A trailblazing CPA on managing a merger and why it’s OK to lose clients

Jody Grunden, CPA, stands out for more than his brightly colored Hawaiian shirts at accounting conferences and events. Grunden was one of the first firm leaders to embrace remote work, and he remains a proponent of it. His firm also was one of the first to offer outsourced CFO services.

In this JofA podcast episode, Grunden reflects on his firm’s growth, explains how cultures can mesh during a merger, and predicts where the future lies for CPAs. Hint: It’s not in delivering financial statements to clients.

In an earlier JofA interview, Grunden discussed not feeling fear when trying something new and explained why Monday is his favorite day of the week.

What you’ll learn from this episode:

• The evolution of outsourced CFO service offerings.
• Why Grunden says remote work “is the way to go.”
• How off-site retreats helped grow postmerger culture.
• What “remaining independent” means to Grunden.
• The future of client advisory services.
• Why a client’s “graduation” should be celebrated.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Hello, listeners. Welcome back to the Journal of Accountancy podcast. This is Neil Amato with the JofA. Joining me for this episode is Jody Grunden, a CPA and firm leader who is regarded as one of the profession’s top innovators. Jody, I’m going to welcome you to the podcast first, but I’m also going to tell the listeners how you and I met two years ago. You may not even know this story. It was two years ago, Digital CPA. The recap was JofA news writer Bryan Strickland is watching the Town Hall session remotely. The event’s in Austin, Texas.

I am on site in Austin, but I’m recording other podcasts. He sends me a text and says, “Be on the lookout for Jody Grunden.” Now, I didn’t know Jody from Adam, but Bryan helped make it easy by pointing out that Jody was the guy taking part in Town Hall while wearing a Hawaiian shirt.

Jody Grunden: Yep.

Amato: Totally on brand. I guess that was enough for me to figure it out.

Jody Grunden: It’s funny. I got some slack from that. You see all the different comments people make and it was very, very favorable. I was the only one obviously without a suit on stage with 5,000 people or however many people were in the Town Hall. But I did get one critic. Really shot me down, said I wasn’t being respectful and that sort of thing. It’s like, well, I guess I can’t please everybody in that regard.

But being authentic, I think, is the key to anything. I hope people get that from seeing me around – when they see, I’m always wearing a Hawaiian shirt. It’s super easy to get picked out in a crowd. I enjoy it.

Amato: Yeah, we’ll get back to that authenticity topic in a little bit. One thing I remember from our conversation, which I then did meet up with you to record a podcast. That was two years ago. Now you’re a repeat guest. We talked then about virtual CFO services. You mentioned that your virtual CFO services, even in 2022, were among the top search results for that phrase. They still are, I double-checked. But how have those services matured and changed maybe in the past few years?

Grunden: Wow, that’s a great question. I’ll bring you back, to way back in 2004 when we actually started providing this level of service. We basically turned a tax practice into a CFO practice. We’re like, how can we provide more for our clients than just simply providing them a financial statement that they really didn’t understand anyways?

With that, I was like, well, let’s meet with a client on a regular basis and let’s see what we can do with it. We had to try to figure out how to bundle our service. The idea was we’re going to provide maybe some cash flow for the client. Show them, hey, here’s what the next 13 weeks looks like. It was funny because even that I thought was the simplest thing in the world, and the clients were wow, this is cool. This is something we’ve never had that insight before.

It developed from a cash forecasting, then it developed into long-term forecasting because then they asked well, can you extend this over a year and see what our cash position is going to be at the end of the year and what our debt is going to be? It’s like, yeah, we can definitely do that. I took what I learned in the corporate world and brought it to a small business owner, and it just blew up. With that, we just added different services over time.

Recently, we actually created what we call profit-focused accounting and what that means is we take the nonfinancial indicators that people understand and put that into a financial statement and show them how this forecast is really going to work. We talk what the client’s talking about.

If they’re a truck repair company, instead of talking, how are you going to increase your revenue by 10%, it’s like, how many trucks are going to come through? What’s the average truck? Are you going to be able to get this amount through the next month or whatever? Then when the next month comes around, the client said, yeah, we’ll get 10 trucks through. The average truck’s going to be $80,000 a truck, and we meet with them again. It looks like you only got eight trucks through. The eight trucks, here’s what that did to your number. Instead of having extra cash in November, you’re actually going to have to borrow on your line of credit. Are you OK with that? It’s like, well, not really.

Then we can start digging in. Well, how can you better things off? What’s next month going to look like? Well, we’re going to get 10 trucks again next month. I’m like, great, high five, we leave and off goes next month. Then next month hits like you only got six trucks this month. What do we need to do? Then now here’s what your cash position is going to look like five months down the road or six months down the road.

