Entrepreneur, author, coach, and co-founder of Stride Services, the highly accomplished Russell Benaroya joins us this week to help agencies improve their financial visibility.
About Russell Benaroya
Russell Benaroya is an entrepreneur, author, and coach focused on helping people achieve their highest and best use by staying in their genius zones.
Having spent the last twenty years in investment banking, private equity, and entrepreneurship, Russell was in the optimum position to cofound Stride Services, an outsourced accounting and strategic finance firm helping business owners use their data for better decision-making.
Russell regularly speaks about a range of topics designed to help leaders build successful businesses through a combination of self-discovery and tactical financial tools. A recipient of the 40 Under 40 recognition from the Puget Sound Business Journal in Seattle, his writing has appeared in Forbes. He’s additionally authored Free Yourself to Work on Your Business and, more recently, One Life to Lead. Russell is a business school graduate of the Anderson School at UCLA.
On the weekends you can find Russell trail running in the mountains! An avid ultra-runner, he recently completed the Cascade Crest 100 mile ultra-marathon in 30 hours.
Points of Interest…
- What Russell Does 2:00
- How Stride Services Came About 4:00
- Owning the Financial Professional Services Space 7:44
- General Accounting Vs Your Specific Needs 11:05
- Delivering Revenue Recognition 16:57
What Russell Does
Our intros are legendary at this point, but I always like to give our esteemed guests the opportunity to bring more context to what exactly it is they do. As for Russell…
“In professional terms, I’m the co-founder of Stride Services – a back office, bookkeeping, accounting and CFO services firm, specifically working with professional service companies, agencies, consulting firms, and outsourced IT service firms.”
As for how Russell and the team at Stride endeavored into this business? That happened about three years ago, via an acquisition. For them, it’s been such a purposeful opportunity to leverage their experience starting their own businesses, to support other business owners in achieving something.
The ultimate goal? Russell et al help business leaders to…
- Achieve their highest and best use
- Attain and sustain what they refer to as one’s “genius zone”
- Focus on why they started the business in the first place
The optimum way of facilitating business leaders to do this is by letting them delegate the back office stuff – AKA the “unsexy work”. While “unsexy” it’s very important work. By being able to entrust it to a partner, it provides the space for progress to be possible.
To underscore just how amazing the folks at Stride are; they happen to be one of Parakeeto’s (very) few certified partners. As you may (or may not) be aware; we’re rather opinionated and uber diligent about how we do things on agency operations. We believe professional services have a very specific set of needs.
How Stride Services Came About
Usually, when I ask a guest how they came to start their agency, the answer is usually a variation on a theme – that being “I fell into becoming a business owner because I was impassioned about the thing that became the business.” Russell’s story is a little different…
“I happened to be in Costa Rica at that time because the world works in funny ways. My business partner came to me and said: ‘Russell, we get so much energy from supporting and guiding other entrepreneurs to achieve their dreams. There are facets of back-office services that are really growing and look like a great opportunity for us to serve. How about we partner up and endeavor to find a business in back-office accounting and finance!”
From there, they entered the market, building a strategy on the vision that they had to forge partnerships. Given Russell’s ample background in corporate finance, he’s clearly very comfortable in the accounting and financial space; it was kismet.
As for the realm of the full suite of professional services; that took a little longer to evolve. Upon acquiring the company, it was serving a wide range of customers. You know what’s coming, don’t you… You got to niche it! Or, as Russell puts it…
“Customer focus, customer focus, customer focus! Know your customer, understand their needs and wants. Be seen less as a vendor and more as a partner.”
How do you elevate yourself to that strata? Hone in on the processes. What Russell noticed, in particular with regard to Professional Service Firms, was a lack of process technology and automation. Having such tools allows them to “double click” into the underlying drivers of what constitutes cash flow and profitability – specifically customer-level profitability.
***Russell delves deeper into the labor versus work scenario from 6:50 minutes***
Owning the Financial Professional Services Space
Personally speaking, there’s a massive vacuum in proper accounting, bookkeeping, financial advice for professional services businesses. In fact, I can count on one hand the firms I know of that specialize in this space. That is quite something considering about 50% of agencies in the size range use an outsource partner…
Ergo, many agencies are using an outsourcing partner which isn’t giving them a sufficient level of insight from their financial statements. This, dear readers, is a missed opportunity. Properly structured/personally designed financial statements bring with them a level of business insight to your business which is invaluable.
