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Intro: I’m Paul Higgins, an ex-corporate executive turned business owner who, for five years, struggled to grow a cloud Consulting business whilst battling a chronic disease. With the help of mentors and experts, I got the business model right, built a sales and marketing engine, and developed a high-performing team that ended in a successful exit. I received a kidney transplant from a mate, and now on my second life, I dedicate my time to helping other Cloud Consultants go quickly with less effort to enjoy life. Detecting an accent, I'm an Aussie working globally from Melbourne, Australia. I interview successful Cloud Consultants sharing their scaling story to give you inspiration and practical tips. I have dedicated experts for Cloud Consultants on the show to save you time and money by working with the right people. If you want to scale quickly with less effort to enjoy life, you're in the right place. Let's get started.

Speaker 1 (0:55): Hi, I'm Paul Higgins and welcome to the Cloud Consultants Show, episode number 477. Today's topic is recession readiness for digital consulting agencies. It's not just for digital consulting agencies, it's for all consulting services, businesses. And you'll learn three key things. One is contingency plans. And there's a great way that our guest Ryan goes through it. The second is what metrics to follow. And he doesn't overwhelm you. He talks about the top two and you really need to follow those. And the third thing is cash preservation. We all know cash is king or queen. But what do we do to preserve? And he's got some brilliant ways of doing that.

Speaker 1 (1:32): If you're a first-time listener, welcome. And if you love what you hear, please subscribe. So anyone that consult and deploys a SaaS platform, you're in the right space. If you're a regular, thanks a lot for listening and why don't you reach out and let me know that you listen because otherwise I don't know. So [email protected], say hi. And also mention some topics you'd love me to cover. You can get a full transcript by going to PaulHigginsMentoring.com/podcasts, Episode 477. And you can also get a summary on the notes that you're listening to now. So if you're driving, riding, whatever you're doing, this will all be there for you.

Speaker 1 (2:11): Before we go into the interview with Ryan, I'd like to thank our sponsors. The first is the Cloud Consultants Collective. The world's only revenue-focused collective for cloud consultants. It's basically your peers answering your hardest business questions faster than you'll find on Google or YouTube. Don't believe me? Why don't you try it for yourself? Just go to the cloudconsultantscollective.com to join for free today. The next is Workflow Academy. Are your top performers feeling overwhelmed by their workload? Do you worry about their performance will suffer and at worst, they will leave the company? We have an innovative solution that can help you. We partnered with Workflow Academy to provide you with highly trained junior talent who can support your top performers to ensure that the team stays on track. And you keep your most important team. You can learn more about this game changing solution at PaulHinsmentoring.com/WFA today. Let us help you support your top talent and achieve your business goals. 

Speaker 1 (3:10): Our guest today is Ryan. He's an experienced operations and finance leader for creative agencies and venture-funded startups. As a partner of Upsourced, he helps scaly agencies build better plans, see the future and drive profits. Product source Ryan led operations and finance for a large influencer marketing agency called Ahalogy where. He built the team to 50 people and to 10 million in annual AGI and they ended up selling it to Quoting Technology in July 2018. Perfect timing to sell Ryan. So what we're going to do now is hand it over to Ryan Watson from upsourcedaccounting.com. Great to have you here Ryan.

Speaker 2 (3:51): Great to be here, excited. Let's do it. 

Speaker 1 (3:54): Yeah, yeah. So, you know, we had a really good conversation. It's not often that you have someone that has both the compliance of accounting and then the advisory all in one firm, and it's not often that people look after agencies. So, you know, it was like an absolute sweet spot to get you on because even though, you know, if you're watching or listening to us today and you're not an agency, effectively you’re a service business, right? So, if you're a cloud consultant, you're a HubSpot agency, it's all one and the same, right?

Speaker 2 (4:22): Problems are all the same.

Speaker 1 (4:23): Correct. Correct. So, why don't we kick off with who your ideal client is and what problems you love to solve for them?

Speaker 2 (4:29): Yeah, that sounds good. This might go in reverse order, but ultimately, again, it's important to say I were, you know, you would call us an accounting firm, right? But ultimately, it's a bit of a misnomer. I think mostly what we're doing is CFO and advisory services, right? We're building operations, accounting operations, and in order for us to generate the kind of data, financial and non-financial data we can use to make decisions with our clients. And then we're sitting side by side with our clients, and we're using that data to make decisions, to see the future and make interpretations, right. So as you mention we work with creative agencies, service-based businesses somewhere in the 1 million to 10 million in revenue range, and you know, ultimately they're going to come to us because they're heading an inflection point and they have a particular problem. But very simply we like to help our clients see the future and drive profit. 

