Latest / Big Talk About Small Business / Ep. 99 - CFO Advice Every Founder Should Hear

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Ep. 99 - CFO Advice Every Founder Should Hear · Big Talk About Small Business

• 0:00
  Speaker 1: Yeah, I mean, you don't want to be responsible for somebody else's payroll and livelihood if you have no idea where your business is going.
• 0:07
  Speaker 2: I think I agree that's a really interesting.
• 0:09
  Speaker 2: I've never had that trigger point explained like that.
• 0:14
  Speaker 3: That's a big deal.
• 0:15
  Speaker 3: But she just said to you when you go past the point of taking care of yourself and you're going to have to start taking care of other folks, right, it's the stakes get high and you're going to have to start taking care of other folks, right.
• 0:28
  Speaker 2: The stakes get high.
• 0:29
  Speaker 2: Hey everybody, we're back again with another episode of Big Talk About Small Business, small Businesses.
• 0:39
  Speaker 2: I'm here in the studio with my good buddy and partner in this affair, eric Howerton.
• 0:47
  Speaker 2: You know I was really hangry when I was coming in here.
• 0:51
  Speaker 2: I had to stop and get an enormous chocolate chip cookie, or I would have really not been good today.
• 0:55
  Speaker 3: You know what's crazy is?
• 0:56
  Speaker 3: I was hangry too, but I got me like a sausage egg bagel.
• 1:01
  Speaker 3: But you got a cookie I did.
• 1:03
  Speaker 3: Yeah, where did you get a cookie Right there at the coffee shop.
• 1:09
  Speaker 2: Oh, you went next door and got you a chocolate chip cookie.
• 1:11
  Speaker 2: Yeah, I saw you in there talking to some old guy.
• 1:16
  Speaker 3: That's not good for you to get a chocolate chip cookie like that and just have that on your stomach.
• 1:23
  Speaker 2: That's my lunch, man, that's my breakfast in my life.
• 1:25
  Speaker 2: So, hey, power to you.
• 1:28
  Speaker 2: We've got a guest we better introduce.
• 1:31
  Speaker 2: Yeah, right, uh, danielle hendon is with us.
• 1:34
  Speaker 2: Um, she is, uh, the founder of four corners cfo, which is a company that provides fractional CFO services to small businesses.
• 1:46
  Speaker 2: She's based in Houston, which is the epicenter of everything.
• 1:53
  Speaker 2: I guess you got the biggest Katy Freeway is always whenever I think of Houston, I think of being on the Katy Freeway 28 lanes, 28 lanes.
• 2:04
  Speaker 2: Yeah, it's huge Really.
• 2:07
  Speaker 2: It is a case study of build it and they will come.
• 2:11
  Speaker 2: Oh, and they come because there's traffic they come, it's the widest, and every time they kept expanding it, just more traffic flows to it.
• 2:20
  Speaker 2: So it doesn't solve the problem.
• 2:22
  Speaker 3: I've never even heard of this in my entire life life.
• 2:24
  Speaker 2: well, eric, you got to get out more bud 28 lanes yep, that's right.
• 2:29
  Speaker 1: 14 in either direction and and I'm sure danielle wants to talk about that today instead of accounting hey, houston traffic could be a whole topic of its own, because I live here and I will admit we are not the best drivers.
• 2:45
  Speaker 3: Oh, right yeah.
• 2:47
  Speaker 1: We're a little aggressive on the freeway, but you are.
• 2:49
  Speaker 3: You're an excellent driver, it's just everyone else right, I just stay off the freeway.
• 2:52
  Speaker 1: That's why I work from home.
• 2:54
  Speaker 2: You're right.
• 2:55
  Speaker 2: One of the companies I used to work for had an office in Houston and their Houston partner would like go through toll booths at 100 miles an hour.
• 3:04
  Speaker 1: I mean, it was absolutely if you're doing the speed limit, you better be in the slow lane regular occurrence I mean not like yeah anyway, I like that, though things are moving fast down there yes, man, big it bill, building it big, exactly.
• 3:19
  Speaker 3: Get your stuff out, get it down.
• 3:21
  Speaker 3: No, slowing down, no, not at all.
• 3:23
  Speaker 3: If you're in the way, if you're going slow, get out of the way.
• 3:25
  Speaker 3: Yes, yes, all those wonderful things about business, right?
• 3:30
  Speaker 2: So tell us a little bit about your business and how you got into this thing, Danielle.
• 3:40
  Speaker 1: Oh gosh, I love telling people that I actually started as a music major.
• 3:42
  Speaker 1: I didn't think that I was going to be an accountant, but we had.
• 3:43
  Speaker 1: I had an English professor and we wrote an essay all about our career path and I realized very quickly that I didn't have friends in high places and I was going to be really broke.
• 3:51
  Speaker 1: So I decided that I did have friends in the business school and accounting sounded fun and there's this weird connection between numbers and music and it just it fit.
• 4:03
  Speaker 1: I've loved every bit of it.
• 4:05
  Speaker 1: Hindsight 2020,.
• 4:06
  Speaker 1: My family and friends are like I don't know why.
• 4:08
  Speaker 1: You didn't know that's what you were supposed to do.
• 4:11
  Speaker 1: Did my master's, got my CPA, went the traditional route with public accounting, started a family and realized I didn't want to work 60 hour weeks with a newborn at home.
• 4:23
  Speaker 1: So I left public and, being in Houston, I landed in oil and gas for about a decade, where the company I was with ended up going through bankruptcy when all the prices tanked back in.
• 4:35
  Speaker 1: What was that?
• 4:36
  Speaker 1: 18.
• 4:37
  Speaker 1: And anyways, prices tanked bankruptcy.
• 4:40
  Speaker 1: Bankers were selling everything off.
• 4:43
  Speaker 1: It took about two years, but when the pandemic hit, it was really obvious the doors were going to close and it was also a bit of a silver lining and perspective shift for me.
• 4:55
  Speaker 1: We were in the process of hiring a nanny to get the kids to all the things, because that's what you do in corporate when you're climbing the ladder and I was now at home with my kids, trying to teach them and figure out who the teachers were and the friends and the parents and the coaches and all of these things, and I realized there was this whole other side of parenting that I was missing out on and I didn't want to anymore.
• 5:19
  Speaker 1: I wanted to find a way to do what I love because call me weird I love what I do as an accountant, but also be there for my family and the people that I love.
• 5:27
  Speaker 1: So I started Four Corners CFO in order to bring those big business concepts when it comes to budget and analytics and the things that make big business bigger to small businesses in a way that fits their budget, that's fractional and also makes sense to them, so that they can use it and understand the story that their numbers are telling and build livelihoods and legacies.
• 5:50
  Speaker 1: And honestly, it just feels really cool to get to be a pebble in the pond and watch the ripples of all the people we're helping.
• 5:56
  Speaker 3: That's a cool story, you know.
• 5:58
  Speaker 3: I think that for our audience, let's demystify this fractional CFO, if we can Like.
• 6:02
  Speaker 3: I mean, it's a term that's kind of it sounds really cool, doesn't it?
• 6:06
  Speaker 3: Yeah, no, it sounds so awesome, but what does it really mean to the small business owner, right?
• 6:11
  Speaker 3: Why is that valued A lot of?
• 6:12
  Speaker 1: people get confused because when you see I am a CPA and most people think accountant, and when you think accountant you think taxes or you think bookkeeping.
• 6:20
  Speaker 1: And what we do is actually not taxes or bookkeeping.
• 6:24
  Speaker 1: We don't touch either.
• 6:25
  Speaker 1: We focus on, as fractional CFOs, what would be more of that operational accounting perspective where you're looking at building budgets and how do those budgets compare to your actuals and what's the forward looking future component of your business.
• 6:40
  Speaker 1: Your bookkeepers, your tax preparers, their really good tax strategy which I hope all of you have are usually looking hindsight.
• 6:47
  Speaker 1: They're looking at the past, they're categorizing and they're trying to do what they can to minimize the taxes for things you've already done.
• 6:53
  Speaker 1: As a fractional CFO, it's our job to come in and help you understand the numbers so that you have the confidence and the peace of mind to take that next step in your business.
• 7:05
  Speaker 1: As a business owner myself, you've always got that gut instinct and a lot of people fly by it and they don't even look at the numbers and they just go by gut and they keep moving and it can work for a while.
• 7:18
  Speaker 1: It works until it doesn't.
• 7:19
  Speaker 1: But we want you to have that gut instinct and then go no, I can really do.
• 7:23
  Speaker 1: I can hire that person because the numbers say it's okay.
• 7:26
  Speaker 3: Sure.
