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SmartBooks COO Jeff Provost Appears on the Pillars of Franchising Podcast

SmartBooks COO Jeff Provost Appears On the Pillars Of Franchising Podcast.

On January 14, 2021 I appeared on the Pillars of Franchising podcast with hosts Ray Pillar, Owner of Molly Maid Aurora-Naperville, co-host Kristin Selmeczy, Female Business Warrior & CEO of Molly Maid Bloomingdale & Mt Prospect, and Fred McMurray, CEO of Westvyne.

We discussed a variety of topics related to franchising, including considerations for prospective franchisees who are evaluating franchise systems, the types of support franchisors should be thinking about to ensure their franchisees are successful, and even how SmartBooks can help in the event of an alien invasion.  It was a lot of fun and I hope you’ll give the show a listen below:

Included below is a transcript of our discussion.

Ray: Well, welcome to the show, Jeff.

Jeff: Thank you so much for having me guys. I’m really excited to be here.

Ray: It should be a fun show. I’m really interested in what you do and I think since I am not that familiar with what you do, can you tell our audience what it is you do?

Jeff: Absolutely. I am the Chief Operating Officer with SmartBooks. We provide outsource bookkeeping and accounting, payroll, HR, and tax to small businesses and franchisees. Many people go into business for themselves to either do what they love or at least to build something for themselves instead of for someone else, right? And so many of these folks, they’ll go get into this business ownership and they want to be in control, they want to live a certain lifestyle and produce income that supports them and all that stuff, but they don’t necessarily know how their business is actually doing.

And they don’t necessarily know how to get the most out of their financials and use their financials to make smart business decisions and that’s where SmartBooks comes in. We really strive to be an extension of our clients teams and to give them all of the back office finance and operational support that they need. They didn’t go into business to do their books, but we did.

Kristin: Well, I am curious because bookkeeping is definitely not my strong suit. When I opened my business, I knew that going in and I think that it really wasn’t until the last couple of years that I even wanted to figure it out. And then the part I figured out, I decided I’m still not really good at it. It’s just not my thing. I don’t like to read directions, I don’t like to do the details. And so we’ve been having a fight about, you need a bookkeeper. No, I don’t. Yes, you do. You need an accountant. Well, I have an accountant. It’s a constant struggle. And I think for a lot of people, you may go into it thinking that you know enough and you know enough probably to get you in trouble is the problem, right? I mean, I don’t know about you, Ray, did you start with somebody doing your books right away?

Jeff: Actually the very first person I consulted with was an accountant before even an attorney because my weak spot is taxes and specifically business taxes. So I consulted with this person and he read the franchise disclosure document for me and I wanted to make sure everything was on the up and up. I think that’s one of the things that Jeff needs to impress upon our audience and how important it is to get these people on board. When I say these people, I mean, accounting and tax accountants specifically, right from the get go, because you can really get in trouble fast especially when you begin to hire people.

Fred: Absolutely. So if you’re a prospective franchisee and you’re evaluating systems and you’re going through the franchisee validation and all of those different things, and you get to the point where you’ve found it, you’ve got the one, you feel good about it, I would highly encourage anyone to make sure you tap into the expertise of someone who can help you look at their Item 19, if they have one. Try to help you build out a proforma, scrutinize it, don’t just accept what they tell you at face value and expect that, “Okay, well, these are the results. So therefore, I’m going to accept that as gospel and this is what’s going to happen to me.” Scrutinize it.

Fred: What are you really going to need for capital? If they tell you can do it with a SBA Express Loan for $150,000, but yet you’re really going to need $180,000 over the first six months, then you’ve got to be smart about it, right? There’s so many gotchas, there’s so many things that you don’t know. And one thing I’ve learned is, as I join these different networking groups and things like that, I may not have all the answers, but my network does. You can spend and waste so much time and ultimately money by just going and try to figure this stuff out on your own or you can just enlist the help of someone who can actually look at this with you that’s been there, done that, can draw on their past experience and be that neutral third party to help you make the right decision.

Kristin: Well, I know when we completed our business plans and then we sent them to some other owners and said, “Hey, can you take a look at this? Can you make sure our cards look right?” And I think of the three or four that we sent them to, only maybe one or two actually took the time and said, “Hey, I think you’re off here. By the way, you might want to tweak this number.” Oh yeah, by the way, we still wound up spending almost double than what we thought we were going to need.