Speaker 1 (5:14): Yeah, yeah, brilliant, brilliant. And what are some of the problems that I come to you with?

Speaker 2 (5:18): Well, yeah, and I'll take what could be a very long answer and I'll try to convince it into a somewhat short answer. But what I would say is it depends based on their life cycle. So we see agencies across a life cycle, right? And so let's talk about a couple of the sort of more common ones. So we have names for them. We call agencies in that like $1 million to $3 million range - we call that build mode. You have a business, but now you're trying to refine it. And I would say we find you somewhere in the spectrum of what we would call the hierarchy of financial needs. What I would say is your problem is, you have put this agency on your back, you've put it together with shoestring and bubble gum, you've built it to this thing that should exist in the world, but it might have warts all over it. Like client concentration risk is not profitable. Like I own my job, not a business, all these sorts of things. So they could be very varied, but you probably have a problem with either solvency, like you might not be able to make payroll, or project profit or gross profit, that you're not earning on a gross profit basis. Cash reserves would be the third, the fourth being like just operating profit, did the owners make any money? Or the fourth being, you're not generating repeatable revenue. You don't have a predictable growth. So you've got one of those five problems, if you are in that range. And we see that. The other bucket of problems, so the other major inflection point, we'll see agencies who've eclipsed that. They've got a business that's working at that three to four million. And at that point, things start to break. Like it was working and now it's, it's not working. And you have some staff morale challenges and you might lose a client or two. And that's because you've kind of gotten to the point where like you as the owners or partners are no longer able to just kind of bear hug the agency and sort of be involved in all the decisions, right? You're several layers removed. And so now you have to empower and incentivize the next level of deputies in your organization to be able to make those decisions on your behalf. And that is a painful process to go through. And we help you do that both through good like reporting tools as well as incentive structures. And, and so anyways, those are probably the two most common like archetypes and problems that accompany those archetypes.

Speaker 1 (7:25): Yeah. And I'm assuming on the second one is around, you know, when, when do we hire like in that cap balancing that cash flow of when you bring on the people versus when you bring on the work?

Speaker 2 (7:35): Yeah, I mean, and that's, you know, again, that is like a universal struggle with every agency. The thing is like, you know, again, as you said, like these are all service-based businesses. And all businesses have like the thing that's hard, right? So if you're, you know, a widget seller, the thing that's very hard is like managing your inventory and managing the cash flow that comes with the inventory. You know, if you're like a logistics, it's the operations of the sort of node to node. That's very difficult. In a service-based business, it's like managing the human capital. It's managing capacity management and utilization, right? It's very tricky because if you don't, if you have, you know, utilization is all about how busy are your people. And if your utilization rate is quite high, well, that's profitable, but it's also very restrictive. If it's too high, you're unable to sell new work and adapt to it quickly. But if your utilization rate is too low, as in you've got too many people with too much free time. Sure, you can react to new deals. You're not going to make any money. And so it is a very fine line, particularly in a tight labor market, like most of our clients are in, to be able to sort of thread that needle. And that's the challenge, right? So though, like, when should I hire? How should I think about this? That's the tricky thing. There's, you know, the solution to that, of course, is many fold, but I agree with you that that is one of the main challenges that second, you know, that second persona of agency really struggles with.

Speaker 1 (9:00): Yeah, great. And we'll definitely look back to sharing our discussions. But, you know, let's call the elephant in the room. Like the economy is not going as well as we'd like, no matter where you are and where you're listening to in this world. I'm in Melbourne, Australia, but most of my clients are in North America. And if you look at, you know, Australia, Canada, the US, very similar models, right? We've got high inflation. We've got high prices skyrocketing, and it's just, you know, tough environments. And some sectors that are doing really well, some sectors that aren't right. And I know that, you know, that R words being used quite a bit, you know, there's recession, technical, not ultimately things aren't great. And I don't know that you, you know, sort of got some, well, the reason that we bought you on other than you're a fantastic guy. And I think, well, there's you could say, you could get some help from Ryan is, you know, what do you do at these tough times, right? As people say, it's always easier to run a business in good times. It's much harder in tough times.

