Latest / The SmallBizChat with Melinda Emerson / Financial Planning and Strategy with Kathy Svetina

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Financial Planning and Strategy with Kathy Svetina · The SmallBizChat with Melinda Emerson

• 0:01
  Hi.
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  This is Melinda Emerson, the small biz lady host of the small Bizchett podcast.
• 0:06
  I want to serve you.
• 0:07
  This pandemic has been so hard on America's small businesses and on just America in
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  general.
• 0:13
  If you're ready to start your dream business, boy, do I have a great offer for you?
• 0:17
  I am giving away 1000 copies of my best selling book, become your own boss in 12 months.
• 0:23
  Over a hundred thousand people have this book It has been printed in multiple languages
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  around the world, and I wanted to find a way to serve America small businesses in this
• 0:33
  pandemic.
• 0:33
  And so I am giving away a 1000 copies of my book.
• 0:37
  All you have to do to get your copy is head over to begin my biz dotcom slash free offer
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  to, you know, sign up for your copy.
• 0:46
  All you have to do is pay shipping, and we will mail one out to you.
• 0:49
  I am so excited about this.
• 0:51
  I wanna serve you.
• 0:52
  Grab your copy today.
• 0:56
  Ending small business failure.
• 0:58
  Welcome to the small biz chat podcast with a number one small business expert, Melinda
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  Emerson.
• 1:05
  Melinda's goal is to end small business failure, and she'll give you the information
• 1:09
  you need succeed and live the life you dream of.
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  Now here's the small biz lady herself.
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  Melinda Emerson.
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  Hi, everybody.
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  I'm Melinda Emerson, the small biz lady.
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  America's number one small business expert And I wanna welcome you to small biz chat.
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  Now the small biz chat podcast is a peer to peer interview show that give small business
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  owners a way to get invaluable business insights.
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  Now the goal of small business chat is to end small business failure And we want to give our
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  small business audience an opportunity to hear sage advice from multiple angles.
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  With that, let me introduce my guest the founder of Newcastle Finance.
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  Her name is Kathy Christina, and she is gonna talk to us about how she became a part time CFO
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  for women business owners for nearly 14 years.
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  She did senior level financial planning and analysis for Fortune 500 Companies, and she saw
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  firsthand how financial information was used to drive companies forward And she wanted to offer
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  those same kinds of services to small businesses so they could be healthy and
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  sustainable.
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  So for more information about her company, is newcastlefinance.us.
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  Kathy, welcome to Small Business Chat Live.
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  Thank you so much, Melinda.
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  I'm really happy to be here.
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  Alright.
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  So tell me how you became a part time CEO.
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  Like, how did you say?
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  You know what?
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  Corporate America, I'm done with you guys.
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  I'm gonna go help the little guys.
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  How did you make that decision and and how has that been working for you?
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  That's exactly kinda like what actually happened.
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  You know, I was in the corporate America for almost a decade and a half.
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  And what always really bothered me about that was that these large corporations have huge
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  departments to take care of their finances.
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  I mean, if they have the tax, the men, they have the accountants, the financial analysts,
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  the strategy people, but when you go into the small business space, no one's really doing
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  that for them.
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  I mean, they have the accountants and they have the bookkeepers, but they're really concerned
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  more about the current pieces and what happened in the business and what happened in the past.
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  But when it comes to the future and the mapping of the strategy of the business, no one's
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  really doing that for them.
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  And they are not financial Wizards, the business owners, they're there because they
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  really love the product.
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  They and they enjoy the service that they're giving.
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  So they're really missing that crucial piece of the finances is how do you actually take that
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  data that your accountants and bookkeepers are giving you and how do you actually plan for the
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  business?
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  So that's when I said, you know what?
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  I'm gonna lead the corporate America, and I'm gonna try to help them.
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  Alright.
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  So I know one of the things that a lot of business owners say I wanna be a $1,000,000
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  business.
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  Right?