Ray, you and I talked about that before, right? “Hey, whatever you think you’re going to need that first couple years, double it. And be pleasantly surprised if you don’t need double, but really be ready and expect double to be what you really have to have because things pop up.” The economy takes a crap, you’ve got a pandemic on your hand, who knows what’s going to happen. And I think people just need to be aware and get as many people look at your stuff as they can before you really take the plunge.

Ray: Absolutely. And even when it comes to things like, again, franchisee validation, you can go and talk to a whole bunch of folks, right? What questions are you going to ask? They’re not always going to be forthcoming with what their finances are, right? And so you’ve got to be discerning about it. You’ve got to understand how to draw out the information you’ve got, also identify whether or not you are in the same situation as that person or not or whatever.

And so again, even to your point about when to engage and everything, if you’re going through that and there’s an opportunity for you to really learn what it’s like as a day in the life of a franchisee and someone who maybe grew up in the system and then bought their own versus someone who’s coming in fresh from the outside or a semi-absentee versus an owner operator and understanding all of those different intricacies and differences to really have that support to help you understand, to ask the right questions and then to validate that afterwards too. I think it’s really important. So the short answer is, the sooner, the better.

Jeff: Yeah, absolutely. Very important.

Ray: And then the other piece, I guess I would add is when it comes to, you’ve done that, you feel good about the financial path, you believe that it aligns with your goals and all that stuff. And then you actually have to take that scary step of signing the agreement and setting up an entity. And what kind of an entity do I do? I’ve heard about this LLC thing, does that work for me? Do I do this? Do I do that? Whatever. So there’s so much stuff there. And so consult with a tax accountant at that point to understand, again, match it to your financials, match it to whatever other complexity you may have with your personal situations and help you make the best decision there to both protect you from a liability standpoint, but also to make sure that you’re optimizing your situation for tax and others.

Kristin: The one thing I wanted to ask you, you guys are based in Massachusetts, how do you do it if somebody calls you from California?

Jeff: I mean, we work with not necessarily in all 50 states today, but we can work with people anywhere in the country. Our team is remote, so we’ve got people located across the country. And we’ve got clients in California and Idaho and Florida and everywhere in between. So we’re not onsite, not the classic, we’re going to come in and do your books every Tuesday afternoon from two to four and go through your receipts and things like that. We really work to put the right technology stack in place and the right finance stack to make sure that we’ve got all the right pieces to be able to support you. And we put everything up into the cloud and we did that 10 years ago before that was really even a thing. And it’s really come in handy now because we’re not trying to figure it out while everyone’s rushing to figure out how to do this remote thing.

Ray: Yeah, that’s true.

Jeff: We just had to figure out how to work differently with all these intruders in our home offices that we didn’t have previously.

Kristin: So I would have to imagine that you have gotten extremely busy with all of the PPP loan stuff. Are you getting inundated with that? I mean, I haven’t heard back from my accountant in three days and when I finally got to her, she’s like, “I’m just buried.”

Jeff: Yeah, it’s been a busy year on a PPP front. And it’s interesting, we have clients, we’re somewhat industry agnostic. We work with a lot of service-based industry type clients and things like that, but we’re relatively industry agnostic. So we’re not the quick service restaurant only firm, right? We haven’t been impacted as much as some other industries, but we do have all kinds of clients. We have startups, to the fledgling franchisees, to big established companies and again, everything in between. And we’ve seen all kinds of different things. People going through layoffs, people having to cut back, people having to close down their business that was already struggling and things like that.

And so at times, we saw a little bit less of a demand for the core basic bookkeeping, but then we got a lot more demand for fractional CFO, for tax, to help with questions like, “Can you help me figure out how should I be thinking about my finance? What am I actually going to need? What happens when I can reopen? How am I going to plan for that, both from a revenue and an operating expense perspective? And then, can you help me figure out which loan is best for me? Can you help me track all of the expenses so that I can have a higher likelihood that it’s going to get forgiven?” So we have been incredibly busy navigating all of those things.

