Summary

In this conversation, Daniel Gertrudes shares his journey from corporate America to entrepreneurship in the accounting industry. He discusses his experiences in acquiring accounting firms, transforming operations to the cloud, and the evolution of marketing strategies. Daniel emphasizes the importance of building relationships during mergers and the value of offering finance as a service. He also introduces his innovative approach with Streams, focusing on automation and integration for accounting firms. The discussion touches on the future of accounting, the impact of AI, and the financial strategies necessary for growth and sustainability.

Takeaways

Daniel transitioned from corporate America to entrepreneurship in accounting.
He acquired an accounting firm for 50 cents on the dollar.
The journey involved significant operational transformations to the cloud.
Building relationships was crucial during the acquisition process.
Marketing evolved from traditional networking to digital strategies.
The vision was to provide comprehensive finance as a service.
Streams focuses on automating and integrating accounting processes.
AI will not replace the human relationship in accounting.
Plain vanilla bookkeeping is becoming less profitable.
Future acquisitions are being considered to expand the business.

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Transcript:

Kajabi Course Video DRG (00:00.858)
Welcome to Top &A Entrepreneurs. Today, my guest is Daniel Gertrudes with a company called Growth Lab Financial Services. He's also, if you go to his LinkedIn page, it says, Finance as a Service. He's also acquired three accounting firms. So I want to hear this story. Daniel, you've been doing this a little bit longer than most of the ETA -ers. Started back in 2015. So let's rewind a little bit.

Daniel Gertrudes (00:27.778)
Yep. Thanks, man. Appreciate the opportunity.

Kajabi Course Video DRG (00:30.478)
Yeah, let's slur. Yeah, welcome to the show. Let's rewind and see where how this started and

Daniel Gertrudes (00:36.58)
Yeah, ironically like 10 years ago you didn't find a whole lot of and I didn't even know any non accountants that owned an accounting business. And you know, I sort of got into this. I will start in the beginning. I spent about 15 years in corporate America. The last 10 were in a Fortune 200 company, so pretty big company background. Again, not an accountant, not a CPA.

I had spent about four years doing restructurings, turnaround distress debt kind of stuff as we were liquidating a commercial finance business. That's kind of the boring stuff. And then all of sudden I found myself unemployed. But at least I got paid to hang around to liquidate that company. And I spent about probably a good year and a half really trying to figure out what I wanted to do with life. I was already in my late thirties, 38. And one thing is for sure, I was like, I

I can't go work for somebody else. Did not want to go back into corporate. And so I started on this journey of providing literally fractional CFO services, totally a mercenary, billing by the hour. And I was like, my word, I'm getting too old to be doing spreadsheets again. And I have no idea what the heck QuickBooks, nevermind Xero was. I'm so dyslexic, I can't even figure out debits and credits.

And I'm like, I can't do this by myself. And so it was around the summer of 2014. I met this very young 65 year old woman and she had an accounting, a bookkeeping business and I was and we had some customers in common. And so I was like, hey, you're doing the bookkeeping. I'm trying to get into more of the elevated financial management CFO stuff. What's your exit strategy?

She looked at me, she's just like, what the heck is the exit strategy? I was like, you know, it's that thing like where you want your legacy to continue, but you don't want to work anymore. Maybe you're to work for a few years with me. I learned this stuff.

Kajabi Course Video DRG (02:44.186)
That was a good setup. That's a good setup, man.

Daniel Gertrudes (02:48.132)
It was fun. mean, it was was it was crazy. I remember telling my wife I was just like, Okay, I'm about to buy this for about $300 ,000 actually 350 ,000 all in because we bought the equity. And I was like, I'm just going to take like 125 out of our savings. And I'm gonna ask for a little bit of money from dad and your dad because I need $100 ,000 to pay back the line of credit.

Kajabi Course Video DRG (02:49.561)
Yeah.

Daniel Gertrudes (03:14.02)
from the bank because the bank wasn't willing to lend me $100 ,000 or refinance her line of credit. And that was like a surprise at the end. yeah, it all worked out. It was good.

Kajabi Course Video DRG (03:25.114)
What did you know about buying that accounting firm? you, you know, there's a rule of thumb in the accounting world that it's a one to 1 .2 X of sales versus, you know, a multiple V, but did you know that going into that?

Daniel Gertrudes (03:39.204)
No, as a matter of fact, I looked at that business not so much from the perspective of revenue, but I was a little bit of a corporate geek. I kind of looked at EBITDA and what was the propensity, probability of increasing prices and then cross selling. So, you know, the old fancy synergies thing. I was kind of that guy. So I ended up buying the book for about 50 cents on the dollar in terms of revenue.

Kajabi Course Video DRG (03:51.247)
Yeah.

Kajabi Course Video DRG (03:59.95)
Yeah.

Daniel Gertrudes (04:07.716)
and you throw in the $100 ,000 line of credit that had to be obviously refinanced with friends and family.

Kajabi Course Video DRG (04:14.916)
Yeah. Why did she have a line of credit on a county business? Cause I've never actually seen that. Yeah.

Daniel Gertrudes (04:18.116)
great question. Great question. Back in the day, there was this thing called like billable hours, and then you invoice the customer every week. She was doing every week. We literally had one customer and said, I need a bookkeeper just to pay my bookkeepers bills like we would we would be billing $15 invoices is crazy. But anyways, we built up working capital.

At the time the working capital was always hovering around 30. It was always a month, month and a half worth of revenue that was outstanding. So it was about 50, 50 to 60 ,000 in outstanding. It was rolling. it was rolling. Frankly, from a banker's perspective, I would consider it more structural because, know, when when business when you're not growing your business and you're always floating 45 days, it doesn't really like revolve.

Kajabi Course Video DRG (04:56.068)
So it's kind of a rolling thing. It's just, but it was paid quickly. Yeah.

Daniel Gertrudes (05:12.74)
Let's be honest, it's a fixed. If it's a fixed asset, I have fixed assets, fixed. See, I'm not even an accountant. It's a fixed loan, right? And yeah, no, was. was a lot to be like I want to use. So when I use the word fix, it probably rubs people the wrong way in my perspective, because I had a future state. There was a lot to be fixed, right? I wanted to bring the operations into the cloud. You still had servers. You you had like 60 file cabinets.

Kajabi Course Video DRG (05:14.03)
Yeah, that's true. Okay.