That really developed into what we call that profit focus accounting, really focusing on the future and how can you actually control as a business owner. Because like I said, most business owners have no clue how to increase their revenue by 10%. We did last year, so I guess we’re going to do it next year. It’s like, that doesn’t necessarily equate. With that, we’ve really focused on that high level. Now, I want to make sure there’s a distinction there.

When we provide virtual CFO services, what that means, it’s more the strategy and the high level. That’s not the bookkeeping and the accounting that’s in CAS 1.0. But we do do that for about a third of our clients. A third of our clients, we do provide that as an ancillary service because maybe they can’t afford both the CFO side and the virtual side. How has it changed over the last few months? Well, we’ve really gotten a lot into more detail with our CFOs on really showing industry-specific comparisons.

For instance, if it’s a dentist practice, we want to make sure that that CFO can compare what they’re seeing to other dentist practices across the U.S., using different software and analysis to do that. Being industry-specific to the client is super important, especially nowadays, and so it’s been more geared towards that.

We’ve always done that for marketing agencies because we have about 80 marketing agencies that we work with, and so our CFOs naturally understand that vernacular and know the trends and so forth. But as we ventured into different verticals, like the law practice and transportation and that sort of thing, we want to make sure that our CFOs are really versed into those different industries.

Amato: I didn’t say this in the introduction, but the name of your firm, you’re Summit CPAs but also with Anders. Could you help set me straight on that because I know you had a merger?

Grunden: Yeah, I’ll be happy to. Once we hit that $10 million in revenue, we were actually courted by Anders CPA Advisors out of St. Louis. With that, the idea was, maybe merging the two together and becoming their virtual CFO arm would be something I was super interested in doing. Because my end goal was how can I get this to a $50 million practice, and how quick can I get there?

Because I’m 55 years old. I don’t want to work forever. I thought, well, this gives me a great opportunity to merge with a larger CPA firm and with that, potentially using their resources, you get to that, our $50 million mark. It’s been a great success story so far. The name changed a little bit. We went from Summit CPA Group to Summit Virtual CFO by Anders, and we’ve had that for the last two years. This will be the third year going onto it.

Then we’ll eventually migrate that off to Anders Virtual CFO. The Summit will eventually fall off and it will be Anders brand versus the old Summit brand. That’s the transitioning that’s going to happen. Like I said, it’s been a great ride. The Anders team has been great to work with, and hopefully we can keep our high growth rate and high profit margins going.

Amato: We talked about the innovation of virtual CFO services. Another way that you’ve been ahead of the game, and this is a topic we addressed before, too, but I want to hit it again: remote work. You are a very early adopter in remote work. Now with the advantage of, I guess, more than a decade of going fully remote, what do you think about it?

Grunden: I would never go back. I think remote work is the way to go, and it’s a big mind shift for people. We did this back in – and I don’t know the exact date, but it was like 2013, 2014, is when we actually went remote and we dabbled a little bit in it. We had an individual that was in Texas and we’re like, hey, can we make this work? Because actually our very first CFO client was a fully remote client. They had 65 people all across the U.S. and the United Kingdom and Canada, and they’d never had an office.

This was something we actually learned a lot from them on how to make it work. I wish I could say I invented all this cool stuff, but it was more learning from other people. With that, we really enjoyed it. Back in 2013 when I pushed it to our team, big revolt. The team was like, “No, we can’t do this. Even though we’re working remotely with other people, we can’t really do this because we’ve got to mix and mingle, we’ve got to actually see people,” everything you hear. With that, it wasn’t soon after I kicked everybody out of the office.

I probably told you the story before, but I kicked everybody the office. With that, we did new construction. We built the offices up. We had 18 people. We made it really cool so when they came back, they could really have a good environment. When they were out of the office for the six weeks, they figured out how to work remote and they loved it. The funny part about it is we never used the offices that we built.

I spent $100,000 on construction that we never used. Funny part about that is I owned the building, and so when we had new tenants come in, they didn’t like the layout, so they remodeled it again. It’s kind of funny. But with that back in 2013, when we did do the remote, Forbes wrote an article about us and it was a nice thing about the top 100 companies ever to go remote and they had companies like Apple and Microsoft and all these big companies on there. Then it was Summit CPA Group.

So we were by far the smallest, but again, the only financial firm at that point that they recognized is going remote. What happened was over time, we had to figure out, hey, how to make this work? How do we create that remote culture that’s going to really survive in the environment? Because we were the first. We were trying to figure it out, flying the airplane and figuring it out type of a deal.

With that, we had to make sure that the autonomy was the key focus on the remote thing because again, people really like autonomy. They like the ability to make choices. We really basically did everything around autonomy. Instead of clocking in and clocking out, we didn’t care if you worked 40 hours or 45 or 50 or 30. Didn’t make any difference to us. Just long as you got your job done timely and it was accurate and quality work. Within the book of business that we needed you to support in order to justify your salary.

