this network of people that you’re bringing together.

Try to keep a balance between the number of referrals you receive, vs the number you give. Be careful here though! You have to do your homework and find referral partners that offer services at the same level that you provide so you don’t end up with clients who may be disappointed, or potentially blame you for bad service. 

Reward your referrers

After you asked for a referral, and you’ve gone through this whole process of perhaps creating the template for them, and they’ve gone through all the work of reaching out to their network, and you finally get a referral from somebody, you don’t want to just ignore it. You want to reach out and thank them for their efforts on your behalf, and make them feel appreciated! The people who refer your business to others are the ones who have that trust with you, and you want to reward them. There are multiple ways to do that, and it should align with the type of business that you have and your shared values. 

For example, you could send out a card, or a gift, and  you could even do cash. Some people choose to institute an official customer referral program where the rewards are very clear. Everything’s detailed, everything’s outlined, but that obviously takes some work to put together. If you don’t want to go that route, you can kind of default back to a simpler incentive such as a gift card. Keep in mind the level of service that you’re offering when rewarding. If your service is a hundred dollars versus $10,000, that gift, and that thank you is going to change depending on that level of service. The main thing is to come from a place of gratitude, and thank them for referring your business.


When it comes to referrals and growing your business, it comes down to taking action and asking for trust to be placed in your business from clients whom you’ve built a relationship with. When the trust you’ve built with your clients is transferred to you via a referral, it’s critical that you use that trust placed in you wisely and do your best to deliver on your promises to the new client. There’s a lot of relationship building that has gone into getting you to that point. So don’t waste it. Use that trust wisely. Take action, keep doing the hard things that no one else is willing to do, because that’s going to take your business to the next level.

If you liked this topic and are interested in more ways you can grow your business, you can get our free webinar that walks you through the 4 Ways to Grow Your Business. We have included a worksheet with that as well so you can walk away with actionable ideas for your own business. 


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#77: The Power of Extraordinary Customer Service

#77: The Power of Extraordinary Customer Service

Today’s episode of Cultivating Business Growth is focused on the power of extraordinary customer service. It’s generally accepted in the business world that retaining current customers is a much more efficient way of growing profitability in your business than gaining new ones. The caveat is that they must be the right kind of customers. We will dive into how you can deliver extraordinary service and positively impact sales and customer retention by working to eliminate risk factors from your offerings.

What we cover in this episode: 

  • 01:54 – The cost of acquiring and keeping customers
  • 03:43 – How to create raving fans of your business
    • 04:27 – Exceed expectations
    • 08:53 – Know your target market
    • 11:39 – Know when to say “no”
  • 14:50 – Always make things right
  • 19:44 – Customer feedback
  • 25:24 – Can you guarantee that?

    The cost of acquiring and keeping customers

    There have been a variety of studies and research over the years that focus on the costs associated with customer retention vs. gaining new customers. When it comes to retention strategy, it is clear that it has a big impact on growth and profitability. Research from Forbes has shown that the cost can cost five times more to attract a new customer than it does to retain an existing customer. Research also noted that increasing customer retention rates by just 5% can increase profits by 25 to 95%. 

    Beyond the obvious benefits of delivering a service that exceeds expectations, you will see the effects ripple throughout your business. It is the easiest way to make a customer happy, which leads to referrals, repeated business, cross selling and upselling because once you’ve developed that trust with a customer, the rest falls in place.

    How to create raving fans of your business

    Providing excellent customer service should be a given but, unfortunately, it’s not always the case. Setting proper expectations, following through, and delivering what you promise during the sales process is a big deal for customers. Taking steps to do this intentionally with every transaction builds trust in your company and, ultimately, leads to raving fans.

    Exceed expectations

    You must give your clients something to talk about! In order to reach the status of a “raving fan” you really have to go above and beyond to reach an extraordinary level. But how do you do that? No company is perfect, but doing the best you possibly can at giving excellent service, and integrating that mindset into your culture and training across the organization will help you reach that next level. 

    Stellar communication practices, like answering questions in a timely manner, are really step one in delivering exceptional service. If you don’t have a decent response time or ignore communication best practices, you will struggle to create happy clients, let alone raving fans. People appreciate getting responses quickly, even if you may not have the right answer at the time, or have to let them know you’ll get back to them shortly. That communication is vital, and that communication needs to continue throughout the process in order to build rapport and nurture that trusted relationship with the client.

    Know your target market

    It’s important to define and understand your target market because it allows you to anticipate their needs and take a more proactive role in the service you provide. This proactive approach and intentional communication style can do wonders for your client experience. 

    If you do not make the effort to understand the needs and desires of your target market, it can lead you to bring in clients that you won’t serve well, and you set yourself up for failure. Getting the right clients from the start that fit your niche will allow your business to focus and it makes it easier to provide excellent service. Once you’ve found the right market, you have to lay the groundwork before you begin to provide excellent service. You will need to communicate with the client or customer and set the expectations of the services you are going to provide. 

    Know when to say “no”

    Almost every business owner has been in the situation where you just keep taking on the work, and then realize that your service may be declining because you don’t actually have the correct capacity to perform all that work. The customer always seems to suffer in those situations, and in order to provide excellent service, it’s important to shift your focus to giving quality service vs. quantity. 

    One thing that will allow you and your business to have a smooth onboarding for a client or customer is to ensure you actually have the capacity to take on new clients or customers beforehand. It’s not easy to say no to adding clients or new business, but it really needs to be within the capacity of your team to take on, otherwise your customer service will suffer. You want to be in a position to excel in your customer service and to respond to your clients, and that may mean hiring and training extra staff. Hiring extra staff also means you will need to be sure you are set on the backend of the engagement as well, and that you have the capacity and time to do quality control and be sure that the client is getting what they’ve been promised. 

    As a business owner, you have to be prepared to say “no” to additional clients or customers if adding them will negatively affect your customer service or company performance. Instilling a culture in your business where making sure the client is happy at all times, and having that core value resonate with your staff will nurture the qualities that your clients will appreciate and rave about.

    Alway make things right

    Despite how much you plan or prepare, or the quality controls you may have in place, there will be situations that come up where things do not go quite right, and no matter what you do, the client or customer is not going to be happy. It is really important to evaluate the situation and always try to make things right for the customer. In any case, you should always communicate with the client and have that discussion about expectations and how you can make it right for them. Clear and concise communication will allow you to handle those situations, and allow you to make it right, if possible.

    If you’ve made a mistake in the evaluation of a client and discover that the time needed to do the job for them will cost more than expected, you have to have that conversation and be upfront and realistic with them. Having that open communication with the client and being honest as to why the cost may be higher than they expected, will allow you to have integrity behind you, and will show you have the customer or clients best interests in mind. Some clients may think that you are trying to upsell, do more more work or change pricing, but if you communicate with them early, and come from a place of trying to service your clients properly and exceed their expectations, you can help them to understand you are trying to give them the service that they need.

    Doing everything you can to correct a mistake or misunderstanding is key to making a client happy, especially if the error was on your side. Crediting an amount that was overcharged, offering a free month of service, providing extra time over and above what they normally receive, are just some of the ways to go above and beyond to make things right. And of course, if you find the mistakes or errors on your end, putting the corrections in place so those errors do not happen in the future is paramount. When you do these things, clients will appreciate you and your business and understand when mistakes happen, and know it was unintentional and move forward.

    If something does come up, and you have a glitch and an unhappy client, you really want to avoid becoming that “horror” story that it seems everyone has experienced. You don’t want to be the company that people talk about in a negative way, where they spread the word to their friends and say “I’ll never shop there again” or “I’ll never eat there again.” No one is perfect, but being that “horror” story is something you want to avoid at all costs. 

    Customer feedback

    How do you measure your performance? Do you know how your customers truly feel about your services? If you are only basing this off of a gut feeling, your customers’ true sentiments may be unknown. Using a tool to measure customer feedback can help you create a tangible number that you can track and improve upon, if needed. Some customers may readily give you feedback directly and let you know exactly how you are doing with praise and kudos, or the opposite if you’ve not met their needs. But many clients need a prompt, like an official survey in order to voice their opinions or concerns. As a business owner, you want to be able to capture the whole picture and grasp where you really stand. Implementing a customer feedback program to track and capture that information will help you have a sense of where you stand, for everyone in your company.