Kajabi Course Video DRG (05:40.474)
This is 2015 -16. Yeah.

Daniel Gertrudes (05:42.212)
This is 2015, right? You had 60 file cabinets full of paper. They had these blue binders. And so it was very much a transformational journey. And part of the saving grace was I found this really great guy. He became my late co -founder. joined the company in 2016 as a shareholder. You know, he helped a big time with bringing that business into the cloud. Obviously the business is very different.

I believe as of today, I still have one employee or two employees, one's about to retire in 30 days. But we had really great, we retained a lot of those team members and we still have some of those customers, believe it

Kajabi Course Video DRG (06:21.252)
Let me, let me clarify something or just ask to clarify is that when you say cloud, you were taken, you've taken the chart of accounts and all the information to the cloud, but on cookbooks online wasn't online till I think much later. Cause I worked for Intuit for five years. Yeah.

Daniel Gertrudes (06:38.788)
Yeah, QuickBooks Online Accountant came out in early 2016 or late 2015. But you had QuickBooks Online. You didn't have QuickBooks Online Accountant Portal where you could bring everything together.

Kajabi Course Video DRG (06:54.222)
Just go do your, into your transactions. Yeah. It wasn't, it wasn't.

Daniel Gertrudes (06:57.29)
yeah, when I'm talking about like into the cloud, I'm talking getting rid of the premise based servers, the fax machines, the paper, all those file cabinets, like operations into the cloud.

Kajabi Course Video DRG (07:13.624)
Yeah, gotcha. Okay. All right. So yeah.

Daniel Gertrudes (07:15.842)
It was a heavy lift. Late nights throwing a lot of stuff out the door.

Kajabi Course Video DRG (07:20.57)
You buy this business and you own it and then all of a sudden like it's great Profits are going up or was there anything under the hood that just didn't match what the seller said. Yeah

Daniel Gertrudes (07:32.748)
so it was, I think it was April 17th. We bought the business, like I've finally signed on the dotted line. people went home on a Friday and I remember that Sunday. It was, it was brutal. And I was telling my wife and at that time, Steven, who's going to become my late co -founder, I remember like calling him up and I'm like, God, I hope these people come back tomorrow morning.

Because this will really suck if it doesn't. You know, it's a you're buying a book of business. You're not buying plant property, plant and equipment. Nothing's like, you know, drilled, screwed to the ground. It's all people. It's a merger of cultures. If I rubbed them the wrong way when we first met them, I mean, who's to say they would stay?

Kajabi Course Video DRG (08:01.237)
Hehehehehe

Kajabi Course Video DRG (08:15.736)
Yeah.

Kajabi Course Video DRG (08:24.356)
Did you have these conversations with the seller about moving that, you know, all the employees, Hey, you got a new boss in two weeks, a new boss, or was this a complete surprise to everybody? Customers and employees. Yeah.

Daniel Gertrudes (08:37.966)
So.

So for better or for worse, every acquisition we have done, it has been, I would say, very much a saving grace that the seller was very open to us almost building a relationship, not even through the due diligence process, because that first acquisition, I was already kind of going to her office by October of 2014. So for six months, I was becoming

Not just me, but also this other gentleman. We were already becoming a familiar face around the shop because I had met Steven in January of 2015. And so even he was starting to become a familiar face. So we were fortunate enough to, you know, sort of breaking the bread with the team members.

Kajabi Course Video DRG (09:31.578)
Yeah, so they saw your face. He's nothing crazy. I did interview with a guy that bought a manufacturing company in England and he said, hey, come meet me at the shop at 10 a And they, he was there early. The seller came in and had all the employees there because he told everybody about him and he was like, here's your new owner. I'm out. That was it.

Daniel Gertrudes (09:55.972)
Yeah. That's crazy. Like that's I don't even know what I would do to do it myself. Now that said, like how we kept it together it right from the first day it was very much of that family, right? Familiar family cohesiveness of relationships, which I would say is probably what got us into trouble 10 years later. Not to fast forward too too quickly, but that's how we kept it together.

Kajabi Course Video DRG (10:03.737)
Yeah.

Daniel Gertrudes (10:25.54)
I knew you're first born. I knew your spouses. You had to build that relationship really quickly for fear of them not coming back on Monday morning.

Kajabi Course Video DRG (10:37.732)
Yeah. Now, were these accountants or bookkeepers or what were they?

Daniel Gertrudes (10:41.432)
Bookkeepers and staff accountants and one or two controllers. So yeah, no

Kajabi Course Video DRG (10:45.228)
Yeah. And did you lose any customers with the transition?

Daniel Gertrudes (10:49.448)
Not immediately. So her name was Janine and she was very much non ceremonial type of person. And I remember her exact words were, let's not make a ceremony out of this. Like let's introduce the theme of Grinnell at the time had been acquired the new owner, Gridan, Growth Lab. Like let's not go out there and make these big announcements. Let's not scare our customers. And you know, I,

I actually look back 10 years ago and I still don't know if that was, we don't do it that way anymore. Like on day one, you tell the customers, right? You just do and it is.

Kajabi Course Video DRG (11:27.631)
Yeah.

my invoice is different. and it's going to a different bank account. okay. Yeah.

Daniel Gertrudes (11:33.988)
Yeah, we wouldn't do that nowadays. But again, starting from nothing outside of having a little consulting business with a few 1099 bookkeepers, you really didn't have anything to hold on to. And then all of a sudden, you just dumped a ton of money that you can't recoup, right? And you've got three installments over the next three years, and you've got these people and you know nothing about the business except from.

from very high level, like as a CFO, as an analyst, like yes, I understand like the balance sheet and the income statement, but actually getting the data and the nuances, the logistics, I mean, this is 10 years ago, right? A lot of paper, a lot of paper. had checks, we had live checks from our customers with rubber stamps.

Kajabi Course Video DRG (12:15.022)
Yeah.

Kajabi Course Video DRG (12:21.05)
Yeah, yeah. 10 years ago. mean, that was QuickBooks. And I remember QuickBooks being there was 124 steps to actually launch a chart of accounts in QuickBooks, a new company. That was the QuickBooks. You take the CD -ROM and put it in your computer.

Daniel Gertrudes (12:21.892)
And these were very wealthy families.