Speaker 2 (10:03): Totally. And this is, this is, by the way, it's such a, this is particularly hard because the last two years were like so much easier. I mean, again, especially in, in the US specifically as there were, you know, several government sponsored programs with free money, right? Running a business with like six figures of free money is a lot easier than the alternative. And now we're kind of in a face where you said like, you know, it's, it's, some industries are maybe facing a headwinds to a greater degree than others. But there is one commonality, which is like there's not a business in the world right now that minimum isn't going through their P&L and evaluating every single source of spend and asking themselves, like am I getting what I expect to be getting? Is this worth it? Is there an ROI here? And that's at a minimum, creating some difficult conversations that we all, you and me too, Paul, like we're not immune from that. We're all living in. So yeah, so obviously we're having these conversations with our client with regard to just, hey, whether you're feeling it or you're not feeling it, let's get ready, right? Let's get prepared. And we've got a guide and ultimately like, what we did is we put together this little questionnaire of like 30 questions that are basically like a risk assessment. So let me answer these questions and see, am I at a greater than average risk in the event of recession? And if so, what can I do about it? And the guide is really meant to address each risk kind of sequentially and say, all right, this is a risk for you. Here's some ideas. But what I would say is there's like a few themes. The other thing I'll also say about this is you're going to read it and it should all sound familiar because it's good solid evergreen advice. Right. None of the things that you should do in a recession are not things that you shouldn't do. They are, it's just now it at this time it's more important than ever to follow some of these like comments and things.

Speaker 1 (11:45): Yeah. And just before you go through them, Ryan, like, listen to Ryan Watson episode 477 of the cloud consultant show. If you're listening and you're thinking, how do I get this guide? It's in the show notes. Right. So we'll have a link in the show notes. It's called creative agency survival guide. So it's in the show notes. So you'll get it. So if you're walking, you're riding, you're driving, don't worry about it. Right.

Speaker 2 (12:07):  We'll get it to you, it's right there. OK. Awesome. Yeah. So anyhow, relatively comprehensive guide, a few like major themes. You know, one of the themes is in this, this permeates the whole thing, of course, which is like the preciousness of cash. Right. So there's a handful of things that we talk about with regard to cash. One thing we talk about is to the extent that you're able prioritizing an adequate amount of cash reserves, right? And so in our case, we advocate for three months of operating expenses in cash reserves, particularly heading into headwinds like this. Now look, that's kind of a rule of thumb. You might be a business that has a higher degree of uncertainty than normal and other factors that might suggest you should hang on to a little bit more than that. And certainly other businesses that have recurring revenue streams and maybe less.

Speaker 1 (12:55): But just quickly on that, I think you get right. The one that I always add a little bit to is your average tax bill, right? Cause here in Australia, we've got to think all BAS switches like VAT that you have to pay every quarter, right? And there's nothing worse when you just got over your payroll. Like in here's the so, yeah. Normally put a tax offer on top of your operating expenses.

Speaker 2 (13:17): You're totally, you're totally right. So certainly having adequate cash reserves, we also advocate for having a line of credit. If you don't already have an operating line of credit. It's a thing that we advise all of our clients to get. For what it's worth, we don't advise getting debt and funding an unprofitable business with your debt. That's not what we're suggesting. It's a rainy day. It's only really meant to smooth out the peaks and valleys of cash flow endemic to project-based work. That's the purpose of the line of credit. And then of course, some other common sense things around cash, which is specific to, let's make sure that we are also going through being and very thoughtful about what we're spending money on. Let's not, what we really want is flexibility. So if we're coming up on any long-range or large, contractual obligations to spend money, let's consider are there alternatives to that kind of agreement, which would be shorter and duration, more flexible, or maybe abstaining from that expense altogether. So a lot of discussion around cash specifically. Another piece is really just, and this is more of an operational motion, which is, you're going to want to get closer to your clients, especially if you have risk factors like concentration risk, where you're going to want better information faster about how their business is doing so you can be prepared to react in the event they're facing headwinds that are going to trickle down to your budget. Other factors like whether you've got, you know, you're bringing discretionary dollars from that client or necessary dollars. So if you have a discretionary budget with a high concentration risk, that's, you know, two risk factors stacked on itself. And so again, getting very, very close to that client. And then the third, and this is maybe the most important tangible piece of advice. And this is the thing that we are working on with our clients, which is a contingency plan, right? And so again, you know, many of our clients have not yet felt the effects of the headwinds. But what we're advising is whether you have or haven't, we're going to build a plan. And we're going to build a very specific plan that says in the event A occurs, here's what we are going to do about it. And here's what we're going to do about it is a very specific set of actions. So for instance, like if, you know, we lose our largest client that's a bit of a risk, we are going to cut $20,000 a monthly expense. Not specific enough. What I want is, here's the individuals or roles that we are no longer able to carry in the event we lose our largest customer. Because the biggest thing about the contingency planning is these decisions are really hard. They're emotionally charged. They're the last thing we want to do as business owners. And you don't want to make those decisions when you're on tilt. Like when you're actually in the throw of having that like really gut wrenching stress of, oh my gosh, that actually happened. That is the last time that you want to try to make some of the most important decisions. So right now, when you have a clear head and things are not crazy, write down what you know in your gut to be true. Write it out, put it in the desk drawer, file away, hope you never pull it back out. But if that event occurs, then the goal is just read it. Don't think about it, don't react emotionally to it. Your clearer former self decided that these are the steps you should take. So take them. That is what we're advising folks to do. And I think if nothing else, that provides a great deal of sleep at night factor.

