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Why Banks Ask for Financial Projections with Suzy O'Connor · Budget Your Business

• 0:00
  Scott: Hello, and welcome to Budget Your Business, the podcast for small business owners who want to plan for every aspect of their business.
• 0:11
  Scott: I'm your host, Scott Geller.
• 0:14
  Scott: Today I'm joined by Suzy O'Connor of MT Bank to talk about why banks ask for financial projections.
• 0:24
  Scott: Welcome, Susie.
• 0:25
  SPEAKER_00: Hi, Scott.
• 0:25
  SPEAKER_00: Thank you so much for having me.
• 0:28
  Scott: Absolutely.
• 0:30
  Scott: So for folks who are just meeting you for the first time, could you share a little bit about yourself and what you do?
• 0:38
  Scott: Sure.
• 0:38
  SPEAKER_00: So Susie O'Connor, I'm a business banker with MT Bank.
• 0:42
  SPEAKER_00: I've been with MT for just a little under three years now, but been in the banking industry for about 13 years.
• 0:50
  SPEAKER_00: Of those 13 years, eight of them have been with working with small to mid-size businesses.
• 0:56
  SPEAKER_00: And what I do is I take a holistic approach to banking.
• 0:59
  SPEAKER_00: So not just looking at the checking accounts or the loan requests, but really taking a full review of your business and how are some steps that we can help to make your business run better, smoother, faster in regards to banking.
• 1:15
  Scott: Okay, great.
• 1:16
  Scott: And one follow because small and mid-tier size firms, depending on who you talk to, can have a wildly different definition.
• 1:25
  Scott: So maybe share what does that mean to you?
• 1:28
  SPEAKER_00: Yeah, so so I work with businesses from startups, so essentially zero revenue, and the about the largest clients that I work with are in the$30 million range.
• 1:39
  SPEAKER_00: So that's where I would lean more towards the mid-size, is anywhere between 15 to 30, and then small is probably anything under 15.
• 1:48
  SPEAKER_00: But it's it it runs the gambit, everyone has their own definition, but that's kind of where I where I see businesses fall.
• 1:56
  Scott: Good.
• 1:57
  Scott: And so you you've been at MNT for three years, sounds like you're elsewhere before that.
• 2:03
  Scott: Why why MNT?
• 2:04
  SPEAKER_00: So MNT truly cares about the clients uh and is a bank that really has a lot of focus around small businesses.
• 2:12
  SPEAKER_00: Um, there's a lot of banks that really focus on retail banking, so your personal, um, all of your personal assets and um banking needs, and then there's a lot of business, a lot of banks that focus on large commercial clients, so you're you're really big companies.
• 2:27
  SPEAKER_00: Um, and what happens is the the folks in the middle, the ones that you know really build our United States, the small businesses, kind of get lost in the middle.
• 2:36
  SPEAKER_00: And MT has seen that as an area of where we really want to focus.
• 2:41
  SPEAKER_00: Um, and I really just help love helping those types of businesses because they're they're the ones that you're using every day, they're the ones that are helping fix your gutters, they're the ones that are um you know helping to clean your house, they're they're services, products, and services that you're using and that you want to see succeed.
• 3:00
  Scott: Great, thank you.
• 3:02
  Scott: Um now it can be a bit intimidating for companies.
• 3:08
  Scott: Now, personally, I don't think you're terribly intimidating, Susie.
• 3:10
  Scott: I hope I hope that's a compliment.
• 3:12
  SPEAKER_00: Yeah, I would hope not.
• 3:13
  Scott: Um, but it can be a bit intimidating for companies to go to a bank, and they don't really know exactly why or or what to do.
• 3:23
  Scott: So maybe could you just tell me about the process of a bank coming on board and kind of working with a business when they need capital?
• 3:33
  SPEAKER_00: Yeah, so it's really important for small businesses and mid-sized businesses to have a banker, um, to have someone to know that if something goes wrong or they have a question in a trusted partner for them to be able to go to.
• 3:46
  SPEAKER_00: So a good place to start is your local branch, um, but really just asking around other businesses that you that you work with.
• 3:53
  SPEAKER_00: Hey, who's your banker?