Daniel Gertrudes (12:38.052)
See, I wouldn't even know that. And that's what I struggled with because what I really loved about the opportunity was everybody at the time, I'll speak at least from what I knew in Boston, you could go get yourself a CFO, a fractional CFO. You could go get yourself a bookkeeper. You go to Craigslist, you go to your CPA, or maybe you go to your investor for some referrals, but everything was sort of cobbled together. And the onus was on the founder or the manager to keep.

There was no real financial leadership, right? Because not everything was under one umbrella. And to boot, you you were paying people $150, $250 an hour for a CFO, but really the CFO was acting more like what they knew, which was, well, yeah, I used to be a partner at a public accounting firm and I love my journal entries. But that's not why you're hiring a CFO, right? That's why you hire the bookkeeper and the controller. My vision from day one was how do we bring this all together under one umbrella?

We never talked about it as finance as a service that probably came came later in 2017. But how do we bring the entire accounting and finance value stream under one roof?

Kajabi Course Video DRG (13:46.926)
Yeah. Why was this your mandate versus just like, Hey, I got a nice business. Let's just start growing more customers and adding more people. Why, what was this coming?

Daniel Gertrudes (13:58.84)
I think it's because I started the reverse starting from the fractional CFO side and knowing not that I'm inherently lazy, but I really didn't want to learn how to do that stuff. it's not in my DNA. And I'm like, why am I going to go do that when I, you you in this business, you create human leverage, right? It's kind of how you, one of the ways you make money. And I like, well, you can go out and hire at the timing on Craigslist. You could hire a bookkeeper for

$20 an hour, $25 an hour. Nowadays, it's very different. But what I realized was when I did that, when I was by myself, bookkeeping is not about debits and credits. At the time, it's all about processes, systems, right? And even today, I would say our team is probably more elevated around systems and systems integrations. Hence the reason why we went with this other company I'll talk about later, Streams. Then

knowing about the real debits and credits.

Kajabi Course Video DRG (14:59.77)
Yeah. So you were trying to, you had a vision of what this is going to look like five or 10 years from now, the value that you were going to bring the customers versus just doing their books and maybe their taxes. Yeah.

Daniel Gertrudes (15:13.508)
Right, so we didn't even do taxes. We didn't start doing taxes until April 2020. And that was an acqui hire. So that and that was a that was a scary move to right bringing on someone super elevated, having them leave their current job in the middle of COVID. But you know, I remember turning to my shareholders and I was like guys. This is like a you know, go big go home moments like if we can't figure this out.

Kajabi Course Video DRG (15:23.247)
Yeah.

Daniel Gertrudes (15:42.596)
We shouldn't even be doing this. But I gotta tell you, so you going back to those early moments, yes, the employees Friday, come back Monday, I hope to God. The other big one was come May, revenue fell off a cliff. Now, I knew it was a seasonal business, right? But when you're actually living it 45 days after closing the deal,

Kajabi Course Video DRG (15:44.474)
Right, right.

Daniel Gertrudes (16:12.494)
That May, it was scary. revenue actually was the same number as payroll was. And I was like, my God, did I just buy myself? Yeah, that was scary. I was like, we need to work ourselves out of this. we just started, I ended up hiring, I reached out to an old friend, old coworker, Cory Knoyer, who's here and is a shareholder and actually runs Streams.

And I remember calling Cory in the middle of May. He was a freshman up at St. Michael's University. And I said, Hey, Cory, you know, I just did this. You know, you seem like you were really good when I first met you. Like, do want to come over here and be an intern this summer? And he's like, no, no, I'm actually going to work for the same person I was working for last year. And I said, all right, well, if you change your mind, give me a call. He called me a week later.

And he's like, is that opportunity still available? I said, yeah, man, I'll guarantee you 20 and I guarantee you'll be doing 40. So all day long, he ended up staying here through his entire college experience and joined us right after. But he was a saving grace too, because, you know, when you're dealing with on -premise systems, it's very different. And I was already used to like cloud -based tools. He was our tech guy. Like he helped us move a lot of the on -premise

whether it's documents, servers, all into the cloud, and then also helping us focus on marketing. He's the one that really got us to, well, we had the ability to like spend time on what does marketing look like for an accounting business. And that was the beginning.

Kajabi Course Video DRG (17:57.658)
Yeah. What does that look like for a cloud business? But QuickBooks wasn't really online. I mean, you, till the 2017 era and people weren't adapting to it as fast because a lot of it, you didn't have inventory capabilities till a couple of years after. Yeah.

Daniel Gertrudes (18:17.762)
Right. So what does marketing look like for an accounting? Well, I would say we are quite unconventional, unorthodox with our marketing. always, for starters, I never treated this business as Gertrudes and Associates, right? Always wanted it to be about a brand, about the company. So that was, that's sort of the mandate to start with. And two,

Our customers, they may be businesses, but they behave like consumers. They're small businesses, they're founders. The way of the consumer is pretty much the way of the small business. And they're going to buy in the same way. It was all relationship, shaking hands, rubbing elbows at networking events. And we knew we wanted to move away from that, or at least diversify early on. By the time 2020 rolled around, we were like, we want...

nothing to do with networking events and we want all digital marketing, which ended up

Kajabi Course Video DRG (19:17.799)
The Rotary Kiwana Club, Chamber of Commerce kind of things, trade shows, yeah.

Daniel Gertrudes (19:21.38)
Kind of thing, yeah. And that move in 2020 bit us in the ass, which we're finally working through that now because of all the recent changes. But what was our marketing? So I put this deck together for an audience and Corey and I actually put it together and the title is actually Growth Labs Unintentional Marketing Journey. Our marketing journey was never sort of like stepwise. We're gonna do this first, that second.

But it was always like, know the direction we want to head in. We're just willing to experiment and learn as much as we can about digital marketing to get us to that essentially that mandate. it was started off with some content. We were super light on content. I probably still remember our first blog. We started doing some blogs. We were using medium.

Kajabi Course Video DRG (20:04.525)
Yeah.

Kajabi Course Video DRG (20:15.812)
Blogs, blogs, back then.

Daniel Gertrudes (20:17.612)
Yeah, back then and we were on that platform called medium and LinkedIn articles, right? And it was just a lot of experimenting. No video. Some social media, but nothing like it wasn't deliberate, right? Yeah, and so.

Kajabi Course Video DRG (20:34.292)
You didn't have a content calendar. yeah, not that time.

