Practice Success Podcast

Hannah Smolinski Shares How to Scale Smart with Tips for Small Business Success

• Canopy • Season 2 • Episode 8

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Hannah Smolinski, founder of Clara CFO Group, shares insights on scaling small businesses through smart financial strategies. She discusses the benefits of fractional CFO services, overcoming hiring challenges, and adapting to industry changes. 

Chad Saley:

Hello, I'm Chad Saley and welcome to the next episode of Canopy's practice success podcast. I am super excited to be sitting down today with Hannah Smolenski, the CEO and founder of Clara CFO group. And today we'll be discussing different ways, uh, that Hannah has helped small businesses grow their firms, grow their business and how some of those same tips might be applicable to accounting firms. As well as a variety of other topics. So, uh, thanks for joining us today, Hannah.

Hannah Smolinski:

Thank you for having me. I'm excited to be here today.

Chad Saley:

Um, maybe to just start things off, uh, just tell us a little bit more about yourself and about, uh, Clara CFO group.

Hannah Smolinski:

Sure. So I am a CPA, but I don't do taxes. That's where I always start. Um, I always try to tell people, yes, you can be a CPA and do other things. Um, Even though people still ask me tax questions all the time, I'm sure other CPAs relate. Um, but I started a fractional CFO company in 2017. And since then we've been serving small businesses with just CFO services. So unlike lots of businesses that are trying to, you know, do the whole gamut of everything from bookkeeping to tax to CFO, we do not do that. We just focus on the CFO services alone. So, um, other than that, I'm located just North of Seattle and, um, just enjoy, you know, playing tennis and spending time with my daughter and, um, just kind of try to have a full life outside of running a small business, which is. Difficult sometimes, but I try to do my best.

Chad Saley:

No. And I know just that, I mean, so accounting as a whole is, is very much a service industry and. Is one of the, one of the things I think that most impressed me about you was your focus on trying to just help and essentially helping others with free advice on how to run their businesses. And what I'm referring to is your, is your YouTube channel and, uh, everything that you kind of have done there has been about just like answering people's questions. Maybe, I mean, tell me just a little bit about how the YouTube channel came about and kind of what your goal was when you first started posting those videos. Uh, compared to kind of what it's become today.

Hannah Smolinski:

Sure. Yeah, it's been um, youtube has been a really wild ride, but I love talking about it and I Think like the way it started versus what it's become is like way different. So I I Originally started the channel maybe back in like 2018 just because I had You might remember that people at one point in time were posting Facebook lives. That was a thing. Like, everybody was like, you gotta post Facebook lives. Um, so that was a way to take some of that content and put it somewhere else. So it had longevity. Um, so we, uh, just thought, hey, we'll post it on YouTube. Nothing ever came from that. I think one time I did a video where I did a walk through of a payroll provider. And, um, then I looked at that video like two years later and I realized that it had some views on it, like at the end of 2019, beginning of 2020, that video had maybe like 7, 000 views and a few people had signed up for this provider through my affiliate link at the time. And so it just kind of made me sort of think like, Oh, this is like. Interesting that I got some views on this, that felt like a lot to me. And, um, I was thinking, well, this is kind of a cool way to like, get some information out. Like maybe it's not necessarily bringing clients in, but it could also like potentially be a revenue stream or something, or maybe I could, you know, put some other content out on, um, on, uh, the channel. And I think at that point in time, at the beginning of 2020, I just decided like, okay, I'm going to try to use YouTube to, um, Grow the business in some kind of way. So I just started, I made like a couple of videos that were just maybe about like profitability or something like that. Um, but then we all know what happened in March of 2020. And very quickly I had clients asking me about this. Program. What is this? And I was thinking to myself when I really started to understand the program, which was very quickly as I was reading out of the content, I realized how important it was for people to know about it very quickly and how I also knew. That tons of small business owners, because I'd been working with small business owners at that point in time, usually did not have a financial professional on their team that was going to advise them on things. And so at the time and the news, all of these kind of big businesses found loopholes to get access to PPP money. And it was making me like upset that, you know, the businesses that it was designed for, we're not getting the money and all my clients were needing answers. So I did a quick webinar. And then invited anybody I knew, put it up on YouTube, and then that got shared so many times, and then there were questions that came out of it. And then before I knew it, I was making another video to answer the questions on the first video or correct something that we thought was correct, but it's not, it wasn't correct. So we put out another video. And so. That time was really crazy. I say we, but really it was just me. Um, it was, uh, just like, okay, let's respond to this question and make another video, respond to the question and make a video. Um, so that's kind of how like the channel really got started. When I first put that first PPP video up, I think I had like 50 subscribers on the channel and then very quickly. It jumped to like a thousand and then it was 5, 000. And then, um, it happened pretty quickly on those first couple of months of just. Really answering people's questions. I wasn't getting any benefit from answering people's questions besides the fact that I was like, I feel, I felt like I was doing a public service at the time and there was a lot of bad information also on the internet at the time. So I felt like I was fighting that as well.