• 3:54
  SPEAKER_00: Um, who do you all work with?
• 3:56
  SPEAKER_00: And then really it just starts with um, you know, an introduction.
• 3:59
  SPEAKER_00: Tell me about your business, you know, what is it that you do, and how can we be, you know, a helper in making your business more successful?
• 4:08
  SPEAKER_00: And what are some struggles that you see and how can we help with those?
• 4:12
  SPEAKER_00: Um, so really it's just reaching out to if if it's not your bank, of course, I would love for it to be MNT and especially for it to be me.
• 4:20
  SPEAKER_00: Um, but really it just takes starting a phone call and just getting to the right person with the bank that you are currently with, or looking at outside banks and asking for advice and then interviewing.
• 4:32
  SPEAKER_00: Interview those people.
• 4:33
  SPEAKER_00: You want to have a good synergy with your banker.
• 4:36
  SPEAKER_00: Um, they should understand what your business does, they should be asking questions.
• 4:40
  SPEAKER_00: Um, it should be kind of a two-way street where you know the conversation is going both ways, and so that um you find someone that that you believe is someone who can help your business and and not just you know, someone who can get the loan done.
• 4:57
  Scott: I I always regardless of of who the service vendor, whatever provider, I I I like to say, you know, talk to two to three people.
• 5:06
  Scott: Is that kind of what you're thinking of as well?
• 5:08
  Scott: Is that what you're referring to?
• 5:09
  SPEAKER_00: Yeah, yeah, of course.
• 5:11
  SPEAKER_00: I mean, you know, you want to find someone who you have that good synergy with.
• 5:15
  SPEAKER_00: And especially, you know, depending on the type of business, you really want someone who either understands what you do so they can make the right suggestions, um, or at least are asking the questions so that they do understand what you do and can make you know good suggestions for you.
• 5:33
  Scott: Right.
• 5:35
  Scott: And and it's one thing to go to a bank and set up um you know, a checking account, a transactional account, maybe um credit card processing.
• 5:47
  Scott: It's a whole other other story sometimes to go and ask for capital.
• 5:51
  Scott: Yes.
• 5:53
  Scott: When you're asking for capital, um how would you recommend a bank or sorry, a a a business, small business, how would you recommend a small business uh kind of going into that process?
• 6:05
  SPEAKER_00: Yeah, so you know, you should think about what are you looking to use the funds for?
• 6:10
  SPEAKER_00: That's always going to be your number one.
• 6:12
  SPEAKER_00: That's what the bank is gonna want to know.
• 6:14
  SPEAKER_00: That's what you should know as a business owner.
• 6:16
  SPEAKER_00: What are you looking to use the funds for?
• 6:18
  SPEAKER_00: Um, is it you're looking to buy a building, you need capital to grow your business, you need to buy new equipment, it's you know, um you you want something as a backup just in case you know the business is growing, you're bringing on new projects or new people, and you need, you know, you have enough cash, but you you want to have the option of maybe I want to borrow money instead of using my cash because I can earn something more on my cash.
• 6:42
  SPEAKER_00: And it's having that open conversation with your bank that'll allow you to to make those decisions to say, hey, you know, here's what it's gonna look like.
• 6:52
  SPEAKER_00: Um, but really having that open-ended conversation and understanding what you're gonna be using the funds for.
• 6:57
  SPEAKER_00: That's that's what we always talk about in in the banking industry is purpose-driven.
• 7:02
  SPEAKER_00: What is the what is the loan for?
• 7:05
  Scott: Hmm.
• 7:06
  Scott: Okay, very nice.
• 7:08
  Scott: All right, so what we've I've figured out on e money, I figured out the purpose of it.
• 7:12
  Scott: I need to buy a building or or or I need to purchase inventory or or whatever it happens to be.
• 7:20
  Scott: Um what do I what do I have to have?
• 7:25
  Scott: Let's let's say I come in, I come into your into your uh you know, I'm coming to your bank and to MNT, and I'm saying, okay, Susie, I have like a I have this budget that's kind of roughly laid out what I think the next 12 months are going to be.
• 7:44
  Scott: In your point of view, though, there there's a budget and then there's more of like financial projections.