Daniel Gertrudes (20:37.132)
Not at that time, but we began building that as the years went on. Like as the years went on, like we we checked off those boxes, right? The foundational stuff, the next step and then the next step. And but one thing is one thing I'm very proud of is that as a management team, as shareholders and as a company, we never we never let go of the accelerator. We kept leaning in and putting more weight into it, more weight, which got us to this point now where

You know, we have it down to like a science.

Kajabi Course Video DRG (21:10.17)
So when you're talking about accelerator and you mentioned stream, so what are you trying to do for your customer? What do you hope to provide for them? And I'm hearing that you want to just go past doing their bookkeeping. You want to be a partner to help them grow their business or management more effectively and efficiently. Am I hearing that correct?

Daniel Gertrudes (21:32.708)
Yeah, 10 years ago we used to say, you one of our aspirations is to be an extension of their management team. We were, we wanted to do the entire accounting and finance value stream. That's what we focus on, whether it's the bookkeeping daily, weekly, monthly, the control or ship, the financial plan and analysis piece really blossomed once Corey and Stephen began focusing on that in like 2017, the CFO piece, right? We were already doing that.

the tax piece came on because we were sort of like, boy, like five, six years into our journey, the dynamics of the industry really started rapidly changing. 10 years ago, like the top 100, I'm being super brushstroke here, so I apologize, but the big guys didn't want anything to do with payroll. They didn't want anything to do with bookkeeping. And the fractional CFO thing, it was just a little foreign to them because they're not used to that

They don't have that rapid velocity, high velocity cadence that you need with CFO services. They're used to those like biannual swings and tacks. They're used to the audit projects, right? And so our business, we step back, and now I'm gonna be super like trivial or academic, I remember this bar chart I put up on a whiteboard. I said, here's the profit pool, right? If you look at the profit pool of what a company,

is willing to spend on accounting and finance and tax, it looks like this. And if you extrapolate that or transpose that, yep, for an SMB owner, or you can apply this to like Fortune 500 companies. I remember we would do benchmarking of our finance and accounting to other Fortune 500s, right? And it always like, like world -class was somewhere between two and two and a half percent of revenue, would be focused on that.

Kajabi Course Video DRG (23:10.194)
for a SMB owner. Okay. Okay.

Daniel Gertrudes (23:29.454)
finance and accounting. So you book that to like a bar chart, a compound bar chart. And you look at that profit pool, the bottom, bottom, bottom, which happens to be one of the most important things, paying your employees was the one thing that people, businesses didn't really want to spend too much money on. Paying for that tax advice and the compliance, they were willing to spend a lot of money on. How not to pay my taxes or

delaying of paying my taxes. And then the next sliver was bookkeeping. And maybe they were willing to spend a little bit more for bookkeeping than they were for payroll. And so on and so forth. Right. And you keep doing this and you and we have the evidence because back then you look at my customers P &L like we knew where they were spending their money. Right. they're spending 50 percent of what's available on the CPA. yet the CPA would pop in once a year.

on the 15th, right? And then I'll see you next year. But yet they took a large, I believe at the time, disproportional amount of what was available to spend on finance and accounting. Fast forward five, six years later, guess what? The CPAs and the CPA public accounting, they started to get into CAS, bookkeeping, let's be honest, right? They started wanting to get into the bookkeeping. They were seeing the value. The problem is, of course,

This is a different podcast, but it's the dynamics, the overhead and all that. How do you how do you service a customer for 500 to $800 when you have that level of overhead? anyways, we'll go there. They started getting into our business. Ten years ago, 95 % of our referrals, at least to our company, came from CPAs. Ten years later, 0 % come from CPA. They're now in our business.

Kajabi Course Video DRG (25:24.036)
They're in that business. Yay, right.

Daniel Gertrudes (25:27.684)
And that's why we in 2020 made the strategic decision to start offering tax because we believed one tax was low hanging fruit. Tax, tax should not be the tail wagging the dog. Like we own the dog because we touch the customer daily, weekly, monthly. Like we should own the relationship. But 10 years ago, we didn't actually own the relationship and that would drive me crazy. One, I get a

less disproportionate amount of what's available for this value stream. And two, the relationship wasn't sticky with Growth Lab. It was always with the CPA. And if I wasn't catering to the CPA to make sure their life was easy come at the end of the year, I'd lose the customer. It was cutthroat.

Kajabi Course Video DRG (26:12.388)
Yeah. Yeah. And you're to, do somebody's taxes. I mean, you just to get a license for an EA, which is sometimes in some States, it's just a day's test, one day test.

Daniel Gertrudes (26:27.214)
We're doing it and I I would say that is probably one of my top five best moves.

Kajabi Course Video DRG (26:28.547)
Yeah.

Kajabi Course Video DRG (26:33.005)
Is it a

Kajabi Course Video DRG (26:36.374)
Profit Center, is it profitable? Very profitable. Yeah, that's amazing. Yeah.

Daniel Gertrudes (26:38.532)
very profitable. It's 55 % gross margins.

Daniel Gertrudes (26:44.26)
yeah, because if you ask the team, we shouldn't be higher than 35, 40. Now it's super choppy, right? So if you look at your business as a rhythm, right? And cash operations, like you gotta be a good predictor of like expenses. You gotta have to, you have to have a lot of control because at least for us, so we don't build, so back in the day, like a lot of firms, and I know this has changed. I just saw a survey from Ignition back in the day.

When you prepared and filed a tax return, you probably invoice your client, as they call them, you invoice your client like 30 days later. So you've got all this like working capital built up. yes, it doesn't cost you anything. But that's not true. Like you're paying for people's wages. It's your time that's like being held up there that you're not probably getting paid as the owner, hence the line of credit. And then then you get all this money.

Kajabi Course Video DRG (27:35.982)
Hence the line of credit. Yeah.

Daniel Gertrudes (27:41.028)
Today we do it very differently. Like we take a 50 % deposit on all tax returns on February 15th across the board. And then we either bill you immediately on the 15th of say March or April or October, September, depending like what type of entity you are.

Kajabi Course Video DRG (27:59.15)
when you extension.

Daniel Gertrudes (28:02.174)
Right, and that's that's our hedge of getting paid in full or we get paid when we actually send you the file for signature. We don't even wait for you to sign like we pull the money so. Lot of leverage and a little more predictability around cash flow, but it's a super choppy cash flow, whereas accounting, FPNA, CFO like it's all build. It's all MRR.

Kajabi Course Video DRG (28:08.697)
Yeah.

Kajabi Course Video DRG (28:17.508)
Little bit of leverage.