Speaker 1 (16:38): Yeah, and then, you know, do you, how it plays out, do you see, you know, the top of the salary people, they're often the people that go or is it the bottom end? Or are you seeing any patterns to who people normally let go?

Speaker 2 (16:52): Well, that's a great question. There is some degree of bang for your buck factor with regard to higher salary folks. I think the devil is in the details, right? And again, this is why having a really thoughtful contingency planning conversation is so important. I can think of one particular client where we're doing this. And that example of our largest client leaving is a real example from that particular scenario, right? So there's a little bit of concentration risk there. There are definite headwinds in that business. And so we've identified that as a scenario that we want to war game out. But in that very specific scenario, we have lost revenue that we no longer need to service or we no longer are in a position to service, right? And so in that particular scenario, the individual, the role-based component of that looks a lot more like the kinds of people performing the kinds of services that that client was buying and now is not buying. Does that make sense? So it's not generically related to just like, I'm looking for dollars. I'm looking for very specific dollars in that case. So it'll just depend, but sure, like, you know, you should be very thoughtful about, you know, like a $12 an hour person who spends five hours a week with you, maybe that's not a critical. But ultimately you're picking up pennies in front of a steamroller at that point. So yeah, I'd look elsewhere. 

Speaker 1 (18:14): Yeah. And look, I had a client recently that came on new, we always look through their p&l. Like, I'm actually did accountancy at university, never practices accountant. But when I was at Coca Cola, we're all traders accountants, right? We had to now and I used to do billion dollar acquisitions. And so I know my number is pretty well. And I said, you know. Well, you've got a, at least 50% of your developers costs of revenue, right? That is just crazy. Like, so all of a sudden that led into the conversations of performance or whatever. I'm like, well, and sadly, you know, no one ever wants to let go of your people like their life family. It's very different of working in a, in a company where it's a little bit reserved. This is like really hard, but you had to make a hard decision because you can't not continue to run his business with 50% of his revenue in development costs. 

Speaker 2 (19:09): Yeah, you know, it's crazy. It's not crazy. It's not at all crazy. It makes all the sense of the world why that's such a common problem, but it is such a common problem. And there's so many reasons for it. And I think, I think the thing that's really tricky, you know, recession aside is, we see this a lot, which is salary load is one of the very, you know, we try to go very simple with metrics of salary load. Forget about what they're doing, just like salaries divided by revenue. Where are we? And, you know, there's rules of thumb, somewhere in 45, 50% of the agency is trying to max you'd want to see there. And we see 80s plus, sometimes greater than 100, which is appalling. It's not as if in those cases, it's we've been derelict or sleep like a wheel. It's usually more a case of optimism, right? It's, it's yes, I know. I know that. But two things. One, I need these people in order to exist, right? Like, if I if I let go of my only developer, I no longer can provide development services, what am I supposed to do? Right? And it's okay, I'm going to grow myself into that. And I get that, like I completely get that. I think the thing that's tricky is it's just entrepreneurs are optimistic by DNA. We have to be, you have to, you can't do it. You can't do it as a pessimist. You wouldn't, so you have to be optimistic and you have to create systems to reign in your optimism. So in those cases, what we try to do is sit down and say, totally with you. I think selling into this team is the perfect plan. But why don't we do this? Let's create a stage game for ourselves. Let's say like we're here, we want to get here. I think you can do it. You think you can do it. Let's do it. But also let's check in. Like who knows? There's also things outside of our control. So if in three months, we're not, you know, we think the trajectory looks like whatever it is. So we're not going to be all the way there. But we'll be a quarter of the way there. But if we're not a quarter of the way there, let's admit to ourselves right now that we might not, we're not going to be able to sell into it like we did. So if we don't hit this stage, then we are going to have to pull this lever. Do we agree right now? And so that at least reigns in your optimism. I'm on your side. I don't think we're going to have to do this. You don't think you're going to have to do this, but let's at least agree in the very unlikely case. We're going to do it. And, but it's tough. I mean, that's, that is just, it's just the DNA of entrepreneurs. And that's what I love about it.