Kristin: And some of those have changed, right? I mean, from where we were, I started filling it out and the next thing, I would get a phone call, “Stop, don’t do it. Everything’s being revamped.” And so then now I fill out my second wave of PPP and it says, “Well, was your first wave forgiven?” I’m like, “Well, hell no, it hasn’t been forgiven. I can’t even fill out the paperwork because you all just changed everything. What am I supposed to do?” It’s really crazy. It’s a wild time to be a small business.

Ray: All those things that Jeff mentioned are easily looked at if you have some sort of an accounting system. And if you don’t, if you don’t know what you owe, if you don’t know what your income is, I mean, you’re doomed for failure because you may be at the edge of either failure and all you need is a couple more bucks, or you may have more money than you think and we think you should close your business.

Kristin: Totally.

Ray: So if you don’t know those things, that’s why accounting is so important and people need to start with something. I know before the show restarted, we talked a little bit about, you said you use QuickBooks. And I started out with QuickBooks and I think utilizing some software like that to account for all the things that are happening in your business and you own your bills and all your income, and you can print out a picture of how your business is doing, maybe you can tell our audience how important that is to know what’s happening in your business.

Jeff: Absolutely. Many instances, we’ll get a new client who isn’t starting from scratch, right? They’ve already had some other solution there. They are like, “Okay, I can learn QuickBooks. How hard can it be? It seems relatively user-friendly, there’s lots of help content out there, things like that. I can do this, I got this. I don’t want to spend money on this, right?” And so they limp along and they think that everything’s fine, but they don’t really understand the true financial performance. I can print out these pretty reports, my income statement and my statement of cash flows and my balance sheet, but do I really understand what those things are? Do I understand what the metrics are, what they mean?

Do I understand what’s important for my business model that might be different from the business model that was loaded as the default with QuickBooks and my chart of accounts and all of those technical things? And maybe you do, in our experience, more often than not, you don’t. And so what we end up doing is we go in, we clean things up, we take time to understand their business and their business model. We get things organized so that we can start to bring to the surface, the true financial performance. And that could be things like understanding project or clients or product profitability.

So you might make decisions based off of what you have for cash on hand in the bank at the end of the day, but maybe there’s one product or one project or one customer that’s carrying you and your business and you don’t recognize that because it’s lost in the busyness of just keeping up with, okay, I know I have to bill or categorize this thing, but now I’m not actually taking the time to really understand at a strategic level, what’s happening in my business.

Kristin: Ray, remember when they told all of us to go back and realign, because they wanted to be able to compare all of our franchises equally? And what was happening is we all had a different chart of accounts. And so the good thing is if you’ve got a great franchisor, they’re going to ask you to set up the same chart of accounts so that they can compare business to business and really be able to identify those who are doing well, those who are not, set up what percent should you have in each category of expense and then say, “Hey, here are really the guys that are running or girls that are running the most profitable companies and why.”

Jeff: I totally agree. In fact, we’re working with an emerging franchise brand and we’re the default bookkeeping solution for all of their franchisees. And what you just described is exactly what they’re intending to do in the way of supporting their franchisees. So we have a standard chart of accounts, we have the standard metrics, everyone is going to be getting the same exact treatment in terms of their books, so that when they look across their base, they can really truly compare apples to apples. And that really helps them from a coaching perspective. This happens to be a brand that really, really, truly cares about franchisee success. And so if they need to do some coaching, then they want to know what they’re looking at is real.

And they want to have confidence that it’s being done well, and that everything is captured and that their books are up to date. And they’re not six months or nine months or, “Oh God, it’s tax time. I forgot I have to do all my bookkeeping.” It’s regular, it’s kept up to date regularly. They get great insights and can compare across the system. So that’s incredibly valuable to the franchisor and the franchisees benefit from it because either A, they just get it and now that they got all this stuff taken off their plate and they can actually just focus on working on their business, as opposed to in their business, with their back office stuff, then great.

And if they don’t, then they’re going to get the help that they need, whether it be coaching from us, coaching from the franchisor, et cetera. So that is a very, very important thing, especially for the franchisors out there in terms of how to really provide that right level of support across the base.

Kristin: Okay, Jeff. Tell me, I want to know. So you’ve done these things with cars, tell me what else you’ve done, because from our brief conversation before the show, it sounds like you’ve done nothing even close to what you’re doing today.

Jeff: That is 100% correct.

Kristin: So how did we get here?