    There are many different ways to get customer feedback, and one of those ways we’ve implemented here at PJS & Co CPAs is to create and send out customer surveys. You want to keep the survey brief. Ask one to three questions at most in order to get a sense of what they are thinking, and give them an opportunity to express themselves. A survey can highlight any red flags that may be occurring, and provide a chance to address any issues before they become bigger problems. Jamie stated “If you don’t ask, you’ll never know.” No matter if the feedback is positive or negative, opening that door to more communications and discussions with your customers and clients can help you provide that excellent customer service you are striving for. We use Customer Thermometer to embed the survey within monthly emails and make it very easy to provide feedback on a regular basis.

    An owner may have a good sense of how they are doing when they are the only one performing the service, but when their business scales and adds staff, they can lose a little bit of that connection with their clients. An owner should review the results of the feedback and look at it as an opportunity to grow and improve, if needed. Surveys should not be used to point fingers or reprimand your team if the feedback is not positive. Rather this should be used as an opportunity for more training or to improve systems to create the raving fan experience you are aiming to provide.

    Can you guarantee that?

    Establishing a guarantee for your clients or customers can easily be done if you are selling a product. If you have a product that isn’t functioning, you can replace that product. That’s a fairly straight forward guarantee. But what if you are in the service industry? It does become a bit more complicated to provide a guarantee. If your customer is unhappy with your services, they may not want the service provided a second time. Companies in the service industry can establish a money back guarantee to overcome those challenges.  

    Building up the client’s trust in you and your service from the beginning of your engagement is what will set you apart from other service providers. Service providers should always be communicating with their clients, especially in the beginning in order to build that trust. If they feel like they are being heard and that you’ve done everything you said you were going to do, that trust continues to build. Jaime stated “If you are really looking for long-term relationships, there’s nothing more important than building trust from day one.”

    Building a business is an evolving process, and if your goal is to ultimately continue to build your business, you have to pay attention to providing excellent customer service as you continue to grow. Laying the foundation and putting good processes to take care of clients is the start, but additionally, you should reassess from time to time to be sure that foundation does not develop any cracks or crumbles.


    As a business owner, providing excellent customer service is the key to success, but many companies struggle with going above and beyond and setting themselves apart from their competitors. Finding the right customers, exceeding their expectations, and showing you can deliver on your promises and make things right if things do not go as planned are the proven steps to extraordinary customer service. Making the hard decisions upfront to implement the items we discussed today, can really pay off for a business in the long run, and make your business thrive.

    Your goal should be to create amazing experiences so that every customer becomes a raving fan. Exceed their expectations in unexpected ways so they have something to talk about when they are asked about your business.

    Links mentioned in this episode:


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    #76: Tapping into Testimonials

    #76: Tapping into Testimonials

    Did you know that 72% of consumers say positive testimonials and reviews increase their trust in a business? Today we are talking about how to tap into and use testimonials to your benefit. Plus, we are giving you several tips to help you get persuasive testimonials and use them to convert prospects into buyers. We want to show the true impact on your business of getting, and tapping into, testimonials and reviews. We are speaking today with Jami Johnson, Partner at PJS & Co. CPAs, and Megan Spicer, our Marketing and Business Development Manager to discuss the importance of this topic.

    What we cover in this episode: 

    • 01:30 – The importance of testimonials
    • 05:56 – Tip #1: Go after testimonials
    • 11:50 – Tip #2: Don’t stop at one
    • 14:34 – Tip #3: Use testimonials with the right characteristics 
    • 20:06 – Tip #4: Do not “fake it ‘til you make it” 
    • 22:24 – Tip #5: Show them off

    The importance of testimonials

    Let’s start by sharing some of the statistics and research we’ve found that show the impact for a company by getting testimonials and reviews. Did you know 92% of customers read online reviews before buying? If you think about this first one, it seems pretty standard for consumers to do these days. Most people research a product or company before making a purchase and go straight to the reviews to get a good read.

    Additionally, 72% of consumers say positive testimonials and reviews increase their trust in a business. Think about your own behavior when considering a product or service. When searching on Amazon or Google, and you find what you’re looking for but it doesn’t have any reviews, you’ll keep looking until you find one that does. If researching a service business on Yelp or Google, you’ll look for positive reviews before calling them. It’s that non-biased opinion that is powerful and can spur people to action. 

    Lastly, 70% of people trust reviews and recommendations from strangers. Not everyone writes reviews for products or services, so when you read a review and know that someone took the time to write it, you feel like you are hearing from someone who feels very strongly, either good or bad. Having that honest review or testimonial of their experiences with a product or service can be very helpful for future customers when making their decision to purchase. 

    Tip #1: Go after testimonials

    The first tip is simple – just ask. Think of the old saying “Ask, and you shall receive.” Many business owners don’t have testimonials because they simply don’t ask for them. Business owners may think asking can be kind of awkward, or they feel it’s bragging, but when the request comes from a place of no pressure and authenticity, many customers are happy to help. When a client gives you good feedback over the phone or via email, don’t hesitate to ask them for a review or testimonial. It can be a simple and a no-pressure request such as “it would be really appreciated if you could hop on Goggle when you have a free moment (or wherever you are trying to get a review), and add a review for our product or service.” The timing of the request matters as well because you should be asking for that feedback while it’s fresh in the mind of the buyer. Think of requesting a review within a few days of a single transaction, rather than a few months from the time of service, when they may not remember exact details. There is a reason why Amazon sends those review emails in the next 24 hours after you’ve received your package; they want to have real-time feedback. 

    There are other ways you can encourage testimonials or reviews as well. Some companies perform surveys on a regular basis (monthly or quarterly) and you can use the comments section of those surveys to encourage testimonials. You can also incorporate a link for feedback into your company’s email signature lines. The more ways you can open up for customers to provide you with feedback, the more likely they will be willing to do so, but you have to ask. When a company makes it a priority to request feedback and gain insight on how the experience was for their customer, the customer will know that you are taking the initiative and are making them a priority. 

    Tip #2: Don’t stop at one

    Do not stop once you have one testimonial. Use that as leverage to spur you on to get more, especially if you have multiple lines of service. You will want to go after testimonials for each line and level of service because client experiences are going to differ across each of those service lines. Most businesses have multiple products or services they provide, and customers have different reasons for selecting various offerings. Potential clients will want to see if there is a common thread or something that will resonate with them when they read about your current clients’ experiences. That’s why it’s so beneficial for a company to have multiple testimonials, and get as many as they can to appeal to all different scenarios of your services. If you work with multiple industries, be sure to try and get testimonials from each niche in which you operate. 

    Tip #3: Use testimonials with the right characteristics

    Focus on benefits over features

    Our third tip is to use only testimonials with the right characteristics. And by that we mean the testimonials you receive that focus on the benefits rather than the features of your service or product. For example, a feature is “you handle my bookkeeping every month”, but the benefit is what you would want to use and focus on, such as “I don’t have to worry or stress over doing the bookkeeping every month. I have peace of mind that everything is done correctly and timely.” The benefits you want to highlight in your testimonials should also mirror the things you are promising to deliver for your clients and customers when selling to them. 

    Include hard facts, numbers, and percentages to highlight results 

    Including actual numbers, facts and figures in your testimonials can be a very powerful tool to highlight the results you have achieved with your current clients. Some clients may not be comfortable sharing specific details about revenue, but perhaps they can share that using your services has saved them x amount of money, or helped increase profits by x percentage. Using some hard numbers or statistics can really beef up your testimonials.

    Make it easy

    Your client may not know what to say when you ask them for a testimonial. If you don’t want to overwhelm your customer, you can always provide them with a few writing prompts for a testimonial. If you give them prompts and questions such as “what have we been able to help you achieve in your business?” or “what stress did we relieve by providing our services?”, you can get them to talk a little more about the benefits rather than the features of your services or product. 