Kajabi Course Video DRG (28:32.42)
Yeah, yeah, yeah, that's a, you know, the difference between, you know, trying to do business and stirrges or fireworks, right? Your a hundred percent of your revenue is made within a week. That's it for the entire year.

Daniel Gertrudes (28:32.439)
wonderful.

Daniel Gertrudes (28:44.804)
That's it. Yeah, so you bet you have to have a you have a hat. You have to have a crystal ball man like to control. I think it also impedes you from making certain investments in the future because you're just not certain. And one thing is for sure, I rather have a conversation. So there's two benefits to this one is working capital, right? You kind of go negative working capital or two. The conversations is the customer experience. I'm not having to deal.

10 years ago, like a customer call. I can't believe you just sent me this bill. It's for $150. She was only here two hours and she was having lunch half of the time she was here. I'm not paying this. And I'm like, guys, like if this is, if this continues, this ain't gonna work.

Kajabi Course Video DRG (29:32.558)
Yeah, yeah, yeah. Too many of those calls, I gotta figure out something, right? Yeah.

Daniel Gertrudes (29:36.352)
It's not a healthy conversation to have with, it's not a delighting conversation. So I rather have proactive conversations, which sometimes takes a little more work, but I rather have the upfront conversation with the customer. Do you see the exchange of value? One. Is what's being scoped out what you need? Yes. Yes. Great. Here's the price.

Kajabi Course Video DRG (29:59.236)
Yeah. And so I may be skipping ahead here, but let's talk about some of those, a couple of acquisitions that you weaved in and why you made those actions acquisitions.

Daniel Gertrudes (30:05.796)
You're good.

Daniel Gertrudes (30:12.93)
Yeah, so the first one is a no brainer. It got us in the door. It it's like the perfect ETA model, right? It's something that's pre built. The folks are there. Reverent producing controls. Good succession planning, especially when someone's looking to retire in the next few years. The following two the acqui hire was a no brainer too. In hindsight, although COVID made it a little scary.

Kajabi Course Video DRG (30:25.358)
Revenue producing, revenue cash flowing, yeah.

Daniel Gertrudes (30:42.756)
But the next two they kind of came out of it was not a necessity. It wasn't a necessity. As a matter of fact, the second one had two entities. One was focused on and I'm actually having dinner with her tonight. This was in April of 2022 and she was ready to find find new opportunities in her professional career. Today she's actually at.

which is a huge consulting and they actually run and put on the scaling new heights conference, which is like very well attended. But she came with two entities and the one that really got me super excited was the training and consulting entity.

Kajabi Course Video DRG (31:30.087)
So she was, did she, you find her or she found you or?

Daniel Gertrudes (31:35.126)
Ironically, I've known her since I started since I jumped into this industry. She was one of the first people I actually met in the accounting space, and we just kept in touch. Rhode Island is small. so I called her up. I call her up. I call Heather up every like three, six months just to say hi. And this time she was kind of like, know, Dan, I think this might be a good opportunity. I was like, great, I'm all in. And, you know, we literally like.

Kajabi Course Video DRG (31:39.673)
Okay.

Kajabi Course Video DRG (31:44.441)
Okay.

Kajabi Course Video DRG (31:49.018)
Yeah.

Daniel Gertrudes (32:04.9)
did the transaction in 60 days.

Kajabi Course Video DRG (32:07.652)
She was a CPA or a bookkeeper? Or... She's okay.

Daniel Gertrudes (32:10.752)
Actually, I think she is a CPA. she went back to school later on in life to get her license.

Kajabi Course Video DRG (32:17.764)
So she had a book of business of bookkeeping, but she also had some other business which was training and what was it?

Daniel Gertrudes (32:25.516)
Training consulting for other bookkeeping and accounting firms so she would help them understand the application Ecosystems all these major platforms and how to integrate them very large projects Sort of again nice shot in the arm sort of revenue It wouldn't it's it's not for everybody because the the price tag is high right? but one of the things she turned me on to was

Kajabi Course Video DRG (32:30.278)
okay. Okay.

Daniel Gertrudes (32:54.146)
She loved zaps and she had courses on zap, zappia, right? And I said, hey.

Kajabi Course Video DRG (33:00.052)
By the way, Zapier, anybody knows what Zapier is? It's like a Star Trek communicator. It talks, helps talk to each other. Yeah.

Daniel Gertrudes (33:08.004)
Exactly. Now, the nice thing about Zaps is it's very much a DIY. You do not need a PhD in coding. It's very much a no -code type of platform, but it's limiting. It doesn't do deep integrations, deep API integrations. It sort of integrates the 80 -20 rule. So anyways, in March, before we even closed the deal, Heather and I were talking and she's like, Dan,

What if we sell this on a monthly subscription basis, these Zaps? And I was like, I like that idea. I'm not sure I want to like hang on to Zaps because it's too easy to like take, right? You can replicate it very easy. And I said, but what about a platform like at the time they were called IntegraMAT, they're called Make now, something a little more elevated, not too like crazy software development.

but enough that the average person would, they need help, right? Make is sort of where, make is one step between API, deep API coding and Zapier. So they're kind of like in the middle. And I was like, that's a cool idea. Like, yes. And she's like, but you're gonna have to hire a software developer. My mouth dropped and I was like.

Kajabi Course Video DRG (34:29.774)
Yeah, sure, sure. I mean, it's an SDK. Yeah.

Daniel Gertrudes (34:32.452)
I was like, did you just say I have to hire like an expensive software developer? And you're telling me this before we actually get the deal done. I'm like, okay, let me think twice about this. We did it. We closed the deal April 1st. Within 30 days, we hired our first software developer. A year later, we hired a second software developer. We migrated most of our effort away from make.

and we ended up doing a deal with a new company that had just raised money, a Series A called Prismatic. And from there, Streams was born. So we sort of moved away from the intensive consulting piece to more of this like monthly subscription -based approach where we go in to either accounting firms

or accounting and finance teams inside of medium -sized businesses, and we help them make their life easier. We reduce, rework, improve quality, efficiency, increase speed. mean, it's, we help them like move data. Back in the day, you'd have to type the same thing three or four times into different platforms. Maybe you would do some calculations and manipulations, but now it's all done.

And for as low as like $500 a month, we give owners back a ton of time. And it's so much fun watching this.