Jeff: Yep, I’m not an accountant. I am not a tax preparer. I am not a payroll or HR specialist, but I’ve grown up in operations. So I started my career with Staples. I was there for seven or eight years, on the corporate ladder and Staples was a fantastic company. A bad thing to say about Staples: it just wasn’t for me in the end. So one of the things that I felt about the corporate world was that selling more office supplies did not necessarily align with me as a person and what I believed in. I’m someone who needs to work in an organization where there’s an overarching purpose. So I bounced around after Staples with smaller technology firms and things like that.

Most recently, I was with a company called DealerRater and we sold it to Cars.com, which is located in Chicago. So I spent some time, lots of time in Chicago, up by you guys and was really focused on taking the DealerRater products to market within the Cars channel. And then I ended up being tapped to oversee cars operations for a period of time, but I was tired of commuting from Massachusetts to Chicago every week, back at home. And so-

Kristin: You didn’t like O’Hare?

Jeff: Oh, I mean, I ended up flying into Midway a little bit more and that was slightly better, but not much, not much for sure. And I loved my experience with cars. I loved my experience with the DealerRater. Cars, publicly traded company, another fantastic company, but it ended up getting to the point where it was dealing again with the bureaucracy and the crunch to hit the quarterly numbers and all of those things and getting further away from DealerRater, which was smaller, from being able to sit down, make decisions, to go and act and things like that. And so the SmartBooks opportunity presented itself and it just seemed like a really good fit.

Looking for someone who really could bring a client service tech background to the organization. Accountants aren’t necessarily known for delivering a great client experience. They’re really good practitioners, but not necessarily thinking about the client experience as a whole and what can we do to make sure that we’re meeting their total needs and that we’re able to retain, and then all those things, right? And so there was really an opportunity and I was concerned. I’m like, “Okay, well, you’re asking me to be COO, run all the day-to-day operations, not an accountant, not a practitioner in any of the things that we do,” but really what SmartBooks needed was overall leadership and focus on the client.

And so that’s what I was able to bring to the table. Another thing that most endeared me to SmartBooks was the purpose. So Calvin Wilder, Jenny Wilder are the co-founders, husband and wife. They started the company in 2009 and they did it from day one with the mission and the belief that small business owners deserve better. They both saw that so many of these medium and large sized businesses have access to all of these different financial resources and entire departments with accounting and finance and all kinds of different backgrounds and everything, and small businesses are just out there on their own, trying to figure it all out and stressed and not able to achieve their goals and their dreams.

So that was how they got the start and they’ve never lost that. And so, that was one of the things that I love, that focus on really, truly helping people. As I mentioned in the quick intro before, I’m a bit of a matchmaker. So I know enough to be dangerous. I’m not going to get in there and do your books, but I can understand what your business model is, I can understand what your pain points are. And if I think that we can be of service to you and we can help you, then I’ll present a great option.

Jeff: If I can’t, then my goal is to introduce you to someone who can. And so that’s where that client service focus comes in, kind of that rising tide raises all boats kind of thing, right? There’s so much opportunity out there and I just want to make sure that people are matched to the services and the provider that’s going to meet their needs.

Kristin: Yeah, I think a lot of small businesses need companies like yours. There are probably many that don’t know they need services like yours until the IRS is knocking on their door and they have an audit or something like that. And then they go, “Oh, crap.”

Jeff: Yep, exactly. Or in many instances, it’s, “Oh, my bookkeeper is retiring or my spouse told me if I don’t have someone other than them do my books, then there’s going to be hell to pay or whatever, right?” And so it’s those types of pain points as well that present themselves and they’re like, “Okay, I’ve known that I wasn’t getting necessarily the best solution, but it was good enough and it worked, but now it’s time to upgrade and I feel like I want to get more.” So we get a lot of that too.

Ray: Many people in our audience are thinking about starting a franchise. So if you were in touch with one of these audience participants and they said they wanted to start a business, what would be your recommendations to them at this point?

Jeff: I guess if you’re obviously thinking about franchise, I think that’s a fantastic place to focus. There’s so much benefit in adopting a quote unquote proven system, as opposed to just trying to start from scratch on your own. So I think it’s a great way to get going and many of the franchisees and prospective franchisees that I talk with, they’re great practitioners. They have a particular skillset. If they want to be an owner operator, then stick to the industries you know, if you just want to be a general manager and leader and care less about the work and more about the money, then that’s fine too. So franchising really has something for everyone, which is great.

