The Wize Guys

Episode 38: The Wize Fab 5 Key Performance Indicators

January 19, 2023 Wize Mentoring for Accountants and Bookkeepers Season 1 Episode 38
The Wize Guys
Episode 38: The Wize Fab 5 Key Performance Indicators
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Episode 38: The Wize Fab 5 Key Performance Indicators

In this episode of The Wize Guys Podcast, Brenton Ward, Jamie Johns, and Ed Chan discussed the fab 5 KPIs for running your business. These KPIs will help you track the performance of your practice and scale your business. Unfortunately, most firms do not track their numbers, productivity, and more which makes it hard for them to manage from the bottom up. 

Find out how Ed and Jamie shared their views on the importance of setting up a system that will allow you to monitor your firm’s productivity and performance.


0:35- The importance of measuring KPIs

3:41 - Why profitability has the biggest area in terms of impact

4:23 - How to be in control

6:31- How to manage expectations

7:41 - The concept of lockup

8:41 - Ways to track productivity and performance

11:01 - The importance of capacity planning

11:35 - How to match your senior client managers to clients


“All the reason why the cost of goods sold is such an important area is that the cost of goods sold is our labor and other businesses might be other things.” - Ed Chan









Download the full transcript here.

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Episode 38: The Wize Fab 5 Key Performance Indicators

Brenton Ward: Dissect this Fab Five. And Jamie, I want to start with you, because you coined the phrase obviously pulling on your experience from working with it and looking at the different types of jobs, the business. But if you wouldn't mind taking us through your version of the Fab Five and then feel free to chime in terms of further explaining the importance of these KPIs.

Jamie Johns: Yeah. Thanks, Brenton. 

We'll work through each one on its own merits, but the very first one is that you should be looking at at least monthly as the growth fees. Because if I take one step back you should have an overall goal for the firm, of growing the firm to a certain level of revenue or fees to take to get your ideal income. If you don't have the level of fees there in the first place, you're not going to get to your ideal income. And from previous videos and discussions, we know what the ideal income is. 

So it's really critical that you measure the revenue of the entire firm, but also how you measure the revenue per senior client manager. An important aspect of that is to go away and take some time out in May and June every year and set the overall fee budget for each client manager. And if you do that and Ed took me through these years ago, you'll end up setting the overall revenue budget for the firm for the next year. You can break that down per senior client manager and per month. Then you can even you can go down into a bit more micro level and look at the budget of the overall team per month. And so you've got the whole gamut there to look at. You've got a year-to-date budget versus a year-to-date actual. That seems to be critical. That's going a couple of the guys almost just leaving this spreadsheet to see that they're hitting the school. That exiting the school card, sort of creates this culture of healthy competition are healthy, ‘Are we hitting budget?’ 

Just on that, Brenton, it's really important to make sure that once you do step back from the firm that the senior client managers set their budget themselves. You can't force it on them. You've got to articulate what they did last year as in actual fees, Then, ‘Okay, how much more are we going to get this year? Can we lift that another 5%? Can we do 10%?’ So get there by setting budgets. It's critical to get there, so they are invested in that figure. And that's a key there. 

Obviously, you can see the under and overs. That's a point that the next, not one there is profitability. It's always taught me the most important feature in a firm, almost any business is the cost of goods. So it's the biggest area that you can have an impact on for the better. If you can offshore if you can save costs on technology efficiencies, that just has a massive impact on EBITDA. In terms of profitability, we look at really two things. There is the cost of goods sold percentage and obviously the EBITDA percentage. 

Brenton Ward: I'm just really sorry. Ed, you go.

Ed Chan: All the reason why the cost of goods sold is such an important area is that the cost of goods sold is our labor and other businesses might be other things. So, if you're selling or not making up, make this up like glasses. If you're selling glasses and you know what a glass is. If you're buying this particular glass, you know how much it's going to cost you. You can sit there on your shelf and you're not the cost of it. But our cost of goods sold goes up and down depending on the feelings of our staff. So someone could wake up one day and then feel bad and their productivity is really bad and they can get up the next day and they feel really good and they're really productive. And your cost of goods drops. On other days the cost of goods goes through the roof. 

Unless compared to selling a product where your cost is fixed, this is this goes up and down. So if you don't manage your people and if you don't have time. She's sorry to labor on that. Things like that. You're not managing the staff's productivity very well. Unfortunately, if you've got two or three staff that you're there all the time, you can manage them because you're there. But if you've got 40, 50, or 60 staff, and some of them are working from home and you can't do it by brute force in this area. The cost of goods sold costs you a huge amount of money if you don't manage it properly. It's really because we sell time, we sell our labor and we can lose control of this cost of goods sold depending on what our stops doing. So you need to have all these systems in place, these measurement systems in place to hold people accountable and so that you're not controlling. So you're in control without being controlling. 