    Get permission

    You will also want to be sure and get your client’s permission before sharing that testimonial with their full name, title and business name. An anonymous testimonial doesn’t build much trust and won’t be of use, so ask your client if they mind if you share their testimonial (with a name at the very least) on your website or marketing materials. You can even give a finalized version to them beforehand so they can see what it will look like when published. 

    Using headshots and names is always advised if possible, because it puts a real person behind the words. Taking it even a step further would be to get a video testimonial, or an audio testimonial, so take advantage of these mediums if your client is comfortable. Not all clients feel comfortable providing a video testimonial though, so be sure not to make it a high pressure situation for your client. It is best to be very clear about when and where and how you would use their testimonial so your clients understand the context and where they may see it in the future. The request has to come from a place of respect, and they need to trust you to use their words appropriately in a way to compliment your business with their testimonial.

    Tip #4: Do not “fake it ‘til you make it”

    The fourth tip is to remember that this is not a “fake it ‘til you make it” area of your business. Your testimonials have to be genuine and unfiltered. You can get something very eloquent and polished if you send it through multiple edits, but then it’s not a true testimonial anymore. You want it to sound real, so don’t ever edit or rewrite your testimonials. Now, if there is a grammatical or spelling error that needs to be corrected, you can send it back to the client and get approval on making those kinds of changes. Bottom line is that if you can’t use the testimonial as the client wrote it, don’t use it. Fake testimonials are easy to spot, and no one wants that. Everyone wants to know the truth, and know that your testimonials are authentic.

    Tip #5: Show them off

    Our fifth and final tip for you today is to show them off! Use them whenever possible! Use them in all your marketing materials, use them on your website, any ads that you may run, use them on your newsletters, brochures, packaging, etc… If you have a physical location with a waiting area, frame them and put them up there. You can even put them on the back of your business cards. Basically, you should be using them anywhere that you have clients who can visibly see them. If the testimonial is too long for a certain placement, for instance a social media post, you can use a portion of the testimonial and link to the full version on your website. There are many creative ways you can use testimonials, so take advantage of them! After all the hard work of asking and getting testimonials, don’t be timid about showing them off. 

    Many business owners also use them for motivation. To see those testimonials can confirm for them the how, why and what they are doing well in their businesses, and it can give them affirmation they need to keep moving forward and continue excelling. It can be very rewarding to receive positive feedback and testimonials, especially as an owner who may not always feel that their efforts are appreciated. Testimonials can encourage a business owner to build up, tweak, or re-evaluate things in their business. Perhaps they were planning on changing something, but now learn from testimonials that what they are currently doing is really helpful. Using the testimonials that you receive to reflect on your business and refine it, can only make your business better. 


    Business owners can tap into testimonials and use them to grow their businesses and convert prospects into buyers. Reviews and testimonials are prevalent in today’s business world, and the statistics show the proof of how important they are for a consumer to make a buying decision. Business owners should ask for reviews and testimonials, get as many as they can, a variety that covers all aspects of the services they offer, and use the ones that show the benefits of your business to their prospective clients. The testimonials should be genuine and unfiltered to show honesty and build trust in your business, as well as show them off and use them everywhere they can.

    If you enjoyed this topic today, and found it helpful, please subscribe, rate and review our Cultivating Business Growth podcast and check out the additional free resources and learning opportunities at your fingertips available on our site! 


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    #75: The Selling Your Business Series: Avoiding Common Pitfalls

    #75: The Selling Your Business Series: Avoiding Common Pitfalls

    Our goal in this three-part “Selling Your Business” series of the Cultivating Business Growth Podcast is to help business owners understand all the variables involved and show up better prepared when it comes to selling their businesses. In this third episode, we are going to talk about how to avoid common pitfalls that may come up during the process, as well as discuss some insights and real-world examples. We are speaking today with Jami Johnson, vCFO, Partner and Co-Founder at PJS & Co. CPAs, tapping into her expertise in the subject, and reviewing scenarios and case studies from the real world. 

    What we cover in this episode: 

    • 02:30 – Emotional fitness
    • 06:20 – Don’t try to sell your business alone! 
    • 12:41 – Real-world examples & implications
      • 14:00 – Company structure implications
      • 18:58 – Taxation implications
      • 24:28 – The changing times implications
      • 28:46 – Misconceptions in equity implications
    • 37:38 – Multiple bumps in the road

    Emotional fitness

    Per Jami “The number one underlying theme when you get into this process, whether you are a buyer or seller, is that the process is a marathon, not a sprint.” You should have the emotional fitness you need to go through this process because it can be very draining, and it is important to prepare yourself for any unexpected pitfalls or surprise circumstances that may arise. What can seem like a smooth process from the outside, can actually get messy in the real world. It was discussed in our first episode in the series that you have to prepare and ramp yourself up to go through this process.

    You don’t want to walk into a process like selling your business unprepared. You hold much more power when you have the information you need about what your business is worth, its value and a fair price. From an emotional fitness perspective, you need to be ready to hear from people who may have just taken a guess at the value of your company, not done their due diligence, and be ready for the highs and lows of that situation. There may be instances of highs where you’re thrilled and can’t believe someone is going to give you X amount for your business, and the lows of thinking “is this ever going to close?”, or “why aren’t they communicating?” Emotions tend to run high on both the buyer and seller’s sides. You should know your position in the market, and fully understand the implications of the sale before signing anything. The selling process can be draining, and there may be a large amount of back and forth, and quite a bit of waiting, so you should build your stamina to go the distance in order to have a strong position in negotiations. 

    As a seller, you need to understand why buyers may walk away, and if you have multiple buyers walking away, that could be a problematic sign. As a business owner, you’ve invested time, money, blood, sweat and tears, and you don’t want to settle, which is why getting a business valuation and setting clear and realistic expectations is crucial. You can put yourself in the best position possible with your emotional fitness if you have a strong foundation and know what your business is worth when navigating these types of negotiations and situations. 

    Don’t try to sell your business alone! 

    Having an excellent advisory team and good resources available during this process is very important because it will allow you to know where you stand at all times vs. trying to feel things out by yourself. A strategic advisor will be able to identify problems and give advice, offer corrections, and will help guide you as the owner in the right direction. It’s always better to know about errors or opportunities before you start the selling process than to find out later. We spoke at length about knowing what your business is worth in our second episode of this series and advise owners to have a trusted advisory team to get the correct and proper valuation of their company well before they begin the selling process. 

    An advisory team will be able to look at everything in your business from an unbiased perspective. They will look for improvements for the future operations of the business, improvements in processes, and changes that can increase the value of your company. An owner may need time to process and understand the proposed changes, and they may be hard to hear. If there are multiple owners in a business, an advisor can help the leadership team communicate and get on the same page to avoid any misunderstandings. Having cohesiveness amongst your leadership team and your owners is extremely important before entering into this process. You need to know where you stand, what you are willing to do, and it will save time on the backend. When you enter negotiations, it’s uncharted territory so any work you can do beforehand will serve you well.

    Real-world examples and implications

    Because the real world isn’t perfect, real-world situations can get messy. There is no cookie cutter template for the sale of a business, and what you may encounter during this process and during negotiations can be completely different than what you would expect. We want to give real-world scenarios where errors were made, how to potentially avoid those errors and minimize risks. 

    Company Structure Implications

    In one instance where PJS & Co CPAs was hired to consult, the selling process took two and a half years. Due to errors made prior to our firm’s involvement, there was a large amount of time and money spent by the seller, as well as the buyer, that could have been avoided. The PJS & Co CPAs team spent time doing due diligence and discovery, and getting familiar with the business itself. The owner was considering a stock sale vs. an asset sale, and it was discovered that the previous professional financial team had actually made an error from a tax perspective that had to be disclosed to the buyer in order to be fully transparent. All the calculations made by the PJS & Co CPAs advisory team were given to the buyer so they could review, but the buyer decided they wanted to have their own discovery done and brought in an external CPA firm to validate the calculations and represent them in the sale. 

