Building a Solid Financial Foundation for Your Agency with Adam Rundle
Key Takeaways
- The Perfect P&L for an agency: about 10% of revenue on acquisition, 45% on fulfillment, 15% on overheads, and 30% pre-tax profit, give or take a point.
- Only two things drive a business: your ability to get a client and your ability to deliver. Rent, software, insurance, and merchant fees are a byproduct of those two.
- Taxes are a 100% byproduct of your business decisions. If filing is all you care about, Adam says pay someone on Upwork $500 once a year instead of a bookkeeper.
- Finances don't need to be complicated. Find the most important constraint, solve it, and move on to the next one.
- The six-week Profit Accelerator exists so both sides can test the fit before a retainer. Adam doesn't expect anyone to sign their life away.
- CleverProfits' weekly and monthly client reports started as a report Adam built for himself to keep up with clients. A teammate suggested sending it out.
Adam Rundle is the co-founder of CleverProfits, an accounting, tax, and CFO advisory firm for agencies and other online service businesses. Gray MacKenzie hosted, and he came in as a CleverProfits client himself. They covered Adam’s route from a South African law firm to a 35-person firm, why every engagement starts with a six-week program, and the Perfect P&L benchmarks.
What you do with the numbers is the whole value
Adam grew up in Pretoria, studied accounting at the University of Cape Town, and joined a 150-person law firm as he finished college. Within four years he was effectively its CFO, telling partners who’d been there 45 years what they could pay themselves.
Anyone can run a P&L, anyone can reconcile an account, but what you do with it… that’s the value.
He and his wife moved to Annapolis, Maryland, where he started a small practice. Then he met Brian, a tax specialist in California: “If I don’t have a tax guy, I’m nothing.” They merged in mid-2018 after three or four phone calls, and CleverProfits was 35 people at the time of recording.
Why every client starts with a six-week Profit Accelerator
Gray described the onboarding as he’d experienced it: six weeks of catch-up bookkeeping, benchmarking, strategy, and a tax plan before any retainer. Adam said the firm used to sell straight into retainers.
We’re a sticky service. Not everyone’s looking for a new accountant every second day of the week, or a new doctor or new lawyer, and they’re relatively grudge purchases. No one’s waking up in the morning like, “I can’t wait to pay my accountant today.”
Without the historical cleanup, Adam said, anything he tells a client is a guess. The short engagement also gives both sides an exit.
We don’t expect you to sign your life away. This is two to six weeks. You’re going to get what you need anyway… But also you’re going to be like, “I don’t want to work with them,” or you’re going to be like, “Hey, these guys are cool.” And I think that’s a good way to start the relationship.
After that, clients land in one of three tiers: compliance (bookkeeping, taxes, a monthly report with a Loom walkthrough, Slack access), strategic (an account manager and a CFO call every two weeks), and executive (CleverProfits sits as CFO on the leadership team). Of roughly 250 clients, 15 to 20 were at the top and 50 to 60 in the middle.
Finances don’t need to be complicated
Gray asked what CleverProfits most often has to fix. Adam’s answer: focus. Finances can feel complicated, but they don’t need to be, and the biggest distraction is taxes. When a prospect says they just need bookkeeping so they can file, he pushes back.
You do realize that that’s a 100% byproduct of your business… If your only interest in the world is to file taxes, please don’t ever pay a bookkeeper. At the end of the year, take all your stuff, find someone on Upwork who understands accounting, say, “Hey, can you please prepare my books for me,” give him a week, 500 bucks… If you want to run a business so that you actually have taxes to pay, you’re going to need that stuff every week.
The same goes for the owner who wants to talk about software before enough clients are paying them. Adam’s method is one constraint at a time.
Everything in the world is a series of constraints. You identify the most important one, you solve it, and you move on to the next one… They’re putting the byproduct first. They’re putting things that are really non-needle movers at all front of mind.
The Perfect P&L: 10, 45, 15, 30
Adam built the Perfect P&L after reading Profit First and Simple Numbers and realizing he still couldn’t tell clients whether their margins were good. A traditional P&L lists expenses alphabetically. His groups them by what drives the business.
There are only two key drivers in every business… it’s client acquisition and performance: your ability to get a client and your ability to deliver… And then the third one is overheads. You have to have a bit, but they’re the byproduct. How much you spend on rent, software, insurance, utilities, merchant fees, it’s all because of the other two.
In an ideal world, if you’re an agency, you want to be spending about 10% on acquisition, about 45% on fulfillment, and about 15% on overheads. Get your 30% pre-tax profit number. Awesome number, really robust.
Give or take a percentage point, he added. Gray noted that ZenPilot’s growth, delivery, and operations map directly onto acquisition, fulfillment, and overhead.
The reports and the Slack channel were built for Adam first
Gray said Slack access and Loom-narrated reports were the biggest difference from accountants he’d used before. Adam said none of it was designed as a differentiator.
It originally was just me… but I found it hard for me to keep up with where everyone was at. So what I did for two months is I just created a report for myself to know where people are, and then the guy on my team was like, why don’t you send this to people, because this is super helpful. And then the report was born, and now it’s a massive part.
Slack happened the same way: clients were already in it and asked to use it, so Adam’s rule is to go into the client’s world and “have a button next to their button on Slack.” The team had just run an internal project on improving communication further. As for how CleverProfits grows: one salesperson, almost no marketing, and about 90% of the work from referrals.