Jamie Johns: Yeah. That's actually me. 

Brenton Ward: Perfect! I've got a couple of questions coming through, but I might just hang onto them until you run through the KPIs, and then I'll ask at the end if that's right. 

Jamie Johns: Yeah, that's fine. 

Just to finish on that profitability as well, it's as soon as you follow the Wize way and you set up your teams. These days now I've got five teams. One of the really critical things is to look at the EBITA calculation per team. There’s a piece of information on the WizeVault on that as well. 

It's critical that Brenton, once you grow more than one team, you have a look at which teams are contributing most to the overall EBITDA. It's such an interesting KPI because you can have some managers with the highest revenue and they're quite chuffed that they've got the highest revenue while they're contributing the least of the firm's EBITDA. So you get all these types of scenarios and you can weed out the facts and that'll help you manage the business and manage the senior client. 

The third point is lock up, whether we're bookkeepers or accountants, we've all heard of the term lock up. But essentially what lock up is where for work in progress. If you're doing timesheets, you put time on the clock against jobs and clients. Then, of course, you've got you're treated as if you're billing in arrears and offering terms, you'll have to try data. The difference there is, when you actually go to build the time against that job and raise an invoice, you'll see that right off time. If you can't invoice it, so it's a write-off. If you can say, ‘Well, we did a great job on that.’ For whatever reason, you can invoice it up higher, you'll have a write-up. Just on that lock-up is really important because in my experience at Sky you can have some managers or some teams or some individuals who have a massive amount of productivity. In other words, out of their ideals on a day, let's just say they put down 80% and they might hit their productivity, they might actually increase and go above their productivity. But the question then becomes, ‘Is that invoiceable, or is that billable?’ You can be left in a situation where that particular senior client manager, the person with the relationship with the client doesn't manage the expectation right. So you can get a situation where you've got a heap of write off because you simply can't build it. Because if you send the bill to the client, they're going to tell you to get staff. 

Brenton Ward: In the technical term. 

Jamie Johns: So, I come back to the thing that Ed says, manage the client expectations and there's no point absolutely working your butt off and not being able to build the client. You've got to manage the consultations around your billings. 

The fourth point there is sales. You know, it's critical for you to measure for a whole acre of reasons, and I'll touch on them. If you've got a marketing team going and you're spending your money on marketing, you want to know how many leads are coming in. But critically, I want to know what percentage of those leads the senior client managers convert. So while you might have a heap of heat beneath the leads, they might be converting them. 

At Sky, I've got people that can convert 70% of them versus they can only convert 30%. Then they might say, ‘Oh, they're poor leads.’ But perhaps that person needs better sales training or needs to follow a sales to help get their conversion up. So that KPI is critical. Then obviously fees come in and your fees are lost and your net. So it might be all well and good that someone's won $200,000 worth of fees, as I've seen. But I've also seen people lose 200,000 in the same year. If you track your fees won and lost, it's absolutely critical because then you can capacity plan for the year ahead and know how many team members you need or know with you. If you've got too many team members because there is a reality, clients come and go for all sorts of reasons. The right thing out for everyone is that if you track this, you can see the trends and it always comes out and trends and it's always focused on what's working and what isn't working for that particular team and the leader.

Ed Chan: The rest of that journey also helps you identify which clients to match up with which senior client manager. So often we talk about A-class clients, B-class clients, and C-class clients, and we forget that if a client doesn't get along with one particular client manager, they may get along with another client manager, and it's to do with a personality. So for example, we have three or four client managers and I often say to the new clients that the new prospective client that comes along. I'd say to them, ‘Look, I'm going to match you up. I think Julie is the right person for you. But in the event that, you don't like her for whatever reason, then let me know. Don't just leave, let me know. We've got three others here to choose from.’ 

So you've got to match the personality of the managers with the personality of the clients. Often where one particular person sees a particular client as a C-class client. Another person sees that client as an A-plus client simply because they're getting along with them. So that's really important as well. 

And if you're measuring the leads conversion and the fees one and the loss of the fees, you can actually drill down into whether you've got the right that you've got the right match between the personality of the client and the personality of the senior manager. 

The importance of measuring KPIs
Why profitability has the biggest area in terms of impact
How to be in control
How to manage expectations
The concept of lockup
Ways to track productivity and performance
The importance of capacity planning
How to match your senior client managers to clients