• 7:26
  Speaker 3: So if we look at this, like if we said, okay, a CFO for a bigger company that can afford a CFO full time, yeah, that's, their job internally is to do the budget planning, to set pricing's a big deal I'm sure Like, does it make sense?
• 7:42
  Speaker 3: And payroll costs, capital structure Capital structure Capital structure right, is this business?
• 7:47
  Speaker 3: Yeah, borrowing All that stuff.
• 7:50
  Speaker 1: And exit planning.
• 7:51
  Speaker 1: If you want to get out one day, you've got to know how to make sure that you can do that.
• 7:55
  Speaker 3: So all that stuff is CFO territory, right?
• 7:59
  Speaker 3: And so I think for a small business owner like you mentioned too, danielle like that CFO doesn't mean they're preparing your taxes, it doesn't mean that they're doing your books, it means that they're a strategic part of the company.
• 8:11
  Speaker 3: That's, that's looking at the numbers to make sure that this stuff all makes sense operationally.
• 8:16
  Speaker 3: And then, but the fractional part, right, just for clarity is for small businesses that cannot afford a full-time CFO to have that part.
• 8:26
  Speaker 3: The fractional is representing that your business, basically, is doing a portion of that work for them.
• 8:34
  Speaker 1: Yes and no, I would argue we do all of that work, but because they're a small business, they don't need a full-time person doing it.
• 8:42
  Speaker 1: It can be done in a fraction of the time that a corporation might need.
• 8:46
  Speaker 1: So we can serve multiple people.
• 8:47
  Speaker 1: But at least for us, in the way that we do it, our clients have access to us.
• 8:51
  Speaker 1: I don't want to say 24 seven during business hours, but they have access to me and my team.
• 8:58
  Speaker 1: If they've got questions, we do the coordinating with the bookkeeper and the tax preparer.
• 9:03
  Speaker 1: We help them step out of that piece and know just enough of the finances to move forward but not have to be in the weeds of it.
• 9:10
  Speaker 3: Yeah, yeah, so they still.
• 9:12
  Speaker 3: I'm sorry, mark, I'm hijacking.
• 9:14
  Speaker 3: No, go ahead.
• 9:15
  Speaker 3: Every time I say something, you look like you're pissed at me.
• 9:20
  Speaker 3: No, I'm not, okay, cool.
• 9:22
  Speaker 3: So if we were working with you, Danielle, we would still need a bookkeeper because you're not going to do that, and I still need my tax preparer for the end of the year.
• 9:32
  Speaker 3: All right, so, because you just stay in that lane.
• 9:35
  Speaker 3: But I think that's really important, because I've been in small business for a long time and I never understood that I would just hire a CPA as for taxes, and I think that they're supposed to help me with the strategy.
• 9:48
  Speaker 3: And I'm so freaking frustrated because I'm like why didn't you say that two years ago, exactly, if I'm losing so badly, why didn't you tell me to?
• 9:58
  Speaker 3: Oh well, I mean, it's never anybody's fault.
• 10:01
  Speaker 3: Yeah, I hear you.
• 10:02
  Speaker 1: And it's one of the first questions we ask new clients.
• 10:05
  Speaker 1: We ask them to introduce us to their bookkeeper and their tax preparer.
• 10:08
  Speaker 1: And then I say do you have strategy meetings with your tax preparer?
• 10:11
  Speaker 1: Because if not, we need a switch.
• 10:13
  Speaker 2: Yeah, it's true.
• 10:15
  Speaker 2: Well, I think the other thing, the whole idea with the fractional CFO stuff too is you could go hire somebody and call them a CFO, but you're not going to necessarily get the same quality.
• 10:26
  Speaker 2: You want a full-time person at a price, or do you want a part of somebody who's better at the same price?
• 10:35
  Speaker 2: It's kind of the way I look at it.
• 10:38
  Speaker 2: I mean, I've done this role myself.
• 10:39
  Speaker 2: I'm doing it right now in a company.
• 10:41
  Speaker 2: Now, unfortunately, I don't know what your experience has been, danielle, but don't you find that sometimes you can't really do the CFO job because the accounting is so bad that it forces you into the weeds?
• 10:57
  Speaker 2: And that's certainly what I've encountered?
• 10:59
  Speaker 2: You know things like revenue recognition.
• 11:03
  Speaker 1: We get a lot of back and forth with the bookkeepers to make sure that the numbers are good, but we go through a very structured framework when we onboard a new client.
• 11:12
  Speaker 1: And the very first thing we do is their balance sheet Cause if.
• 11:15
  Speaker 1: I can't, as an accountant, reconcile your balance sheet and, for those of you listening, that is not the same as QuickBooks saying it's reconciled.
• 11:22
  Speaker 1: If it doesn't make sense and it's not reconciled properly, that's the first place we have to start.
• 11:27
  Speaker 1: I'm not going to touch your P&L with a 10-foot pole.
• 11:31
  Speaker 3: I like that.
• 11:32
  Speaker 3: Why is that?
• 11:32
  Speaker 3: Explain it to us folks that don't understand all this stuff, please.
• 11:37
  Speaker 1: The easiest one to give is your bank account, and I'm dating myself a little bit.
• 11:42
  Speaker 1: It's kind of like balancing a checkbook back in the day of like you may have money in the bank that you already spent and that's the purpose of a reconciliation between the books and the bank account, and QuickBooks will do that.
• 11:53
  Speaker 1: It'll match, it'll look for what's different and then it gives you this list of outstanding items.
• 11:57
  Speaker 1: A really good bookkeeper is going to make sure that list of outstanding items makes sense, that you don't have a check from two years ago sitting in that list.
• 12:06
  Speaker 1: A not so good bookkeeper is going to say oh, they're reconciled numbers match.
• 12:10
  Speaker 1: You've got this list, we're great, let's keep going and we're going to say time out, we got to back up.
• 12:14
  Speaker 1: What is this?
• 12:16
  Speaker 1: Another really good example that I love to give is the balance sheet is a place where a lot of accountants will put what we call clearing accounts.
• 12:23
  Speaker 1: So something that just needs like a placeholder payroll is a great example.
• 12:27
  Speaker 1: If you have people on payroll and you're doing 401k payments and as part of their payroll they're contributing to the 401k, that's going to go sit in a clearing account because it hasn't actually been paid out to the 401k company, yet it hasn't hit your cash.
• 12:42
  Speaker 1: But people will use that clearing account incorrectly and it'll steadily grow and grow and grow and I'm like wait, where's the offset?
• 12:50
  Speaker 1: Something got booked wrong here.
• 12:52
  Speaker 2: How about inventories?
• 12:54
  Speaker 2: I mean, I got involved with a company and a couple of years ago I looked at their balance sheets and they had the same value for two different inventory accounts over three years.
• 13:06
  Speaker 2: Okay, now that's a red flag, isn't it?
• 13:10
  Speaker 2: It's like what are the odds?
• 13:11
  Speaker 1: Because the inventory assets that have never recorded depreciation because the bookkeeper didn't talk.
• 13:19
  Speaker 2: Yeah, I mean.
• 13:19
  Speaker 2: So, yeah, the inventories I find are a big problem, the work in progress, I mean, I'm sure a lot of these little companies you work with, professional services firms, I noticed I was going to say I'll be honest.
• 13:31
  Speaker 1: We avoid the inventory unless they're a trade that has very small amounts of it.
• 13:38
  Speaker 2: I don't really care much about that, but you still have unbilled whip, you do?
• 13:42
  Speaker 2: You have a lot of unbilled time.
• 13:44
  Speaker 2: Yeah, unbilled whip you do.
• 13:46
  Speaker 2: You have a lot of unbilled time.
• 13:46
  Speaker 2: Yeah, that unbilled work in progress.
• 13:48
  Speaker 2: So you're a service firm.
• 13:49
  Speaker 2: You do the work, but you haven't sent a bill out yet.
• 13:53
  Speaker 1: That's really an asset you want to begin to talk unbilled and accruals if you haven't walked them through, actually cleaning up the books first, If they're not billing well, to begin with and I will give we do a lot of law firms.
• 14:05
  Speaker 1: One of my favorite examples in a law firm you have what they call a trust account which is basically like the escrow, the retainers you haven't actually earned it yet.
• 14:16
  Speaker 1: Law firms love them, but they can be notorious for moving money because they know they've earned it but they didn't actually take the time to go put it in their practice management system.
• 14:24
  Speaker 1: And now the books are a total mess and nothing ties.
• 14:26
  Speaker 1: That makes a lot of sense, but until I clean that up, we can't begin to talk about your unbuilt.
• 14:31
  Speaker 1: I need to fix your build first.
• 14:33
  Speaker 2: Yeah, yeah.