Kajabi Course Video DRG (36:05.722)
Yeah. So, so an accounting firm, are, don't know what others are, $300 ,000 of them out there or bookkeeping firm. Yeah, there's a lot. what's the, a good profile avatar, somebody that has still doing QuickBooks online or still doing what, what does that look like?

Daniel Gertrudes (36:13.882)
A lot.

Daniel Gertrudes (36:28.612)
So the strike zone for an accounting firm for us would be, it usually starts with size. So anywhere between that five, eight team members, upwards of 40 to 50. At that point, you probably have enough.

Kajabi Course Video DRG (36:45.37)
That's pretty big. That's just not just SMB. That's some mid -market in there too, if you've got 18 people. Yeah.

Daniel Gertrudes (36:50.564)
yeah, for accounting firms, it's a pretty decent size. mean, we have 42 team members right now. So at that point above then, if you have the vision, right, the conviction, you're probably going to hire your own person. The problem is like you need someone that knows how to code, someone that can manage these automations, the type of platform. Because what we find is, we created this curve and it's a log norm curve.

Kajabi Course Video DRG (36:53.337)
Yeah.

Daniel Gertrudes (37:18.916)
where it's too easy to start on Zapier, but the problem is with Zapier, by the time you get to 200 Zaps, you found yourself saving a ton of time in those first like 20 % of those Zaps. Now you're spending that time managing those Zaps. So that's not a good place to be either. So we're sort of that, if you look at us like simplistically, like we're that outsourced automation maintenance. We make the automations and then we also maintain them. And so it,

It's been a lot of fun. It's created diversity for our business. We've had team members who were on the finances service side that are actually now working in the stream side of the business. But back to your question, like what is the persona? Definitely like either in the cloud or with the intent to go into the cloud. Because we do deep API level coding.

to extract, manipulate, and then input data into other platforms. by the way, that business is now being led by Corey Knoyer, who I hired as an intern 10 years ago.

Kajabi Course Video DRG (38:30.872)
that's cool. But what does that do for your business? So let me restart the question. It sounds like you're doing bookkeeping. Is there a conflict of interest now teaching other bookkeepers how to do this? Or is it a product or service that doesn't conflict with bookkeeping services? know, don't want to, know, a bookkeeper goes, why should I go with you? You're doing bookkeeping. You could have access to my customer list and you could take my customers.

Daniel Gertrudes (39:01.294)
Sure, you can go on my website and see all my customers too. You can go on my LinkedIn profile and I show you my financials. I think it comes down to community. I do believe that there is going to be a point and we're actually reaching it. So in full transparency, the intent is to spin off streams into its own legal entity, Delaware C Corp, where Corey will be the CEO.

with its own corporate governance. But right now, lot of our customers are either first or second derivatives of our very close community. The accounting industry is very weird when it comes to community. I've never experienced this in any other industry. I've always attended treasury best practice forums, investor relations,

associations. Those are very like pound chest pounding sort of associations in the accounting industry. I mean, I'm going to Montreal like tomorrow to go hang out with 20 accounting firm owners and I'm putting together a deck on our restructuring journey. The good, the bad, the ugly, the learnings. So there's a lot of sharing and a lot of trust. Is there a conflict? Sure. mean,

an MBA would say yes. But in this industry, people are very close.

Kajabi Course Video DRG (40:36.794)
Let me ask you about some of the other products you decided to go to the streams things versus, and it's a technology play versus going, let me give you some context. I have a friend that just sold her accounting firm to a private equity group. She had a 75 % net income margin because of some of the products she offered upstream, which was investment management and insurance versus doing that. Did you explore that?

Daniel Gertrudes (41:03.406)
Mm

Kajabi Course Video DRG (41:06.286)
that not work, work, or was this just an opportunity that took off and you didn't have to focus on

Daniel Gertrudes (41:12.302)
This was an opportunity because of Heather's acquisition. it was, the timing was right. We knew for ourselves, and she had the talent behind the scenes. By the way, two of the team members, I have four people on my management committee, me, Corey, and the other two team members, both women actually came from Heather's business. So she had great talent.

and they have my back. They're like my closest confidant. And I had the conviction and we had the conviction like, this is a good play. It's totally off in right, left field, but it felt more like in right field. it was a, yeah, ultimately it was a good move because we spent the first six months testing it on ourselves. And now we're marketing it as a

buy accountants for accountants, and it was born out of necessity for ourselves. And then we had friends that were asking, hey, what are you guys doing about this, this, and that? We're like, we have a software developer that does that for us. And they're like, well, can you show me? And I was like, wait a minute. Maybe there's an opportunity here. That's how that all happened.

Kajabi Course Video DRG (42:31.386)
Right, right. And now you have your bookkeeping service, but you call your business Growth Lab, Financial Services, Finance as a Service. So you do have your bookkeeping and now you have this streams business. Which one's, what does that look like as far as revenue and profits? Which one's kind of doing better? And you couldn't be able to do in the streams without spending 10 years in the bookkeeping business. So yeah.

Daniel Gertrudes (42:59.788)
Yeah, you know, it's sort of like, yeah, and that's part of our value proposition. And the other thing with Streams is it's really a three legged stool. So there is the subscription based automations. That's one. That's what we led with. We sort of sunsetted the consulting until about six months ago, we were realizing the customers we were bringing on, they actually needed process mapping. They needed documentation. And some of them actually needed platforms to be implemented.

before you could even talk about automations. So now the other two legs to the stool, one is focused on accounting operating systems, if you will, and then the other one is actually focused on the management operating systems, like implementing EOS. Think about it as like that fractional integrator. That business...

Kajabi Course Video DRG (43:49.466)
I actually I'm a I'm an interrupt you because I don't really know what you mean by accounting operating systems. What are you saying there?

Daniel Gertrudes (43:57.678)
So, accounting operating systems is the back office that you need, which includes technology, so platforms, systems, processes, and less about people, like on that side. So, it is the major practice management solutions that are out there, what works for you, depending on the type of accounting business you are. I mean, if you're tax heavy, you look very different. You've got larger swings throughout the year.

If you're a payroll bookkeeping business, your touch points with your customers are 52 times a year. So we go in, we do a discovery call, design, what are the systems, what are your processes, and what system? So we design, we lay out the process map, and then we lay on top of that, what are the best solutions from a technology perspective? And then...

That's where streams can come in with the automations. Because if you got nothing to connect, I can't automate anything. I can't make you disappear. So you need to have the systems and the platforms in place. And that became a greater need as we began marketing this.