So I think starting first with, “Okay, what’s really important to you?” Again, if you’re going to be an owner operator, then it’d probably make sense to be an owner operator in a business that you are passionate about and that you think you would enjoy doing for at least the next 10 years. If you’re really looking at it more from an investment perspective and you’re going to be a semi-passive and you’re going to hire someone to run the day to day and things like that, then really think about, “Okay, well, what do you really want to get from this investment?” What do you need in terms of what you look to pull out of the business and in what time period?”

Because finding that great manager that’s going to lead these operations for you sounds fantastic, but you’re going to have to be capitalized enough to be able to sustain that until you get to the point where there’s enough actual revenue coming in to support that person and for you to be able to draw something out of it and whatever. So those are things that I would encourage people to think about in terms of which path and think about the industry and the business model and purpose and all those things as a starting point.

Kristin: The one key thing and we’ve talked about it on previous shows, is being able to identify where your strengths are and where your weaknesses are, so that you can hire someone that complements you, because I did the same thing. And I had somebody who stayed in the office and I went out and I did the estimates. I met with the people, I went to the chambers, I did all the social parts and they were there taking the phone calls.

And when a quality check or whatever needed to happen, if I couldn’t be there, they went. Because it’s really hard depending on the type of business you have to be the one and only and Ray talks about it all the time, right? You want to work in the business, around the business. And so I think that’s the one thing we really talk a lot about is you have to really define where do you want to be and for how long?

Jeff: And what you were just describing there too, Kristin, you don’t want to outsource the growth and the sales to some extent, depending on the business model, but in the example you’re using, you don’t want to outsource someone out representing your business and building your brand and your market and doing all the networking and things, but there’s no one that’s going to care more or do that better than you, right? But why not outsource those things that are the necessary evils, right? Your books, payroll, those types of things, but that is not what’s going to help you grow from zero to a million, right?

It’s the other activities of working on that are going to help you grow. And you just need to be able to get empowered, to make better decisions along the way with outsourcing to those. One other piece I’d too, sorry, is just a story. We have a franchisee that we’re working with that had a very successful corporate career running a large, large organization. And one of the things that he told us was, “I always had a whole bunch of people. I never had to worry about payroll, I never had to worry about hanging up a HR poster in my break room and worry about all of these things that now that I’m it, I’m the head honcho, I’m responsible for everything, I don’t know what I’m doing, right? And I need someone to help me and to make sure that I’m not opening myself up to all this risk, to liability and whatever, right?” So it’s interest.

Ray: And that’s an interesting point because I have lost contact with some of the things that my office people do and starting the business, I did it all pretty much. And the way I make decision points is I gave away the things I hated to do, and one of that was dispatching. And I really hated to do that. And since then, the software has changed so much. I would have to spend a couple of days in the software just to figure out where things are and how to move people around and things like that.

So that is a dangerous thing, but it’s probably a good thing that I don’t know, because I’d probably screw it up more. I mean, I really have to compliment my managers. They really do a fantastic job in getting the people out and making sure things are efficient, all our clients are taken care of and all our employees are happy. They really do an excellent job with that.

Kristin: But when you look at the evolution of businesses, it is really, really interesting. And I think that the last few shows that we’ve done, I think for people who have listened and really paid attention and are really thinking about starting their own businesses, we’ve talked a lot to people who’ve said, “Listen, these are critical programs that you need to have right when you get started, because if you don’t, if you try to implement them later, it’s going to be a lot harder. It could cost you a lot more money, because you’re then cleaning up the mess that was created by not having them. And doing something like this, it doesn’t maybe cost you a little bit more yet initially, but it could save you a lot down the road.” I’m always a super out front person, right? So I do my own payroll and I have a staff of 30 people. So I was talking to a guy yesterday, he’s like, “Oh my gosh, Kristin, you’re doing your own payroll?” I’m like, “Yeah, it takes me 20, 30 minutes. It’s not a big deal.” Yeah, but then you have to do your own taxes. Yeah, I do my own taxes. Well, how does that work out for you? Well, I hate it and sometimes I’m a day late and sometimes I forget. I’m like the absent minded professor, right?