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  Everyone that's like that's just like magical goal, but, you know, we heard earlier that only
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  4% of small business owners ever get there.
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  But I think that it's a little bit of a misnomer to run a $1,000,000 business.
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  And I and I wanted you to sort of like break down for us sort of like the secrets to running
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  a $1,000,000 business, because I think people really I don't think people really understand
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  what it means.
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  Yeah.
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  And and there's a good point when it comes to a $1,000,000 business, what does that really
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  mean?
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  Does that mean a $1,000,000 in sales?
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  Does that mean a $1,000,000 in profit?
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  Does that mean a $1,000,000 in cash or those are kind of different those are different forms
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  how you wanna go and classify a $1,000,000 business.
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  So for the purposes that I wanna talk about, the $1,000,000 business is a business that's
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  actually making a $1,000,000 in sales annually.
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  So when you're getting to that point of the business ownership, that's usually when the
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  business becomes a little bit more complex and there's a lot more processing.
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  There's a lot more financial planning that needs to happen than just what happened before.
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  So usually business owners are very comfortable with looking at their checking account and
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  actually seeing the money, the cash, that they have in the bank accounts.
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  I have the money in the bank account.
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  I'm good.
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  But the problem with that is when you come to those levels, that's when you really started to
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  think about future of your business and how you're actually planning for it.
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  And if you are not having the right processes and the right planning, financial planning, in
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  place, the business can actually start to unravel.
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  There's a lot more complexity, and there's a lot more planning that you have to be doing at
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  those levels.
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  So there's an old rap song where he says, more money, more problem.
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  So is that is that what you is that what you're trying to tell me that this is what happens?
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  Like, $1,000,000 business you think you want that, you might not, right, because it's kinda
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  complicated.
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  Yes.
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  Yeah.
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  It is more money, more problems, but it's actually different type of on.
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  So you can actually have get to a point, believe it or not, when you have too much cash
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  in your bank account.
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  And I actually call that lazy money because, you know, you have a new bank account.
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  It looks good.
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  It looks great, but the problem is it's not really doing anything for Right.
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  And what's worse is because of the inflation, it the inflation is actually chipping away all
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  of that money.
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  So instead of having that in your bank account, it's looking at it and saying, what could I
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  actually be doing with a money that I'm getting a good return on it?
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  Do I wanna invest it in my own business?
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  Do I wanna invest it in more people I can grow if that's what your goal is.
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  Do you want to, for example, invest do you have to invest in an equipment or even you can
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  actually go and start buying other businesses, and that's gonna give you a good return.
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  So looking at it from a perspective of What do I have right now?
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  And how can I better use these resources so that they're gonna give me a good return?
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  That's really interesting because Is it typically when someone gets to about a
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  1,000,000 in revenues when they really need to be thinking about bringing a CFO in house
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  versus just kinda using a an accountant or or whatever?
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  Like, Tell me about when does someone need to be thinking about a CFO in their business?
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  So there's a difference.
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  When you're bringing someone in house, that means they're actually going to be on your
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  payroll.
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  The problem with that with the CFOs is they're really expensive.
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  And when you are the $1,000,000 sales, you don't really need someone full time in your
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  business at that point.
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  Mhmm.
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  But you do need that expertise.
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  You need that strategic financial expertise that your accountants and your bookkeepers are
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  just not able to provide, but that's where the fractional CFO step in.
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  So what a fractional CFO does, and that's actually in the in the name piece too, they are
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  offering the same type of CFO level service, but they're doing at a fraction of a cost, and
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  they're doing at a fraction of a time.
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  So instead of paying someone, you know, for 40 hours a week, you're only paying them for 5, 10
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  hours or however long you need them for and whatever support that makes sense for your
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  particular business.
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  Mhmm.
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  Mhmm.
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  So without the CFO, you can tend to miss some of the things that are going on with your
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  finances.
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  Right?
