In this episode of The Trusted Advisor, Rob Pyne sits down with seasoned finance leader Dan Heckendorf, who brings a wealth of experience from his time as CFO of AZ NGA, one of Australia’s most active acquirers in the financial advice sector. Now the founder of Astilla Advisory, Dan shares what it really means to build a true CFO function; one that drives strategy, not just compliance.

Together, Rob and Dan unpack the lessons learned from scaling AZ NGA through rapid growth, managing private equity expectations, and redefining how finance can serve as a strategic value driver rather than a back-office cost center. Whether you’re running a growing advice firm or leading a scale-up with big ambitions, this episode offers a roadmap for building strong financial foundations early before you hit the pain points of scale.

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SHOW NOTES

Topics Discussed

Preparing for scale early: Why early investment in systems, people, and processes pays off before growth hits.
The myth of 50% EBITDA margins: Why high short-term profitability may not be sustainable long-term.
Lessons from AZ NGA’s federated model: The challenges of balancing entrepreneurial freedom with the need for consistency and standardisation.
The arrival of private equity: How Oaktree’s investment reshaped financial governance and the push for deeper performance insights.
Finance as a strategic partner: Why the finance function should be a powerhouse of value, not just a reporting mechanism.
Virtual CFO vs. True CFO: The critical differences between transactional finance services and strategic financial leadership.
Warning signs your business has outgrown its finance setup: From delayed reporting to burnout and siloed teams.
Designing a right-sized finance function: What an ideal structure looks like for firms in the $10M–$50M revenue range.
The birth of Astilla Advisory: How Dan is helping growth-focused businesses build strategic finance capabilities that scale.

Episode Highlights

(Timestamps are approximate)

[00:02] – Rob welcomes Dan; outlines AZ NGA CFO tenure and Astilla launch.
[01:11] – Biggest AZ NGA lesson: prepare for scale early; 50% EBITDA often unsustainable long-term.
[02:17] – Reinvest early profits in tech/process; $5M systems fail at $10M.
[03:28] – Oversaw 36 firms / 100 entities / 100 Xero instances; credits supportive CEOs.
[04:57] – Finance as strategic powerhouse if resourced; AZ NGA’s 8-person team handled $140M→$300M with zero automation.
[06:47] – Oaktree PE entry: culture shock, driver-level scrutiny, storytelling via finance.
[08:20] – Federated model preserves entrepreneurship but collapses at scale; Oaktree accelerated uniformity.
[11:27] – True CFO: CEO’s revenue/cost/risk/exit advisor; virtual CFO: historical/transactional.
[14:28] – Red flags: delayed reports, siloed team, burnout/turnover.
[15:56] – $10–15M revenue: hire 15+ year financial controller as CFO stepping stone; $50M: full CFO.
[17:45] – Astilla inspired by high-growth experience; tailors playbooks, mentors CFOs, eyes VC.
[19:12] – Onboarding: deep listening, risk prioritization (cashflow > policies).
[21:01] – CFO co-pilot eases CEO loneliness with objective counsel.
[25:02] – Biggest scaling gain: 5-year quantified strategy (revenue/EBITDA, pricing, AI).
[26:24] – Blind spot: no monthly P&L driver transparency.
[27:32] – Three disciplines: 1. Revenue before staff; 2. Process/tech/offshoring; 3. Budget adherence.
[29:50] – Advisor model: $500K revenue target + MI dashboards; ~120 clients industry avg.
[34:05] – Capacity = clients + revenue/client; cull low-value books.
[36:23] – 50% EBITDA elite; expand via 5-year initiatives (pricing, offshoring, segments).
[39:12] – 40-20-40 useful starter benchmark; flex for stage/seasonality/M&A.
[41:35] – 90% of AZ NGA owners embraced discipline post-trust.
[43:01] – Final advice: invest in strategic finance early; linear growth-CFO value link.

Quotes

“People power alone is really the path to maintaining strong EBITDA margins to scale as you reach those steep growth curves.” – Dan Heckendorf

“Finance can be a powerhouse value driver to an organization.” – Dan Heckendorf

“A strategic CFO takes the time to understand the business intricately… they are the CEO’s most important advisor.” – Dan Heckendorf

“Being a founder, a CEO, a business leader can be a lonely place at times… a strong CFO should be that CEO’s trusted advisor.” – Dan Heckendorf

“Don’t let it linger. Act as soon as you feel the need… a strong CFO is not only gonna help you grow your business, but I hope you protect it too.” – Dan Heckendorf

“Don’t wait until you’ve scaled to fix your finance structure. Build for where you’re going, not where you are.” – Rob Pyne

Resources & Links

HPH Solutions: https://hphsolutions.com.au/
Astilla Advisory: https://www.astilla.com.au/
Connect with Rob Pyne on LinkedIn
Connect with Dan Heckendorf on LinkedIn
Follow The Trusted Adviser Podcast

Key Takeaways

Reinvest early high margins into tech and process. 50% EBITDA signals peak utilization, not scalability.
Federated autonomy works small; scale demands uniform systems (pricing, tech, offshoring).
Strategic CFO partners on vision, risk, exit. Virtual CFO delivers compliance only.
$10–15M revenue needs a 15+ year financial controller building toward full CFO by $50M.
Prioritize risks on entry (cashflow visibility trumps policy gaps).
Five-year plan must quantify drivers: clients/advisor, revenue/client, AI leverage.
Hire staff only after advisors hit capacity with high-value clients; use revenue targets and dashboards.
Margin expansion requires deliberate initiatives, not just volume.
40-20-40 is a flexible starting benchmark; own your destiny with custom pathways.
Invest in strategic finance early. Small formative outlays prevent massive remediation later.