Chad Saley:

How, um, so maybe now when you think about, okay, the videos that you want to put out, are they coming from? Just the questions that you're hearing from your clients or what kind of will spur you to say, Hey, this is something that's big enough that I actually ought to do a video and put some information out on.

Hannah Smolinski:

Yeah. I mean, content has been, um, uh, changing because, you know, when the PPP and the ideal programs and ERTC, all of that kind of started to go away where people weren't able to get those, um, access to those things anymore. I looked around and I said like, okay, well. Now, I have an audience on the YouTube channel of small business owners. What else do they need to know? Because I don't have any more content ideas to talk about programs that are essentially dead. So you got to do something else. Right? So, um, I, a lot of the content ideas were coming from. Conversations that I was having with clients over and over and over again, because we were, you know, having advisory calls with our clients all the time. You know, we found ourselves constantly talking about like, what's the minimum amount of profit we're looking for in our business? Or how do we do cashflow forecasting? Or, um, you know, let's talk about like how to build a budget or, um, you know, how do you use this little thing in QuickBooks? That is kind of annoying sometimes, you know, um, there was a lot of Things that we found ourselves doing as CFOs that, or just like consulting with small business owners that, um, some of that translated into, well, this could be a video. Um, and then sometimes it was like really basics where it was, it was. Thinking about things that people might need to know, like how to read an income statement, how to read a balance sheet. Um, and then also looking at people's comments and questions and trying to come up with content ideas from that as well. So it's kind of come from lots of different places.

Chad Saley:

So jumping into like some of those actual tips and, and some of those things that you've, that you learn and then you share what, um, What are some common themes you've been hearing recently? Like what are the common questions that you're getting from small businesses that they're trying to figure out about their own internal finances and how they're running their businesses?

Hannah Smolinski:

Yeah. I mean, I think, um, for, for our clients right now, because we work with mostly B2B service companies, so we work with agencies, um, consulting companies, either professional consulting or, um, Education consulting, DEI, things like that. Um, what we're seeing in the market right now is, um, a couple of things. So we're seeing like cash is tight for a lot of people. Um, especially any of the, the consultants that might be somewhat deemed as like luxury is being pulled back or marketing has had like a hard time in the past couple of years with a recession. Um, But we're also seeing trends of just labor costs continuing to rise. Um, that's like a common thing right now where we see, um, employees wanting raises, and we're not seeing as much of the ability to raise prices as much as we need to on some of that. So we're starting to see like that margin, um, Margin challenges between what we can really charge for our services and what people are wanting to get paid. So that's like one of the things we're seeing as a trend. And then we're having lots of conversations with our clients right now about pipeline and how to get consistent business development in. Because. We're looking at it like way ahead of time before revenue comes in, what, what are they doing? Like, what are their actions? What do they need? How do they need to be spending their time? And so we're having those strategic conversations with them as well.

Chad Saley:

And I think those are both two things that obviously, you know, the accounting industry is, is facing as well. Like they're having those same issues with finding new employees. And hiring and retention. And then that same issue with business pipeline and business development. As you look at, um, kind of small businesses and maybe kind of turning that and looking at actual like accounting firms, what advice would you give an accounting firm that is having a hard time hiring? Is there, are there tips or are there things that you've come across that you think would be helpful or beneficial?