• 14:34
  Speaker 2: So there's a lot of problems.
• 14:36
  Speaker 2: How do you explain to these small business owners the difference in things like cash and accrual, because I've found that's very difficult for some people to understand, even though you can tell them look, cash is like your checkbook what came in and what goes out in accrual is when you earned it, but they just it's like a lot of small business owners just simply cannot understand accrual.
• 15:01
  Speaker 2: Do you find that to be the case and how do you help them?
• 15:05
  Speaker 1: Absolutely the case, and my initial gut answer to you is I don't explain it.
• 15:10
  Speaker 1: But second to that is we talk about it in different ways.
• 15:12
  Speaker 1: I don't talk about cash.
• 15:15
  Speaker 3: Sorry, that was an awesome answer.
• 15:20
  Speaker 1: We don't, because, similarly, I don't talk about cost to get sold, I talk about revenue generating costs.
• 15:25
  Speaker 1: I want it to be in language that they understand and recognize.
• 15:29
  Speaker 1: So I'm not going to say cash versus accrual, because that doesn't mean anything, but what does make sense.
• 15:34
  Speaker 1: And I'm going to use law firms again as the example.
• 15:36
  Speaker 1: Sure.
• 15:36
  Speaker 1: When you get paid it hits your bank account and we're going to have a cash forecast that's going to show you when we think things are going to hit your bank account and it's going to be based on your budget.
• 15:45
  Speaker 1: But your budget needs to show me what's happening in real time Because if your team and back to your unbilled piece if your team put in 100 hours and we think there's only $20,000 of revenue or whatever, if it's not hitting the target that that 100 hours should, we need to have a conversation.
• 16:03
  Speaker 1: But if I don't know how much actual time and actual revenue and we don't have that revenue matching component in the same month, we can't begin to have that conversation and that's why we need to book these accruals.
• 16:18
  Speaker 2: Yeah, I'm glad you brought up cash flow forecasting, I mean.
• 16:20
  Speaker 2: So I know you specialize in these companies that do like less than a million bucks a year or whatever, right.
• 16:27
  Speaker 1: Usually we have a couple that are up in 10 and 15, but not very many.
• 16:31
  Speaker 2: Okay, so whatever let's even say 10 or 15 million how many of these companies, when you go to help them the first time, if you found that, have any kind of cash flow forecasting whatsoever?
• 16:47
  Speaker 1: They don't usually even have a budget.
• 16:49
  Speaker 2: Let alone a cash flow forecast.
• 16:51
  Speaker 2: There you go.
• 16:51
  Speaker 2: So I mean again.
• 16:54
  Speaker 2: I mean, I don't know what your experience is, but I'm just going to go back to my own, working as a fractional CFO in a company I also happen to have some ownership in the cash flow.
• 17:07
  Speaker 2: Forecasting was non-existent.
• 17:09
  Speaker 2: We update it throughout the day, every single day, and it's the most critical tool that we have.
• 17:17
  Speaker 2: I don't know what else to say other than my experience is, at most, all these small companies.
• 17:25
  Speaker 2: They don't do it and I don't understand why.
• 17:27
  Speaker 2: Is it because they've got so much?
• 17:29
  Speaker 1: needed at that level, Like we're not do.
• 17:31
  Speaker 1: I will be honest we don't do daily cash flow for any of our clients.
• 17:34
  Speaker 1: We have a couple of those larger ones that we're looking at it weekly to make sure that payroll and billing goes out on time.
• 17:40
  Speaker 2: Right.
• 17:41
  Speaker 1: But the majority.
• 17:43
  Speaker 1: If you're in that kind of 250 to a million space, we're usually doing it monthly, but you need to know when you expect that cash is king.
• 17:50
  Speaker 1: If you run out of cash, you don't have a solution for it.
• 17:56
  Speaker 1: I mean, unless and one of the very first things I tell clients is I'm a huge fan of a line of credit you need to have a safety net and if it's not your own savings, then we need to find one.
• 18:06
  Speaker 1: But you don't want to always be reaching into that, and if you don't know where cash is gonna go, we've got big problems you know what I love?
• 18:14
  Speaker 3: what's that?
• 18:14
  Speaker 3: I love being the dumbest person.
• 18:16
  Speaker 3: Oh, come on.
• 18:17
  Speaker 3: No, I mean for real.
• 18:18
  Speaker 3: You guys are going back and forth, I mean talking about all these things that are just like scientists.
• 18:26
  Speaker 3: But I'm here to represent our listeners because, like well, I mean like you brought up the cash flow, like why?
• 18:34
  Speaker 1: don't they.
• 18:35
  Speaker 1: Are you going to ask us what a cash flow forecast is?
• 18:37
  Speaker 3: no, no, I'm not, I'm not going to ask that, but I'm going to say, hey, like as an like, like.
• 18:44
  Speaker 3: The reason I didn't have that and the only thing that was in my brain as entrepreneur was nothing other than making a deal, getting revenue, getting a sale, getting a sale.
• 18:56
  Speaker 1: I bet you looked at your bank account at least once a week, if not every day.
• 19:00
  Speaker 2: He managed his cash very, very tight, was super undercapitalized, okay for a long time, and that teaches you to be.
• 19:10
  Speaker 1: Even my clients without a budget are at least checking their bank account Like if it's in the bank I've got it.
• 19:15
  Speaker 1: May not always be true, but at least they're looking.
• 19:18
  Speaker 3: I'm telling you, man, I'm the worst, like I am the worst, I really am.
• 19:22
  Speaker 3: Why don't you get me help in your business?
• 19:25
  Speaker 3: Because you will.
• 19:26
  Speaker 3: I'm embarrassed and I'm scared, get down.
• 19:30
  Speaker 1: That is a very real thing, though.
• 19:32
  Speaker 1: Okay, people would rather stick their head in the sand.
• 19:35
  Speaker 1: Yeah, fly by gut.
• 19:36
  Speaker 1: Then feel embarrassed or ashamed of what their numbers are there is absolutely a huge mindset piece that's exactly right.
• 19:44
  Speaker 2: I am be embarrassed or ashamed.
• 19:45
  Speaker 2: I mean listen, it really isn't no accountants that enjoy this.
• 19:47
  Speaker 1: It's like putting together a puzzle.
• 19:48
  Speaker 1: What you see is messy and embarrassing.
• 19:48
  Speaker 1: We're like, oh, this is so much value we can add if I do this.
• 19:50
  Speaker 1: So accountants that enjoy this.
• 19:51
  Speaker 1: It's like putting together a puzzle, what you see as messy and embarrassing.
• 19:55
  Speaker 1: We're like, oh, this is so much value we can add If I do this.
• 19:58
  Speaker 1: I can do these two little things and you're going to see so much.
• 20:01
  Speaker 3: So here's my thing, though I mean I think this is a good combo, because the reality is is no, I don't look at my bank account.
• 20:08
  Speaker 3: No, I don't look at the books.
• 20:15
  Speaker 3: As a matter of fact, my entire town, at my previous company that we built, I never looked at the books, I never looked at the bank account.
• 20:21
  Speaker 3: I had no idea.
• 20:23
  Speaker 3: God love you, how's the business?
• 20:25
  Speaker 1: doing yeah.
• 20:30
  Speaker 3: That ended up doing pretty good.
• 20:32
  Speaker 1: No, I mean, how did you gauge it?
• 20:34
  Speaker 1: How do you measure it?
• 20:35
  Speaker 1: How did you get check, pulse check, feel for?
• 20:38
  Speaker 3: Making deals, man Just making deals.
• 20:40
  Speaker 3: If I would sign another deal, then I would go back and we would hire somebody and I'd just understand the people out of capacity and can we hire?
• 20:47
  Speaker 3: And so, to answer, I had a business partner.
• 20:50
  Speaker 3: My business partners would always be on that side.
• 20:54
  Speaker 3: Somebody's looking at it, somebody's looking at it, but I was never looking at it.
• 20:58
  Speaker 2: Well, when you had it all by yourself before you brought that business partner in, what you were doing is you're going oh, I don't have enough money.
• 21:06
  Speaker 2: Therefore, I'm not going to take anything out.
• 21:08
  Speaker 2: I'm going to kick money out of this thing, right, 100%.
• 21:11
  Speaker 2: I had self-sacrifice, yeah, total.
• 21:13
  Speaker 2: So I mean total, utter self-sacrifice.
• 21:16
  Speaker 3: You you were looking at it and then just calling, getting on the phone, calling, meet and meet and meet and it's all about revenue.
• 21:23
  Speaker 1: But I mean, I think that that's a statement about revenue and you could have lived life easier oh, I'm sure I could have.