• 7:51
  Scott: So maybe walk me through the difference between what you see as a budget versus financial projections by by business.
• 8:00
  SPEAKER_00: Sure.
• 8:01
  SPEAKER_00: So a budget, I imagine, you know, when I'm thinking about a budget, it is, you know, here are the funds that we are going to collect this year, and here are all the buckets that the money is going to go into.
• 8:13
  SPEAKER_00: Um, that's what I think of as a budget.
• 8:15
  SPEAKER_00: Even if you look at your personal funds, you know, you receive money in, here's all the buckets that the money is gonna go into.
• 8:22
  SPEAKER_00: Um, that's what I would think is a that's what I would consider a budget.
• 8:25
  SPEAKER_00: Um, when I'm looking at projections, it's okay, based on us buying this building and us being able to put X amount of people in here and hire more people and have a centralized location, here's the work that we can do.
• 8:39
  SPEAKER_00: So it's the money that you are projecting or you think you're going to get.
• 8:44
  SPEAKER_00: Um projections, you know, they're they're sometimes unknown, right?
• 8:49
  SPEAKER_00: You you can try to get the the closest to what you think the actuals are going to be, but it is based on what you think you can do.
• 8:58
  SPEAKER_00: Um, a budget is more of, okay, these are the projects that we have, this is the money that we have coming in kind of on a regular basis.
• 9:04
  SPEAKER_00: Projections are thinking are more big picture to me.
• 9:08
  SPEAKER_00: Um, you know, growing the business, those are projections.
• 9:11
  SPEAKER_00: What do you think is going to happen in the next year, two years, three years?
• 9:16
  SPEAKER_00: Um, and and where you can pull the levers.
• 9:19
  SPEAKER_00: If I hire more people, can I make more money?
• 9:22
  SPEAKER_00: It can if I buy more equipment, can I do more projects?
• 9:26
  SPEAKER_00: Um, those types of things.
• 9:27
  SPEAKER_00: So, kind of where you can change the levers for you to be able to see how does it change your or affect your business.
• 9:36
  Scott: Okay.
• 9:37
  Scott: And do you like, do you prefer seeing a overall, this is my projection for the entire business, or do you like to see, okay, these are the different projects or these are the different directives I have within my business, and seeing the projections broken down by maybe you know, maybe a more finite level.
• 9:58
  SPEAKER_00: Yeah, so what we like to see is a year of about monthly projections.
• 10:04
  SPEAKER_00: Um, when we're looking at what we can relate it back to buying a commercial building, um, we like to see monthly projections and then annualized over years two and three.
• 10:13
  SPEAKER_00: It's probably really hard to do projections for 15, 20 years.
• 10:18
  SPEAKER_00: You could probably do them up to five years where they'll be somewhat accurate.
• 10:22
  SPEAKER_00: Um, but really we look at the first three years, and the first year is very important for it to be broken down monthly because you're in a ramp up period, so you want to understand, okay, it's gonna take you know three months to hire the you know, hire the people or build out the building to be what you need it to be.
• 10:38
  SPEAKER_00: Then you're during that time period you're also going to be hiring.
• 10:42
  SPEAKER_00: Okay, what is that gonna look like?
• 10:43
  SPEAKER_00: What funds do you need to be able to do that?
• 10:45
  SPEAKER_00: How long does it take for those people that you hire to become income producing?
• 10:50
  SPEAKER_00: I mean, that's what should really go into the first year, and then of course, um, years two and three can be annualized.
• 10:57
  SPEAKER_00: Um so you can take like, you know, the the final three months and kind of put those over over the next year, depending on the type of business, as long as it's not seasonal or something of that nature.
• 11:10
  Scott: Right.
• 11:10
  Scott: And and I've I've been in several different industries, including insurance, which looks out you know, hundreds of years and and dealt with actuaries and still kind of confused at how they think they can actually project something 80, 100, 120 years out, which they have actuarial tables and a whole lot of math around that.
• 11:33
  Scott: But for a practical sense, when you're dealing with a let's say you're less than$30 million business, knowing what's going to happen in a year is hard.
• 11:44
  Scott: Knowing what's going to happen in year two and three is even harder.
• 11:48
  Scott: Knowing what's going to happen beyond the year three is to me a bit of a crapshoot.
