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welcome to the modern CPA success show the podcast dedicated to helping accounting firms stay ahead of the curve our mission is to provide you with the latest and greatest insights On cuttingedge Tools Innovative marketing strategies virtual CFO services and alternative billing methods join us as we change the way people think about accounting hey Adam how's it going today doing well how about you Tom I'm doing really well you know as we go through our podcast and we do our webinars we talk talk a lot about our course the vcfo Playbook course teach everything that that we can about how we provide services and thought maybe it' be a good chance to dive into one of the topics today and talk a little bit about that one I was thinking about pipeline sound like good topic to go through yeah can I change my answer on how I'm feeling today yeah pipeline's a great conversation we can talk about that for sure so anyone who's wondering what pipeline is you want to give some idea of what it is and why we focus on it yeah basically I mean whenever we talk to our clients we're always talking about um leading lag indicators and so you know a a good lead indicator obviously to sales is going to be your pipeline and of course you can go even further back and downstream and you can look at things like you know the activities that create the pipeline which are natural conversations um but the pipeline is that that pre-meeting where you have the ability to um you know look at what the future is going to be and how you're going to fill in those gaps because you know nobody's ever met a forecast they didn't like right we can just throw a bunch of sales numbers up there and say this is what we're going to do but how are we actually going to execute on that and so those pipeline conversations regardless of the industry um you know because they take different forms right if you're selling projects versus even somebody that's in retail or something the you know the the format of those meetings change a little bit but the conversation's still super important and it's not only to make sure that you're going to hit Target but it's also an opportunity from an operational standpoint to bring Finance operations and pipeline kind of all together in one meeting yeah that's a great point and I can talk just a little bit about what we actually do in those meetings so I'll focus on service companies that lots of times do projects as you mentioned those but I'll be the one who's preparing for those conversations and a lot of the data that we're bringing is one side is what's already been committed so if you've got some projects under contract that you can tell me for the next several months what that's going to be and so we can compare that to what your capacity is and say that's 2/3 that you've got your pipeline 2/3 full for the next period so now we can turn and say then let's look at what potential is and our clients have some kind of a customer relationship management system pipe drive or HubSpot or something like that and so then we're pulling the data from there and sharing them back with it hey here's what you're showing with the opportunities and one thing that's pretty cool in those systems is you can look at like what's your average sales cycle how long does something take from the beginning to the end what's the percent of these things that you you wi and then how long do things last and as you know with that data we can tell people here's how big your pipeline should be if you're trying to hit a sales goal so it is US feeding back information but you've probably had the experience that I have is that sometimes customers look at their own data and they're learning things or they're saying well this isn't right and then you're helping them say okay well let's get it accurate so this can be a more fruitful conversation yeah and I mean I think it's important to frame that this isn't an absolute right what's absolute is the financial statements this these are more guard rails and so they're intended to just kind of be more of a you know let's take the temperature of where we're at and what we need to improve and so especially in a service-based business maybe you're going to break it down between recurring clients and and new clients so that you know or you might break it down by geography or the size of clients so that you can because you're going to have different win rates you know if it was just a cold lead versus a warm lead you know those kind of things so and you can go back through and predict and look at your historical information that's what's really cool um you can go back and look to see how much of that you've done historically so like you said length of time to close percentage wi those are very important in determining you know when it's actually going to get started you know that as well because you want to kind of bake That Into You know how much do I need in my Pipeline and we can usually step back and and with a formula be able to tell a client like hey your pipeline should be you know $3 million you've only got 1.5 seems a little light unless you're going to do better than what you did before you know those kind of things and and so it's uh again it's not an absolute um they could win all that 1.5 and that's maybe all we needed and they could be great but it it gives them just a little bit of confidence and understanding like what they need to do and then they start having these conversations about the lead indicators for it even getting to the pipeline in different Avenues and so it leads into a lot of strategic conversations about how to execute on bringing in new client work yeah and you said it's not precise and as accountants we love it to be precise but whenever I tell them okay you know your pipeline should be 3 million you're sitting at a million a half I'm always then saying is that about are you feeling about the same you got about half of what you need and the majority of the time the client is saying yeah that does feel about right um for what I'm looking at you mentioned bringing in multiple groups like operations and sales sometimes those groups aren't together very often talking about projects and I had an experience with one client where they were really busy they were fortunate and the sales guy had told me hey give me a six- week lag between when we sign and start the work because we're really short on people and it was a fantastic meeting because the VP of Ops there got there and he freaked out when he saw that he said it doesn't take six weeks and so they sort of had an argument on there and as it turned out there was a particular skill set that they kept saying we don't have that but he's like but all these other skills we do have and I'm loving it because I'm like great we're resolving something really cool because you're sitting there having everything get delayed and this guy saying you need to change what the salespeople are telling customers so it was a really cool chance that we had the people together and show data that had them change what they were doing and and the other thing is is from a finance arm so not only you're sitting back watching this like this interaction happen and then them kind of working it out