We had that idea and it gave the person autonomy to where they could actually go home during the day and go to a PTA meeting, whatever that might be and then come back and work just as long as, again, the communication was there. That was super important.

We did team retreats and we still do team retreats, we do two a year, where we take the whole team to Vegas and then St. Louis, St. Louis being the headquarters for Anders, and then Vegas something that everybody can go. It really gives that opportunity to collaborate and to mix and mingle and to make friends. That’s the whole idea of retreats. It’s not to learn the newest tax law or anything like that. It’s to learn soft skills, work with people, and really get to know people because again, friendship is one of the keys people stay and that’s how we build that friendship.

It also makes the company bigger, because in a remote environment, you’re only as big as the people you work with. Even though we’re a 65 person-remote team, if you only work with three people, you’re a three-person remote team. What the retreats allow you to do and we force people to do it is that we mix and mingle and have small group dinners and get them to know other people. Man, now instead of a three- or four-person team for that person, maybe it’s a 10-person team. Then the next retreat, maybe it’s a 15-person team. Maybe they’re now bouncing ideas off of people they don’t work with just because they know people and it creates that atmosphere. But again, the idea is that you’ve got to really be intentional with a remote environment, and you got to create that autonomy with people.

Even to the point where we give stipends to people through different cards. What I mean by that is we give it’s like a $250 a month stipend where they can get their own chair or they can upgrade their computer or they can get a nice mic or they can really do whatever they want without having to go to us, Big Brother, and get permission. Just as long as it falls into the guidelines, they can spend that money however they want.

We give them again the autonomy to make those choices and people just love it because again, it just makes them feel part of a bigger group and they feel important and not have to really worry about what am I doing next that I’m going to have to get permission for or that type of thing, or who’s got the best chair in the office? We don’t care about that stuff. If they need an upgrade, they just simply use their card and do it and it makes it nice.

Would I go back? Absolutely not. Remote work, I think, is the way to go. It’s unfortunate that a lot of folks have tried it and failed because they just didn’t have the right tools or the training or the right ideas or how to do it, or maybe they are be too, hey, is this person really working type of mentality. In reality, you can’t have that mentality going. It’s got to be a trust-first environment. You trust until that person takes away that trust. If you have that, remote work will be really great.

Amato: I think you just touched on so many topics that I could ask you about from hearing that. One of the things I was going to ask was how you build that sense of team when everyone’s dispersed. I think those retreats do make a difference. I think if you never had those, your workforce has autonomy, but they also have some loneliness.

Grunden: Exactly. They feel like they’re on an island. We’re seeing that within Anders right now where maybe the tax department has a few people that work remote or the audit department has a few people that work remote. Without having that bonding experience, those folks will leave with the next pay increase. Someone offers them a little bit more money, they’re gone, because there’s really not that stickiness.

What we’re finding with the remote team, perfect example is when we merged, we had I think 50, 55 people on the team, somewhere in that ballpark. Since the merger, we still have about 50 people. We haven’t lost hardly anybody through that remote, even a big change like merging with another company, you lose a lot of people typically.

Out of the five people that we’ve lost, we had to let three of them go just because they just weren’t a good fit over time. That’s another thing with remote is if a person’s not working out in the remote environment, you’ve got to let them go. You got to let them free so they can actually find something that’s a better fit for them versus trying to fit that circle-in-the-square type of a deal. That’s a really important concept.

Amato: I’ve heard it a few times, either from some people I’ve talked to at Anders, people who know people from Anders: We want to remain independent. What does that mean to you?

Grunden: What the independent part was that when we merged, the important thing was that one of the requirements that we had, because we had a lot of people reach out and say, hey, we’d love to acquire you to come aboard. It was like, well, only if we can stay independent, meaning that we had to be able to run our division or our service line independent from everybody else. I didn’t want my marketing team just to go away, or my HR team, or my tax team, or I didn’t want my people to all of a sudden be part of different groups.

I wanted it to be concise, because what we did is we came up with a formula for success on growing profitably and growing a team at a high growth rate. Because we were at 20% net profit and a 25% growth rate for years, and I didn’t want to do anything that was going to change that.

With that, the independent part had to be there, where we had our marketing – as you mentioned, type in “virtual CFO,” we pop right up anywhere in the United States. That was an important concept because we got a lot of our leads through our website. I didn’t want that to just go away and be part of a bigger website or whatever that we get lost in the mix. I knew that if we did that, we wouldn’t be as successful. Our margins would drop, and our growth rate would slow down.

Amato: What part of that independence thought is also, I want to be authentic. I want to be Hawaiian shirt-wearing Jody?