• 11:53
  Scott: You can think about it and you can plan for it, but being really honest with it, it's I don't want to say useless because it's a good mind, it is a good process to go through, but actually kind of using that is is I think you you you kind of lose some of the value when you get out that far.
• 12:11
  SPEAKER_00: Yeah, and you should definitely have goals, right?
• 12:13
  SPEAKER_00: If you have a goal that you're you know you're building a company and you want to get it to that$10 million mark or that$5 million mark, then you should set those goals because I think it's important to have something that you are going towards and building towards.
• 12:27
  SPEAKER_00: Um, but I think in the projection world and when it comes to banking, we're not gonna, you know, we're really gonna look at the first three years.
• 12:37
  Scott: Right, exactly.
• 12:38
  SPEAKER_00: Okay.
• 12:39
  Scott: And um, so when do you usually ask for the for projections?
• 12:43
  SPEAKER_00: So it depends on the the type of business and what the request is for.
• 12:48
  SPEAKER_00: Um, so I'll give you a good example right now.
• 12:50
  SPEAKER_00: I'm working um with a client that is opening her third location for her business.
• 12:56
  SPEAKER_00: Um, and so based on you know her other two locations, she can essentially predict what the third location is gonna look like.
• 13:04
  SPEAKER_00: Um, but with just the two finan the two um current businesses that she has and those financials doesn't necessarily support the third location to purchase it.
• 13:17
  SPEAKER_00: So we need to look at projections to say, hey, based on what you've done previously, and then what you think you're gonna be able to do in this third location, then based on those numbers, we can qualify you to be able to purchase the building.
• 13:30
  SPEAKER_00: So that's a that's just a good example of using projections in that case.
• 13:35
  SPEAKER_00: And that can happen even in a you know, in a startup business, there is no historical financials.
• 13:41
  SPEAKER_00: Um, you have to be looking at projections.
• 13:43
  SPEAKER_00: Um, and so that is really important for us at the bank is well, we don't know what your business is gonna do, you don't know what your business is gonna do, but at least you have a roadmap of of where you want to be and what we can look at.
• 13:57
  SPEAKER_00: Um and so, and those numbers shouldn't just be, you know, I'm guessing.
• 14:02
  SPEAKER_00: Um, there are some resources out there.
• 14:04
  SPEAKER_00: There's a vertical IQ that that's what we use at the bank, um, and it's a resource that can break down what other businesses in your industry have done in terms of net income, top-line revenue, what their expenses look like.
• 14:19
  SPEAKER_00: And so we do kind of cross-reference those.
• 14:22
  SPEAKER_00: And every business runs a little bit differently, but at least that gives us an idea that, you know, landscaping business, you know, in in this area, you know, because it's seasonal, is not going to be able to do 10 million in its first year.
• 14:38
  SPEAKER_00: Are there outliers?
• 14:39
  SPEAKER_00: Yeah, of course there's outliers, and there's businesses that that you know skyrocket like they do like that.
• 14:46
  SPEAKER_00: But um, you know, for the most part, based on this this data that um vertical IQ has collected, you know, the the average number is let's just say 3 million.
• 14:57
  SPEAKER_00: I don't know the actual number off the top of my head, but um, you know, that that's where we could say, okay, you know, your projections are a little bit too high, here's some resources, go back, you know, revamp them, or you know, have someone like you to help them understand, okay, here's what they look like.
• 15:15
  SPEAKER_00: Because a lot of business owners, they're really good at their craft, they're really good at what they do, and and the numbers are not always a piece of that craft.
• 15:22
  SPEAKER_00: Um, and so you having someone else on your team to help you with those is really important.
• 15:29
  Scott: Right.
• 15:31
  Scott: So as a business owner, and I'm coming to you, I have projections.
• 15:34
  Scott: I'm putting these projections together, right?
• 15:37
  Scott: And if I'm thinking about, okay, these, you know, I I could I could increase sales by 10%.
• 15:44
  Scott: I think it's probably around 10%.
• 15:46
  Scott: But you know what?
• 15:47
  Scott: If I make it 30% or 50%, then the bank is going to give me a better deal and a better loan, right?