• 21:31
  Speaker 2: I mean, I think too, though a lot of it depends on, like, how capitalized the company is, cause I've also, you know, as you say, professional service firms.
• 21:39
  Speaker 2: I worked with architects and engineers my entire career, yeah, and that's a long one.
• 21:44
  Speaker 2: And I remember there were like an architect in Connecticut who had his entire revenue he needed for the year in cash in the bank.
• 21:55
  Speaker 2: He's like a 70 year old dude.
• 21:57
  Speaker 2: Okay, that guy didn't care about his accounting at all.
• 22:01
  Speaker 2: It's like they'd send bills out every three months if they felt like it because they just were so overcapitalized.
• 22:10
  Speaker 2: Yeah, they were just flat out overcapitalized and it just takes all the.
• 22:16
  Speaker 2: I'm used to operating on the other basis, like payrolls Thursday how much money have we got?
• 22:21
  Speaker 2: Where can I get another 20 grand?
• 22:24
  Speaker 2: I mean it's you know it's a different thing.
• 22:26
  Speaker 2: I think when you've got a really undercapitalized company, the financial management stuff that you're talking about doing, it gets even more critical that it's done.
• 22:37
  Speaker 1: How really fun when they've got a lot of cash, because then we get to connect them with wealth manager and it becomes like okay, so let's figure out how to make this tax efficient.
• 22:44
  Speaker 1: And do we want to go buy real estate for the office instead of renting?
• 22:48
  Speaker 1: And how do we make more money for you out of this?
• 22:51
  Speaker 1: Not just sitting in a bank account doing nothing Because I can't I'm a huge proponent of emergency funds and line of credits and having safety nets but sitting there doing nothing.
• 23:06
  Speaker 2: No, thank you.
• 23:06
  Speaker 2: It's crazy, it really is.
• 23:07
  Speaker 2: Are resistant to take money out of their business and, let's say, put it in the stock market or other things that maybe are considered safer, because they feel like they don't have control over it, like they do their own business.
• 23:24
  Speaker 1: I absolutely, and I think part of it, part of it is that a lot of small businesses.
• 23:30
  Speaker 1: We know we can budget and forecast all we want, but if the world has shown us anything in the last four years, five years since I started this, it's that you're going to get hit with something you never saw coming every year.
• 23:42
  Speaker 1: And.
• 23:43
  Speaker 1: I think there's that what if?
• 23:44
  Speaker 1: What if we get hit with this thing and then we lose clients or we need money and they want to make sure that it's still there.
• 23:48
  Speaker 1: We lose clients or we need money or we need and they want to make sure that it's still there.
• 23:52
  Speaker 1: But I think that's why it's important, when we have that emergency fund conversation, to say, okay, let's put that somewhere safe when we're beyond like a three to six month emergency fund and when I say that I don't mean all of your money, because let's be real, if your business is tanking, you're not keeping all of your people, but a three to six month emergency fund then we really want to say what makes this cash effective and efficient for you?
• 24:16
  Speaker 1: How do we put it in a place that doesn't just benefit the business but benefits you?
• 24:21
  Speaker 3: so three months.
• 24:22
  Speaker 1: So your emergency fund is three to six months of what like the total overall operating cost of the business we go through an exercise with our clients where we actually talk about if all hell break loose, what do you absolutely need to keep this business running?
• 24:37
  Speaker 1: What keeps the lights on?
• 24:38
  Speaker 1: If it's a revenue generating cost and they're not generating revenue, are you really still keeping them so that we can come down to what's a realistic number along with?
• 24:48
  Speaker 1: We all know it costs money to hire people.
• 24:50
  Speaker 1: How long would you want to keep somebody and give you time to pivot and adapt before you say, ok, we're going to have to do some layoffs, because as a business owner, that's one of the last things we all want to do.
• 25:00
  Speaker 1: You know you're responsible for other people's livelihoods and that feels like crud to do a layoff.
• 25:06
  Speaker 1: But if they're not generating revenue, then we can't keep paying them.
• 25:12
  Speaker 2: Yeah, yeah, what.
• 25:14
  Speaker 2: How do you feel about open book management?
• 25:16
  Speaker 2: Do you ever advocate that or put that in place in some of the companies that you work with?
• 25:20
  Speaker 2: Oh, I haven't heard of that.
• 25:22
  Speaker 2: Okay, that's basically sharing firm financial performance metrics with every single employee in the company.
• 25:29
  Speaker 2: Like one of the companies I work with, we share everything Cash accrual, how much cash is in the bank, sales web hits, all that stuff.
• 25:37
  Speaker 2: How do you feel about that?
• 25:40
  Speaker 1: I think there is a ramp up to it.
• 25:42
  Speaker 1: I think for a lot of the businesses that come to us when they're first starting out and don't have budgets or any they don't even have KPIs Our first step is to identify those KPIs and figure out who's responsible for them, because all of those primarily administrative, non-revenue generating people should be revenue affiliated and have a KPI and they need to know what that is first and we want to make sure we're incentivizing it.
• 26:07
  Speaker 1: They know what it is and they've got access to what that number is as you grow.
• 26:12
  Speaker 1: I definitely think that open book management helps the firm as a whole come together and build a better team and build a better firm and have a really great culture.
• 26:22
  Speaker 1: But I think you have to lead up to it, otherwise it's information overload.
• 26:26
  Speaker 1: I have clients that'll get on and I'll open Excel and I just watch them go blank get on and I'll open Excel and I just watch them go blank.
• 26:34
  Speaker 2: So I love that.
• 26:35
  Speaker 2: She said revenue affiliation Is that what you said?
• 26:38
  Speaker 2: Did I catch that right?
• 26:44
  Speaker 1: I'm telling you, I'm all about the non-accounting terms, if you hear me say an accounting term.
• 26:46
  Speaker 2: it'd be really rare.
• 26:47
  Speaker 2: So it's like what you're saying is you got to justify your existence here some way?
• 26:51
  Speaker 2: It's basically revenue affiliation.
• 26:54
  Speaker 1: There is nobody on the payroll or in your operating expenses.
• 26:58
  Speaker 1: That is not either required revenue generating a personal part, like my kids on payroll, or an investment in the business, and everybody and everything that's an investment needs to return time, money or both.
• 27:11
  Speaker 2: Yeah, I agree, I like that.
• 27:13
  Speaker 2: How do you get people to think like that though?
• 27:18
  Speaker 1: So when we go through the budget, the onboarding process to their budget building, step one is the balance sheet.
• 27:23
  Speaker 1: Step two is revenue streams.
• 27:24
  Speaker 1: We look at most of our clients come to us with a single sales line and nobody does one thing.
• 27:30
  Speaker 1: If it's by price, format or location or type of service, we want to know what those revenue streams are in a way that makes sense to the business owner.
• 27:39
  Speaker 1: The end goal of the revenue section is to understand the true profit margins, not your 100% service provider thought profit margin.
• 27:48
  Speaker 1: And what is that?
• 27:48
  Speaker 1: Profit margin by product or service.
• 27:49
  Speaker 1: Then we get into expenses and we're looking at all of those operating expenses.
• 27:51
  Speaker 1: And what is that?
• 27:51
  Speaker 1: Profit margin by product or service.
• 27:52
  Speaker 1: Then we get into expenses and we're looking at all of those operating expenses and we literally will go through my team will go look up who's the vendors for all of these things.
• 28:00
  Speaker 1: Is it a required cost for your business?
• 28:03
  Speaker 1: Is it what we think is either a passion project, like charitable contributions, or a personal park, like kids on payroll?
• 28:10
  Speaker 1: That's really more of an owner's comp that you get to run through the business and then everything else.
• 28:14
  Speaker 1: We sit down with them in that meeting and we say this is an investment.
• 28:17
  Speaker 1: What is it returning in time?
• 28:20
  Speaker 1: Money or both?
• 28:21
  Speaker 1: And we start to get the business owner thinking about what are those KPIs?
• 28:24
  Speaker 1: How is it giving back to my business?
• 28:26
  Speaker 1: What are all these shiny object bolt-on systems or people that we have added over time, that aren't necessarily adding value?
• 28:35
  Speaker 2: Or people we're protecting, that we had for 20 years working for us.
• 28:39
  Speaker 2: Yep, that's another one.
• 28:41
  Speaker 2: So anyway, I did have one other thought and then I'm going to let Eric.
• 28:47
  Speaker 2: I'll turn the interrogation back over to Eric.
• 28:49
  Speaker 2: So how do you deal?
• 28:52
  Speaker 2: Well, let me rephrase it A lot of accountants I've dealt with don't seem to understand that my goal as an entrepreneur has always been to build value in my business and have a big exit, whereas they seem like they're preoccupied with short-term profitability and the two are indefinitely in conflict.