    The expense of the negotiations quickly escalated in this case, with multiple lawyers and CPAs involved representing both sides of the transaction, all working to get the side they represented in the best possible position. It was an unexpected expense, and a really expensive one that could have been avoided if the original mistake had been avoided. The original financial team could have been more proactive in their tax approach and discussed company structure solutions that would have avoided these issues. It is best to work with professionals who are experienced, take a proactive approach, and establish checks and balances that can help catch errors like this before they become larger problems.

    Taxation Implications

    When we were brought in to evaluate another firm for a client, we first looked at the structuring of the business to determine if changes could be made prior to the sale to reduce the taxation implications. Since we were brought in later in the game in this instance, there was not enough time before the sale to make any changes. In this instance, if our team had been involved to provide proper advisory, we could have elected to split the company’s assets up, and then sold them as two different companies, saving the owner quite a bit of money from a taxation perspective throughout the years, (potentially hundreds of thousands of dollars) as well as increased the profits for the client at the time of the sale. 

    It is very important to be proactive regarding taxation implications and have a solid tax foundation when considering and planning to sell your business in the future. This is why we at PJS & Co CPAs always preach to begin planning early, and advise to start at least five years ahead of time. Changes in legislation and tax codes can happen at any time, and they can really affect your business. Owner’s need to ask themselves if their current CPA or financial team are keeping up with those changes, and what the standards are for their industry. If you are not having those conversations with your accountant or financial team, it can affect your business health and should be a red flag for owners that needs to be addressed.

    The changing times implications

    When you are looking at the companies that are currently selling, the majority were most likely formed over the last 20 to 30 years, say in the early nineties, and at that time there were only three options when it came to company structure; sole proprietorship, partnership, or a C-Corp. Many owners felt comfortable with those choices, especially the legal liability a C-corp provided. But as the two thousands rolled around, the limited liability company and partnership options came about and changed the game. Without the help of an experienced advisor, the options to make changes in their business and structure, changes which could minimize risks, were not implemented.  

    We had a client in the past where their CPA did not set up their structure properly, did not know that they qualified for a new option that would have given them the same veil of protection that they were currently structured under, and would have allowed for a better taxation liability position. Perhaps the CPA they were working with was not well-versed in the various options available and the changes that could have been made, and the owner did not want to change CPAs since they had built a trusted relationship over time. In this instance, as well as most, it’s critical for an owner to educate themselves and not be afraid to ask questions, because it could cost you thousands, or hundreds of thousands, of dollars.

    Misconceptions in equity implications

    It is very important to have a good, strong equity position when selling your business, but there is a common misconception that we have seen when owners try to build equity in their company. Jami shares that some business owners think that in order to sell it at a higher price, they should not take a distribution or pay themselves, and keep all the money in the business. This can turn out badly for an owner because it can impact the valuation of your company, cash flow and lending abilities, etc. 

    Once again, it’s important to have a strong advisory team in place to help navigate any of those negative implications. As we mentioned in our first podcast episode of the series, you have to be able to look at the sale from a buyer’s point of view, and if the buyer sees that the owner has not paid themselves very much over the past 20 years or so, it could be a red flag for the buyer. 

    The buyer won’t be very interested in any emotional attachment the seller has to a business they are interested in buying, and will not pay for sweat equity in building the business. The sacrifices you, as an owner, may have made in missing your child’s games every Saturday for the past 20 years, is not what will increase the value in your business. A buyer is not going to pay an owner for their hard work, but pay what the business is worth and the opportunity and the potential that they see in their future position as the owner. 

    Multiple bumps in the road

    The situations we discussed today are about what can happen when you have a bump in the road when selling your business, but what if you encounter multiple bumps in the road along the way? The answer actually comes down to having the solid foundation in your business that we’ve talked about throughout this three part episode series. Putting yourself in the best possible position for a sale and being able to get over multiple bumps that you may encounter includes knowing all the factors that will help minimize any risks. You should know your financial position is solid, have a good advisory team and know where you stand, know your market and the value of your business, be all on the same page if partners are involved, know your limitations, and be able to walk away from a deal if necessary. You will need this strong foundation to overcome bumps in the road. In order to put yourself in the best position for a positive outcome in the sale of your business, you have to know that the preparation process is part of the selling process.


    The return on investment that an owner can get in preparing for the unexpected that may come up in the sale of their business can be invaluable. Being prepared will put you in an offensive position during a sale, allow you to stand tall, minimize stress, and navigate any unanticipated situations that may arise. Remember that this process is a marathon, not a sprint, and think of the old Boy Scout motto of “Be Prepared.” If you are planning to go through this process in the future, know that we here at PJS & Co CPAs are available for a free discovery call, and you can speak to our virtual CFOs and get some real-world advice.


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    #74: The Selling Your Business Series: What is My Business Worth?

    #74: The Selling Your Business Series: What is My Business Worth?

    What is my business worth? In this episode we are answering that question, as we want to help business owners understand more about the process of business valuations, understand that there are many variables involved, and what you can do to be proactive about your business value. This is a deep dive into business valuations, including the types of reports available, methods used, and factors that impact the value of your business.


    What we cover in this episode: 

        • 05:03 – When would someone need a business valuation?
        • 12:50 – Types of valuation reports
        • 20:04 – Methods used for valuations
        • 29:25 – Factors that impact the value of a business
        • 36:49 – The levels of value
        • 39:40 – When do you need to start thinking about this if the exit plan is to sell?

    Introduction to Zach Sharkey

    This is the second episode in a series of three, featuring Katina Peters, partner in our firm PJS & Co. CPAs, and Zach Sharkey, the founder of Gateway Valuation Consulting, LLC, a valuation and exit planning firm. Zach is an expert on this topic and has 20 years of experience in valuation, corporate finance and M&A, as well as being only one of three CPA’s in the State of Missouri to hold the globally coveted CFA charter and the ABV (accredited in business valuation) designation.

    When would someone need a business valuation?

    There are many reasons why you would need a business valuation, but for the purposes of this episode, we will consider the most common scenarios, and look at them from the perspective of a closely held business rather than a large publicly traded firm. For context, we will be discussing valuations that may be necessary for anything from a “mom & pop” small business, to anything closely held under one hundred million in revenue.

    Buy / Sell Agreement

    One of the most common reasons why you would need a business valuation in place would be prior to executing a buy/sell agreement in the event that some sort of trigger event occurs, such as buying a company, a change in partnerships, or adding onto an existing platform. A buy/sell agreement is something that you enter into with the partners or shareholders of your small business, and having a valuation in place establishes the value of a business in case one of the partners were to pass away or become disabled, for example. There could be multiple partners involved, spouses, insurance implications, and knowing what the value is that would be paid out to an estate in these cases minimizes the stress and gives understanding up front what to expect. You can see how critical it is to know what the value or worth is of the interest in the business when executing any buy/sell agreements.

    Less Common Uses

    A few less common reasons for a valuation would be to put an agreement in place in order to retain a key employee, such as a stock options agreement or a value performance-based compensation agreement. Another occasion that would require a need for a valuation would be for gifting purposes for gift taxes. If someone is wishing to lower their taxable estate, they can give a portion of their interests over time as gifts, and utilize valuation discounts and exemptions in the tax laws. The tax laws can change in the near future, and given the current tax climate with the new federal administration, there may be a reduction in the overall estate limits and state tax laws.  

    The bottom line is that having a business valuation in place helps a business owner look at the long-term plan for their business, helps plan for any exit strategies, and gives an important baseline in case of an unexpected event.  

    Types of valuation reports

    Many people do not know that there are several different types of business valuation reports, and they vary depending on the valuation organization. There are two non-profit valuation organizations within the United States, the ASA ( American Society of Appraisers) and the AICPA (American Institute of Certified Public Accountants) that regulate the standards of the reports. There are three different types of reports, which we will detail below. 