• 15:55
  Scott: Isn't that the way it works?
• 15:56
  Scott: And a tongue-in-cheek here.
• 15:58
  Scott: So hell, you know, come maybe walk through how aggressive should these business owners be when they are putting together their projection.
• 16:06
  SPEAKER_00: Yeah, we want a realistic projection.
• 16:08
  SPEAKER_00: Um, you know, we want it, we want you to be setting higher goals, but but like I had mentioned earlier, we'll we we will go back and say, okay, based on other businesses in the same industry, here's what they're doing.
• 16:21
  SPEAKER_00: So as long as they aren't completely outlandish, um, then of course, you know, we're gonna say, okay, these look realistic.
• 16:29
  SPEAKER_00: This is what a business in its first year can definitely do.
• 16:33
  SPEAKER_00: And based on how many people do you have to hire, what's the average project dollar amount, all those things come into a you know, when you're looking at the full picture, if you're one person, how are you gonna make$10 million, right?
• 16:46
  SPEAKER_00: And a land, we'll just use the landscaping because that's you know, a well-known business.
• 16:52
  SPEAKER_00: Um, one person would be almost impossible, I guess, unless you were m mowing lawns and doing a lot of stuff, you know, 24-7.
• 17:00
  SPEAKER_00: Or maybe if you, you know, you landed the Fenway Park and you were the landscaper for them, you know, maybe that that's where you could you could do it with one person, but it's got to be realistic.
• 17:09
  SPEAKER_00: Um, and so that's where having someone who understands your industry um is really important to have on on your team.
• 17:19
  Scott: Okay, good.
• 17:21
  Scott: Um what are so when when do I know that I need capital?
• 17:27
  Scott: I need to start putting some of this together.
• 17:30
  SPEAKER_00: Yeah, so when do you need capital?
• 17:33
  SPEAKER_00: Um, there's a lot of different answers for that one.
• 17:36
  SPEAKER_00: Um, some people think I think they want capital in the beginning, um, and then they get nervous about borrowing money.
• 17:43
  SPEAKER_00: Um, there's people who wait a really long time to get capital and they probably should have done it earlier.
• 17:49
  SPEAKER_00: Um, and it depends, and I think that that's where having someone who can look at your business and say, hey, here are options, or you can qualify for a loan based on what your business is doing.
• 18:01
  SPEAKER_00: Um, you know, and it's nice to have the option, right?
• 18:04
  SPEAKER_00: It's can I qualify for it?
• 18:06
  SPEAKER_00: Okay, if I qualify for it, what do the terms look like?
• 18:10
  SPEAKER_00: You know, if you have short-term needs, a line of credit is the the right product for you.
• 18:16
  SPEAKER_00: Um, and so you know, having that line of credit in place may be advantageous where you get to decide, okay, we either want to use our cash or we want to use the line of credit.
• 18:29
  SPEAKER_00: Um, and so it and it depends.
• 18:31
  SPEAKER_00: It it'll also still go back to the type of business that you have.
• 18:35
  SPEAKER_00: If you are um, you know, an HVAC who does a lot of commercial jobs and you need the equipment, so you need to buy you know the big HVAC equipment and you need the things to install it and all the different hoses and all of those things.
• 18:53
  SPEAKER_00: And you know, because you have a big project that's gonna take you three months, well, you won't get paid on that job until you know four or five months down the road in in um commercial HVAC.
• 19:04
  SPEAKER_00: So, do you have enough capital to take on that job, or do you need to seek something from the bank, or is it something where you're like, okay, I think we can make it without using the bank's money or outside capital?
• 19:17
  SPEAKER_00: But we want to have that as a backup in case that we do need it.
• 19:21
  SPEAKER_00: So it's really on a case-by-case basis, and I'll and I'll I'm sure I'll say it a lot in here, but it really is important to have a banker who who understands your business and who can walk you through what are the options for you specifically because every business is different.
• 19:38
  SPEAKER_00: Um, you know, HVAC is different from landscaping, it's different from being an engineer, it's different from being, you know, a fractional CFO.
• 19:46
  SPEAKER_00: It just depends on the type of business that you have and where money you know from the bank can fit in.