TRANSCRIPT

Rob Pyne

Welcome Trusted Advisers. This is the Podcast where we explore what it really takes to build, grow and sustain a thriving financial planning business. Every fortnight, you’ll hear candid conversations with the leaders, innovators and trailblazers of our profession, people who have navigated the challenges, embrace your opportunities and are willing to share what they’ve learned along the way. If you’re curious, ambitious and committed to raising the bar in advice, you’re in the right place. My guest on today’s show is Dan Heckendorf, the former CFO of AZ NGA, one of Australia’s most active acquirers of financial planning firms and now the founder of Astilla, a business that provides true CFO capability and strategic oversight for growth focused firms. Dan shares what it was like to oversee financial governance across more than 30 advisory firms during a period of intense expansion, and what he learned about the hidden weaknesses that can creep in when businesses grow too fast without the right financial structure in place, we unpack how founders can move beyond keeping the lights on in finance to building a genuine strategic finance function, one that drives value resilience and foresight, rather than just reporting on the past. And be sure to listen right through to the end, where Dan shares his one piece of advice for business owners, the single biggest mistake he sees when firms delay investing in their finance capability, and how that decision can end up costing hundreds of thousands to fix later on. It’s a point that every ambitious business owner should hear. So with that, let’s get into it. And here’s my conversation with Dan Heckendorf from Astilla. You

Rob Pyne

Dan, welcome to The Trusted Adviser. It’s great to have you on the show.

Dan Heckendorf

Thank you, Rob. Yeah, it’s great to be here, looking forward to the session.

Rob Pyne

So Dan, we’ve only met recently, but from the moment I heard about your background, particularly your time as a CFO at AZ NGA, right in the thick of one of the most active acquisition phases our profession has seen. I knew it was a story worth exploring further. That experience, I guess, combined with your what you’re doing now at Astilla, your own business, bringing true CFO capability and strategic oversight to growth focused businesses, that’s what caught my attention. And at HPH, we’re embarking on our own deliberate growth plan. So I’m especially keen to hear what you’ve learned along the way, and what advice you’d have for firms like ours that want to scale with strong financial discipline and intent. But let’s start back at AZ NGA, it’s been certainly one of the most visible, active acquirers in the advice space for a long time, acquiring firms and attracting outside capital in the last year or so. So when you look back on that chapter, what stands out to you as, I guess, the most important and biggest lesson from your time as CFO there,

Dan Heckendorf

there are so many to choose from. I think if I was to make it relative to HPH and other businesses that are similar, it’s trying to take opportunity in the formative years to prepare for scale. Often, businesses are running really strong margins early in their development, and there may be 50% EBITDA ratio, but really try and think, Is that achievable for the long term? Is it sustainable? The advice industry is a real people business that thrives on relationships. However, people power alone is really the path to maintaining strong EBITDA margins to scale as you reach those steep growth curves, that would be one of the pivotal ones that I can think of. Okay, so

Rob Pyne

if someone’s running at 50% EBITDA, you’re saying it’s arguably not a sustainable model, because that’s everyone’s full utilisation at peak capacity, and there isn’t that sort of growth built in, or some capacity built in. Is that what you’re saying there?

Dan Heckendorf

Yeah. And also take stock of are people burning you out to get to that? Because you may all be reaching that margin now, but doesn’t mean that when you sort of double the business that you can achieve that same level. So what you might be better off doing is saying, Well, why don’t I use that margin now and invest in technology and try and have some vision the processes that work now at a $5 million revenue business you know won’t work when we’re a $10 million business. So if you have that vision to reinvest some of your profits into technology deployment, it’s great to do so in those formative years, rather than think you can hug on to a 50% EBITDA ratio yet forever.

Rob Pyne

Yeah, no, for sure, makes sense to me too. So AZ NGA, have scaled tremendously over the last decade or so. I think it was formed in 2014 first deal was done in 2015 so 10 years ago, that kind of journey started with Paul Barrett at the helm, with Azimut backing Paul in to build the AZ NGA business model, what was it like managing the financial oversights of so many advisory firms spread across the country? For you as CFO, that must have been

Dan Heckendorf

a real challenge. It was, indeed, when I left, we had 36 firms in the portfolio with 100 legal entities underneath them. With multi disciplined firms. So yeah, imagine all having 100 different instances of Xero was quite a challenge, but that said, partnering with such high quality businesses made it a highlight of my time at AZ NGA, where we’re talking about really strong practitioners, great entrepreneurs and the CEOs and them and their leadership teams understood the pressures that I was under and always felt very supported by them during such a rapid period of growth. And without my experience with them, I probably wouldn’t have the weather all and the sort of gumption to take on my own business.