you can always kind of come in and say and financially speaking I I need this so I hear what you're saying you you you can't do this and you have to do that but um just letting every know you know as kind of the mediator in the room this is what we have to have so you two need to kind of work that out and then we need to work backwards to kind of figure out you know what we need to do uh another guard rail that's kind of cool to look at too because um especially with one of the industries that we work with um the pipeline sometimes the length of time to close is really light so they only have like a three what I mean by that is they only have like a three to four month visibility into what their their pip you know the work's going to look like and so four weeks out you can tell them what their booked work is so again just defining that earlier before that's people that have like committed signed a contract that hey we're going to get started we know that we have carryover work that's going to hit these months so you can look historically back uh what their catch-up percentages are based on their pipeline size so I know four months out you should have 25% of your booked work in three months out it should be like 50% and then two months out it's going to be 75% so you you can kind of look back there and you can measure those again just as a rule of thumb just taking the temperature tell the client they're like oh I'm really worried I've only got 25% booked work for January it's like historically you only have about 25% and you can see you always catch up and you land at about 95% now if you're at 40% booked work in January right now and you're historically at 25 then it's like look at the pipeline it's like H you might actually be pushing work into the following month if you kind of continue that Trend again not an absolute just good conversation about you know predicting what's going to happen kind of in the future and it's an opportunity to connect sales and operations and finance all in one kind of get us all rowing in the right direction yeah that's a cool measure and also I mean you can also help that when people get busy often they take their foot off the gas on the Sal side and so you could be looking out saying yeah I know you're really busy right now but to given your number maybe you're 10% four months out and so you give your chance yourself to give them a little bit of a kick like hey you're about to come into a big Valley if I look at the data and interpret it this way and you might help that because we probably both had clients that got so busy and then six months later they don't have enough work because they're like we took all of our attention to focus on the operational part of that yeah I think the other thing is too is like it's also there's also a forecasting opportunity here in a different way so what I've had happen in these pipeline meetings before is you know whenever you're talking about that battle between operations you know the delivery of the work and the sales side I've also had it where sales team comes in it's like hey I just killed a whale you know this client is going to take so much of our time it's a $2 million project whatever that looks like everybody's super excited it's going to feed us for the next six months and then they go from a staffing perspective we need to hire six more people and then you can this is an opportunity again for finance to kind of Step In say okay like pause I get it you need six more people to execute this contract agreed but now you've built instead of a $7 million company you need to in the future be an 11 million company Y which means your pipeline outside of this deal instead of being $2 million at any given time needs to be like three and a half million you've never had a three and a half million pipeline ever like never even close are you sure you want to hire six people to execute this contract can we talk about contractors can we talk about you know like instead of like filling that void because what you're about ready to do is you're reacting to this big contract that eventually is going to end and then you've now built a bigger house which is going to require a bigger Pipeline and then whenever you turn around and you tell the salesperson it's just high-fiving about this whale that they just brought in and you go are you good with s finding a $3.5 million pipeline after you you know got rid of this one or once the you know once the newness of this client wore off and they're just like well no like to talk about like what have you've done for me lately kind of crap you know what I mean it's like I just brought this whale and now you're telling me I got to do it again it's like well yes if we're gonna hire six more people right um and so that's where you get again it's it's strategic conversations around the best way to even resource so this pipeline meeting can just deliver so much value yeah that's great you are such a wet blanket though meeting right this guy's all excited about his deal and you're like here's what it means but I do love the the assumption that I walk in with is well we have to hire six people and so I love that you're picking that one particular thing and saying here's what it means if you're saying I'm hiring and they become employees for doing that which is a great way to look at it yeah I mean for me as a finance person I'm thinking oh this is cool and then I look at the numbers and I'm like oh wait a minute like let's have this conversation and so um and and that was a real situation I had with a client and uh we ended up sourcing it with contractors we didn't build a bigger house we didn't you know Step Up ended up being very successful very profitable um we paid a little bit of a premium for our contractors but whenever the deal was done we were still had our full capacity and we're hitting our numbers and and things we we took the opportunity to you know get ahead financially and put some money in the bank because we were so profitable on that big contract yeah that's cool one things I've struggled with a little bit is I'm not a sales and marketing expert right so when things are difficult sometimes it could be hard to know what advice you give them um and I've learned in that but we've talked about some measures so if someone said If you're looking at someone saying you probably need to shorten your sales cycle what advice might you give them to say here are a couple places that you could look to make that sales cycle shorter and maybe mention why you'd want a shorter sales cycle well yeah so on the on the sales cycle side of things um that's going to go into that formula right like the longer it takes you to get into the sales cycle the bigger pipeline you're going to need the shorter the sales cycle the smaller the pipeline so it's in your you know as whenever you're educating the salesperson on these metrics um I think it's important for them to understand all the inputs and how they can impact them and so for advice in terms of of that you know sometimes it's just self-awareness like them just understanding how that input affects you know the the total value of the pipeline they figure out their own like efficiencies and logis and followup conversations to have you know they they change