• 19:53
  SPEAKER_00: And and I'll be honest, a lot of times I tell clients, you don't need the money.
• 19:59
  SPEAKER_00: You know, you have enough of it.
• 20:01
  SPEAKER_00: You know, we're not showing that you have a delay in accounts receivable and that or you're working on a you know the big project, you can fund it on your own.
• 20:10
  SPEAKER_00: Um, but without the projections or a budget to know, hey, in the future, in three months, we have a big project coming up and we need more capital for that, um, it's those conversations where it's important to have the bank to say, okay, now we see why you need the funds.
• 20:28
  Scott: Absolutely.
• 20:29
  Scott: I I you know you you don't the bank isn't the only option, right?
• 20:34
  Scott: Bank, bank, make yourself the bank, right?
• 20:36
  Scott: Build up enough cash.
• 20:37
  Scott: But to your point, is if you don't have the projections, if you're not putting a budget together, if you're not thinking about the future, you don't know how much you're gonna need.
• 20:48
  Scott: And and you don't know whether or not you can be your own bank, or if you want to go that, you know, take take uh uh some type of uh debt instrument out with a bank, or go ask for or go ask for investment, right?
• 21:02
  Scott: I mean there there's a lot of opportunities.
• 21:05
  Scott: What I what I do recommend businesses do is bank on yourself, but also have that relationship with a bank because you want somebody there either having something in place before you need it, or have that relationship so you're not starting from scratch and they they know your business, they're comfortable with it, because to me, I see the process as being much smoother and much more efficient.
• 21:32
  Scott: Yes.
• 21:33
  SPEAKER_00: Yeah, even when it comes, you know, um specifically at MNT, we I work with only two underwriters.
• 21:40
  SPEAKER_00: Um, and so you know, when clients come back for a second request, or let's say we've done a line of credit for them and then they they're going to do um they're going to buy a building, the underwriter, I mean, they remember, they remember those clients and they're like, Oh yeah, you know, I remember doing this for them.
• 21:57
  SPEAKER_00: The financials looked really good at that point, you know.
• 22:00
  SPEAKER_00: I feel more comfortable to be able to do this because I'm familiar with them.
• 22:05
  SPEAKER_00: And so that does that does make a difference.
• 22:08
  Scott: Absolutely.
• 22:10
  Scott: Susie, share with me a few do's and don'ts for looking for a banking partner.
• 22:16
  Scott: Or going with a projection.
• 22:18
  Scott: Either way.
• 22:19
  SPEAKER_00: Yeah, so I'll I'll hit on the banking partner first.
• 22:23
  SPEAKER_00: So do's like I had said earlier, interview people.
• 22:28
  SPEAKER_00: You know, make sure you have that good synergy.
• 22:30
  SPEAKER_00: Look for a bank that you know fulfills your needs.
• 22:34
  SPEAKER_00: I I have this little speech a lot, but I say that you know the big banks are gonna have big technology, they're gonna be able to let you do everything online, which is super convenient.
• 22:45
  SPEAKER_00: Um, but then usually, not always, um, but their servicing is not gonna be as great because essentially they want you to be able to do everything online.
• 22:53
  SPEAKER_00: Um, and then you know, you have the really small banks which have not great resources for technology, but they have really great service.
• 23:02
  SPEAKER_00: Um, and so where I think MT kind of falls in the middle is that we have the technology and we don't have like every single bell and whistle that you could ever think of, um, but then you do still have a person that you can reach out to.
• 23:15
  SPEAKER_00: So I think it's important to find those, the common ground or find what your business needs and having that partner to understand what it is that you do and how they can help.
• 23:26
  SPEAKER_00: I mean, when you talk about getting a loan, a loan is not always the only option.
• 23:30
  SPEAKER_00: It could be cash flow.
• 23:32
  SPEAKER_00: It could be, you know, are you could you be accepting credit card?
• 23:36
  SPEAKER_00: Could you be accepting ACH payments?
• 23:38
  SPEAKER_00: Um, you know, are checks taking too long to get through the mail?
• 23:42
  SPEAKER_00: How do your contracts look?
• 23:43
  SPEAKER_00: Are you, you know, you're not pushing enough, or if you are your contract says you get paid in 30 days, yet you're only you're getting paid 60, 65, and 70.