• 29:16
  Speaker 2: I mean, I can just you know, I've told it on this show before.
• 29:19
  Speaker 2: I mean, I remember a story after we were in business, like probably, I don't know six or seven years, and our accountant says to us, me and my business partner that well, you could have each out another two, 250,000 out of this company this year.
• 29:35
  Speaker 2: And we're like you know, Bob, you've got a four person company.
• 29:39
  Speaker 2: Okay, you don't understand what we're trying to do here.
• 29:42
  Speaker 2: We're trying to grow this thing and sell it to private equity, which we did.
• 29:45
  Speaker 2: How do you, how do you deal with that?
• 29:49
  Speaker 2: I mean, do you find that most small business owners are more concerned about their short-term profitability, or they want to have a big exit, or do they expect to do both, realizing they may be in conflict?
• 30:04
  Speaker 1: It's a mix, and one of our earlier meetings with new clients is always going to focus on what their goal is.
• 30:12
  Speaker 1: I want to know is your goal?
• 30:13
  Speaker 1: Because some of the clients and I've heard you talk about this on other podcasts, but some clients come into this and they're like I want to get more time back?
• 30:20
  Speaker 1: And I get that.
• 30:21
  Speaker 1: We all go into this thinking we're going to have this really cushy lifestyle job and then we're working 80 hours when we thought it'd be 20.
• 30:28
  Speaker 1: But it's not impossible to get some of that time back.
• 30:34
  Speaker 1: But to do that, you have to create operational efficiency and you've got to buy that time back with people.
• 30:38
  Speaker 1: And that's where we start creating that exit plan.
• 30:42
  Speaker 1: So I'll give you a couple of examples with real clients We've got.
• 30:46
  Speaker 1: One of our larger firms is actually in the conversation of how do we add value?
• 30:50
  Speaker 1: We don't want to just take all this money out.
• 30:52
  Speaker 1: Their emergency fund needs to be like a million dollars and that sure should not be sitting in a like zero percent interest bank account.
• 30:59
  Speaker 1: How are we adding value to this firm?
• 31:02
  Speaker 1: And we're talking about real estate and offices and how to do things that sit on the balance sheet not just the P&L but also create a more effective tax strategy for them, because then they can leverage the rent strategies and the real estate tax stuff.
• 31:17
  Speaker 1: Versus another one of my clients that's been with me.
• 31:20
  Speaker 1: He was one of my very first clients.
• 31:21
  Speaker 1: He's an engineer, does a lot of outsourcing and does it as his second career and I'm like look, you don't want this to be nothing at the end.
• 31:29
  Speaker 1: So we have to start talking about how do you find a mini me?
• 31:34
  Speaker 1: How do you find somebody that might be interested in this down the road?
• 31:37
  Speaker 1: How do you start to train somebody and get them involved in the relationships, because right now you are the business and you can't sell that if you want to get out.
• 31:47
  Speaker 1: So those types of conversations.
• 31:49
  Speaker 1: Versus I've got another attorney that's a small firm who finally found her mini me and she's getting her time back and we're in that place of okay.
• 31:58
  Speaker 1: Now where do we create operational efficiency so that we can exponentially scale this?
• 32:04
  Speaker 2: Yeah, yeah.
• 32:06
  Speaker 2: That's where you really start getting into what I would just call really almost classic management consulting, as opposed to just financial.
• 32:14
  Speaker 1: And there's a little bit.
• 32:15
  Speaker 1: I mean, I'm sure you experience it too when you're a CFO.
• 32:18
  Speaker 1: There's almost as much management, coaching, consulting, goal setting, and we're just putting it into numbers, Sure.
• 32:27
  Speaker 2: Yeah, I find that, unfortunately, a lot of professionals which is what you know you're working with, regardless of what their discipline is they just they feel like it's I don't know if it's beneath them or it's just too boring or they don't have you know have an interest in it, but they just don't pay attention to the numbers.
• 32:50
  Speaker 2: They pay attention to selling and client service and the doing of whatever the place does.
• 32:57
  Speaker 1: That's why we get to exist, because we love the numbers.
• 33:00
  Speaker 1: I have some clients.
• 33:01
  Speaker 1: We'll get on those calls and I won't even bring up the financials.
• 33:03
  Speaker 1: We'll start with talking about what's giving them heartburn right now and because I know the financials, we can talk through whatever that is.
• 33:12
  Speaker 3: I mean I can.
• 33:12
  Speaker 3: That was kind of what I was bitching about earlier.
• 33:14
  Speaker 3: You know a little bit, but I mean you know.
• 33:16
  Speaker 3: Excuse my language, danielle.
• 33:18
  Speaker 3: Sorry Mark.
• 33:18
  Speaker 3: Mark requires me to cuss on this show.
• 33:21
  Speaker 3: I personally don't use any profanity, but Mark said if we're going to do a show, together yeah, yeah.
• 33:28
  Speaker 1: It's such a lie.
• 33:29
  Speaker 1: It makes us all human right.
• 33:31
  Speaker 3: I guess.
• 33:31
  Speaker 2: so I mean I am who I am now.
• 33:33
  Speaker 2: Well listen, I happen to have read that people who curse more are actually more intelligent.
• 33:38
  Speaker 2: Oh, that's cool.
• 33:39
  Speaker 2: Anyway, I'm going to go stake my-.
• 33:42
  Speaker 3: That's what I'm cutting now, right there, that peer pressure.
• 33:44
  Speaker 3: But I mean to your point though.
• 33:47
  Speaker 3: This is my thought and I want to bring some comfort to any entrepreneurs out there, because my thought process is to answer your question.
• 33:59
  Speaker 3: I'm in the business for marketing.
• 34:03
  Speaker 3: I can see the things, a problem that needs to be fixed.
• 34:06
  Speaker 3: I'm trying to articulate that value to clients all the time.
• 34:09
  Speaker 3: I spend all my time, my waking moments, trying to find a value statement that simplifies what the hell it is that I'm talking about, this complex thing so that somebody else can understand it.
• 34:21
  Speaker 3: Building graphics and sites and marketing programs to communicate sales and meetings, drinking coffees and all this crap.
• 34:28
  Speaker 3: The last thing on the planet earth that I have any kind of attention and time for are all these numbers.
• 34:37
  Speaker 3: With all these, you know, all these different, different reports and all these different things, it becomes this whole other thing that I want to depend on somebody else.
• 34:49
  Speaker 1: But I bet you would care if I came to a meeting and I said, hey, you were expecting to make $100,000 in revenue this month, but your team only performed at 80% and we came in 20% short of that.
• 35:01
  Speaker 1: Oh, I would totally care, because now you need to have a conversation with the team and figure out are we using the right tools, do we have the right people?
• 35:10
  Speaker 1: Do we have the right processes?
• 35:12
  Speaker 3: No, I totally care about that.
• 35:14
  Speaker 3: I just don't want to be the one that has to figure it out.
• 35:16
  Speaker 3: Yeah, I just want it done, but don't you, I'm doing my job.
• 35:21
  Speaker 3: Why can't you know?
• 35:22
  Speaker 3: Why can't?
• 35:24
  Speaker 1: everyone else do theirs.
• 35:25
  Speaker 1: I will be honest, I would bet you, out of all of our clients, maybe 10% actually open their CFO reports that we, we, send.
• 35:32
  Speaker 1: They want to have the plumber thinking I bet they're not and if they do?
• 35:35
  Speaker 2: they're looking at the graphs and not the numbers so so I'm kind of your, I am part of your, basically your clientele because you don't want to be in the weeds, so we get in the weeds for you yeah, I want everything done for me and yell but don't you think I mean I I guess I'm having a little bit of a problem with that I start to understand, maybe, why you struggled for so long and I'm still struggling.
• 36:01
  Speaker 2: You made the big bucks because I think if you're not really tuned in as a small business owner to your numbers I mean I always advocate to my students don't give up your bookkeeping until you're at a certain level.
• 36:14
  Speaker 2: I mean, for me it was like a million, five or two million a year.
• 36:17
  Speaker 2: I wanted to see every dime coming in and going out and it gave me a much better sense of the business than if I had just delegated that to oh you're funny.
• 36:28
  Speaker 1: It's the first thing I tell everybody to get rid of.
• 36:30
  Speaker 1: What's that I'm like?
• 36:32
  Speaker 1: Go find a bookkeeper.
• 36:33
  Speaker 1: I don't care who you are when you started, what level you're at, go find a bookkeeper.
• 36:38
  Speaker 2: Okay, well, I'm just telling you that my experience was that I've always had these undercapitalized bootstrap companies, and so I just had to be that close to the numbers to develop a sense of it.