their meeting structure so that they're answering a lot of questions more in The Upfront instead of like staggering them out and just trying to put a bunch of feelers out there they're trying to get a little further in the sales process in that first meeting or two you know they're a little tighter on their follow-ups you know those kind of things they maybe change how they're pricing so that they can deliver a more functional price at a faster you know instead of having to go away for three months and come back or two weeks or you know maybe they can figure out a way to get the pricing out within that the next week you know all those things are you know really give you the ability to shorten up that um that delivery time you know in order to close and then ultimately lowers the the pressure that you need on on the size of the pipeline yeah I think that's great advice and a lot of it is some of our client some of my clients I've looked at don't have a good defined process so even just getting that to know what happens when so that you're not in the meeting saying oh you know I probably should follow up with that person versus our processes to do this kind of thing that's in there all right Tom so this might uh this might upset you and go against your grain so good um but uh I am really just I absolutely cannot stand um percentag out wins so anytime I've ever seen any calculation from software or people they like to wait things and for some reason that always just irritated me so and and again I know it's I know what we're talking about we're talking about estimates anyway so it shouldn't really be that big of a deal but whenever people break things out and they say well I'm going to wait this at 60% because it's you know maybe it's at a different stage in the pipeline so sometimes people do them different stages which isn't fair because again if it's a referral maybe you know it's already an 80er right out of the gate you know so you have to be careful about putting percentage weights on stages um and then of course you can override it you know based on gut and how you feel the thing is is like where I've found that to be challenging is clients never win 50% of the project or 40% of the project or 80% you're either winning it or you're not so the way I prefer to look at the pipeline is looking at it like you know basically like you know hey this is I'm feeling really good about this deal and 50/50 probably not likely you know and so those three things could be based on the relationship could be based on the first call it could be based on the stage but I bucket the full dollar amount into those three buckets and then I layer them on top of each other so that I can say hey your total pipeline needs to be this big and you have this much of it and you know and then what I can do is I can take the the highly likely stuff and stack it on top of their booked work to show them hey if we get all the highly likely stuff on top of your booked work we only need this much left right we only need um 100 ,000 and then I look into the 50/50 work and I see how big the 50/50 work is and that 50-50 works I got a million dollars okay well we only have to win you know 10% of these contracts in here in order to to get you what we need for booked work for the next couple months so rather than like parsing it out and say and and again I don't know maybe you do the maybe you prefer the waiting method either based on whatever but but for me it's either I wanted it or I didn't and I like to put it in just like three simple buckets um yeah and so and I did have a client add a fourth bucket on me which I understood and I was fine so it went from likely to all but one and all but one meant like actually I'm just waiting on a signature so it's like Beyond likely so they wanted to see it layered in like booked all but one or you know and then likely they wanted to see those those things stacked on top of each other and like a bar graph against the the target for revenue for the month yeah I was hoping to disagree with you because I thought it'd be fun to to have that but we're in the same place the the main reason I agree with you Adam is when you wait it's easy to sort of ignore the deal itself and say well I only had it at 20% so I'm not arguing and when you actually see the deals a common thing I will find is either your pipeline say it's a million half but you've got two deals in there that say are half million each and so you're like yeah your pipeline's this big but win both of these and you're thrilled and lose both of them your pipeline just fell apart but if you put a couple deals in you're looking specific you can look like if I'm at the beginning of October looking at October you can look at the deals in October and say can you really win and get this much revenue of these three Deals and you know you've got three weeks left and then they're like well it's G to take a week to sign and a week to get the team so no we can't and that seems important to look at the specific deal that you're talking about and then I do similar to you where we're saying we call it best middle and worst case so if I take what you already have and put your worst case on top of it here's what you look like in the same discussion that you talked about yeah it was in there and I mean the fun stuff and being able to do that and talk about specific clients is you know any of our clients that are service based that are doing project-based work it's that's there's a lot of different tools and a lot of things that you can bring um the conversation's not as as um you know specific like and whenever you think about like a retailer or somebody like that like why would you have a pipeline conversation about that well just the focus shifts right so now you're talking about um now you're talking about seasonality potentially you're talking about product sales so now you're talking about which products are selling when they're selling um you're you're having sales conversations um by sales I mean like uh sales discounts like pricing you know hey do we need to get more of this in do we have high margins here you know how can we bring sales up in this in this month or this next quarter you know those kind of things so you're having maybe pricing conversations and and seasonality conversations and those kind of things for product placement stuff if you're dealing in like more of a reta environment and not a Project based so the the value of that conversation is still there it's just the focus kind of shifts and maybe the analysis is a little bit different yeah hopefully this is a good summary for people what we do with Pipeline and as I mentioned at the beginning we have our CH pipelines a module in there and we'll show you the tools that we use and go into even more depth than this but if we're looking to advise clients and say that we're starting to look we want people looking forward pipeline's one of the great places where you're looking forward and and we've talked about the different ways that it can help people in doing that absolutely good thanks Adam yeah thanks s enjoy this podcast visit our website Summit cpa.net to get more tips and strategy for achieving modern CPA firm success we're here to be a resource in this everchanging industry