Speaker 1 (21:18): Yeah, great. And like some of you listening here probably haven't been in the workforce as long as you know, you and I Ryan.. I know our hair gives away a few secrets if you're watching us on YouTube.

Speaker 2 (21:29): It does.

Speaker 1 (21:30): Yeah, like some of us have been through these cycles and some haven't, but you're right. Like, you know, I always say to owners that, you know, okay, we're going to grow the business. So let's have target revenues when we're going to bring on roles, right? Because you can't do everything. Like you said, it's that sort of, you know, moving it across into your team, which is the second phase we spoke about. Flip. You're talking about the flip side, which I think is also very pertinent in a time when you know that there's risk associated with economy. And like you said, it's often not things that you do, it's what happens to your clients and then it's a knock on effect, right? And if your clients happen to be in the wrong segments or, you know, if you look sadly travel, right? And I saw many agencies that, you know, were heavily in travel through COVID. No one, no one could predict that. No one could control it, right? So I think it's, it's really good. And I think, you know, the worst thing is where you're paying everyone else and not paying yourself, right? And you know, as an owner, you've probably been in those situations, you might be in that situation now and it's just not fair on you. But more importantly, it's not fair on your family, right? The reason that we run these businesses is to support our family. And we're basically cheating our families. And that's not something anyone wants to do. So, so look, discussion around contingencies. How you sort of talked about, you know, one of the metrics was around, salary loads, total salary divided by revenue. But what other information do we need to make the right decisions at the right time?

Speaker 2 (22:56): Well, again, and I'll make this relatively, I'll try to get this brief, but we have, so I have a point of view on metrics, which is like, you know, you can read all sorts of articles that's like, here's 20 financial metrics for digital agencies or HubSpot agencies or whatever it is. And I would look at those and say, yep, I agree, that is those are 20 KPIs. Should you look at all of them right now, the answer is almost definitely not, right? I firmly believe in simplicity. And I think for any given agency, there's probably just like one or two that you should be focused on, and just forget about the other stuff right now. Because I'm a big believer in building momentum. And so I look at financial metrics in a hierarchy of needs, right? Like Maslow's hierarchy of needs, we start at the bottom and we work our way to the top and we do not skip steps. So we cannot worry about self-actualization if we do not have shelter. And so that hierarchy of needs is, you know, again, like we look at solvency, can I make payroll? And there are metrics around the solvency generally like cash divided by, you know, current liabilities or my monthly burn. So if I'm not solvent, then I'm not going to worry about profit. Of course, I'm not profitable. I don't need to continue to remind myself I'm not profitable. I just need to make payroll. So once I've cleared the solvency hurdle, then I'm looking at project profit, right? Am I earning a gross margin of 50 or more, ideally 55, 60% if I'm not, forget about everything else. And of course, there's also, so that's where a lot of agencies who come to us in that build mode are stopped. They fail. That's where we start to help them. And ultimately that's either a function of a utilization problem. I've got people that I'm paying that do work that are not doing work or it's a rate per hour problem. People are utilized, but I'm not earning an adequate rate on them. And there's all sorts of reasons for that, right? So project profit and we're going to start there and we're going to build momentum there. And then we'll get to the next one, which of course is cash reserves. We like to look at cash reserves as a function of runway, how many months of operating expenses, can we clear that or not? And from there, now we can worry about firm profit, right? Because ultimately, if you're not profitable on a gross margin basis, you're not going to be profitable on a firm basis. So forget about it, right? So once we've cleared that hurdle, then, yeah, we're going to work on operating profit. We're going to target 20% or better. And then finally, the sort of the capstone to this is repeatable revenue generation. Do I have a predictable growth rate that is a function of my growth engine? And there's all sorts of like cacti LTV and other metrics that we might look at there. So it's very contextual based on where you are. And again, I'm a big believer, especially for agencies that are struggling with one of those. There's nothing more demotivating than continuing to beat yourself in the face every month with like my profit margin is negative or 2%, or whatever it is. Like I don't need to keep telling you that. That is not, that makes you feel bad. Let's just focus on like the one thing, let's build really small wins. Let's feel good. And then when we clear that, now we can worry about the next thing, right? But it's reversing negative momentum is very hard. And that's the whole game. So anyways, hopefully that is your question, but yeah.