Rob Pyne

Yeah, so you were forged in the fire, so to speak. You really had to, I guess, become highly capable at managing such a diverse business as it was growing and growing rapidly. So when we chatted last week, you were saying the finance function is often seen as a back office function, and I’m a big fan of the Verne Harnish books and Scaling Up. And he talks about how don’t under invest in the finance function. Some people think just to keep the lights on type function. But how did that mindset affect the way the business at AZ NGA operated? Was that the way it was perceived, or how did the finance function sort of fit into the overall executive function?

Dan Heckendorf

The first thing I’d say is, I feel like a lot of companies around the world would still view finance as a back office function. Finance is like profit center is what you’ll commonly hear across the globe, but I think it’s quite normal to try and change that mindset, where a finance leader needs to say, let’s invest in the right people and process and technology, and if that happens, then finance can be a powerhouse value driver to an organisation. But yeah, so at AZ NGA, we had limited resources to keep the light financially. So Rob and this sort of prevented the finance team from being a more strategic value driver. So yeah, as AZ NGA, was turning over about 140 mil in revenue when I started, and over 300 million with minority interest by the time I left. And during that period, the finance team had eight people with no investment in automation or technology advancement. So yes, keeping the day to day lights on was a challenge in itself, and I think the wider business understood the limitations of finance and traversed around it. And when private equity came in, they saw the need to invest in people and process technology, and I’m sure we’ll sort of come on to that a bit later on.

Rob Pyne

Yeah, because Oaktree came in as a key investor, they took some of the as in Mark ownership out of the equation at the time. How did their arrival as a very highly visible and highly credible investment manager globally? How did expectations change when their level of scrutiny perhaps came in around financial reporting and

Dan Heckendorf

governance? It was a culture shock, to say the least, not necessarily for me personally, I see the impact of KKR when I was at Pepper Money, so I knew how the landscape would change, but it was a shock to the federated system. I would say that firms have been afforded in the past, since onboarding with those AZ NGA and like most PE and venture capital firms, it’s all about the numbers. Yeah, and the drivers of the numbers, for example, if revenue was up versus the prior month, you know, pe want to know what is that? Is it from new client growth in the month? Is it from new adviser growth in the month, or is it some pricing upside that we’ve been able to embark on? Now, it seems quite simplistic, but this data is not always easily accessible from licensees or in-house CRM tools, but this is where finance needs to play a role, is in storytelling, in trying to extract those drivers the business, to tell better stories around the numbers and unlock the true drivers of performance behind the profit and loss. Yeah.

Rob Pyne

Can you talk a bit more? But you mentioned the federated system, yeah, and that was a term I hadn’t heard, but it’s obviously something that’s the way you thought about the business model at AZ NGA, can you talk about that federated system and some of the, perhaps, the challenges or shortcomings of that model, that Oaktree has sought to try to change since their capital arrived.

Dan Heckendorf

Yeah, the federated model speaks to not wanting to stifle the entrepreneurial endeavor of firms when they come on board. You can say that the things that make a business successful shouldn’t change when they come on board to pivotal organisation like AZ NGA, that was the ethos, don’t change what’s working. And so whilst that works at a smaller level, what happens as business grows is there is a need for standardisation, there is need for consistency, there is need for uniformity, to make sure that everybody is on the same kind of pricing, the same kind of banking system technology platform, using the same services around offshoring, because that’s true. Way to scale is to make sure that there is that sort of common platform that’s being used. So AZ NGA started at bar. On that, but when actually came in, we just hadn’t quite landed that to the finishing line. And actually, we’re keen to expedite that stage of the growth.

Rob Pyne

Yeah, and I guess I understand the ethos from the outset, but you know, you talk about best practice in any business, and you think, Well, surely there’s good things that are happening across our network here, and we should be learning from the best of them and actually applying it so everyone can learn and apply those best practices. Because as much as you don’t want to interfere with the entrepreneur and get in their way, you are looking to try to enhance their capability, because that’s good for them as well. It’s not just like you’re doing it for your own ends. It’s actually about making them more effective and more successful as well.

Dan Heckendorf

You hit it on the head, and I’d say that that’s probably one of the bigger learnings. I spoke about the learnings early before. I’m sure Paul would say that Federation was quite a point in time to endear firms to the nests, but it didn’t work at that scale, and that’s why there had to be a big transformational kind of effort to change that mindset. And maybe if that had been done earlier, then it wouldn’t have been such a challenge, but therein lies the learnings of scale. We really need to think what does the business look like at 50 million and 100 million, and put those parameters in place to prepare for that. Rather than wait until an investor comes in and says, you need