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  What about I know that I've I've read before that you talk a lot about financial planning,
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  and you feel like that's almost more of a need than a priority, as you will, over sort of like
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  the monthly analysis, like, kind of reconciliation, or as you would say, like, sort
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  of, like, the look backwards stuff versus the look forward stuff.
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  And and I wanted you to really explain that because when I think financial planner, I think
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  the person's handling my stocks and my my Bitcoin or whatever.
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  You know what I mean?
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  So help me understand when you talk about financial planning in a small business, How
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  often does that need to be done, and what are you looking at with that?
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  Yeah.
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  So first of all, before you do any of the financial planning, you have to have that
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  foundation in place, which is where your data comes in.
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  The all the stuff that your bookkeeper and account that they're putting in.
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  If you don't have that done well.
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  It's, you know, as the saying goes, you have garbage in, garbage out, unfortunately.
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  So that is the piece of the foundation.
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  And once you have that that in your, you know, accounting system and you know that it's
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  accurate, then you can put on top of the financial planning and how often you should be
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  doing it.
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  It really depends on the type of business you have and how complex it is and how established
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  you are.
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  So I also work a lot with businesses.
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  They're they're just starting up with the startups.
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  So start up is a completely has a completely different planning cycle than an already
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  established business, right, that's already making $66,000,000 figure in sales.
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  But the way how I like to explain to my clients that there are essentially 2 seasons that you
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  should be looking at.
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  So I like to think about the fall planning and the sprint planning.
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  So since we're in the spring already, that is where you actually do strategic planning of the
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  business.
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  You're looking at it from a 3 to 5 year plan Where do you wanna be 3 to 5 years from now?
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  What do you need to?
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  What are your goals?
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  And most important is how are you gonna get there?
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  How are you gonna achieve them?
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  That's when you're putting your projections, your budgets together for the next 3 to 5
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  years.
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  You're putting a plan.
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  Right?
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  And in the fall is where you're actually preparing.
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  You're preparing for the next year, and that is where you put the budgets together.
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  And the budgets are how much do you think you're gonna be selling your products and your
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  services for all of your expenses that you're gonna be putting in, the cash that's gonna come
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  into your business.
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  So these are all the pieces that you should be looking at.
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  And when you're doing that, you have to keep in mind that the environment is gonna change, the
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  business is gonna change, and you probably going to have to take a look at the budget
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  later on and do another forecast.
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  So the forecast is basically what it means is that, you know, you're using the budget for the
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  3 months and then things happen.
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  You're gonna have new contracts, new clients come in, new expenses, you want to be updating
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  it.
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  So it's a living document.
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  It's not like you you put a budget together and you put it in the desk and that's done.
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  Right?
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  It's a it's a plan.
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  You wanna look at it through the monthly planning, through the monthly monthly cycle,
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  and also when you're doing your forecasting.
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  So that's when I say what I mean, you have to do the financial planning.
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  So then in the fall, is that when you're doing your tax planning?
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  That's a part of it too because you do wanna make sure that you're planning for taxes as
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  well and wanna sit down with the accountant to make sure that how are the purchases that
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  you're planning for, how is that going to affect your taxes?
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  So that's a piece of it.
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  Yes.
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  Mhmm.
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  Mhmm.
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  So
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  from a CFO perspective, what do you think people need to do better as they're inchen up
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  to a $1,000,000 business.
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  Like, there's some stuff they need to kinda be paying attention to in order to get to a
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  1,000,000 and then be what are some of the key things that they should be looking at when they
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  see themselves having major growth?
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  I think the the main thing that people don't do is they don't take a tep away from the business
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  and look at it from a ten thousand foot view.
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  Right?
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  They're very embedded in the business.
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  They're very embedded in the details.
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  But when you're starting to grow your business, when you're really seeing that momentum is
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  where it really pays off when you take a step back and say, where am I really going?
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  What is my goal?
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  And especially if you wanna sell your business 3, 5 years down the road, you the way how you
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  operate right now is gonna be a lot different if you just wanna run it.