Speaker 1 (25:54): Yeah, that's great. So around the I totally agree with profit project profitability right. So if you've got some examples of how people have turned that around, like how you'll climb to turn around that?

Speaker 2 (26:04): Yeah, yeah, one that comes to mind is actually relatively recent HubSpot agency actually who came to us. And you know, the classic story, I kind of told the archetype, they fit it perfectly of like here, you know, we've crossed the seven figure mark, maybe the year prior. And so like we did it, right? This thing exists, it should exist. We coasted it on fumes, but we made it. And now we're trying to build what is a sustainable profitable business. And the business wasn't wasn't profitable. And so, we went through the hierarchy of needs, and we did not have a solvency problem, but we did have a project profit problem. Right. And so then we asked the this owner, we asked her, Okay, so like we'll just look at some of your individual process, like which ones are making money, which ones aren't, right? And she's like, oh, this is easy. Here's my top five projects, and she quoted me like highest revenue. These are our best clients. I'm like, hey, great, but I understand these are strong revenue projects. I'm looking for which ones are the most profitable projects, right? And this, she didn't have any idea, right? Got a lot of salary per people were going across lots of different projects, but couldn't tell you which ones making money and which wasn't. So one key action was like, we got to implement some time tracking here. Like we need some data to help us answer this particular question, right? Time tracking, you know, key diagnostic in this particular issue. So anyways, we go around, we implement some time tracking and we do this for a lot of clients and we help to do it. We sold it into the, to the team and we're very clear about why and the benefit to them and all those sorts of things. And so anyways, we go, we go away, we come back, let's say six weeks later, whatever the timeframe was, and now we've got some data like we can look at what's happening, right? And so as I mentioned before, like if you've got a gross margin problem, then you have either a utilization problem or you have a rate per hour problem. In her case, didn't have a utilization problem, right? We had, I don't know, utilization close to 70% as a firm. We target like 65 to 70%. That's fine. That felt healthy. So it wasn't that. So then we were looking at like, what's the rate per hour of this business? You know, revenue divided by these billable hours that we're tracking. And that was where the problem was, right? And that was a business. And the thing that was surprising to her was when we're quoting these, engagements, right? She's quoting these retainer work, we quote what we think is going to be profitable. We have some expectation of how much work it's going to be and think we're going to make money. But of course, scope is being blown all over the place, right? And classic story, we all see it scopes all over the place and we just don't have a feedback loop for us to identify, oh, we went over scope. We need to have a conversation with our client. We need to either adjust or raise the rate or whatever it is. And so, you know, that, the 80% of it was just identifying for this owner that we had the problem the solutions are very, but she had some pretty good relationships and was able to, in some cases, rain and soap scope, in other cases, raise the rate. And now this agency is turning like, I don't know, it's like 52% gross margin. And it's like, great, wonderful. And so, yeah, like it's not hard, it's not hard, but it does take looking at the right thing, at the right time.

Speaker 1 (29:00): Correct, and I think, you know, we used to talk about, I don't know, it's not a great way of saying it in today's time, but we used to talk about normal time and wartime, right? And like, a color we'd have wartime, which is like, you have to make big hard decisions in these times, right? And if you're in the situation where your cash flows tight, you know you're not paying yourself what you should be. You've got to make these tough decisions. And, you know, often we've worked with clients where we've gone and said, you know, like these projects, you've got to either go and increase the rate of you got to lose the business, right? Because it is just draining you. And they're not easy decisions, but they're decisions that need to be made. And if I just want to ask a quick question around this, right? Because people will probably, you know, listening to Ryan, you're thinking, God, like my accountant doesn't do any of this right. Like I need a Ryan in my business, right? You constantly, or you often have clients that leave accounts and come to you, right? But for most of us, it's like the worst thing in the world. Oh my God, I've got to leave my account. It's going to be an excellent nightmare. Tell us that it's, you know, like I said, you've been through it lots of things. How painful is it really to change accounts?