• 36:51
  Speaker 2: I mean, we used to even say to people like you should always open your mail.
• 36:55
  Speaker 2: I mean you remember this, yep?
• 36:57
  Speaker 2: I'm sure Don't you.
• 36:58
  Speaker 2: It's like one of the fraud prevention uh measures is the business owner opens all mail.
• 37:05
  Speaker 2: Yeah, because there's so many ways people can steal from you with fake invoices and stuff like that.
• 37:10
  Speaker 2: But it's sort of analogous to looking at keeping the books and signing the checks.
• 37:18
  Speaker 2: I mean, at least sign the checks right.
• 37:20
  Speaker 2: Would you say that, danielle?
• 37:21
  Speaker 1: yes, you need to know every check going out the door okay.
• 37:25
  Speaker 3: Well, maybe that's so.
• 37:26
  Speaker 3: I know that I like, I approve all that kind of stuff, but I mean the.
• 37:29
  Speaker 3: I guess my thing is is I'm I recognize and appreciate and 100 value the significance and importance of it.
• 37:38
  Speaker 3: I just don't have the capacity for it.
• 37:41
  Speaker 3: That's why you hire.
• 37:43
  Speaker 1: I was going to say that's what CFOs do first.
• 37:45
  Speaker 3: Now didn't I just do a fantastic job of setting that up so that we have more sales and marketing For Danielle?
• 37:54
  Speaker 3: That's what I do.
• 37:57
  Speaker 1: I need Danielle to do numbers for me your bookkeepers are going to ask you a million questions and I mean, let's be honest, they do.
• 38:03
  Speaker 1: And when I talk to the bookkeepers because we don't do bookkeeping, coming from an audit background I'm all about the segregation of duties.
• 38:12
  Speaker 1: I was like I don't want.
• 38:13
  Speaker 1: You need as many eyes on your financials that you can get, and yeah honestly, I actually prefer when your bookkeeper and your tax preparer are completely separate, because then everybody can ask questions, and that's important.
• 38:26
  Speaker 3: On that real quick, danielle.
• 38:27
  Speaker 3: So what I like about that is is so would you recommend?
• 38:31
  Speaker 3: You have a bookkeeper?
• 38:32
  Speaker 3: You have the CFO fractional CFO.
• 38:35
  Speaker 3: You have a tax preparer and an auditor CFO.
• 38:36
  Speaker 3: You have a tax preparer and an auditor.
• 38:38
  Speaker 3: Four totally different folks in different companies.
• 38:48
  Speaker 1: If you are at a point where you need audit.
• 38:49
  Speaker 1: Yes, I would say a lot of our clients are not at that perspective and as a fractional CFO, we usually, if it's just small bank stuff and just reporting, we usually step in for bank covenants.
• 38:57
  Speaker 2: Yeah, you'd probably just do mostly compilations.
• 38:59
  Speaker 2: I don't even know if you do.
• 39:01
  Speaker 2: You do many.
• 39:01
  Speaker 2: Well, you're not in the public.
• 39:02
  Speaker 1: I don't even do compilations, because we're not a compilations.
• 39:05
  Speaker 2: So forget that.
• 39:06
  Speaker 2: Um, that's, that's what their outside bookkeepers or accountants would do for them.
• 39:11
  Speaker 2: Yep, Um, so yeah, I think too.
• 39:15
  Speaker 2: Just step back for a minute on the CFO role.
• 39:18
  Speaker 2: We're kind of focused in some of the nitty gritty stuff here.
• 39:21
  Speaker 2: I think a lot of people don't really appreciate maybe broader concepts, such as a good CFO is going to help you minimize the capital investment it takes to run your company.
• 39:35
  Speaker 2: Okay, now that's a really core idea.
• 39:38
  Speaker 2: Okay, Now that's a really big deal.
• 40:01
  Speaker 2: Speeding up billing, speeding up collection those are things that improve cash flow, take less capital.
• 40:10
  Speaker 2: Looking at things, as Danielle said, like utilizations of individual employees and how chargeable they are versus their billing rate, which really you know, that's the other side of it, I think, Danielle.
• 40:25
  Speaker 2: And their collection rates and their collection, yeah, what's actually realized?
• 40:30
  Speaker 2: You work with these professional service firms.
• 40:33
  Speaker 2: My experience is they're preoccupied with how chargeable somebody is, but A.
• 40:38
  Speaker 2: It doesn't mean that it's going to get billed to a client number one.
• 40:40
  Speaker 2: They could.
• 40:40
  Speaker 2: How chargeable somebody is, but A it doesn't mean that it's going to get billed to a client Number one.
• 40:42
  Speaker 2: They could be chargeable to an over budget job and you discount it, yeah, and so it's not the whole measurement of what they do.
• 40:52
  Speaker 1: So what we do and I love this because it gives the business owners a really clear perspective when we're going through that revenue process.
• 40:58
  Speaker 1: With a service provider.
• 41:00
  Speaker 1: We create a budget based on capacity, so I want to know what is their billable rate and how many hours should they be doing billable work?
• 41:08
  Speaker 1: Because, let's be honest, we've all got admin time, so you should be doing billable work 30 hours out of the week and you've got a $350 an hour rate.
• 41:16
  Speaker 1: I don't care if it's flat fee, contingency, any of it, that's what's going in the budget and if we're not hitting it, we have a problem we need to solve.
• 41:25
  Speaker 2: It's how much revenue you're generating.
• 41:27
  Speaker 2: I call that the revenue factor.
• 41:29
  Speaker 2: It's really your labor costs to your revenue, total labor costs for an individual.
• 41:34
  Speaker 2: But it's exactly what you're saying, and and so, yeah, I think, but these, these sort of bad habits have been like programmed into them.
• 41:44
  Speaker 2: Well, that's the way we did it at this old law firm that I worked at all about billable hours.
• 41:49
  Speaker 1: Yeah, it's all about billable hours, period um but the really way to make sense of it is if you've got a, let's say, a two thousand dollar flat fee that you thought was going to take somebody five hours and it's taking them 10, don't you need to know that, cause you could build them out at three 50 for a whole lot better than that.
• 42:09
  Speaker 2: Yeah.
• 42:09
  Speaker 2: So anyway, though the CFO, you know they're going to help you with your banking relationships.
• 42:14
  Speaker 2: That's a big deal and help maximize the amount of credit you can get.
• 42:19
  Speaker 2: Do you do a lot of that?
• 42:22
  Speaker 2: You mentioned lines of credit.
• 42:24
  Speaker 2: You want your clients to get them.
• 42:26
  Speaker 2: Get them, while you don't need them.
• 42:27
  Speaker 2: Obviously.
• 42:30
  Speaker 1: Even though the interest rates are not great right now, get them.
• 42:32
  Speaker 1: While you don't need them, negotiate them again later.
• 42:35
  Speaker 2: Sure Do you find a lot of clients in these small businesses don't understand that there are covenants tied to these lines of credit that they've got to maintain.
• 42:45
  Speaker 1: Oh, almost none of them do.
• 42:46
  Speaker 1: But I will say before we go too deep into it, we are not huge on the funding and the private equity and the banking side.
• 42:54
  Speaker 1: We do a lot more of the operational side.
• 42:56
  Speaker 1: We have some partners that we work with that are really great in that space if they need additional help on the banking and capital aspect of it.
• 43:04
  Speaker 1: We're more in the managing and making sure that we can go get all the right things in place.
• 43:11
  Speaker 2: Right.
• 43:11
  Speaker 2: What about like compliance related stuff and forms that have to be filled out?
• 43:17
  Speaker 2: Do you guys get involved in that at all for these companies?
• 43:21
  Speaker 1: Depends on the responsibility of the form.
• 43:24
  Speaker 2: A lot of times, small business owners, as you well know, like anything that doesn't fall in the domain that they like lands on the desk of whoever it is that's in charge of financial stuff.
• 43:37
  Speaker 1: But that's what a really great referral network's for, because then I'm like here's a great attorney that can help you with that one, or here's a great CPA that can do that piece of it.
• 43:46
  Speaker 1: Or because, like I said, we do not operate as a CPA firm, so by all technicality we can't officially file anything for anyone.
• 43:58
  Speaker 2: Yeah Well, I mean maybe not officially filing, but filling all this stuff out.
• 44:03
  Speaker 1: And we do have a lot of that when it comes to bank forms and lending, and they want this report and that report and these forecasts and all the things.
• 44:10
  Speaker 1: We absolutely jump in and help with those pieces.
• 44:13
  Speaker 2: Yeah, like an insurance audit or something they don't know how to deal with going through the payroll and putting all these stuff and fighting the insurance company that suddenly gives you a bill and says you owe me 12,000 more, right.