Hannah Smolinski:

Yeah. I mean, we're going through hiring right now. And, um, I've been thinking about this a lot because We've seen it as probably one of our biggest business challenges is. Bringing in quality people because I, especially for a fractional CFO work, because the people we put in front of our clients is so important. We can't use an outsourced, you know, somebody who, um, you know, is living overseas, like it doesn't really work even from a time zone perspective, you know, and, um, so there's lots of different things that we need to think about when we think about who we're bringing in front of, And, um, I think hiring for us, we've really started to think about how we can, um, how we can attract people to us by our like marketing efforts, but, um, not necessarily our marketing efforts to our clients, but how can we have marketing efforts to people who are, um, who are, we might want to have as employees. Yeah, so we've actually kind of thought about, like, we're splitting the role between, like, um, our COO, for example, is going to be more, um, focused on, you know, Like instead of her, you know, meeting with potential clients or anything, her kind of ongoing business development, quote unquote, is to meet with potential candidates, people in our accounting network that might potentially be interested in working with us, not just now, but maybe like two or three years from now. So, I mean, we both come from public accounting. That's where we originally met. And, um, you know, we have lots of good contacts from that. And a lot of those people are really interested in like this Potential work now to do this, like, as they've, you know, kind of been burnt out on corporate. So, um, kind of doing a little bit more of a proactive approach to recruiting where we're sort of identifying people that we'd like to work with and, um, kind of doing it that way. Now we're a very small firm, so we don't need to be hiring, you know, a 20 person incoming class, you know, um, but, you know, it's also about like making the firm. Um, attractive to work at, you know, I think accounting has a really, um, you know, bad reputation from, you know, jobs in general, people don't want to be working as much as we were required to work when we were working in public accounting. And, um, now, you know, even people who. Have had corporate jobs, you know, they're looking at what is this going to provide me overall as like a better life to come in and work at a different company. And that's what we're trying to, um, kind of put as the forefront is like, your life will be more fulfilled working with us versus maybe like a different type of company. So it's a bold claim.

Chad Saley:

Yeah, but I think that's true. No, absolutely. But like it's, but it's so important just because. I think all, you know, almost all potential employees, like when you're looking at a place to work, you're not just looking at, you know, the, the job title and the salary anymore. And, and, you know, along with the actual work, but you're looking at, okay, well, what is the work life balance and what is the culture like within that company and what is the environment? How are my coworkers? Is this, and again, like you say, people don't want to work 50, 60. 70, 80 hours anymore. And so, and they have a little bit more room to choose that, you know, there's especially in accounting, it seems like there's so many job openings that people are going to take their time. And they're going to look around and find something that they feel is the right fit. And I think it's really important that you, when you're looking in within your own company, like, okay, well, how do we then make ourselves attractive? And it's not just, you know, stocking the fridge with treats and, you know, you've got to look at, okay, well, what are our actual core values and what do we believe in and what does that employee going to deal with? Um, and it's nice to see that more and more companies are starting to address that and starting to realize, okay, we need to actually look at. At core values are just as important sometimes as a salary.

Hannah Smolinski:

And, and I think also the work to, um, I mean, we're, we're a CFO company, so, um, the work is actually very fulfilling, um, that we do because we're impacting small businesses. Like so directly we can be we are their trusted advisors. So it's a very fulfilling role role for people where if they're coming from, I mean, we have people who've left like, you know, big corporations that they felt like a cog in a wheel. And then they get to go into an environment where they get to be seen as, you know, a very trusted individual whose opinion really matters. And people are really You know, understanding their, their value that they're bringing to the table. And there's a fulfilling part of that. When a client's like sits across from me, it was like, Oh my gosh, I'm so glad you're on my team. Like, I'm so glad you're here with us. You know, like that is that, I mean, you, that's something you wake up and go to work every day for, you know, when you're like, I'm really making a difference here. And that. I mean, that's super attractive to people.

Chad Saley:

Yeah, absolutely. Jumping into kind of that, that fractional CFO world, how have you seen kind of that just as a, um, as kind of part of accounting and the accounting profession, how has that grown in recent years? Are you seeing more and more kind of. accountants and CPAs trying to focus on the fractional CFO work or is it still relatively new?