Rob Pyne

this. Don’t wait till you get there, because that’s more challenging. But starting with that in mind, and building the right sort of foundations, if you like, so that as you scale, you can effectively continue to function comprehensively across finance and technology and the systems you build. So when I was talking to you last week, we shared a bit about how we’re doing what we’re doing. We’ve got a virtual CFO function in house person who really takes care of the finance but we have that outside virtual CFO. You draw a clear line between what firms are doing in that virtual CFO space versus what you see as a true CFO role. How do you define that difference between a virtual and a genuine, high level CFO presence in the business? I think a strategic

Dan Heckendorf

CFO takes the time to understand the business intricately. That’s probably my first thought. In many ways, they are the CEO’s most important adviser, advising on strategies that help grow revenue, optimise costs and protect the company from any brand or reputational damages. And this typically involves partnering a longer term shareholder value where capital needs and exit strategies are quite vital. And you might sort of look at the virtual CFO services oftentimes being more historically focused. They made services such as bookkeeping, payroll, statutory reporting and management reporting, and their service offering is a little bit more homogeneous or transactional in nature. Say that they’re the key distinction points. Yeah,

Rob Pyne

why do you think so many firms that are really growing and have great intent to grow underestimate their strategic value of that finance function? Because I know exactly what you’re describing. Yeah. So why do firms underestimate the strategic value of that function?

Dan Heckendorf

Yeah, it’s good question. I see growing firms as wanting to prioritise the same things that got them to where they are today, sales, marketing, R&D, so you’re prioritising what’s worked for you in the past. And these areas understandably get priority at the investment table because their ROI is a little bit easier to quantify, right? But I think finance leaders need to educate founders and CEOs that small, incremental year on year investments into sort of more Strategic Finance capability will enable deeper analytical insights to make more timely commercial decisions in the future, and this investment should also form part of a risk management framework for either mitigating risks that might not be mitigated with virtual CFO such as liquidity risk and financial misstatement risk. I think in some ways it’s really not knowing what you don’t know until a finance person of more strategic nature comes on board, until you can sort of see the value. It’s probably hard for them to know that. The second thing I say is that finance functions have inherently been under resourced and under invested, and the capabilities might have been used for many years by keeping the lights on. I think about my time at AZ NGA. So if you haven’t been afforded the ability to show your strategic value because you haven’t been invested in then that capability doesn’t come to light. Yeah, so in your experience, then, what are the warning signs that a business, perhaps, has outgrown its current setup and not waiting until you’re having to sort of retrofit it when it’s really scaled already? What’s the signs that it’s time to invest in a more sophisticated financial structure? I think oftentimes you’ll know that there’ll be some warning signs. Is what I would say, you might have delayed or inaccurate or incomplete financial information. You might get a report with a sea of numbers, and you don’t know the why behind the numbers. Another indicator can be the finance team is quite siloed. They do their piece in a vacuum, and they might not be close part. Partnership with the rest of the business units or the enabling departments, you need to be strategically across all the business and working with all parts of the business to be effective. Another sign, I’ve noticed, is people can be worked to exhaustion, and staff turnover can be quite high. So there’s some indicators that something’s not quite right and there needs a second opinion on the longevity of

Rob Pyne

that setup. Yeah, I just say, because a CFO that really understands the business is intimately connected to everything that’s going on in the business, not just that sort of historical perspective. What’s our numbers look like, how we perform? What’s our gross margin looking like? That’s all useful, but it’s all lagging indicator stuff that’s not really a forward looking function, that finance can really play such an important role. So for a firm that’s in the, let’s say, 10 to 50 million revenue range, we’re in that range ourselves. So I’m really keen to know, what does a right sized finance function look like?

Dan Heckendorf

Yeah, it’s a great question. I get asked this a bit actually, the answer depends a little bit on the complexity of the business and the structure. For example, some business might have a reporting obligation to an overseas head office. But if I was to try and generalise a business of that 10 to 15 million in revenue, typically needs a finance leader, like a figurehead. This can be a friendship controller. The title might be our head of finance. And typically this is a person 15 years of experience and is on their way to CFO ship. The person can then decide with the CEO whether the INSOURCE or outsourcing the finance team is the right approach. This finance figurehead then actually builds the finance function as a stepping stone to becoming the CFO with mentorship from someone like myself, and then at 50 million in revenue, the role either turned into the CFO or the business decides that needs something different from a CFO. But either way, the role has created the policies and the procedures and the people and the technology for a full time CFO to take the business into the next phase of growth and maturity, probably a way that I would see a lot of firms in your sort of growth stage take on the finance function.

Rob Pyne

Okay, so enter a new business called Astilla that you’ve set up for this particular purpose. So it’s a new venture. I love the name because it has a sense of precision to it, which really feels fitting for a finance business. But what inspired you to start Astilla, and what gap did you see in the market there that pushed you to make that

Dan Heckendorf

leap? I didn’t actually see a huge gap in the market, per se. I did my research, and I noticed that companies were selling CFO services. However, I questioned whether they had my international outlook and my first hand experience of navigating in high growth companies, I’ve certainly learned that each business is unique, and a CFO cannot simply roll out the same playbook that worked in previous organisations. You need to really tailor the approach to the culture, the values, the strategy, and that’s a really important difference that I felt like I was bringing to the table. But the goal is to create a long, lasting asset, and I want to support ambitious clients on their growth journey, AZ NGA taught me that that working with high caliber entrepreneurs is exciting. Growth feels good, and I want to support clients, but at the same time, bring on the new wave of CFOs and hopefully learn from them as much as they’ll learn from me building out Astilla up to a bigger size.