• 44:27
  Speaker 1: That's where I would go.
• 44:28
  Speaker 1: Hey, do we have a payroll person yet we might want to, or an HR?
• 44:31
  Speaker 1: We need to consider an HR person Ready to level up your show.
• 44:36
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• 44:40
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• 44:43
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• 44:45
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• 44:50
  Speaker 3: Hey Danielle, with the last kind of question on my end before we get going.
• 44:55
  Speaker 3: Unfortunately we're already almost out of time.
• 44:58
  Speaker 3: I'm sure y'all out of time.
• 44:59
  Speaker 3: I was going to say I bet y'all didn't even notice that time was going by.
• 45:03
  Speaker 1: We could talk numbers all day.
• 45:06
  Speaker 3: We might just clip me out of this entire show today.
• 45:10
  Speaker 2: I put that at no value, but you're one of the most important pieces.
• 45:13
  Speaker 2: You're the archetypal client, that's.
• 45:16
  Speaker 3: The other thing about my side is that I need a lot of emotional support.
• 45:20
  Speaker 3: Your eye candy, oh, you're the eye candy, you're definitely the eye.
• 45:29
  Speaker 3: Oh lord, you are funny so, but but how does a small business like, okay, let's take about, let's take two small businesses.
• 45:40
  Speaker 3: Really, you got your brand new entrepreneur never done we talk about this a lot never done in business before in their life?
• 45:47
  Speaker 3: They have an idea they're about to quit their job, your professional job.
• 45:52
  Speaker 3: What is the first thing that they need to do, and when do they need to do it?
• 45:59
  Speaker 3: Do they do it before they quit the job or when they start?
• 46:02
  Speaker 3: And when they do start, what is your advice?
• 46:05
  Speaker 1: as this, as a fractional CFO, Calculate your runway and you do it before you quit.
• 46:11
  Speaker 1: You've got to know what the runway is and you've got to know if it's feasible and I say this from experience.
• 46:17
  Speaker 1: I quit, got let go from my job.
• 46:20
  Speaker 1: I knew that.
• 46:20
  Speaker 1: Not going to lie, we had a nest egg.
• 46:22
  Speaker 1: I knew we had this nest egg.
• 46:23
  Speaker 1: I knew it was going to last for this long and I had this much time to make this work or to go back and get another one.
• 46:29
  Speaker 1: You have to have a runway.
• 46:31
  Speaker 1: Somebody has got to pay the bills.
• 46:33
  Speaker 1: You can't lose your mortgage while trying to set up your business.
• 46:36
  Speaker 1: You've got to know what your runway is.
• 46:39
  Speaker 1: And to know what your runway is, you've got to know either what your capital or your nest egg is and you've got to know what those minimum required expenses are for you to get off the ground.
• 46:50
  Speaker 2: That's good, I never had that luxury.
• 46:52
  Speaker 3: No, I didn't either, but I wish I would.
• 46:55
  Speaker 2: I will say, Danielle, that my experience, I mean I don't disagree with you.
• 47:00
  Speaker 2: I think most people would certainly benefit by thinking about all those things and reducing their personal overhead to the lowest possible point they can, Right, so they don't have to take more out of the business than necessary to live.
• 47:15
  Speaker 2: But my theory is that when you're vastly undercapitalized and you start a business, it actually makes you a better business later because you're going to be so concerned about your cash flow and basically every dime that it builds a discipline in that you know when you're like Eric and you sell your company and you have all this cash sitting there and then you start starting up all these other businesses and your survival, and when I say nest egg, I don't necessarily mean when we're talking runway, it's not necessarily that you've got this giant saving.
• 47:54
  Speaker 1: We're not Eric with millions over here in the bank.
• 47:56
  Speaker 1: Yeah, we're not Eric with millions.
• 47:56
  Speaker 1: No, we're here in the phone.
• 48:02
  Speaker 1: Yeah, I will tell you, I have clients that come to us in that phase and they know they've got $20,000 on their credit card and how long will that last you to get going that you then have to pay?
• 48:12
  Speaker 1: If that is your runway, that's your runway.
• 48:15
  Speaker 1: You've got to know where it gets you.
• 48:17
  Speaker 1: The bills have to get paid one way or another.
• 48:19
  Speaker 1: You're not going to get kicked out of your house.
• 48:25
  Speaker 1: Your runway may be your credit card.
• 48:26
  Speaker 1: Your runway may be a relationship with the credit union down the street that's willing to give you $20,000 to try and get this going.
• 48:30
  Speaker 1: It's not a huge nest egg and I promise you.
• 48:34
  Speaker 1: Getting laid off from oil and gas was not a huge nest egg, but it was enough to say I've got X amount of months.
• 48:39
  Speaker 1: Remoreling gas was not a huge nest egg, but it was enough to say I've got x amount of months.
• 48:42
  Speaker 1: And if I get my shit together we're gonna go, and if I don't, then I gotta get suck it up and go back I think a lot of people under appreciate the solid it is solid, sucking up and going with it.
• 48:52
  Speaker 3: I think a lot of people under appreciate the power of the runway via credit card.
• 48:58
  Speaker 1: Yeah, especially like Not my favorite example, but it is usually the go-to.
• 49:03
  Speaker 1: Let's be honest.
• 49:06
  Speaker 3: Especially like the Walmart credit card and the Banana Republic credit card 0% interest when you go.
• 49:12
  Speaker 3: Rotate too yeah yeah, I mean, like you buy stuff, like you buy your groceries on credit cards and then your clothes.
• 49:22
  Speaker 1: And if you're a professional service, the other option is you may be coming with a book of business.
• 49:27
  Speaker 1: You may know you have people coming with you.
• 49:29
  Speaker 1: Yeah, and that helps too.
• 49:32
  Speaker 3: Yep no for sure.
• 49:33
  Speaker 2: Yeah, no, I mean, I think that's all solid, you were going to say, though, so what's the difference in the new company versus, I think, your original?
• 49:42
  Speaker 3: question yeah, so we're stuck apart to that.
• 49:45
  Speaker 3: So that was for the new person, right.
• 49:46
  Speaker 3: But then you also have somebody that has started.
• 49:52
  Speaker 3: They've been doing bookkeeping.
• 49:54
  Speaker 3: When is really I mean you probably say before but when is it really the appropriate time to bring in that fractional CFO, like, I mean, go ahead and answer that.
• 50:08
  Speaker 1: From an operational perspective, because most of you aren't looking at numbers anyway.
• 50:12
  Speaker 1: It's when you're looking to hire that mini me when you're like all right, I've got to stop being the only doer in this business.
• 50:19
  Speaker 1: I've hit capacity.
• 50:20
  Speaker 1: I need to start building a real business and.
• 50:23
  Speaker 1: I need a mini me, I need another doer, I need a revenue generating person.
• 50:27
  Speaker 1: Hiring a fractional CFO is going to help you build the budget and the scenarios of what that looks like.
• 50:34
  Speaker 1: We jump in and help set up.
• 50:36
  Speaker 1: What can we afford for compensation?
• 50:38
  Speaker 1: What is their affiliation to revenue?
• 50:40
  Speaker 1: What do we want to incentivize versus work being paid on salary?
• 50:43
  Speaker 1: How do we want to set this up so that it maximizes your return?
• 50:48
  Speaker 3: So what that tells me is like okay, if you're an entrepreneur and you want to be a solopreneur yeah, I don't like that term, you know that, I know, but you may not necessarily want to, you't?
• 50:59
  Speaker 3: I don't think the caution of have not having a fractional cfo is too great.
• 51:02
  Speaker 3: But if you're trying to grow a business and you're trying to actually you know what I'm saying get that small business.
• 51:08
  Speaker 3: That's the entrepreneur.
• 51:09
  Speaker 3: You're shifting from small business owner, yeah, entrepreneur.
• 51:12
  Speaker 3: You've gone from.
• 51:13
  Speaker 3: You started the company.
• 51:14
  Speaker 3: You have a runway like we talked about.
• 51:16
  Speaker 3: You have built some clients.
• 51:18
  Speaker 3: Now you need to start growing.
• 51:20
  Speaker 3: You got to start scaling yourself.
• 51:22
  Speaker 3: Yep, that's the trigger point of when.
• 51:25
  Speaker 3: Hey, danielle, listen, I heard you on the greatest business video podcast on planet earth called big talk about small business.
• 51:31
  Speaker 3: I'm the sexy man named mark twyke.
• 51:35
  Speaker 3: Like this beautiful specimen of a man, I shouldn't say that, okay, sorry about that, but yeah, that's the trigger time to call it's to start talking right.
• 51:51
  Speaker 1: Yeah, I mean, you don't want to be responsible for somebody else's payroll and livelihood if you have no idea where your business is going.