Speaker 2 (30:08): Hey, well, I mean, it's not, it's not painful at all, right? Like it's, it's, you know, I think if nothing, it's some, gosh, I don't know, it's like a lot of things, right? Like we build it up in our mind and it's very, and there's personal relationships. And that's probably the worst part of that. Like, oh my gosh, I've had this person and we have history and there's some loyalty. And look, in many cases, by the way, like, there's a reason that they're talking or considering working with us because they've hit an inflection point and they're looking for things that are different than their accountants providing. And almost always both sides are feeling the friction. The other, the existing accountants, like this isn't really what you're asking me to do things that I don't really prefer to do and I don't work this way. And now I'm feeling bad and you're feeling bad. And so generally when they have the conversation and everybody is like, oh, okay, this is way easier than it is. And then in terms of like actually getting up and going, it's just project management 101, right? Like so we have, we have a really regimented process where we can pull you through a course of 45 days and I'm not going to go into our whole process. But the, the short of it is, you build it up in your mind more than it becomes.

Speaker 1 (31:10): Yeah. Spot on. I just recently changed accounts. It was the same thing. Right. And, you know, and the other thing is your account has got lots of clients if they're running a good business as well. Right. So they're not only relying upon you. So if you're not getting what you want, please go make a change. And also a fresh set of eyes over over, and especially if you're getting someone that's an industry expert. It makes a massive difference versus having someone that's a generalist that you might have not even been in the industry when you first started, you're no longer in that industry, right? But you've kept the account. And I think specialization is really important. So we're here talking to Ryan Watson 477 from upsourcedaccounting.com. So we've talked about recession readiness, right? So we've talked about contingency plans. We've talked about what information and what metrics you should cover. So we've talked about cash a lot, right? And it is the life by my last eight, Cash is king or Cash is queen. Now, what are some tips you've got around preservation as some cash?

Speaker 2 (32:12): Yeah, that's a good question. So, you know, again, I think there's basically two sides to this coin. One side is I have cash, I need to keep it. The other side of the coin is I need to get as much of it as I can, right? So with regard to I have cash, let me keep it. Again, I think some of the things I said earlier are still valid, which is, you know, we want to go through like some general hygiene, which is like, let's go through the P and L and let's look at the kinds of things we're paying on if we can get, if we can negotiate for more flexible. Because again, I think some one of the themes for what we're doing right now is just flexibility. Like, so it's not just a cost cutting exercise. It's a flexibility increasing exercise, right? So if I'm finding myself in these like long, contractually obligated agreements, I'm looking for ways to add the ability to cancel in 10 days or 15 days notice, right? So that's where I'm looking. I think with regard to, you know, I also mentioned like having some backstops like a line of credits or even like, you know, if you have personal wealth or you've got folks around the table that have some personal wealth, like lining up some of those conversations, again, just as backstops, I think those are really important. I think there's several things that you can do on the sort of like cash collection side. I think, you know, for instance, so I ran an agency before sitting in my seat here as a partner at Upsourced, and when I started our cash collection cycle was like 120 days or something like that. We worked with large enterprises. It was, and it was just kind of one of those things we assumed like, ah, it's just what it is. What are we gonna do about it? And I'll tell you, we went from like 120 days to like 47 days in the first six months. And most of it was just like having conversations and a little bit of negotiation. So you'd be surprised at like how little you would need to offer in the way of incentives to expedite your cash collections on existing invoices or to change your invoices schedules to move them up. Sometimes it's just asking. And other times the trick here is it's all about psychology. So it's not like you need to, it's not I need to pay you a market rate for you to do this thing for me. It's really just like create the psychology that on their side they're like, oh, I'm really gonna pay more just for this thing. I don't care about fine. Okay, here you go. And so you’d be surprised at how much success you can have incentivizing early collections. Like, you know, we worked with a large, I won't say their name, but a large multi one of the largest CPGs in the world and again they're stated, was 120 days of payment and they paid us in 15. And so anyways, this could be done. And that's where I would focus now.