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  For example, you have to do succession planning, putting all the processes together?
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  How who's gonna, you know, are are you gonna be selling it, or are you gonna be giving it off
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  to an employee to your partner?
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  These are all type of questions that you should be asking yourself when you're looking at your
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  business strategically.
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  Mhmm.
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  Now one of the other things I wanted to ask you about was when is it time to go to a bank for
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  financing, whether it's line of credit or an actual loan for the bank if you're if you're in
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  sort of like growth mode
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  The best time to go for a line of credit is when you don't need it because at that point,
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  you are not going to be desperate.
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  You're not you're you're gonna get better terms.
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  You're gonna be able to have this kind of sober mind and pair different because essentially
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  what it is is comparison shopping.
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  You wanna get the best term that you can so that when you do ask really need the line of
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  credit or any other loans that you need that it's gonna be able to support you in a better
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  way and then you get insurance.
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  So you're not getting 20% interest because, you know, that's just terrible, but you're getting
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  something that really works for you.
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  And the best time to do it is when you actually don't need it.
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  Alright.
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  And last question.
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  So what is the biggest best of business advice you could give to someone that's inching close
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  to a $1,000,000 in revenue?
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  The best thing that I can give would be plan.
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  Really, plan, plan, plan.
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  You have to be proactive about your business, not reactive.
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  And to get there, you know, you can there's actually tools out there that you can be using,
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  especially if you're gonna do them in a DIY style versus using someone like a fractional
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  CFO.
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  And, you know, this is not sponsored in any way, but I really love these 2 tools.
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  They're called the spotlight reporting and the fathom and they both integrate with whatever
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  accounting software you have, whether you have QuickBooks, whether you have 0, They both
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  integrate and they'll be able to guide you through the planning process and to actually
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  putting your KPIs in place so that you can see your financials.
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  You can actually get the insights from it, what you need to support in your business.
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  I love it.
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  I love it.
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  Thank you so much, Cathy.
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  You have provided some great insight.
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  And, actually, I'd never heard of two tools.
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  So you're actually educating me tonight.
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  Alright, Kathy.
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  What's your favorite podcast?
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  I'm a huge NPR nurse.
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  And I love how I built this by guy browse.
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  I listen to that podcast too.
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  I really like that podcast as well.
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  I'm a big NPR nerd too.
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  Kathy, what's your favorite business app?
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  You know, given that I did not grow up in US and English is not my first language,
• 14:57
  Grammarly.
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  Oh, okay.
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  Well, you speak English pretty good.
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  I wouldn't have guessed you didn't grow up here.
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  Thank you.
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  That's I like Grammarly too.
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  Okay.
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  Next question, what is your favorite old school marketing tip?
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  Simple.
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  Talk to people.
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  Talk to as many people as you can.
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  Pick up the phone.
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  Right?
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  It's like, come on.
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  Old school as you can get.
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  Kathy, what is your favorite business book?
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  I thought that Billy's gonna take this what, but because he did, I will, building a story
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  brand by Donald Miller.
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  Plans is on my favorite.
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  That's a great book.
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  That's a great book.
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  And my favorite business book is Disrupt You by Jay Samitt.
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  I think if you wanna disrupt the world, start by disrupting yourself.
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  Listen, you guys are awesome.
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  Thank you so much for being here.
• 15:46
  If you want more information about how to start and grow a successful small business.
• 15:50
  Head on over to my blog.
• 15:52
  Succeed as your own boss.com to get more information.
• 15:56
  And we always say here at small business chat, our mission is to end small business failure,
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  but I leave you with this.
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  You never lose in business.
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  Either you win or you learn.
• 16:06
  God bless everybody.
• 16:07
  Good night.
• 16:10
  Thank you for listening to the small biz chat podcast with Helen Emerson.
• 16:15
  For more resources and small business success strategies, visit succeed as your own boss dot
• 16:21
  com.
• 16:21
  Subscribe to this podcast wherever you listen to podcasts and join us next Wednesday.