• 23:54
  SPEAKER_00: I mean, what what is what's going on there that that maybe can change that a loan may not always be the best option?
• 24:01
  SPEAKER_00: And I think it's important to find the a bank that will sit down with you and say, walk me through how your cash flow works, instead of just in the banking world, we call them like order takers, right?
• 24:14
  SPEAKER_00: Like, okay, I want to do this, I want a line of credit where that might not be the right product for that whatever you're trying to do.
• 24:24
  SPEAKER_00: If you're trying to buy equipment, you know, a a truck, a line of credit is not a good option for a truck.
• 24:31
  SPEAKER_00: You know, that should be a term loan.
• 24:33
  SPEAKER_00: Um, how many trucks do you buy a year?
• 24:35
  SPEAKER_00: I mean, it you can go get into the weeds about all these things, but um, you should really have someone, again, that really understands your business and that can that can just have that conversation with you and understands where you are as a business and can say, hey, right now, the way the numbers are, you can't afford a loan.
• 24:54
  SPEAKER_00: These are these are the the numbers that we want to see.
• 24:58
  SPEAKER_00: You know, we want to see debt coverage ratio at a certain at a certain rate.
• 25:02
  SPEAKER_00: Um, we want to see, you know, other things.
• 25:05
  SPEAKER_00: We need to see the accounts receivable, um, not all be at 90 in 120 days, because you can't really run a business based on those numbers.
• 25:14
  SPEAKER_00: Um, you know, it's these things need to change for us to be able to feel comfortable and and having that conversation is really important.
• 25:23
  SPEAKER_00: And I think a lot of of banks kind of miss the mark in that in that way.
• 25:26
  SPEAKER_00: And bankers, they just say, you know, hey, we can't do it for you.
• 25:32
  SPEAKER_00: Your business doesn't make enough money.
• 25:34
  SPEAKER_00: Bull, what do you need to see the bank, you know?
• 25:37
  SPEAKER_00: And oftentimes I'll sh I'll um I'm very upfront.
• 25:41
  SPEAKER_00: I'll go through all the numbers with the client, and then sometimes we'll play around with them and say, okay, if this line number changes or this number changes, then then we can do it.
• 25:50
  SPEAKER_00: Um, a big thing that we see is um distributions.
• 25:54
  SPEAKER_00: Um when distributions are pulled out of the company, um, that you essentially are paying yourself or taking all the money out of the company, you know, on a business level, the the business can't afford the debt.
• 26:08
  SPEAKER_00: We know that in a full cash, you know, if we look at everything totally, yes.
• 26:14
  SPEAKER_00: But um, you know, in those instances, we want to see that the business can uphold um the debt on its own.
• 26:20
  SPEAKER_00: So it's having those conversations um that really makes the difference.
• 26:25
  SPEAKER_00: And um in projections, we want to see that there they are to the best of your ability, that you are not, you know, over-inflating anything.
• 26:36
  SPEAKER_00: We don't want to see you underinflate anything either.
• 26:38
  SPEAKER_00: You know, don't unqualify yourself.
• 26:40
  SPEAKER_00: They need to be in line or you know, um realistic for what you can do as a business.
• 26:47
  SPEAKER_00: And then, you know, you can if you hire another, you know, within six months you plan on hiring another person, you see payroll go up a little bit, then you'll see the income come up a little bit.
• 26:57
  SPEAKER_00: I mean, so that the numbers all make sense.
• 27:00
  SPEAKER_00: And and I'll walk through projections with with different businesses and just say, okay, how did you come up with these numbers?
• 27:07
  SPEAKER_00: Um, were these, you know, you've worked in a similar industry, you you know, hired a consultant, do you have a friend who also works in this industry and they were forthcoming and showed you their income and how their numbers work?
• 27:21
  SPEAKER_00: Um, so yeah, we'll walk through do these make sense.
• 27:25
  Scott: Okay, great.
• 27:26
  Scott: Well, Susie, you you you shared it a lot here, and I'm going, but we we I like to wrap up all of our shows with one to three actionable or immediate takeaways where they get off this podcast and they can go, you know, right away, they can get they they can go uh uh take action and take steps.