Rob Pyne

Okay, so let’s say a firm like us engages you to become a strategic CFO, overseeing our business and really just building that finance function. When you first come into a business, what’s your process? What do you focus on first, and how do you decide where you can make the biggest impact?

Dan Heckendorf

Firstly, I do a lot of listening and ask a lot of questions to understand the current state as best I can. It gets back to not having any preconceived ideas and trying to cookie cut what worked the other organisations gather as much Intel as you can from all the relevant stakeholders before going into solution node. That’s really critical. But aside from the problem that you’ve often been asked to come in and solve for the question I’m always asking myself when I’m navigating with a client is, what’s the risk here if something I uncover, for example, a client may have no policies and procedure documents, and that’s not ideal, but the risk of that is nowhere near as high as a company not having any visibility of their cash flow. So it’s important to know that, how do you prioritise what the business needs? And is that something that has been flagged to you, or it might be something that hasn’t been flagged, and then you partner with the business to understand how you can remediate those issues and take them on journey.

Rob Pyne

Yeah, so it sounds like it’s very risk focused business proposition. You’re coming in thinking, Well, where are the risks? Growth is always we’re interested in everyone’s focused on how we can actually grow a business. Us. But you’re coming in saying, well, what’s the potential risks to that growth? Where are we actually not functioning? And you’re looking for the highest impact initially, where the business can then mitigate some of those inherent risks of not having visibility, perhaps over cash flow or their spend on staffing and the burnout factor and so on. So you’ve described, I think this relationship with a business as a copilot partnership, just give us a bit of a sense of that. What does a copilot look like in practice?

Dan Heckendorf

You could probably relate to this Rob, but being a founder and a CEO or a business leader, it can be a lonely place at times. Right? I’m sure you’ve had your moments where you second guess decisions that you’ve made, or you can’t necessarily decide on an important decision that’s coming your way. I think that’s really normal for a business leader and a strong CFO should be that CEO’s trusted adviser to council and support hard decisions. And I feel like the skill set of the CFO lends itself to objective, data driven decisions that are made in the best interests of the business when there can be personal strings attached decisions, and as most decisions come down to dollars and cents, the CFO should have a solid viewpoint to support the CEO, just by default, right?

Rob Pyne

Yeah, totally. I’ll have to make a confession here. We’re recording this on a Monday, and I was talking to our chief operating officer yesterday, on a Sunday, he was good enough to answer the phone when I rang him because I was thinking through some things that I really wanted to bounce off him. And he currently functions as that person you described, which is that I’m sounding out ideas and thrashing out some things we want to try and improve upon. Always, you know, never, never complacent, always trying to improve. So having someone to talk to and he, he’s a former adviser, high functioning adviser that stepped into our Chief Operating Officer role. But I think it’s fair to say he currently straddles both COO and CFO functions. And I’m sure he’ll listen to this episode and think, gee, I could really use someone like Dan to talk to occasionally as well. When Rob’s asking all these hard questions, I can

Dan Heckendorf

totally relate to that. That’s Case in point, that example, what I was talking

Rob Pyne

about, yeah, totally. You’ve talked about wanting to ultimately develop many versions of yourself, the next generation of CFOs now that can be inside businesses, but also within your own business Astilla over time. How do you see that playing out for you?

Dan Heckendorf

This is actually part of the Astilla that I’m particularly passionate about. I’ve always enjoyed the personal development side of my career in Weather Company, I’ve worked at seeing team members step up, guiding them on their journey. It’s always given me so much fulfillment. I really want to add a still up, bring top tier talent into the business and foster their development towards the fo ship, and do that with incentive schemes that reward resilience and excellence. So yeah, I’m really looking forward to the journey of new CFOs teaching me as much as I teach them. So I’m quite upbeat about the future of it still. Yeah,

Rob Pyne

great. You’ve also hinted at a long-term ambition to perhaps create a venture capital arm that invests in businesses that you know inside out, because you’ll become intimately familiar with the workings of businesses and their finance function. How do you see the connection between CFO level insight and good investment decisions?

Dan Heckendorf

The connection is very close. There’s no doubt. One might argue that a strategic CFO has a ringside seat on M&A and should be assessing ROI. But there are elements of M&A that fall outside of the numbers. So for example, the caliber of the management team is a real vital consideration when you’re assessing new deals, and the financials may support an investment. However, leadership shortcomings can impact the business so fast with the downstream financial applications happening in quick step. So yes, financial considerations are really important, but there are often intangible elements to weigh up to.