    Full Narrative Report

    The most detailed level of report is called the full narrative report, and is the most costly. This type is needed to support a tax return going to the IRS, or for the Department of Labor. They read similar to a thesis, and they are very in depth and lengthy (up to 100 pages long) and they explain and support every material input or assumption used in the valuation.

    Evaluation, or Summary, Report

    The other two are more common and depending on the situation, and used by most firms. The second is the evaluation report, or a summary report. It’s a less expensive alternative to the full narrative report, and can provide a better cost benefit to business owners. Instead of 100 pages long, this report may be more like 50 pages, and while they may not have all the assumptions and everything detailed out, you still essentially get the same result.

    Calculation of Value Report

    The third is called a calculation of value report, and is the least expensive type of valuation. They are similar to an audit report or compiled financial statement report that a CPA would provide. However, this type of report does give the appraiser more leeway to use management’s assumptions because they are an agreed upon procedures type of project. It is a very popular alternative because there is a way to take the modeling of a full narrative report and put it into the calculation of value report, and strip out what is not needed by most owners, and come back with a pretty reliable valuation number, for a lot less money. If a business owner is doing general planning, we recommend this type of report. If there are situations where you would need to highly defend the valuation number and all the assumptions underlying it, then we would recommend the full narrative report. 

    Knowing the differences in reports available allows the owner to ask questions and make the right decision on what they might need depending on their individual circumstances. Also, having a baseline report early on, and then updating that report regularly every few years as a company grows, will help an owner start working towards the number they are looking for in their business value.

    Methods used for valuations

    There are three types of approaches that are used, and under each approach are different methods. But what impacts the method used for the calculations? And is there one method that is better than the other? 

    Income Approach

    The first approach is an income approach, where you are taking a numerator or some type of income. Many use the simple method of free cash flow divided by a denominator, which gives you the cost of capital. It’s used in most industries, and when valuing a company, it’s really the basic building blocks of valuing a company, which is what it’s earning now and what’s the risk of earning what you expect to earn going forward. There is also the discounting it back method, and the first part where you project your P&L, and then calculate your free cash flow. It’s not our recommended method, since free cash flow is the cash after accounting for your depreciation, and it’s a non-cash charge. But you actually deduct your cash charges, which are requiring networking capital, which everyone has, and capital expenditures. The next method that is used frequently is the capitalization of earnings method. We do not use this method, nor recommend it. What this method does is only take a single numerator and a single denominator. This method assumes that free cash flow is a solid number in terms of what can be expected with growth in the future, and as you know, that type of method had to be thrown out this past year due to Covid. There are just too many variables and flaws with the thinking that the same denominator would remain the same throughout the projection period.

    Asset Approach

    The second approach is the asset approach, and this one is pretty simple. This approach is where you take the current market value of the assets, then subtract out any debt that the company has on their books. This is also called the net asset value method.  

    Market Approach

    The third approach is the market approach, and there are two commonly used methods that fall under this approach. The first is the guideline public company method, where you are looking at publicly traded companies, and taking their pricing multiples. The other one is the guideline company transaction method, and in this method you are using databases that provide transaction information from privately held firms. This method has been a very good one to use, up until Covid hit in March of 2020, because you can’t use pre-covid data for post-covid assumptions. 

    Because you are depending on the unique situation and variables of a company, there really isn’t a best method to use across the board. Using similar situations and comparables, just as you would when selling a home in a certain location, puts you in the best position to best calculate the different values of a company.  

    Factors that impact the value of a business

    Free Cash Flow 

    When you begin talking about a company’s value or what its assets are worth, you have to look at what it earns on a risk-adjusted basis. The simplest factor that impacts its value is free cash flow and obviously the bottom line. Most CPAs and advisors can speak to the income side and advise if you are performing well. We won’t focus too much time on this, but focus on the other factors that impact the value of a business.

    Firm-Specific Risk

    Zach shared  “A big factor that doesn’t seem to get enough focus from owners is the cost of capital, or what we call the unsystematic risk or a firm-specific risk.” For example, if you are looking to sell your business in the next ten years, it’s best to have the next line of successors in place as soon as possible. We’ve worked with many firms in the past where the lack of management depth has burned them badly when an unexpected event occurs. You have to consider the risk of losing a key person and the knowledge and relationships they bring to the business. It can obviously be devastating for a firm.

    Customer Concentration

    Customer concentration is another risk factor for closely held businesses. If 70% to 80% of your revenues come from just two or three customers, the risk of losing just one can be devastating. Owners should look to diversify to lower the risk, and in turn will improve the company’s value.

    Changes in Your Industry or Economy

    Changes in your industry is a risk factor to be considered as well. Changes in the economic climate of your industry can affect companies adversely if owners are not prepared. We’ve seen changes that decimated the taxi cab industry due to the rise of rideshare companies, and what will happen to the companies that work with combustion engines as electric vehicles take over in the next ten years? As a business owner, you can’t ignore impending changes. You have to be able to look down the horizon and be a visionary in your industry in order to have a long term strategic plan and make changes when necessary in order to succeed and grow. 

    The levels of value

    When we speak about the levels of value in a company, we think of it from a place of ownership control, or current owners with controlling interests versus minority interests. If you are buying into a company, you must look at the level of ownership you will be gaining. If you will own at a minority interest level, where you can’t make any operational decisions at that company, you should not be paying a premium. This is similar to the example where you purchase stock in a company, and you become a minority shareholder. If you wanted to buy that company in order to gain that controlling interest, you would have to pay a premium to do so. This is called a control premium, and on the other hand, if you’re purchasing as a minority shareholder that would be called a lack of control or minority discount.

    Per Zach, “Most business owners look at everything from a pro-rata (control) perspective , and owners buying into a company at a minority interest should be paying a minority price, not a pro-rata price, and often pay too much. There should be what we call a valuation discount, or a lack of control discount to compensate a new owner buying into a company from an economic standpoint. Buyers who have the knowledge of what a fair price to pay is in order to get interest in a company are much better off when walking into a purchase situation – and they are not walking in blindly.”

    When do you need to start thinking about this if the exit plan is to sell?

    The answer in this case goes back to the standard “it depends” response. If you are just starting out with your business, the full narrative valuation probably isn’t your best bet. You will want something that gives you the benchmark you need to measure against in the future. Zach suggests a calculation of value report is a great place to start. Since many owners only have a vague idea of what their business is worth, the cost of having that real number in hand going forward is good as gold for planning purposes, and knowing what to expect. It’s good practice to think about your business as if you are going to be selling tomorrow, and operate within that mindset.

    It is a good, sobering practice to have a valuation done for your business periodically, and having that information gives you the knowledge you need to make improvements, minimize risks, and build value. You also never know when a buy-sell agreement might be triggered with an unexpected event. 

    Zach stated “We do see some intermediators or business brokers come in to assist a client or owner with selling their business and sign contracts with owners to do so for a percentage or flat fee, and they usually offer a free business valuation when you sign that contract. We advise that you should always be aware that you get what you pay for, and many of these brokers use the wrong valuation method for these free valuations, and do not take the company’s specific attributes and situations into account.” 

    Zach also shared “It can take a long time to sell a business, and mostly because the business is overpriced. The Exit Planning Institute stated recently that 86% of companies never sell in these situations, and from our experience that is right in line with what we’ve seen. When an owner signs a business broker contract, there is almost always a provision called a tail provision where if you fire your broker, and you then sell the company yourself from within a year or two down the road, you still then owe the broker that full brokerage fee.” 


    We’ve learned today that answering the question of “What’s my Business Worth?” is a bit more complex than it seems. A business valuation should be looked at as an invaluable tool for owners as they plan for exiting or selling, and a way of proving the value of their business to whomever may need to know. Thinking about all of the variables that go into the valuation of a business, being proactive in planning and making improvements where and when needed will eliminate the guesswork and unexpected surprises when changes happen or you are selling your business.


    If you are interested in getting more information on the topic we discussed today and contacting Zach Sharkey for a business valuation, you can go to to get all his contact information.