• 51:58
  Speaker 2: I think I agree.
• 51:59
  Speaker 2: That's a really interesting thing.
• 52:00
  Speaker 2: I've never had that trigger point explained like that.
• 52:05
  Speaker 3: That's a big deal what she just said too.
• 52:07
  Speaker 3: When you go past the point of taking care of yourself and you're going to have to start taking care of other folks, right, the stakes get high.
• 52:16
  Speaker 2: Yeah, Well, it starts.
• 52:16
  Speaker 2: I think you know another way to look at it is just, you decide that you want to be an entrepreneurial venture instead of a small business.
• 52:24
  Speaker 2: Yeah, that's going to remain permanently.
• 52:26
  Speaker 2: Small is only tied to you and what you do basically, and everybody else is just not a sellable venture.
• 52:33
  Speaker 1: You're going to do a business that pays the bills, and then you're done.
• 52:37
  Speaker 2: But but the problem?
• 52:38
  Speaker 2: I mean we all know that right, there's no question to any of us that that's a true statement.
• 52:43
  Speaker 2: But the problem I found with a lot of these small business owners is they strip the money out of it year after year after year.
• 52:50
  Speaker 2: They don't hire anybody who's any good, they don't train them in the business itself, and then at the end they still want to get a payoff.
• 52:58
  Speaker 2: It's like I'm 70, I don't have anybody good.
• 53:00
  Speaker 2: It's going to take over, though?
• 53:02
  Speaker 2: I was going to give it to my kid and she don't seem to already told me they want nothing to do with accounting exactly and so.
• 53:10
  Speaker 2: But.
• 53:10
  Speaker 2: So now I need you to go sell my business, okay.
• 53:13
  Speaker 2: Well, what are you selling you?
• 53:15
  Speaker 2: You've got you nothing it's you.
• 53:17
  Speaker 1: You can't sell yourself.
• 53:18
  Speaker 2: Yeah, you didn't invest in the system.
• 53:19
  Speaker 2: You can't go there.
• 53:19
  Speaker 2: Like I said, we've got nothing.
• 53:20
  Speaker 2: It's you.
• 53:20
  Speaker 2: You can't sell yourself.
• 53:20
  Speaker 2: Yeah, you didn't invest in the system, that doesn't mean you can't go there.
• 53:22
  Speaker 1: Like I said, we've got the one engineer and I adore him and he's booking and I think we might have found somebody that would be interested in bolting on as a partner and then assuming the business and buying him out, which is a great way to go if that's what you're in.
• 53:38
  Speaker 1: It's not impossible to get there, but it's a lot easier to build a scalable business from the start.
• 53:45
  Speaker 2: That's right, yeah, and that's not going to maximize your value.
• 53:48
  Speaker 2: It's an exit?
• 53:49
  Speaker 1: No, but it does give you an exit.
• 53:51
  Speaker 2: It's an exit.
• 53:51
  Speaker 2: Yeah, absolutely, that is true.
• 53:54
  Speaker 2: There are people who will I call those just basically takeover payment situations where you have some employment income and your employees if you got three of them or you're, you know they're not going to get canned and your clients are going to be able to.
• 54:09
  Speaker 2: You care about your clients.
• 54:12
  Speaker 2: You've got a way to take care of them when you're not there, right?
• 54:16
  Speaker 3: But there's got to be a value to the buyer.
• 54:18
  Speaker 3: Like what am I actually buying?
• 54:19
  Speaker 3: My buying more clients, am I buying a process?
• 54:21
  Speaker 3: They're getting some people and they're getting some clients.
• 54:24
  Speaker 3: Yeah, yeah, or maybe they're.
• 54:25
  Speaker 2: They're adding on to a new vertical relationships yeah, maybe they get a service, like you said, that they didn't have.
• 54:32
  Speaker 2: Yeah, you know they're electrical engineers and mechanical, but they didn't do plumbing the sky's plumbing, plumbing.
• 54:38
  Speaker 3: But the problem, like you said a lot of times in the small business owners.
• 54:41
  Speaker 3: They're exhausted, they just want somebody to help get them out of their situation and they've worked their butts off to get to that point and they see so much value in what they've built but nobody else really does.
• 54:55
  Speaker 3: Yeah, that's true.
• 54:56
  Speaker 3: I don't want to say this, but it is kind of like when I was back in the real estate game and we were doing um we were, I was doing loans for folks and people would come in and say, hey, I have this property that I'm wanting to buy and is there a home on it?
• 55:13
  Speaker 3: Yes, well, what's the home?
• 55:14
  Speaker 3: Well, it's a manufactured home and we'd be like we can't lend, we can't finance that, we can't finance that.
• 55:19
  Speaker 3: And they'd be like well, but it has a deck and a pool to it.
• 55:21
  Speaker 3: I'm like that doesn't matter.
• 55:23
  Speaker 3: Yeah, it might be really nice, but the reality to it is is it's still a manufactured home.
• 55:29
  Speaker 3: It's kind of the same thing.
• 55:31
  Speaker 3: It's like you can't have a solopreneur business and expect that you're going to get bought out, like you have some sort of scalable thing for some, and to that point, if you have a solopreneur business and you are taking it all out, you better have a really great wealth manager.
• 55:45
  Speaker 1: that's helping you put it.
• 55:48
  Speaker 2: Yes, very true, all right.
• 55:50
  Speaker 2: Well, if anybody wants out there, wants to get a hold of Danielle who makes a lot of sense, by the way yeah, what?
• 55:57
  Speaker 2: How do they reach you, danielle?
• 56:01
  Speaker 1: We're going to set up a landing page just for you guys, so it'll be on our website the number four, not the word corners cfocom.
• 56:07
  Speaker 1: And then it'll be big talk, small business oh wow, all right, thank you.
• 56:12
  Speaker 2: Thanks, and she's just trying to actually document the value of our show hall.
• 56:18
  Speaker 2: Sounds like a cfo got behind.
• 56:20
  Speaker 2: She's covering.
• 56:20
  Speaker 2: She knows what she's doing over there so so the number four corner corners with an s cfo cfocom
• 56:31
  Speaker 3: slash big talk, small business big talk, small business, all All right.
• 56:37
  Speaker 1: That's great.
• 56:37
  Speaker 1: It was a lot of words.
• 56:40
  Speaker 2: And what's your email address, Danielle?
• 56:43
  Speaker 1: It's going to be my name, Danielle, at fourcornerscfocom.
• 56:46
  Speaker 1: Again, the number, not the word.
• 56:49
  Speaker 2: Okay, very good.
• 56:49
  Speaker 2: Well, that's great.
• 56:50
  Speaker 2: Well, listen, we really appreciate your being on the show and wasting your time.
• 56:55
  Speaker 2: It is never a waste of time to.
• 57:00
  Speaker 1: If anybody listens to this and we just get a little bit of like, oh, maybe I need to go look at my numbers and not be like eric, then, uh, this is a win, yeah that's, that's.
• 57:10
  Speaker 2: That's a good boy.
• 57:11
  Speaker 2: She just jumps in.
• 57:13
  Speaker 2: I'm telling you she gets it.
• 57:17
  Speaker 2: Uh no, you're right.
• 57:18
  Speaker 2: I mean, I think there's a lot of lessons here whether somebody actually hires Danielle to do this or not that are really critical for people to listen to.
• 57:27
  Speaker 3: Yeah, I agree, it's been awesome.
• 57:29
  Speaker 3: I learned a lot, danielle, thank you.
• 57:31
  Speaker 2: Thanks, danielle.
• 57:32
  Speaker 2: Take care you too.
• 57:33
  Speaker 2: Thanks for having me, and now you can join in on our, on our.
• 57:37
  Speaker 2: What is it?
• 57:39
  Speaker 2: Our final salvo here?
• 57:41
  Speaker 2: Yes, this has been another episode of Big talk about small business, oh I went too fast.
• 57:50
  Speaker 3: No, you did.
• 57:51
  Speaker 3: Everyone's supposed to do it their own way.
• 57:53
  Speaker 3: Yeah, all right, thanks everybody.
• 58:00
  Speaker 4: Thank you, danielle.
• 58:01
  Speaker 4: Thanks for tuning into this episode of Big Talk about Small Business.
• 58:06
  Speaker 4: If you have any questions or ideas for upcoming shows, be sure to head over to our website, wwwbigtalkaboutsmallbusinesscom and click on the Ask the Host button for the chance to have your questions answered on the show.
• 58:20
  Speaker 4: Stay connected with us on LinkedIn at Big Talk About Small Business and be sure to head over to our website to read articles, browse episodes and ask questions about upcoming shows.