Grunden: A hundred percent, a lot of it goes that way. It’s just one of those things. I worked in public accounting prior to starting my practice, for really large accounting firms. I also worked at a really large corporate office. Each of them had their own nuances that were kind of cool or not. The one thing that I picked up, especially from the corporate world, is being authentic.

It’s funny because you would think, well, in the corporate world, maybe they’re dressing in suits all the time. This was way back 20 years ago, when that was a norm. If you got out of that norm, they sent you home. Because we had casual Fridays back then, where you could actually wear jeans. You know, that was the new thing.

With that, when we started the practice, that was one of the things that I had to have. We had to have our team feeling comfortable being around clients, feeling comfortable being around us. A lot of times, when we had the suit thing, it made you automatically feel superior to your client because then, hey, I’m going to teach you how to do this. That casual thing carried over all the way through to the merger. It was like, hey, here’s what I wear, here’s how we do things, are you OK with it? Some were not OK with it, and that’s cool; not a good fit. And others were OK with it.

Anders was definitely OK with it. They’re like, absolutely, to the point where, hey, we want you to continue to talk at all these different conferences. Whether it’s a client industry type conference or whether it’s a CPA conference, and teach people how to do what we’re doing. Don’t be so close-vested. We don’t want your secrets to stay here. We want to be evangelists for those secrets and really teach other CPA firms how to provide a high-level virtual CFO service so that they don’t go through the turbulence that we went through.

Because it wasn’t all roses by any means through that whole process. There were years where we were just like, wow. My wife kept saying, hey, when are you going to make it? I’d always say, it’s going to be next year. The next year it happened, it’s we didn’t make it because of these reasons, but next year is going to be better.

It was one of those things until we actually figured out the process, we figured out how to be profitable, were we actually successful. I wanted to make sure that independence carried through all the way through the merger and then even beyond. I’m on a five-year contract with Anders, and after the five years, I’ll probably stay with Anders. As long as everything stays the same and we’re growing and having fun and exciting, it’s going to be a long-term agreement for me.

Amato: What do you think is the future of the profession?

Grunden: Great question. The future of the profession is really in the advisory side. I think the CAS part, where we’re doing the accounting and the bookkeeping, I think a lot of that’s going to eventually get automated, and instead of being in the weeds trying to do the accounting stuff, we’re going to be forced as companies to actually be more on the advisory side. I pictured that from the very beginning.

That’s why we didn’t really dive in initially and say, hey, we’re going to be the tax return experts. I figured at one point that’s probably going to go away, so I don’t want to get to the point where I’m retiring and trying to sell and we don’t have a practice anymore. The same thing with the accounting side. I wanted to be able to provide that level of service, but I didn’t want that to be the main focus. That’s why we provide the CFO side, the forecast and consulting side.

As AI and automation and all that machine learning really kind of kicks in over this next year or two years, the accountant is really going to have to step out and be more of the advisory. It’s out of their comfort zone for a lot of folks, and so it’s not for everybody. That’s a big part, is that we’re going to have to adapt to what the clients really need. Because they don’t really need a financial statement.

It’s funny I say that — I’m an accountant — but they don’t understand a financial statement.

They don’t understand what a balance sheet is or an income statement. We understand that as accountants, but they do not. We have to take that information out and show them, hey, here’s what the important part of that information is going to do, and here’s how it impacts your business. Here are the things that you need to think about as a business owner going forward to be able to hit the goals that you want to hit.

That’s what the advisory does, and that’s why we call it the virtual CFO side, because we’re actually helping them with strategy. We’re helping them answer questions that they probably already know, and we’re bringing that out so that they actually take action upon those ideas.

Amato: Jody, this has been great. Closing thoughts: Anything?

Grunden: Super excited with the industry the way it is. We definitely have an industry that’s going to make waves and be even more of a big part or a big role in a lot of company success, more so than we were before. More so than we’re just simply giving them reports and saying, hey, here are the reports, figure it out. Now we’re actually helping them and advising them and really seeing them grow.

Probably the coolest part about my job that I’ve experienced over time is when a client leaves. You think, why is that cool? Well, it’s because we got them to that end point. We got them to the point where they went from a $5 million company to a $50 million company, and now they got so big, they need to hire an internal CFO, or even better yet, they got to the point where they can now merge with another client and roll off in the sunset or sell it for a big multiple, or pass it down to another generation. That’s the exciting and most rewarding thing.

I think as advisers, we’re going to see that more and more and more. As we get better as advisers, better able to communicate and really help clients out, we’re going to see that, hey, people are eventually going to graduate from our service and move on, and that’s a cool thing.

Looking forward to a bright future with the accounting profession, with CFO [services] probably being one of the leading things in a firm, versus audit and tax. It’s going to be, really, the future of accounting.

Amato: Jody Grunden, thank you very much.

Grunden: Thanks, Neil.