Rob Pyne

Yeah, a lot of our listeners are business owners and advisers themselves. They’re leading professional firms. They’re often growing fast, and sometimes they feel like they’re building a plane while flying it, which I can relate to for a firm like ours at HPH, already running well, but scaling quickly as well. Where do you see the biggest gains from having a CFO like you involved

Dan Heckendorf

vision and strategy is the most important one. Where do you want the business to be in five years time? What is the revenue and EBITDA each year in the lead up to that five year horizon, you need to have a viewpoint on organic growth versus M&A, how many customers would we want to grow with? How many advisers, what pricing improvements we want to develop over those five years, having metrics forecast about for five years, such as, how many customers per adviser, how much revenue per customer, how much revenue per adviser, onshore versus offshore staff, what scale benefits would we get from AI deployment? These are the ideal drivers of the business that you need to quantify around a five year strategy. So that’s pivotally important to me. Yeah,

Rob Pyne

vision and strategy. It’s a big part of that function, isn’t it really planning out, not just having a vision, which is a painting, if you like, on the wall, but actually specific numbers that kind of point to that vision, how it’ll be achieved. So what are the most common blind spots that you see in founder led professional services businesses when it comes to that financial management or their scalability? Yeah,

Dan Heckendorf

they might not have visibility of their numbers in the first place. I’ve come across businesses that physically don’t look at their results at the end of the month. That might sound like sacrilege in some ways, but it’s so important to have a set of numbers, financial numbers every month that you recognise and that you’re familiar with, and, more importantly, understand the why behind the numbers. So if you’re looking at a P&L from Xero that won’t tell you much. You need transparency around the underlying drivers that really say, why is my revenue down, or why is my expense down? And having the underlying pieces of the puzzle are telling you how the upstream business drivers are impacting the downstream financial results. Yeah.

Rob Pyne

Okay, so if the firm that you’re working, we want to scale up responsibly, not just bigger, but better as they go. Because you can be bigger by just acquiring but it can become a bit of a mishmash and bit messy if the integration is not done well. What are the first three financial disciplines you’d help them put in place?

Dan Heckendorf

First one bit to make sure you’ve got the clients and the revenue before you take on your staff members, whether they’re advisers or support staff, don’t go on gut feel each adviser should be at capacity and or supporting high value clients before onboarding new staff members. First one the second, I’d say, investing the time and effort to process improve and invest in technologies, manual processes that work at five and $10 million revenue, businesses will often not work once you grow to 50 million and it’s okay not to have the answers right away too do research and firms like it still can guide you based on industry experience. The offshoring is a lever as well, but make sure that you have the right roles earmarked to be offshored, and considering the right value for money offshore provider as well. And the third one is probably quite elementary, and that’s financial discipline, not only controls around cash flow management, but actually sticking to budget targets from the start of a financial year. You really should have mapped out the pathways to growing revenue organically, and know what the strategy is to optimising expense growth so budget aligned targets are so powerful, it just allows each month you to compare how you’re going against those budget targets and pinpoint what those areas of fluctuations might be.

Rob Pyne

Yeah, let’s get back to that first one you mentioned about knowing that you should be having everyone in, certainly in the adviser world, quite well established with a client group, that you’re not bringing on people too fast, not over investing in stuff when you’re not quite at this stage. So do you have a model there that you use, like a financial model, once you know the business really well, that you can actually give clear guidance as to say, when we hear in terms of capacity, this level of revenue, this many people, you have, obviously, some ratios, perhaps, and some models that you work to that say, Okay, now is the time. And it’s a very stepped approach, and very deliberate, intentional approach to when you bring on the next staff

Dan Heckendorf

member. I think industry average is normally an adviser having 120 clients. That’s probably a bit of a standard number that might be different. You certainly if you’re going towards over 200 you might be thinking, goodness, am I having a good control environment and meeting of your clients need with the right risk framework? But what I would say, more generically is trying to get traction on adviser performance. If you’ve got a revenue target for the year of $500,000 and you’re starting up, you should have every adviser allocated that 500k and how they’re going to get there. I think that’s really important to give them target that leaf level to shoot for and to strive for. So the Mi is quite important to show people where they’re tracking against their target. And that should incentivise behavior and allow them to know I’ve had a poor month and I need to potentially catch up in the next month so the numbers don’t lie, and transparency around performance of advisers will help the business decide, do we need to take on an adviser, or is it just that some of our advisers aren’t performing? You can take on an adviser because it’s under performance. Well, that’s not a very good way to grow and scale.

Rob Pyne

Yeah. Just want to relate the personal account of our experience there, and I would totally agree with what you just said. I think many people in the adviser world are perhaps a little hesitant about having set a target, you know, having a target set on them, because they’re thinking, oh, you know, how has this arrived? And you know, now there’s pressure on me to hit a target, but our experience has been quite the opposite. People want to know what’s expected. They want to have clarity about what they should be generating in terms of revenue, because without it, they kind of are operating in a bit of a vacuum, and they don’t know coming into conversations around how they’re tracking. They’ve got no idea. Because if they know what they’re supposed to achieve, and you’ve given them that clarity. That was really a game changer for us. We noticed people just they want to know what’s expected, and then if they are achieving it, they can feel very confident that I’m doing what’s expected here. So as much as people in the world of advice, I think sometimes are reluctant to have targets or KPIs set for them, because I think someone up high is just going to set a big number and it’s, you know, unrealistic, and they’ve got no idea, because they’ve never been doing my job, and all those sorts of natural reservations. But we found, I mean, we obviously are running a firm, we’re advisers still on the register as advisers, but not doing the advice work so much anymore, but sort of have that experience of working with clients, and so we totally can appreciate that reservation. But yeah, say our experience was quite the opposite, and it was really transformational to give people that guidance as to what was expected of them.