Hannah Smolinski:

I'd say when I first started, um, I had to explain what a fractional CFO was to almost anybody that I talked to, um, because it wasn't really, I mean, people were doing it for sure, but it wasn't as much of a mainstream concept. Um, I would say that now we're in a situation where a lot of business owners have heard about a fractional CFO and so it doesn't take as quite as much education. Um, however, I do think that the accounting industry is kind of putting it on a pedestal of like the answer. You know, this is the answer. Everybody needs to provide this service. Um, but truthfully, I don't think that everybody's very well suited to provide the service. So if you're trying to take somebody who maybe, like, doesn't have the expertise or doesn't have the background or doesn't even have the confidence to, like, Provide the service and then they're trying to sell it. It's not going to be a very successful service, um, and delivery. And then I think you also have a lot of people who are trying to automate a CFO service, which I'm not saying it can't be done, but, um, I think the value of a CFO is so much. time that really like goes into understanding a business and being able to be a thoughtful advisor. Um, so I, I think you devalue it if you try to automate it too much. Um, so I think there's a little bit of that. Um, so there's a lot of new players, I think I'd say in the market, um, you know, we're losing more to like people. You know, going somewhere where I think you get a lower cost where we didn't have that quite as much before. Now we were lower cost before, so maybe that's like part of it, but, um, you know, there's, there's lower cost providers out there. Um, but you know, I think there's definitely a lot of wide ranges of what you're getting when you get a quote unquote CFO service these days. And, um, I don't think that the consumer is very educated on. What they're getting oftentimes. So they might have been told by a business coach, go out and like, get yourself a fractional CFO. And then they go and they hire one, maybe based on price. And then they're not really getting a full, like true CFO service that is going to be providing them with like that ongoing support they really need. Maybe it's like solving a problem, but it's not, maybe not solving their whole problem. Cause I think consumers are generally not educated enough about. What exactly they need when it comes to accounting and advisory on the financial side. So,

Chad Saley:

yeah, where, where would you say is the, is the breaking point between a business hiring a fractional CFO versus that? Okay. It's time for us to actually hire just like a full time CFO. Or do you think they don't, you don't ever need a full time CFO. You can do everything with fractional.

Hannah Smolinski:

Oh, I mean, I think that not all businesses can operate on a fractional CFO. I think, I think there, you do get to a place where it would make, it would probably make a lot more cost. Um, sense to have a full time CFO on payroll rather than having a fractional. Um, I mean, I don't know, a starting CFO salary might be somewhere around like two 50, you know, plus benefits and bonuses. Maybe you're around like three 50 all in on cost 350, 000. That's like kind of, you know, maybe a starting salary. Um, You know, I think if you are trying to pay a CFO on your team as a consultant fairly well, you've got to make a markup on that, you know, that, uh, salary. So you're not going to be able to basically sell your CFO's services for anything less than, you know, 350. So you do have like probably a cost, cost balance there. I mean, Um, I'm sure some people would be fine still having an outsource CFO, you know, for the fact that like they don't have to take on the benefit of a W 2 or the burden of a W 2 wage. But, um, I'd say, you know, there's a cost consideration there. And I think we would have to advise a CFO. And when that transition needs to happen for a client, if they're using, you know, enough of the time, I think there's also a consideration of like how much time that client could potentially need, you know, are there daily meetings that a CFO needs to be involved in? Does that make more sense? Do you want somebody to be there physically on site to be, you know, actually have that, um, Space. Are you doing fundraising where maybe you need like a really, really heavy involvement from a CFO? Um, you know, those might all be considerations that you might want to have somebody who's actually like an employee. Um, but I think most of the time, most small business owners, um, even up until medium can operate pretty well with a fractional option. Especially if they have like a good accounting structure underneath them, you know, you have controller, you have, you know, everything that, uh, all the other accounting functions are being handled really well, the fractional CFO can work pretty well.

Chad Saley:

So kind of looking at your own business. And I think a lot of, there's a lot of accounting firms that either try to be everything to everybody and they offer all, they offer tax and they do all this. And if somebody says, Oh, you want CFO service? Yeah, we can do that. And they kind of just offer this, this whole big laundry list of, Of options, and that might work well for some businesses, maybe talk a little bit about, uh, your decision, like we're only doing fractional CFO and kind of maybe how that's benefited your personal business and allowed you to kind of help build what you offer and what you do.