And so it’s a total nightmare for me. And so now I’m at the point where if I were just more disciplined, it wouldn’t be a big deal, but I’m not. And so I need to recognize that a company SmartBooks would eliminate all of that for me. And is it a little more expensive? Yes, but I guarantee you, it’s not as expensive as all my late fees and penalties, right? I mean, really. And that’s what people have to think about.

You don’t realize, I did it, I won’t even tell you the late fees and penalties, not because I didn’t have my money to pay, it’s because like, “Oh my God, I forgot last week.” I mean, come on, that’s ridiculous. And I’m not the only one out there who can’t remember stuff. So really, let me be the example, get someone like Jeff’s company to help you pay the money up front and don’t worry about all the crap on the backend, it’s just not worth it, really.

Jeff: I’d comment on two things there, one, it’s like diet and exercise, right? It’s much easier to maintain your weight than it is to lose a bunch of weight, right? And so, if you get behind on this stuff, then it is going to be a lot harder to get it right down the road. So starting off right out of the gates, making healthy choices and whatever, you’re going to get better results in the long run.

But then the other piece that I would add is, and it’s hard because it is intangible, but I’ll just speak for me personally. We’re in the process, we’re going to start franchising SmartBooks soon, which I’m really excited about, but right now, we’re working on all the legal docs and the compliance and all of those things and all this stuff that I don’t particularly enjoy. And I’ve got this weight on my shoulders of like, “I can’t start to do the stuff that I really love doing with actually getting out there and talking to prospective franchisees and helping them to figure out whether or not this would be a good opportunity for them because I’m bogged down and I’ve got this monkey on my shoulder that I just can’t seem to get off with getting through this stuff.”

And it’s not something that I’m particularly good at, and so the act of being able to hand that off to someone which we’re working towards, to say, “Here, you’re the expert at this, we’ve taken it this far, but I really need you to take it over the finish line for me,” that weight lifted off my shoulders is worth its weight in gold, as far as I’m concerned, you know what I mean? So we’re going to pay for that, but now I can breathe a little easier, I can get excited about these other things, as opposed to just dreading the fact that I’m going to have to sit down and work through pages and pages of legal docs, right?

Kristin: Absolutely.

Fred: So we are, as we always like to take our weekly trip down rabbit hole, I forget where it started, but I do remember it had to do with an HR person dealing with talking about AI and things like that and I finally said, “Okay, we’re really going to go down the rabbit hole.” And I asked the rabbit hole question, and man, there was eight seconds of panic silence in our heart. And like, “Oh my God, what am I going to say?” So it’s been-

Ray: I get nervous about this, Fred.

Fred: It’s been a fan favorite ever since. So today’s topic, alien invasion, as we know, there’s more and more in 2020 besides all the weird things that were happening, Department of Defense was declassifying video of, I guess, they’re now calling it unexplained aerial phenomenon, something like that, UFOs. Anyways, assuming that the alien invasion is coming, how will SmartBooks figure out how to help alien races minimize their bookkeeping expenses in the alien world?

Jeff: Okay, great. Well, I mean, it sounds not that dissimilar to tax and sales tax and all of those things, right? In the normal world that we live in today with sales tax, there was this big thing within the last couple of years called the Wayfair ruling, that completely changed the way that companies needed to think about sales tax. And it used to be that you needed a physical location in a particular state or jurisdiction in order to have physical nexus, which you were required to file sales tax in that state. Now, it’s no longer the case. It’s now an economic nexus. So if you have a certain amount of revenue that you deliver to a particular states or something like that, then you may be obligated to pay not just at the state level, but potentially even at the local jurisdiction.

So I would look at this alien invasion the same way that we would attack sales tax and say, “Okay, what are the expenses that you’re incurring while on planet earth, as compared to over here? How can we attribute those expenses to the right areas, make sure that you understand, where are you going to pay the toll and pay the tax? And let’s make sure that we take great care of that for you.”

Fred: So Ray, you want to take us home with the final question?

Ray: We’ve talked a lot about how it is important to have someone account for what you’re doing in your business. So if someone wanted some advice in that area, how would they get ahold of you?

Jeff: All right. So you can find me on LinkedIn, it’s Jeff Provost and I’m right on LinkedIn at SmartBooks. You can find me on smartbooks.com. You can call me, my number is 978-905-6346. You can email me, jprovost@smartbooks.com.