Dan Heckendorf

I don’t see it as a draconian measure, and the implications of missing the budget shouldn’t be outlandish or penalising anybody. It’s just trying to give the vision and foresight of business, and it’s okay if the budget needs to be recut. Yeah, and that’s okay. It’s a bit like going on a holiday. You might think you’re going on one route and you might have to detour. That’s okay, but not having a map in the first place is a real sort of cardinal sin in business. To my mind. I think it’s important that business leaders, they don’t have that skill set, that they try and learn it, because it’s critically important as a business

Rob Pyne

grows. Yeah, I totally agree. Now, you said they’re sort of notionally, people say 120 clients is kind of capacity for an adviser. How do you think about that when you’ve got some firms looking after clients where they’re paying $12,000 average, versus some firms that are averaging $4,000 and obviously the number of dollars of revenue that adviser can manage will therefore be constrained somewhat if it’s 120 maxed out. Do you think about the capacity of an adviser in terms of revenue they can manage, or is it down to that specific client number? Because obviously, when you’re doing budgets, you’re looking at revenue. You’re looking at, when does the next person get hired based on the revenue we’ve got on the business?

Dan Heckendorf

I think it’s both. I think you want to make sure that an adviser isn’t red lining, but at the same time they’re performing. So whether 120 becomes 160 or becomes 100 it’s not just that metric alone. I think you want to sort of hit the average mark of 120 in combination with metrics such as revenue per client, yeah, sure, and revenue per adviser, but what you sort of want to see over time is the revenue per client is increasing that we’re trying to take on higher value clients, and I’ve seen before that when you look at the dichotomy of your client base, you might find that a high proportion that your high value customers are driving a small amount of your revenue, which means you’re spending an inordinate amount of time you’re looking after low value clients. The thing that happened in reality, once you break it down, you got rid of 80% of your clients and tried to replace them with higher value like your 20% you might lose clients over time, but you’re actually going to grow your margins, and that’s why it’s not just one metric. In isolation of looking at clients per adviser, there’s other ones that you’d need to consider. Yeah, revenue

Rob Pyne

per client’s a key one, isn’t it? And as you say, if that’s consistently improving over time, even if the client numbers are actually more steady, it’s a good indicator of just improving the business profile. So I want to get back for a second, but I’ve got two more questions for you. What I want to go back to is just this EBIT margin idea around what is the right margin of EBIT to be able to invest in growth. Do you have a strong sense of that. Dan, you said 50 is probably too high. You know, you very profitable at that level. Obviously, 50% by definition, is very profitable, but it may be constraining somewhat the growth of the business, its capacity, and certainly there’s no shortage of demand for advice. Now we’re experiencing it. Everyone I talked to is experiencing it. There’s a lot of people looking for advice. So you’ve got to be able to absorb some of that demand, or you don’t have to, if you choose not to. But what’s your perspective on what’s the right level of earnings margin that’s allowing you to invest some of that capability, or that profitability back into capability.

Dan Heckendorf

I think I’d say 50% is a blue ribbon number, like there’s not many wealth management firms who’d be reaching 50% that’d be the top echelon. So what I would say is it’s trying to break further north through organic initiatives that are going to make that happen. And so I wouldn’t say here’s a certain number of EBITDA margin for a certain type of firm, everyone wants to grow margin. And so it comes down to how you’re going to increase margin over time, which gets back to the five year plan. If you want to grow your margin, if you’re sitting at 30% at the moment, you want to get to 40% how you’re going to get there? What are the initiatives that you’re going to do to get to that 40% and we spoke about an offshoring, low-cost footprint. That might be one looking at the pricing. And know you’re you’ve been big Rob at HPH and looking at pricing mechanisms and good value advice should be priced accordingly. And what other segments are there? Could businesses get into new geographies? Are there new service offerings, mortgage broking, in addition to wealth management, really thinking about what other ways that I might be able to take my current business and grow the revenue and optimise the expenses and make sure that I am reaching to that 40% just thinking that the business scale through critical mass, that just won’t happen. You need to have demonstrable plans in place to make that happen and monitor it ruthlessly. Yeah,

Rob Pyne

I said I had two more questions, but I’ve still got two more I could talk to you all day Dan cause this is interesting stuff for me. So I spoke to Rob Jones from Peloton Partners a few episodes ago. And love chatting to Rob. He’s got a very good handle on the detail of businesses as well. They go in and they assess businesses performance. They look at pricing, but they look at really some of that spend on labour versus overheads and or profit margins. And he talked about that 40, 20, 40 model, which is 40% labour, 20% overheads, 40% earnings margin, as being sort of a good balance spread of where you’re spending your dollars. But obviously it can vary a bit. You can be spending a bit more on labour, so it might be closer to 50% in which case your overheads a bit more under control than 20. But maybe it’s kind of 15 to 20 in that range, and you’ve got your earnings margin some between 30 and 40. Do you have a benchmark position in your mind as to how? And obviously it’ll vary depending on the objectives of the business. But does that 40, 20,40 model make sense to you as a kind of a starting position for a business that’s saying, Okay, what are we striving