Hannah Smolinski:

Well, I think part of it is capacity of, you know, when you're small, um, you can only focus really on one thing at a time and you can try to focus on multiple things at a time, but I think it will potentially diminish the quality of one or the other. Um, when you're, you know, small and you're growing. So, um, for me, it was really more, um. When it was just me working and I was providing all the services, I just frankly said, I don't like doing bookkeeping, so I'm not going to do it. You know, it started from that point and really it came from, I don't like it because it's also not my strength. It doesn't make sense for me to be, you know, toiling away doing somebody's Books, when I can be having a really high value conversation with a client that they value, you know, they're, they'll easily pay, you know, 2, 000 for that conversation versus like a bookkeeper that nobody wants to pay more than like 50 an hour for. I mean, it's just, you know, it doesn't make sense for me to be spending my time doing that. So it. Was, you know, Hey, I'm not even your best bookkeeper because I'm not super detail oriented. I'm much more strategic. Um, that's one piece. And then I, so I was leaning into how can I provide a CFO service without having to do the bookkeeping? And then I realized I could. So, you know, you do have some quality issues sometimes that you come into, but that's also another place that you can advise a client to say like, Hey, Hey, You know, you actually do need to improve your accounting structure and you need to, um, maybe change this bookkeeper. It's really not where this person is not doing a good job for you. You just didn't know because you didn't know what to look for. So, you know, you can kind of come in and be able to do that. And we've, as we've continued to grow, um, we've decided to, we, we toyed around with maybe bringing on bookkeeping for the quality control piece. Um, and to like expand revenue, right? If you can like bring in something and you can add on some bookkeeping, we've always been, um, sell at CFO services. And then if we wanted to add something, it would be like, you know, add bookkeeping or something. But we've actually decided to, um, not. Um, continue even growing bookkeeping services that way. Um, mostly just from like a focus split. Cause we realized like, Hey, we need to have really great internal processes. If we're going to do the bookkeeping and we were thinking like we could buy another business, who's really good at bookkeeping, that's a thought. Or we could just find really great strategic partners. And since we're not at a place that buying a business. Would really make sense from a volume perspective. Then, um, we were thinking, like, the, the option right now is, um. Find really great strategic partners, which we're doing. And that's going to be how we handle the bookkeeping. Do we trust that they can do a really good job? And then our quality of books going in is going to be good. So our CFOs aren't spending time cleaning up accounting.

Chad Saley:

Yeah. Well, just, uh, to, to wrap things up, um, as you kind of look at the different advice that you've been giving to businesses, and we talked Issues with hiring issues with business development. What do you think is next? What do you think is kind of coming up? That's going to be the next big issue to hit small businesses. From this accounting financial side.

Hannah Smolinski:

That's a good question. What's next? Um, I think what we're seeing is just, um, and it's different across different industries, but, um, I don't know if I can standardize it to one thing, but I do see we're having some businesses that they're not adapting as fast as they need to, to potential, um, Changes in either their own industry. Um, so we'll usually like their own industry. So then they're suffering on business development sales side, or they're not able to leverage, you know, other efficiencies and technologies so that they can reduce their costs. And so they're wanting to like take a business that maybe was very viable five years ago. And continue operating it exactly how they were operating it five years ago. And I think that, um, you know, that is kind of one of the big, bigger challenges that we're having, like in, into the future is like, well, how do we, how does business change kind of in this post COVID, uh, AI leveraged, um, you know, new environment that we have. Um, and I think we're all, we're all kind of trying to figure that out right now. So I know I am.

Chad Saley:

Yeah, for sure. The ability to, the ability to change and to adapt to changes is certainly something I think more businesses, uh, they need. And this willingness that you just can't keep doing things the same way you've always done them because the business world is changing too fast. And so the more adaptable you are, I think the more successful you'll be.

Hannah Smolinski:

Yeah. And that can look like, even if it's just like new markets, um, I mean, we have some, some clients that they've always been serving one market, but maybe, maybe it's, maybe it's, that's just not the customer for you anymore, you know, but you're always, you're, you're used to a certain thing. So you continue doing it and then you're wondering why it's not working. So it's, it's always fun.

Chad Saley:

Yeah. Things are always, always changing. There's always something new. There's always something, something else to be, to be working on. Well, Hannah, thank you so much. I appreciate your time. This has been a great conversation. And, uh, thank you everyone for tuning in. You can check out Hannah's videos on her YouTube channel, the Clara CFO group. And, uh, thanks again, Hannah. We appreciate you being on.

Hannah Smolinski:

Thank you, Chad. It's been fun.