    Links mentioned in this episode:


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    #73: The Selling Your Business Series: Business Valuations, Structures & Taxes, Oh My

    #73: The Selling Your Business Series: Business Valuations, Structures & Taxes, Oh My

    How do you know what your business is worth? Most owners struggle with answering that question, but for a business owner, knowing the true measurement of your business’ value is a critical step before planning to sell that business. Today’s podcast is the first in a three part series that will discuss the valuation of your business and the variables involved in the process of selling your business. We’ll be providing an overview today on the subject of how and when to plan ahead to sell your business in order to help owners be proactive throughout the process. Our goal is to help you learn about when to plan to sell your business and understand the process of business valuation before making that big decision to sell. 

    What we cover in this episode: 

    • 02:31 – Defining growth and value
    • 06:46 – How soon to start planning the sale
    • 07:30 – The importance of sustainability
    • 09:48 – How late is too late?
    • 11:21 – Structure of the sale
    • 18:42 – Tax considerations
    • 20:24 – What is the buyer going to look for in your business?
    • 23:26 – What type of business valuation do you need?
    • 25:18 – Bringing in professionals to minimize risks

      Defining growth and value

      In order to do a deep dive into this topic in later episodes, we need to lay the groundwork and start with the definition of growth and value in the business world. So, what does growth actually mean? Is it growth in revenue, growth in personnel, or adding locations? All of those things are related, but the true measurement of business growth is the value of the business itself. Now, what is value? The value of a business ultimately is what a willing buyer will pay a willing seller. Now… What exactly does that mean? 

      If you can put yourself in the position of the buyer, the definitions may become a bit clearer to see. As a buyer, what would you be looking for in a business you want to purchase? One way to gain perspective of a buyer is to look at the stock market. Larger businesses trade on the stock market, but smaller businesses don’t have that readily available. They are similar, however, from the outward perspective in the idea of stock prices. The price of a stock shows the value of that business, and takes into consideration the many different factors that affect the value.


      How soon to start planning the sale

      We do get questions from clients from time to time regarding how soon is too soon to start planning the sale of their business. The answer really does revolve around what your ultimate goals are for yourself as an owner. Whether you are just a few years into your business, or on the tail end, and if your ultimate goal is to maximize the profits from the sale of your business in the future, then the answer may seem a little cliche, but it’s really never too soon to start planning. We typically say you should be thinking about this at least five years in advance, which we will discuss in the next section, but you can really start planning as soon as you start your business. There are many factors to consider and it’s a marathon, not a sprint, to create a business that has the sustainability and value you will want in order to sell. 

      The importance of sustainability

      As you grow your business, you will want to make it sustainable. You’ll want to keep a pulse on the respective value of your business because that is what truly shows how you’re growing, if you are growing well, and if you are effectively adding value to your business. Some business owners do think they have a very valuable business if their business is lucrative, but that’s not the only thing that generates value. You will of course want to make good revenues and profits, but you also have to build a business that someone can step into and have the same continuity to give them a return on their investment. You should have good systems and structures in place so that you’re not required to be there to have sustainable growth. A business that has these things in place, and can continue growing without you as the owner, can make a buyer very interested and willing to pay top dollar.

      How late is too late?

      If you want to sell your business next month, it’s probably not the best time to start thinking about these things, right? We certainly don’t think so! You don’t want to end up in a fire sale situation. The more desperate you are to sell, the lower the price you’re going to get, and you won’t have the time to properly prepare.

      Our advice to business owners is that you want to start planning at least five years in advance before you sell, if possible. Planning this far in advance can allow you the time you need to get a business valuation done, address any weaknesses, and explore areas that could build more value. Most buyers will want to see at least five years of financial statements and tax return history when deciding on a business purchase. Having a stable financial history in place, establishing key personnel in positions for several years, and showing that stability can put a business owner in the best possible position to sell for the best price. Owner’s should also keep in mind that this process doesn’t happen overnight. A private business sale is not like trading in the stock market, and the sale process can take up to a year or two, and perhaps longer.

      Structure of the sale

      There are many considerations when selling your business. Looking at current trends in your industry and marketplace may help you decide how you structure the sale of your business.  There are some important points to plan for when structuring the sale, so you want to be sure you are ahead of the curve when you begin planning. You should be thinking about the basics first, such as liability issues, complexity, and tax implications. There are typically two structures when selling a business, a stock sale or an asset sale. 

      Stock Sale

      The stock sale is just as it sounds and is similar to the version of a stock market sale where you provide a piece of paper to the buyer for the set price, and they take ownership of the same business, same business name, same corporation, LLC, or other structure. It’s a straightforward and simple process. Even though it’s a simpler process, many buyers don’t like to use this type of structure because when they purchase the stock, they also buy every liability and the potential risk associated. This means that if someone in your customer base decides they want to sue for an issue that happened prior to the sale of the business, the new owner would be liable. 

      Asset Sale

      An asset sale is where you take all of the assets in the business and you sell them to the new buyer. The buyer will most likely set up a new company, or absorb into a current business to receive the assets. This option is a little more complex because every asset within a business has different tax ramifications, and you will want to work with a tax professional to understand what those ramifications are before coming to an agreement. The business price also needs to be allocated to every asset, and the buyer and seller have to agree on that allocation and treat it the same way. This typically becomes a negotiation process, because a better tax situation for you, as the seller, is usually worse for the buyer. This process can be difficult and time consuming.

      When you reach a sales agreement with the new buyer, you may structure the sale to have the payment up front for the business, or it can be an owner carry which pays the seller over time. We advise our clients to be cautious with the owner carry situation because you’re no longer in control of the company and how it performs, and you may or may not get paid. You can set up vesting schedules so that if they default you can take ownership of the company back, or even have it structured so that the buyer stays on for a period of transition time from one owner to the next. Just remember there are options, and understand the risks that may come with all scenarios.


      Tax considerations

      The number one thing you want to take out of this is to UNDERSTAND THE IMPACT. This topic can be very stressful for many business owners, so planning ahead and being aware of what to expect is key when selling your business. You will want to know upfront when you set that sales price what the tax implications will be and what you’re ultimately going to get in your pocket.

      We strongly advise that you should work with a professional, no matter the structure of the sale, stock sale or asset sale, so that you can be as informed as possible and have no surprises when it comes to what you will be adding to your retirement savings or nest egg. We plan on getting into some specifics in our upcoming podcast, the third in this series, and dive deeper into a case study on this topic in the very near future.

      What is the buyer going to look for in your business?

      Normally, a buyer will want to look at three to five years of information before a decision to make an offer to purchase. They will be looking at your financial statements, balance sheet, profit and loss, and cash flow statements to gage the value and stability of the company. The buyer may want to have an independent professional come in and do an analysis and business valuation. They will look at your infrastructure, client list, your team, and gage how sustainable the business is without you. 

      You should also be sure to have a non-disclosure agreement in place before you give out any information to a third party, in order to prevent them from sharing this sensitive information with anyone. The information that you will be sharing is extensive and protecting yourself and your business is critical. Having that signed non-disclosure agreement in place before you begin is an important step not to ignore. 

      What type of business valuation do you need?

      We are getting into the details of business valuations in our next episode, the second in this series of three, but we want to establish that there are different types of valuations. They vary in pricing depending on complexity. Planning ahead and budgeting for this expense when selling your business helps you know what to expect.

      A business valuation provided by an expert can vary widely in cost, but depends on your needs, size and complexity of your business. The cost for an informal report can cost a few thousand dollars and can be useful in planning. On the other hand, a full, formal report that can stand up in court and details everything about your business can land somewhere around $20k.

      Bringing in professionals to minimize risks

      Seeking assistance during the sales process seems like a no brainer, but what type of expert professionals do you need to engage to minimize your risks? A CPA can obviously assist with the tax implications of the sale, but you will also need a good attorney. Your attorney will be assisting with the non-disclosure agreement, and will likely work with your team to help determine what the best outcome is for you. Ideally, you’ll want to find someone who specializes in contractual law and has experience in your industry. 