Dan Heckendorf

to achieve here? I think in the absence of any of your own strategy or targets, it’s useful. But I would say, depends on your evolution. When you’re first starting a business, reaching 40% might be difficult, and businesses go through cycles as well. So you might have a good quarter because it’s seasonal or cyclical in nature, and so you sort of have to think about that seasonality for business. And I’d also say M&A can throw that metric out a little bit as well. If you’re taking on a new book and a new adviser, sometimes integrating new acquisitions into a business can take a bit of time to get those synergies that you’ve wanted from the acquisition in the first place. And so whilst I say it’s a good indicator, just don’t be too wedded to it over time, you want to make sure that you’ve got your own pathways in place to extract those margin expansions. And I think if you make a fist of your own destiny with your own plans in place, you’ll probably reach those margins by default.

Rob Pyne

Yeah, and with AZ NGA, when you were there and you were talking to business owners about what you could bring to the table. How did business owners respond? Obviously, enough of them said, Yes, this sounds like a good proposition to me, but some people would be reluctant to give up that sense of control. And I know the model, the federated model, was very much we don’t want to step in and interfere, and we want you to do your own thing and do what’s working, because clearly it’s working. But did you find any reluctance on the part of some businesses that you were talking to about relinquishing some control for fear of what AZ NGA would then require or command of that business, even though what you’re really bringing to the table is a potential for them to sort of turbo charge or accelerate their own growth by bringing some capital and bringing some capability to their business. It’s a kind of a bit of a long-winded question, but how did you see that play out when you’re talking to business owners? Some that were saying, yes, we want the capital to grow and accelerate our growth, versus others that were saying, Oh, look, I’m just fearful of having anyone else on my balance sheet, because, in fact, it might just interfere with my day to day operations, and I don’t want anyone telling me what to do, because I’m running my own show here. Do you have any comments or any experience that you can share?

Dan Heckendorf

My response is different businesses would want different things from a relationship with AZ NGA. Some absolutely would want the business discipline and the thought leadership that AZ NGA provides to spur their growth and take them to the next level. And so I was a welcome union, an absolute welcome partnership, and that’s what happened 90% of the time. Paul had such a strong value proposition, and AZ NGA, executed on that proposition all the time, so there wasn’t too much consternation. Sure, there were businesses that were a little bit reluctant to relinquish that control, that I felt that once the trust factor was earned post onboarding, there was that understanding that AZ NGA have followed through on their commitment, and we do need to sort of fall in line and follow them on the growth journey. And so those fears were oftentimes delayed once they got to know us better,

Rob Pyne

yeah, and once they saw the results that you’re able to help them achieve. Okay, I promised you two questions the last one for business owners listening. What’s the one piece of advice you’d leave them with when they think about investing, perhaps early in their finance function before it becomes a pain point? What’s that one piece of advice you’d give about getting that investment in early so they can scale effectively?

Dan Heckendorf

Do? Don’t let it linger. Act as soon as you feel the need in the formative years, finding an accounting firm that delivers the basics. Well, that’s important. Bookkeeping accuracy are essential. And certainly an outsource arrangement can be long lasting, depending on the rate of the company growth. But as the business grows, so too, the expectations of a finance team and if the outsource team are not stepping up, issues can escalate quite quickly and put your business at risk. So certainly seek guidance sooner rather than later. From my experience, there’s a very strong linear relationship between business growth and the value of a strategic finance leadership. And a lot of high growth companies leave it too late and then they spend crazy money remediating the financial issues that could have been avoided with smaller investments in formative years. So yeah, strong CFO is not only going to help you grow your business, but they’ll help you protect it too.

Rob Pyne

Yeah, I can totally see that, and I’ve learned a lot talking to you last week when we were prepping for this Dan as well as today. So I’m really pleased I’ve had this chat. It’s been a trivia conversation. Terrific conversation. I think a lot of people listening will come away with a very different view on what the finance function can be, not just a back office necessity, but a genuine strategic partner in growth. So thanks for sharing your thoughts today. Dan, I’m sure this won’t be our last conversation.

Dan Heckendorf

Likewise, Rob, no, I’ve enjoyed the chat. It’s really awesome for me to share my experience, and hopefully people will find some value from this across your network.

Rob Pyne

Yeah, terrific. Thanks again. Dan, appreciate it. Thanks for tuning in to The Trusted Adviser. Hope today’s conversation brought you new insights and inspiration for growing your business. If you enjoyed this episode, please subscribe on your favorite podcast platform, leave a review and share it with others in the industry, and don’t forget to connect with us on LinkedIn for updates on future episodes until next time, keep building trust, embracing innovation and driving success in your practice.