TFYW#077: More Recurring Revenue in 3 Ways

Mar 1, 2024

Recurring Revenue

I tried to build my firm on recurring revenue from day one. I didn’t get it right initially, but I was determined to make it work.

When I sold my firm in 2021, 56% of my revenue recurred monthly.

I learned that clients like the predictability of a fixed monthly fee even when it costs them more than a one-time fee.

Recurring revenue and my firm systems increased the valuation of my firm to 1.5X my projected revenue.

The magic about recurring engagements is that you become more valuable to your clients the longer you’re with them.


If you don’t remember anything else from this newsletter, remember this:


When done right, recurring revenue isn’t just a new billing method but an arrangement in which you deliver contextual, long-term value on a monthly basis.


There were three primary recurring services:


I taught myself how to bookkeep as a side hustler while working full-time at EY.

I remember buying QB desktop at Best Buy and installing it on my work computer. I learned the ins and outs of QB (and later QBO) while I sat around in an office tower waiting for the due diligence engagements.

If you’ve ever supported acquisitions and deals, you’re either breakneck busy or dead bored.

I filled my downtime learning the processes and systems for bookkeeping.

Value Proposition

The general value prop for bookkeeping is compliance.

Plain and simple. Governments demand it so businesses need it,

But it’s also what most accounting SaaSs are trying to solve.

Bookkeeping margins are getting tighter, and the space is more competitive than ever.

It is harder to stand out and build a profitable bookkeeping firm without ratcheting up the volume of clients.

Efficient workflows and leveraging overseas talent are key profitability drivers for recurring bookkeeping engagements.

What to Charge

Bookkeeping is seen as a commodity, and frankly, regular bookkeeping is.

When you offer a commodity service, the pricing ceiling is mostly fixed.

You have to stay within a range of general market rates. There is no secret selling technique to charge significantly more for bookkeeping.

I know there are really bad bookkeepers out there, and I see many firms ‘warn’ prospects of bad bookkeepers. I guess they’re trying to justify their higher prices.

But there are a lot of good bookkeepers as well, and those are the ones you’re actually sharing the market with.


The opportunity with bookkeeping has everything to do with the context of your service.

The context is the position and expertise you demonstrate with the client’s information.

Niching down in bookkeeping is the fastest way to charge more for the same work.

Yes, you get the debits and credits right, but you arrange the outputs into specific industry segments, critical driver analyses, and leading KPIs.

The opportunity in bookkeeping is turning data into digestible, actionable info that is NOT the default three-statement format.

Back Office

Back office services include the company’s in-house financial functions.

This can be everything from managing:

    • Sales cycle (invoice, AR, collections)
    •  Payables cycles (POs, AP, vendor payments)
    • Inventory
    •  Payroll

I immediately jumped into back office services when I started my firm, as I had just finished a 3-year role as an operational and finance controller.

I felt confident with small biz finance functions.

Value Proposition

The typical value proposition for Back office service is efficiency and cost savings.

Many small businesses need, but can’t afford, a financial leader who can work autonomously and make sure vendors are paid at the right time, ARs aren’t too old, and someone is keeping an eye on inventory levels.

Simply, it’s outsourced working capital management.

This is a growing space as accounting tech continues reducing barriers to remote support.

What to Charge

A junior accountant could cost between $30k to $50k. Use this as an anchor for your pricing.

When a high-end roofing company asked for a quote on my service, I compared my fees to the outgoing salary of their office admin/ bookkeeper. The biz owner paid her $45k/yr.

When I presented my back office services cost at $1,500/month, the decision was a no-brainer.

We weren’t there in the office to restock the coffee, but we saved them $20K+ on working capital management and offered a higher quality of service.

Back office services cost 1.5 to 3.0X what the bookkeeping does, for a few key reasons:

    1. Back office support requires you to be on the client’s timelines. Yes, you can batch AP payments and create other boundaries, but when you’re an integrated back-office partner, ad hoc requests or items always need immediate attention.
    2. There is a greater requirement to learn the client’s systems and processes. This includes knowing what day their customers pay their invoices or what SKUs are their fastest moving inventory.
    3. There is increased communication with the client and, in some cases, their customers and vendors. Communication is unpredictable and hard to automate, so charge a healthy baseline.


Back office services give you an intimate view of the business systems.

If they’ve hired you as an outsourced finance team, their accounting ledger is probably already in the cloud.

However, there are other workflows and systems that you can improve for better and faster working capital management.

Keep in mind that all business actions affect working capital.

The opportunity in back office services is to track and improve how those actions impact working capital.

It is one thing to create and send invoices. It’s another to decrease the cash conversion cycle through better systems.

Advisory/CFO Services

I learned advisory on the job. I’ve had some clients take a chance on me and some great mentors along the way.

I leaned on my time at EY as a transaction advisor and as a controller to initially build my advisory skills.

But most of my skill development came from listening to my clients and trying to operationalize solutions to their problems.

Most trained accountants can create budgets, forecasts and analyses. There are also some great FP&A trainings out there for these tasks.

However, the value of those tools is limited to understanding the key assumptions the client is using and the actual drivers of their business.

I’ve found that advisory is part numbers and part psychology.

Value Proposition

First off, advisory is a blanket term for all things non-compliance related. It’s ambiguous.

But in the context of recurring revenue, advisory is continued support to overcome the next barrier preventing the client from reaching their goal.

That’s why it can be hard to offer good, long-term advice – each new level of growth requires different tools and approaches.

When I see firms say they advise clients from $1M to $50M in revenue, I don’t believe it.

Sure, they can create forecasts and break-even analyses for those various levels, but the number and variations of barriers between revenue of $1M and $50M are substantial.

The value prop for advisory is not the forecasts and budgets. It is the guidance and shared leadership to identify and remove barriers to achieving goals.

What to Charge

This is less straightforward than bookkeeping and back-office support.

You can take the approach to compare your fees against that of a full-time CFO.

But I feel that when you say:

“Well, a full-time CFO would cost you $180k, and I’m a quarter of that price”

you give the client room to make assumptions, which leads to scope creep and unrealistic expectations.

I like to charge based on the client’s goals.

This differs from a ‘standard pricing and services’ approach, but that’s where, I feel, the most significant opportunity in advisory is.


Advisory prices have no ceiling as long as you charge less than the impact you can make for your client.

And while standard pricing and services for different business sizes and industries are ‘scalable’, they can be lite on value delivered.

The only way to deliver high levels of value at scale is to focus your expertise.

Expertise is less about intellect and more about pattern identification.

If you work with all types of businesses, you’ll never see the nuanced activities that drive growth for all of them. Your advice will remain general in nature.

If you only work with construction companies building multi-family buildings grossing $5 to $10M in revenue, you’ll learn very quickly what is making or breaking those businesses.

The opportunity in advisory is to become good at one type of business.

Bundling Services

I’ve been successful and unsuccessful at bundling these services.

I’ve seen firms do it well and others not so much.

Apart from the actual delivery, the key to a successful bundle approach is how we present them.

Start with the highest level of service you offer that the client would be interested in.

Upselling from bookkeeping services to advisory is hard. Once you’ve positioned yourself as a bookkeeper, moving up is difficult.

Down selling from advisory is easier as it becomes part of delivering a better advisory service.

Explain to the client that better decision-making information comes from better bookkeeping, which your team provides.

If you’ve positioned your firm to offer bookkeeping and CFO services, I would reconsider your message and how you can lead with only CFO services and backfill with bookkeeping.

I hope you found this helpful.

And as always, I hope you can build the firm you want.


P.S. Email with something that you want me to talk about. I’ll add it to the list. 

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