      A good attorney can look at your business holistically, review all of the agreements you will need, and work as a team with your other trusted advisors. Having expert professionals collaborate and coordinate together is ideal for you as the business owner, and will put you in the best position for a positive experience in the sale of your business. Remember that PJS & Co. CPAs has a free discovery call that you can hop on at any time if you have any questions, or you can shoot us an email at


      Planning ahead to sell your business is an important part of the selling process, and getting started sooner rather than later will put a business owner in the best possible position for the best possible outcome. You should understand the full implications of the sale before signing anything, or putting your business on the market, and it is imperative in order for an owner to walk away with what they need when selling their business. 

      In this episode, we cover the basics and some terminology you will see in the process of selling your business. This is to lay the groundwork for the next two episodes in this series, focused on business valuations and business sales.

      Links mentioned in this episode:


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      adp payroll services
      #72: How to Hire a CFO

      #72: How to Hire a CFO

      If your business is growing and the crucial, timely financial information you need for strategic decisions isn’t prepared or available, it’s likely time to hire a CFO. But how do you hire a CFO and what are your options? You may not think you can afford to hire a CFO if your business isn’t bringing in multi millions in revenue, but there are many options available to get the expertise you need. A virtual CFO can help you grow your company faster and smarter, and doesn’t have to break the bank. In this episode we are talking about how to make that happen today with Jaime Staley, CPA, MSA, vCFO and co-founder of PJS & Co. CPAs. She is sharing some guidance and tips on how to hire a CFO or a virtual CFO for your business.

      What we cover in this episode: 

      • 02:53 – What can a CFO do for your business?
      • 04:09 – What level of financial services do you need for your business?
      • 11:55 – What are my options in hiring a financial expert?
      • 24.51 – Where do I find a vCFO that will fit my needs?
        hire a cfo


        The Top 10 Questions You Should Ask Before You Hire a CFO

        This free download will help you ask the right questions to help you find a CFO that fits best for you and your business. 

        Feel free to use this guide during your interview process and pull the questions that are most relevant to your situation. Find the best fit and don’t spend more than you have to on service you don’t need! 

        What can a CFO do for your business?

        We spoke on our last episode about what a CFO is, the difference between a CFO and a virtual CFO, what a virtual CFO does, and all the initial questions a company should review when deciding if, and / or when, it’s time to bring a financial expert onto your leadership team. The previous podcast episode goes into all the details on the differences, how a CFO works with your company, and when it is time to hire, as well as team dynamics. It’s an insightful listen with great tips, and if you’d like to listen to the full episode, check out Episode #71 of The Cultivating Business Growth Podcast.

        What level of financial services do you need for your business?

        So now that you’ve decided that hiring and bringing a financial expert into your leadership team makes sense for your business, where do you start? There are a few questions you should ask yourself to gain clarity in deciding what is right for your business. Start with asking yourself these questions: 

        1. Why are we hiring? You should think about what you really need right now. Think about what will help your day-to-day needs, what will help balance your life and your business needs and what will provide you with the guidance to make the financial side of your business better.
        2. What need am I trying to fill? Do I need a full-time, 40 hour per week person, or do I need a fraction of that? 
        3. What anxiety am I trying to relieve? Understanding what your main pain point is will help guide you to the answer for your business. Do I need someone to manage people who are already doing the basic accounting work and need them to be there constantly to answer questions, or do I need some staff to get the financials in order first? 

        The short and easy answer to all of these questions is – it all depends on your size and individual circumstances with your business. Are you at the level that you need basic services of a bookkeeper or an accountant to nail down the processes first, or do you have the correct processes in place to now move toward an overseer role who will guide your growth?

        What are my options in hiring a financial expert?

        Full-time, in-house CFO

        Some business owners are at that level of their business where they have the budget and can afford a full-time CFO. Revenues must be fairly substantial to justify the budget for an average CFO cost of $200,000/year. Many smaller businesses are not ready for that cost and investment just yet. It’s easy to get a case of sticker shock when doing the research and write off the option of hiring a CFO due to budget concerns. 

        Virtual CFO or Fractional CFO

        It’s important to know that there are flexible options for a smaller company who still have the need for a CFO, but may not yet have the budget to support a full-time hire. If you need a higher level financial expert, but have found that you may not need one full-time, a virtual or fractional CFO could be an option for you. Depending on your size, needs, and growth plans, the cost associated is a fraction of the cost of an in-house CFO. By outsourcing, you can still get the guidance you need without blowing your budget. On average, virtual CFO services can start at $60,000/year depending on your size and needs.


        Smaller business owners might want to explore the option of hiring a Controller first to manage staff you may already have doing your bookkeeping and accounting tasks. A Controller would act as the head of your finance department, and perform a variety of tasks, like ensuring you’re getting paid timely, paying invoices on time, and working toward improving efficiencies in your accounting department. Improving the functioning of your finance department would be the goal for a Controller, but they do not get into the higher level strategic planning and business decisions for your business. The national average salary for an in-house Controller starts at $100,000/year. Controller services can be outsourced as well, and can start around $36,000/year

        Start with what you need and work your way up

        Starting with a CFO when you may actually need a Controller can add unnecessary cost. A CFO may also have to spend their time on clean up work or projects to fix and update financials if they haven’t been properly managed. 

        Think of the process as stepping stones, and each additional position in your finance department builds the financial foundation for your business. Having a great bookkeeper or accountant gets the basics done for you, but how do you know if those tasks are being done correctly? A Controller will be proactive and can bring a level of service that will confirm that those tasks are being done correctly. Once you have your finances in order and need to have the financials reviewed from a higher, strategic level, then a part-time CFO or a virtual CFO makes sense to bring onboard to then get the financial expertise that you need to either correct problems or push further growth. Adding a CFO, or vCFO, will also give you multiple checks and balances. They will look at your business from a higher level, see things that you may miss, and ask those tougher questions to make sure the finances are accurate, and provide guidance to you as the owner for the future. Once your business grows to a certain level, then it’s time to bring on a full-time, in house CFO. 

        Basically, the foundation needs to be in place before CFO or virtual CFO level services will be of the most benefit to you as an owner. The clarity you will get in seriously considering what you really need when it comes to financial help for your business is well worth the time. Ask the questions you need to determine what the best option is for you and your business. 

        Where do I find a CFO that will fit my needs?

        When you’ve made your decision to hire, and you’ve gained the clarity to know what you need, now is the time to find the right fit for your company. But where do you find the financial expert you need? Hiring the right person is never easy, and it may take a bit of time to find a good fit. 

        You should start with the typical first steps, such as posting your opening to job boards to elicit responses, but there are a few additional things you can do as well. Start speaking with colleagues, friends, and family to let them know what you are looking for, and network with your trusted contacts to see if they can provide you with a referral. Speak with a business owner in a similar business that is currently working with a CFO or financial expert to get recommendations and advice. Explore the free consultation options provided by many virtual CFO firms to see if you can make a connection. If you currently use a CPA firm for your taxes, perhaps they also offer the kind of financial services you need, or may know of a firm that offers them that they can introduce you to and provide a referral. And searching online for different services once you know what your needs are can be less of a daunting task. 

        One benefit of finding a good virtual CFO firm is that they usually have a team of people that can help you. They may have bookkeepers and accountants that you may need, and they also will have controllers and CFOs, so they can support you as you push your business forward and experience growth. Working with a virtual CFO firm can provide financial solutions to a business no matter what level of expertise is needed. You can contact PJS & Co. CPAs at any time to book a free discovery call


        If your business is growing and the crucial, timely financial information you need for strategic decisions isn’t prepared or available, it’s likely time to hire a CFO. Understanding where you are with your business is paramount before you decide to bring in a financial expert. There are options and flexibility in deciding what kind of help you need, and working with experts who can help you scale does not have to be cost prohibitive. The option to hire a part-time, virtual CFO may be just the answer your company needs without breaking the budget. We discuss various options available to you to bring the financial leadership to your company that will help you make the strategic decisions to help propel your business forward to the next level.