Speaker 1 (34:39): Yeah. I think that's brilliant. And the other one, which, you know, I often tell my clients is, I'm like, how do you spread your payments out there might be, you know, 50, 20, 10, or, you know, whatever, whatever it is. And I'm like, you know, are you doing it on time? You do it on project completion. And they're like always say completion. I'm like, no, do it on time. Right. Because your incline is always going to have issues in the business where they not you, but they have caused the fact that the project isn't on time. Right. So, so do not do not do it based on completion, do it on time. And that can make a massive difference. And like you said change the variables too. Some people are like, you know, they're only 20% upfront. It's like, well, why not be 50? So there's, there is way is within your control to get more cash in these tougher times. And I think that's, that's brilliant. And also, I think the renegotiations are great point, right? Like all of your suppliers just go and renegotiate who go through your top suppliers from your P and L who you're spending money on the most and then go and look at renegotiating terms. You probably haven't done it for a long time. You know, it's like when I worked for Coca Cola, you know, like we didn't just hand out discounts every year, right? But if someone came in and asked one and it was justified, we'd normally say, yes. And it's like a bank, right? If you call your bank up, nine out of 10 times, you're going to get a better rate. Or if you call your mobile or cell carrier, whatever, you're going to get better rates if you say you're going to leave, but you just haven't done it. Right. So they work on the squeaky wheel, right? It’s the principle. 

Speaker 2 (36:10): Totally and they're all feeling the same thing you are. They're all worried about losing you too. So they are in a they are much more open to negotiating with you than they might have been two years ago. So ask. 

Speaker 1 (36:22): Yeah. Yeah. Look, we've had some brilliant conversations around recession readiness. There's contingency planning. There's the information we've covered in the key metrics and then also cash preservations. Now, there'll be a full transcript in the show notes so you can get it. There'll also be a link. So there'll be a link to the Creative Agency Survival Guide. So that's on the website now. So it'll be in the link, but it's on the website as well, which is upsourcedaccounting.com. But what we're going to do now is go into the rapid fire. So Ryan I’m gonna ask you four questions, you're going to give me some rapid responses. Ready for that? 

Speaker 2 (36:56): Quick. I'm ready.

Speaker 1 (36:57): That's good. Great. So the first one is one of the some daily habits you do to help you scale your business.

Speaker 2 (37:01): So I recently adopted the GTD method that getting things done. And I used to be this person who would just wake up every day and think, what should I do today? Oh, I guess I'll do that. And I'm embarrassed to say it out loud, but I have taken control of my life and I am more organized and more productive than I've ever been. And that has, I don't know, it's been life changing. So that's, I use a tool called things to organize. It's been awesome.

Speaker 1 (37:24): Yeah, Brilliant. Next is, where do you find out more information about how to scale your business?

Speaker 2 (37:29): Yeah, I mean, just others. Like I'm in a, I guess you might call it's a community, maybe some people call it a mastermind or whatever. I just looked at people who have done it before. Like, you know, I'm not reinventing the wheel. There's a playbook out there. And so I find smart people who are further than me.

Speaker 1 (37:40): Yeah. Great. And if you go and look at my LinkedIn profile, you'll see that do not reinvent the wheel, right? We've, we've got you back. We've already made the decisions. The third one is if we could grant you one wish, one wish for upsourceaccounting.com, what would it be?

Speaker 2 (37:57): This is, this might sound like a silly wish, but I wish that everybody who currently works for us would continue to work with forever. Like, I always say like, I want this to be a place that all these people retire and I genuinely want. So if I could wave a magic wand, everybody would, that is, we just have such a phenomenal team. I want everybody to stay here forever.

Speaker 1 (38:13): Brilliant. And the last one is what do you know now with running this practice that you wish had known earlier?

Speaker 2 (38:18): Yeah, I think that I would say it's that success or failure, especially in a service business, is like 98% perseverance and like 2% everything else.

Speaker 1 (38:28): Yeah, yeah. Totally agree. Totally agree and thankfully I've been blessed with a lot of tenacity so that always helps in life. But look, brilliant having you on Ryan. I’ll do the ouro in a moment where I can talk more on where you can find Ryan. But look, great points around recession proof. And look, it's there, right? Whether you want to address it or not, you're going to get some tightness in your profit and loss, you're going to get some tightness in your balance sheet. Be prepared, like have those contingency plans in place. So Ryan it’s been brilliant having you on today. 

Speaker 2 (38:59): Thanks for having me. It's been a lot of fun.

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