One could argue that the act of bookkeeping isn’t that complicated; while that may be true, it’s about the information funneled into the bookkeeping process. In Russell’s vast experience…
“What we’ve learned is that problems arise – not from just how the bookkeeping accounting gets executed – but from the process design inside of the organization for how information flows in order for us to be effective.”
Russell has a bunch of different contracts because every client’s unique – particularly when it comes to accounting. A standardized approach makes it pretty hard for that accounting and bookkeeping to be executed efficiently. There’s no judgment, rather an opportunity to elevate the awareness of the CEO. They need to ask themselves: “Am I building a business that is going to transcend me?”
General Accounting Vs Your Specific Needs
I want to zoom out for a bit. Let’s discuss the difference between general accounting versus the specific needs professional services should be considering. What are some of the specific needs professional services have when it comes to finances?
“The number one is – labor allocation, labor allocation, labor allocation. I’m sure I could make a song out of that. Professional Service Firms need to identify what labor is directly associated with the service you’re performing, plus what labor is associated with the overhead in place to keep your machine running.”
Identifying that labor cost respectively means you can allocate the direct labor into a calculation we call Gross Margin/Contribution Margin. This brings a comprehension around if a company is intrinsically profitable for the service that it provides. So, put your overhead to one side for a second; is the thing that you sell (plus the costs you incur to sell it) profitable?
Second on the list, after Labor Allocation, is Accrual Based Accounting. As Russell points out, this isn’t an Accounting 101 class… therefore, you can hear a rundown of Upfront Payments/Milestone Payments, plus some gems regarding “your instinct becoming a liability” ***from 12:40 minutes***
Parakeeto has experience with regard to allocations of labor and gross margin. This month, we have been in the financials of four agencies. Out of those four, 0% of them were able to see their true Delivery Margin. Our concept may not align with a true accounting concept, however, professional services have two layers. Most accountants are not going to set up the accounting system in order to represent that true figure.
***I do a deep “nerd” dive into this from 15:23***
Delivering Revenue Recognition
Revenue recognition is an elusive thing. If your clients are not experts in finance (very often the case in creative environments) then let’s deliver it to them in visually appealing ways.
“Charts, graphs, colors! We can process more information when we visualize it, versus looking at data on a spreadsheet. If that really matters and so how we manifest it is also core to our service offering.”
It’s not responsible for a CEO to absolve themselves of knowing this information. Therefore, imagine the resulting freedom of having it presented in an easily digestible way? Let’s face it, you can’t ignore it.
As a business leader, you require the brain space to zoom out. You need the bandwidth to remind yourself of what you’re trying to accomplish. That’s where strategy comes in. Now, this doesn’t have to be all tactical from the offset, however, it should – at some level – map towards strategy.
Perhaps a vector for a future conversation, but it’s one Russell and his team enjoys having with their clients! So, if you recognize a lot of variability in your agency – perhaps you spend a lot of time putting out fires? Maybe you feel like you’re doing a lot with little progress to show for it? If so, here are Russell’s key steps to getting on track ***from 19:27***
- Don’t freak out.
- Before you rip out your existing bookkeeping solution, perhaps diagnose your own contributing responsibility to the issue…
- Talk to a partner that perhaps has more capabilities to deliver. You may realize you don’t have a very good consistent system for tracking percent complete in a way that’s consistent with your business model.
When assessing your current bookkeeping model in order to maximize your visibility, approach the person managing your books first. Ask them if it’s possible to collaborate on a mutually agreeable solution.
Until that conversation happens, your finance partner is not best equipped/empowered to give you a better solution. They simply don’t have the visibility to see into that black box.
If, after having the conversation, it becomes evident your finance partner isn’t a good fit, your chances of success with your new finance partner are exponentially higher. Why? Because you’re able to clearly articulate your expectations and needs, thus giving this person a fair shot at meeting those expectations.
See more from Russell…
Did you learn anything new from this episode? Let us know in the comments below! We have helpful blogs designed to bolster your agency profitability, such as How To Calculate Your Billable Employee Cost-Per-Hour.
Our next installment of #APP, on March 9th, will see Marcel chat with Noel Andrews. Part 2 of our Gold Front/Parakeeto Case Study with Josh Lowman is here...
Marcel is an agency profitability optimization consultant, keynote speaker and the CEO of Parakeeto. He’s on a mission to help the average agency get the information they need to be more profitable. From sharing educational content and resources to creating tools at Parakeeto to make measuring the most important metrics easier – everything he does is aimed at making agency profitability more accessible.
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