Kajabi Course Video DRG (45:12.036)
Yeah.

Kajabi Course Video DRG (45:16.388)
So what does this do for the end customer? I know that your CPA is a solution for CPAs, but what does it do for the customer because it offers these tools to the CPAs? Like the manufacturing business or the e -commerce business or the HVAC business.

Daniel Gertrudes (45:31.758)
Yeah.

Daniel Gertrudes (45:35.428)
So we actually view those as two separate personas. So you have the accounting firms as customer A, and then the customers, they're a different customer persona, both customers of streams. are there, there are situations where we are selling through an accounting firm to help their customers streamline.

their accounting processes. We're trying to like there's a lot of opportunity right now selling to accounting firms to level them up, especially with this whole like movement of like selling and retiring, you know, trying to exit. So there's a big like push from accounting firms just to like automate their back office. But again, I go back to you can't automate it if you're still using platforms and systems from 10 years ago, right?

Kajabi Course Video DRG (46:30.426)
Cookbooks on a CD and a PDF.

Daniel Gertrudes (46:33.634)
Right, mean, if you're on platforms like Carbon, Canopy, Anchor, Ignition, QuickBooks, Xero, like we can do a lot, HubSpot. Now for manufacturing firms, like simple things like commission runs for salespeople, that can drive accounting professionals crazy inside of companies, because it's always changing and the...

The goal lines are changing, the commission per specific deal changes. We can connect to your CRM, we can do the calculations, and we can do the journal entries, all in one full swoop.

Kajabi Course Video DRG (47:15.73)
interesting. So this lone wolf out in the field is access to like if he gets a sale, he enters into the CRM system and it's automatically documented in the accounting system at headquarters. Yeah.

Daniel Gertrudes (47:31.032)
Yeah. Yeah. And then paid because you still got to pay the sales guy or salesperson. So there's a lot of things that we can do. But again, it comes out of our own necessity because we've lived it. You know, we felt the pain and it's a it's easier for us to listen and then articulate what a solution could look like because we understand the platforms and the processes.

Kajabi Course Video DRG (47:35.746)
And then, then paint. Yeah. Yeah.

Daniel Gertrudes (47:59.244)
You can't I mean this isn't like rocket science right? It's pretty standardized.

Kajabi Course Video DRG (48:01.582)
Yeah. Let me, let me ask you a question about this. Cause I used to be in the software industry. I'm an ex -engineer, but so is this platform, the streams, is it going to be open API to develop applications on top? Like if somebody comes up with a very specific need, go, Hey, I need that. And you go, well, I could put that in the feature list, but you know, I, I, I can't, know, I can't assign a developer to it to fix it or create it in for, you know, one year, but.

Here's the code, here's the SDK, do it yourself. And he's running on top of you and gives you much more value because it's hard to transition.

Daniel Gertrudes (48:34.798)
So.

Daniel Gertrudes (48:39.716)
So because of our current, so again, it's like the 80 -20 rule. The lowest common denominator here is a lot of these accounting firms are all using very similar platforms or have the intent to use those specific platforms. QuickWorks, Carbons, Xero. And so because they are the sort of the

Kajabi Course Video DRG (48:59.322)
QuickBooks, Great Planes, yeah.

Daniel Gertrudes (49:08.548)
900 -pound gorilla, right? And there's a lot of them. We already know the APIs. Like we know the API documentation. Chances are we've already coded to the APIs. And we're not, you're really not reinventing. So for us, it may seem like you're not really reinventing the process. It's the same process. Like nobody really has a silver bullet process. It's very similar, most of these processes. But we still do customize the integration.

to meet your specific needs because everyone's always going to have like a specific need, like a nuance, like, I want that data point for this reason. So we do spend time customizing the automations, which takes a little bit of time, but we're not really, we're not like relearning the APIs. And then, then you're deploying it and then you're monitoring for failure, failure modes. So it's much more of a managed service than it is of a traditional

Kajabi Course Video DRG (50:06.938)
why you call it FAAs. So let me switch subjects here. We got about 10 minutes left and talk about the future of accounting. Now, there was a couple of data points that are coming out where is accounting going? And I first looked at this when I was reading Brad Jacob's book that he was going to do a roll up. He looked at the accounting industry and said, there's too many threats coming from AI. In fact, I started to do some research and there's about

five applications that are AI based accounting applications. Now I know those are going to be for new companies because it's really hard to change your accounting system from QuickBooks to some other accounting system. People get on it, don't move over. What is your philosophy or a prognostication on where bookkeeping accounting is going?

Daniel Gertrudes (51:03.94)
Yeah, so I believe that and I don't think it's five years. I think it's right now. The biggest value that any firm brings to the table is the human in the loop factor. It's the softer skills. It's the relationship because I don't believe. I don't believe AI is going to replace the relationship.

And we're seeing it in the sales world. The reason why I made the comment. That strategy of moving 100 % to digital. It created a very impersonal experience for prospecting. It's too easy to just shove out 10 ,000 emails a week. Cold emails and I believe that people.

especially four years after the start of the pandemic, they're putting value in the relationships again. Like, this is nothing new, but networking events are coming back. Are we all going back to the office? No. But do we want to be back in the office? Yeah. I just hired a person yesterday. He's like, I want to come to the office. I'm like, well, nobody else kind of comes to the office.

Kajabi Course Video DRG (52:26.842)
I've got kids, trust me, I have little kids at home. I want to come to the office. As much as I love my kids.

Daniel Gertrudes (52:32.612)
And he's actually, I think he's in his young 30s. people want to be around people. People want to build relationships. And I think that's going to be the key to success in the accounting. Now, I don't have a crystal ball, but I also, if I were a betting man, I wouldn't be betting on the data entry piece being a place where I want to double down.

You know, I would say plain vanilla bookkeeping is a race to the bottom. so reimagining what is who is my persona. And it's OK to change this, right? Ten years ago, my customer persona was this. Five years later, it looked like this. And today it's really looking like something else. And for us, it has changed.

Kajabi Course Video DRG (53:23.288)
Are you making more money with the streams? Definitely than the bookkeeping.

Daniel Gertrudes (53:27.224)
So Streams is still in a startup mode. So I believe Streams this month is break even.

Kajabi Course Video DRG (53:29.764)
Startup, okay.

Kajabi Course Video DRG (53:34.585)
Okay?