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        #71: What is a Virtual CFO?

        #71: What is a Virtual CFO?

        Growing your company’s revenue is a goal for almost every business owner, and it’s a great feeling when you hit those financial goals you’ve set out to achieve. Reaching those new goals in your business can come with growing pains so there may come a time when your continued business growth and the desire to drive your business forward requires a financial executive’s expertise. Perhaps you have considered hiring a CFO (Chief Financial Officer). Before you make that decision, you may have seen some other options available, like fractional and virtual CFOs. But what is a virtual CFO, what can they do for your business, and what is the difference between a CFO and a virtual CFO? 

        What we cover in this episode: 

        • 01:54 – What is a virtual CFO?
        • 06:17 – What is the difference between a CFO and a virtual CFO?
        • 08:58 – How would a virtual CFO work with my company?
        • 13:52 – When does a business need a virtual CFO?

        What is a virtual CFO?

        A virtual CFO is an operational and financial expert who performs the services of a chief financial officer. Rather than delivering those services in person, as a full-time employee, the virtual CFO, or vCFO, works remotely, on a contractual, part-time schedule. The vCFO would oversee your accounting processes, provide expert advice, and drive the financial strategic planning side of the business. 

        Strategic planning for a business involves more than the finance processes as well, like marketing strategy, business operations strategy, metrics and performance management, cash flow, oversight of regulatory compliance for the financial aspects of the business, and reporting on financial performance. The vCFO is responsible for working at a very high level with the leadership team, in an overseer role. The vCFO would identify any process deficiencies or financial issues, manage your key performance indicators (KPIs), and report back to the leadership team with executable solutions for what’s important in managing the business processes to optimize growth and revenue.

        What is the difference between a CFO and a vCFO?

        The virtual CFO role is similar to the traditional role of an in-house CFO, but the differences between having a full-time, corporate CFO in-house vs. hiring a vCFO are important considerations for a business owner. It can be very cost-prohibitive for small to medium size companies to hire a full-time CFO, and perhaps a company does not need someone 40 hours per week for their circumstances. In addition, there are team dynamics that will change, depending on the type of CFO you choose.

        Cost Differences

        The cost of hiring a full-time CFO with the traditional compensation needed for an executive position may not be affordable for most small to medium companies. Perhaps the biggest benefit of a vCFO is the ability to access this level of experience without paying the typical cost of an in-house CFO. A vCFO has experience tapping into a structured, proven, best practices process, and will be ready to begin working with a company with just a bit of customization. A vCFO can provide customized service with the skills and scope of work necessary to fit your company, without charging you for anything that is not needed. In addition, vCFO services can be expanded and shifted as your business grows and changes.

        Team Dynamics and Experience Differences

        Another difference to consider between a CFO and a vCFO is the expertise and experience that a vCFO has gained in working with multiple companies and across multiple industries. The expertise of a vCFO can bring a depth of knowledge to a company that is invaluable for all financial aspects of a business. You are also working with someone on a part-time, contractual basis with a vCFO, vs. bringing on a new employee with a full-time CFO. There are obvious differences in how that impacts the dynamics of your team to consider as well.

        How would a virtual CFO work with my company?

        Because a vCFO is not sitting there every day in your office, it will be a different experience for business owners. Obviously, the nature of meetings and communication is going to be virtual, so that is pretty straightforward. Beyond that, the biggest thing you will see is a true decision-maker that specializes in specific industries while working with a handful of different clients across various sectors. This enables a vCFO to demonstrate a deep, relevant understanding of your business and customize services to your needs.

        You can expect face-to-face meetings on occasions, as well as virtual meetings with a company’s leadership team on a regular basis to make sure you’re really connecting. You will want your vCFO to be a part of your business, and assist in driving your business forward. It’s very hard to operate as a vCFO in the dark or have missing pieces to the puzzle, so they really need to be involved in order to have that accountability and that partnership, which allows them to advise you accordingly.

        When does a business need a virtual CFO?

        We have found there are often tell-tale signs that seem to trigger the need for a CFO, virtual CFO, or fractional CFO. There are also stressors that can be relieved when you find the proper advisor. But how do you truly know you’re ready for a CFO? Obviously, you will want to have many discussions before hiring, but some of these can be signs it’s time to begin looking for a virtual CFO or other option for your team.

        Profitability isn’t at a desirable level and you need clarity

        When profitability has become stagnant or you are experiencing slowing in growth, it may be time to get an expert to look at what could be causing the slowdown. There are many factors that can impact profitability, but an experienced CFO, or virtual CFO, can assist you in dissecting the areas that could be impacting growth and identify the areas you can control. If you want to get to that next level of growth with your business, but you’ve exhausted ideas within your current team, it is time to consider hiring a seasoned vCFO. 

        Complexity of the business increases

        You could be experiencing rapid growth and increasing complexity in your business. As growth occurs, so will volume and if you don’t have solid systems in place, things can easily spiral out of control. This can lead to anxiety if you know you need more control but there aren’t enough hours in the day. In addition, you may be seeing more complexity in taxes, more complications when it comes to your accounting, or you may not be able to figure out why you’re bringing in plenty of revenue, but you’re not seeing the cash. These are all examples of signs you could use a CFO or virtual CFO.

        You want to establish a Financial Model for your strategic planning

        First, it’s important to understand why a financial model is important. On its face, it may sound similar to a budget, but a financial model is actually established to determine whether the business model itself works and is sustainable. This crucial tool will help you forecast into the future and see how your team will grow, how you could expect your revenue to grow as you make changes and many other factors. A CFO should be able to put this together and should be leading the discussion and managing this important piece of your strategic planning strategy.

        You want a partner who can help execute a growth strategy

        Perhaps you have more questions with regards to how the business is doing and need expert guidance to get you to the next level. You know you need some structure in place from a financial and strategic perspective, but have a hard time getting that established. A vCFO can help you navigate unsettled times, assist with the best systems for your current phase of business, and help prepare you for the next phase.

        So if you’re struggling in your business with executing your strategic plan, that’s usually a sign that you need somebody who can champion those things with you, and they can help to push you as a business owner and, in turn, can help push the leadership team along. Having that knowledge from a vCFO is very valuable and informative from a management perspective. It also helps ease your mind. You feel like you’re on top of things, you know what’s going on, you know where you’re going with your business. Hiring a vCFO makes sense when you’re in that position where you want to make sure that you can understand what your balance sheet is telling you, you can understand what your P&L is telling you, and what your KPIs are telling you. 

        It’s time to delegate financial duties 

        As an owner, there will eventually be a point where you will not be able to have your hands on everything. It will be impossible for you to manage everything at the level necessary to run your business once you reach a certain size. Offloading this duty to someone like a CFO can help ease your mind, knowing that you have someone experienced and very capable in your corner, who is thinking proactively about the future of your business. 

        What can you achieve with a virtual CFO? 

        Understanding the value of a vCFO and hiring one can bring your business to the next level. Gaining valuable, real-time information with insight from an experienced financial executive can mean the difference between struggling and thriving, and in some cases, business success and failure. Gaining assistance with your business processes and having sound advice in strategies to push forward is key to growth and success. It’s exciting as a business owner to have that insight and work with someone who can really partner with you so you can make sound business decisions. If you are looking for more information, we have excellent case studies for proven results that businesses have achieved in working with PJS & Co. CPAs. Contact us today to see what a vCFO can do for you!


        In today’s episode, we answered the question, “What is a virtual CFO?” You may have been considering hiring a CFO, but then been disappointed to find it wasn’t in your budget, but there are other options available, like fractional and virtual CFOs. We explain what a virtual CFO does, the difference between a traditional CFO and a virtual CFO, and how you could expect to work with a virtual CFO. We then discussed the signs that it is time to bring a CFO, vCFO or other option onto your team. The results you can achieve by partnering with a vCFO can be astounding! The investment and dedication from you to reach new heights in your business will pay dividends. If you are interested in learning more about our services, please feel free to reach out for a free discovery call.


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