• 27:47
  Scott: So what can you share with us today?
• 27:51
  Scott: Maybe you've already mentioned it, and that's fine, but you're kind of maybe boiling it down to one to three immediate takeaways for our listeners.
• 27:57
  SPEAKER_00: Yeah.
• 27:57
  SPEAKER_00: Um, one I would say is understand your financials.
• 28:01
  SPEAKER_00: So understand what money is coming in, where money is going, so understand your budget, um, and then understanding what are you what is the business going to look like for the rest of the year or setting goals.
• 28:13
  SPEAKER_00: That's really important to understand as a business owner.
• 28:16
  SPEAKER_00: Um, and if you don't know how to do it, then then look into resources.
• 28:20
  SPEAKER_00: Scott, you would be a great resource for businesses to understand that.
• 28:24
  SPEAKER_00: Um, but there are others as well.
• 28:26
  SPEAKER_00: Um, so just making sure that you actually understand what the business is doing.
• 28:30
  SPEAKER_00: Um, because a lot of times I talk to clients and they they only see the top line revenue, but but the bottom is really what we're looking at.
• 28:38
  SPEAKER_00: What is the business actually making at the end of the day?
• 28:41
  SPEAKER_00: Um, so that is really that is one action that I would recommend to take.
• 28:45
  SPEAKER_00: And then two, I would say start building a relationship with your bank, with a new bank, interview, um, and just find someone so that in the case that you do need funds, something goes awry with your account, you have fraud.
• 29:00
  SPEAKER_00: We see a lot of fraud, and you don't want to have to be um, you know, calling in 800 numbers, someone who doesn't know your business, um, and just being able to have someone that that is on your side for the business.
• 29:12
  SPEAKER_00: So those two are probably the most important things that I see for a business is those two.
• 29:18
  Scott: So okay, very, very helpful.
• 29:22
  Scott: My my uh my final question here is so I enjoy good podcasts or book recommendation.
• 29:29
  Scott: What what do you have for us to do?
• 29:31
  SPEAKER_00: Yeah, well, not business necessarily, and that's okay.
• 29:34
  SPEAKER_00: I'm a big fan of the skinny confidential.
• 29:37
  SPEAKER_00: Um the him and her show.
• 29:39
  SPEAKER_00: It's uh husband and wife, um, Lauren Bostick and Michael Bostick, and they talk about all things um health, wellness, um, life hacks, um, business advice.
• 29:51
  SPEAKER_00: They kind of run like the whole gambit of things, so really enjoy them.
• 29:56
  SPEAKER_00: They're entertaining, um, and they bring on a lot of guests that I always think are really interesting.
• 30:01
  SPEAKER_00: So would recommend the skinny confidential.
• 30:04
  Scott: All right.
• 30:05
  Scott: So we have our understanding your financials, start your bank relationship or your relationship with bankers as soon as you get off, and then go check out the Skinny Confidential podcast.
• 30:16
  Scott: Perfect.
• 30:17
  Scott: Well, this has been great.
• 30:18
  Scott: Tell me where can people find you online or or anywhere?
• 30:22
  SPEAKER_00: Yeah, so um you can find me on LinkedIn.
• 30:25
  SPEAKER_00: That's probably the easiest way to get a hold of me.
• 30:27
  SPEAKER_00: Um, I'm somewhat active on LinkedIn.
• 30:30
  SPEAKER_00: I'd like to be more active, but um, you know, that's a goal or protection of mine.
• 30:34
  SPEAKER_00: Um and so um LinkedIn, Susie O'Connor is the best way to reach me.
• 30:40
  SPEAKER_00: Um also you can um I work for MNT, and so my email is S O C O N N O R2 at M T B.com.
• 30:52
  SPEAKER_00: Um and email me.
• 30:53
  SPEAKER_00: Um I'd be happy to answer any questions or concerns.
• 30:58
  Scott: Perfect.
• 30:58
  Scott: And thank you for joining me today.
• 31:00
  SPEAKER_00: Thank you for having me, Scott.
• 31:03
  Scott: All right, folks, that's it for today.
• 31:06
  Scott: I'm Scott Keller, and I hope you join me next time for budget your business.