Daniel Gertrudes (53:36.036)
Which is great, but guess what? If streams grows another 10 % I need to hire another developer and let's not forget I'm going to need a customer success and I may need a consultant. It's going to go from break even to bleeding money again. Streams is a long. It's an infinite play right now. It's an infinite play because firm owners. They need their time back. They want their time back. They can't be spending like.

10 years ago.

Kajabi Course Video DRG (54:06.65)
Do you mean they're tying back for the four months of where they're holed up in the accounting office doing books and push it out through a 12 month period or what are you saying there?

Daniel Gertrudes (54:18.532)
So when you scale, you have the choice to either take on the work and work an extra 10 hours a week or hire somebody. Stream solves for that. Streams gives your time back without you having to go out and hire somebody for that task or those series of tasks.

Kajabi Course Video DRG (54:37.882)
So this is your value proposition, right? If I bring on another customer and he's 10 hours per week doing their books, Streams will allow me, you I don't have to go to India, Philippines or South America to find, you know, a gap accounting, you know, person that I can get for a fraction of the cost. Streams is going to help me.

Daniel Gertrudes (55:00.002)
Right and it's not just about saving money like we work. We've got stream bots inside of slack that actually create value not because it's saving money, but it's new opportunities. How many times were so overwhelmed and it's a Friday and you wake up and you're like, my God, that I forget to send that on Monday. Like we have stream bots inside of slack that actually keep certain things top of mind.

certain triggers happen, you get notified. You can actually do work inside of Slack, right? It's not nothing new. I mean, there's a lot of this out there, but this is, it works for us because it's built for accountants. It's not built for an engineering company or a design shop. It's built for accountants. And that, like, it means a lot to our customers. terms of like, Growth Lab is,

Like I'm, I'm very much a hundred percent focused on growth lab. And I, you know, we went through over structuring this year. One of the hardest things I've had to do as a person, nevermind as a professional, 10 years at doing the same thing, the grit, the tenacity, the grind, and it's not moving faster and the economy and the consequences of

the changes in SEO algorithms, mobile core vitals, like all the stuff, outbound cold email like died, died on a vine in the middle of like February. The rules are changing by these like huge companies that don't give a shit about like small businesses. They just change things and they kill your business. They kill it.

Kajabi Course Video DRG (56:51.96)
Yeah, you're referring to Google.

Daniel Gertrudes (56:55.094)
I am I am and and others and we as small businesses like we have to wear many hats and we have to be ready and and so this year has been I've learned a lot about myself. I've learned a lot about our what our company can do can't do. And relationships and you know I'm proud to be here like in the middle of September like we went through an entire turnaround.

that took close to nine months. Margins are back up, growth is back up, and yeah, I'm doubling down on Growth Lab. Just hired another salesperson.

Kajabi Course Video DRG (57:35.352)
Yeah. So this is kind of a, you know, a different direction, but it presented a different opportunity, right? You could have gone down the opportunity, continue to buy a customer's list is basically in more bookkeeping, but it doesn't really scale unless you have some tools. You buy a firm, a bookkeeping firm that has another ancillary business, which actually provided a service to accountants. Now.

You're doubling down on that, both groin. Is there anything else you could be doing to, to grow that firm? For instance, like buying a big, you know, group on Facebook or LinkedIn for accountants.

Daniel Gertrudes (58:20.132)
Like mastermind type groups.

Kajabi Course Video DRG (58:24.378)
Yeah, well, I knew a woman that owns a, she's an accountant. She's owns 123, 3000. used to be Quill QuickBooks Pro Advisor Groups. I think they changed that because they don't have those pro advisors.

Daniel Gertrudes (58:36.42)
Yeah, we've thought about that as some of our marketing for 2025. We are in the midst of having conversations. You know, I'm feeling I'm feeling a lot better where we are going into Q4. So we are looking at a couple of potential accounting acquisitions, especially since the economy might soften up, is softened up. We may be in the middle of a recession, let's be honest. And I believe like cost of capital is going to start coming down.

We're all expecting the news tomorrow. It already is right and I mean and that's going to be a huge relief for small businesses, especially anybody who has a variable rate prime plus two type of loan. It's just eaten into your free cash flow. Labor markets are opening up. You know we're still we're still like we're still dealing with a hangover of the great resignation where we're still like yeah.

Kajabi Course Video DRG (59:06.518)
It is already is. Yeah, it already is. Yeah.

Daniel Gertrudes (59:33.156)
I overpaid for that talent and it's not really the talent I wanted. So we're still working through a lot of things. You know, what goes up has to come down. It's going to figure itself out and it's staying, making sure you have enough cash in the bank to weather any storm and be agile, nimble, just have a plan B in place.

Kajabi Course Video DRG (59:54.02)
What's your rule for that cash in the bank? mean, I remember a long time ago, I read that Bill Gates, as unpopular as he is now, is used to say, I need a year's worth of my expenses in the bank. This is when he was just a pretty small company.

Daniel Gertrudes (01:00:11.908)
So we would always have anywhere between one to one and a half months worth of revenue in the bank. so at our 55 % gross margins, that's enough to last you two to three months with your cost of goods sold. Today, because of all the changes and restructuring, we actually ended August with

$20 ,000 in the bank and my blood pressure came in at 117 over 70. So I have friends. No, no medicine. My friends are like, how the hell do you sleep? Knowing that I said because I have conviction we've made the right decisions. were tough decisions, but we're on the upswing and we I worked my tail off to make sure like I didn't have a plan B so.

Kajabi Course Video DRG (01:00:50.746)
That's not from Lysartan potassium?

Kajabi Course Video DRG (01:01:11.576)
Yeah, yeah. That's interesting. Yeah.

Daniel Gertrudes (01:01:14.476)
And I got a great team, great customers.

Kajabi Course Video DRG (01:01:19.042)
And what do they call you? What's your nickname there? As I saw it online, but you have a nickname.

Daniel Gertrudes (01:01:24.228)
I think it's just Dan. I don't know. The chill boss. that was a marketing team likes to like mess around with me.

Kajabi Course Video DRG (01:01:34.244)
Yeah, all right. Well, Daniel Gertrudes, thank you so much for spending some time with me on top &A entrepreneurs.

Daniel Gertrudes (01:01:40.676)
Totally appreciate the opportunity. Thank you.

Kajabi Course Video DRG (01:01:44.474)
Let me stop.