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Monday Money Myth: If There's Money in the Bank, We're Doing Fine · Sell Well: Helping Agencies Close More Deals and Grow Revenue

• 0:02
  SPEAKER_00: Welcome to the Sell Well Podcast.
• 0:04
  SPEAKER_00: Today is a first of many special episode edition that we're going to call Monday Money Myths with Jason Medlin, who is a friend of mine, a fractional CFO, and a owner of his own bookkeeping company.
• 0:18
  SPEAKER_00: He is amazing and has worked with so many of my clients, has helped make them a lot more money and save a lot more money.
• 0:25
  SPEAKER_00: And I'm hoping that what he can do for us is take away some of the fear around talking about money and looking at our numbers and also give us some wisdom and things that we can do on a day-to-day basis to increase our profitability.
• 0:39
  SPEAKER_00: So, Jason, I'm so excited to have you here.
• 0:40
  SPEAKER_01: Yeah, it's great to be here.
• 0:42
  SPEAKER_01: Thanks for having me, Susan.
• 0:43
  SPEAKER_00: Awesome.
• 0:43
  SPEAKER_00: Why don't you give us a little bit of your background and just introduce yourself a little bit so we can get to know you?
• 0:48
  SPEAKER_01: Yeah, great.
• 0:49
  SPEAKER_01: So I'm probably the most atypical accountant that you will ever meet.
• 0:53
  SPEAKER_01: I started my career in industry accounting a long time ago and had the really good fortune of going attending Harvard Business School where I got my MBA.
• 1:04
  SPEAKER_01: And that just totally changed the trajectory of my career.
• 1:07
  SPEAKER_01: And so really moved into healthcare, technology, small business, you know, smaller enterprises, and you know, was part of a couple of successful exits to private equity.
• 1:20
  SPEAKER_01: And I just reached a point in my life and my career journey where I wanted to start my own business.
• 1:27
  SPEAKER_01: And I've always had this sort of in the back of my mind that this is something that I wanted to do.
• 1:32
  SPEAKER_01: And so, you know, launch the business with a really solid sort of foundation in accounting and also kind of bring bring that business acumen.
• 1:42
  SPEAKER_01: And it's been absolutely terrific.
• 1:44
  SPEAKER_01: I mean, I absolutely love what I'm what I'm doing.
• 1:46
  SPEAKER_01: I can relate to small businesses because I've worked in small businesses for many, many years.
• 1:51
  SPEAKER_01: And, you know, I can help uh help clients really sort of navigate whatever they're they're looking to do, whether it's grow the business, whether it's leave a legacy, whether it's potentially sell the business at some point.
• 2:05
  SPEAKER_01: So I can kind of meet a client where they are uh and help them on their journey.
• 2:10
  SPEAKER_00: I love that.
• 2:10
  SPEAKER_00: And you've been able to help so many of my clients too.
• 2:13
  SPEAKER_00: The feedback that I get from when people work with you is I just feel so much better.
• 2:17
  SPEAKER_00: He's so nice.
• 2:18
  SPEAKER_00: Most of the time when people go and talk about money, they're like, I feel terrible.
• 2:21
  SPEAKER_00: So I think that's just such a testament to the steadiness that you bring to the conversation.
• 2:26
  SPEAKER_00: And I'm hoping that that's what we can bring as the segment.
• 2:29
  SPEAKER_00: You know, we were brainstorming, there's so much overlap between sales coaching and financial acumen and kind of getting your books together and having a plan for taxes and all of that.
• 2:38
  SPEAKER_00: We've been brainstorming how do we kind of bring those two things together to create a really helpful resource for people?
• 2:44
  SPEAKER_00: Um, and so I want to debunk some myths and go through some things that people believe about money that aren't true.
• 2:49
  SPEAKER_00: So I'd love to kick off with our first myth here, which is if there's money in the bank, we're doing fine.
• 2:57
  SPEAKER_00: Um, I'm sure you hear this all the time from business owners.
• 3:00
  SPEAKER_00: They're like, but I've I've got all this money.
• 3:02
  SPEAKER_00: Um, has there been times when you've seen this that this isn't true?
• 3:06
  SPEAKER_01: Yeah, this this happens this happens frequently, particularly with with smaller businesses and particularly if they're just beginning to work with uh with a finance person.
• 3:17
  SPEAKER_01: Well, they may have had a pr a previous bookkeeper who was, you know, doing the debits and credits and producing income statements and balance sheets, but there was sort of a lack of interpretation behind that, right?
• 3:28
  SPEAKER_01: And so, you know, one of the things that I offer as part of kind of fractional CFO services is really uh, you know, diving into cash flow modeling.
• 3:39
  SPEAKER_01: And it's absolutely critical for really businesses of any size should, you know, should really look at uh a cash flow model.
• 3:48
  SPEAKER_01: And anyone can create a cash flow model.
• 3:50
  SPEAKER_01: You know, I've created playbooks around this and happy to, you know, happy to share with the audience.
• 3:56
  SPEAKER_01: Um, but you know, a very simple Excel spreadsheet laying out really the next 13, 12 or 13 weeks, that's typically kind of the sweet spot.
• 4:05
  SPEAKER_01: And you know, you just really you know lay down, you know, courts are your revenue forecast and what you think your expenses are going to be.
• 4:14
  SPEAKER_01: And so, you know, when when a customer comes to me or a client comes to me and and says I'm flush with cash, you know, my my question is, well, what's on the horizon?
• 4:26
  SPEAKER_01: Right?
• 4:27
  SPEAKER_01: Can you demonstrate, you know, to me, if there's you know, significant expenditures or outlays are gonna impact your business, what are you forecasting your revenue to look like six months from now, right?
• 4:39
  SPEAKER_01: Or even three or four months from now.
• 4:41
  SPEAKER_01: And so that begins to paint a picture.
• 4:43
  SPEAKER_01: One of the things that that accounting professionals, you know, I think struggle with, there is there's what's called a statement of cash flows, which is kind of a formal accounting statement that you're you're supposed to provide to clients, but it's not very useful, I find, because really what a client wants to know is cash in and cash out, right?
• 5:04
  SPEAKER_01: So they want to really determine, okay, revenue sources over the next 12 or 13 weeks, less my expenses.
• 5:14
  SPEAKER_01: And you almost have to kind of create that on your own.
• 5:17
  SPEAKER_01: But literally a simple Google sheet will allow you to do that, right?
• 5:21
  SPEAKER_01: And you can just create, you know, from week one to week 12 and begin to forecast where your cash is ultimately gonna end up.
• 5:30
  SPEAKER_01: What it does is it just breeds tremendous amount of confidence for the client.
• 5:35
  SPEAKER_01: Now that they have sort of this visual picture of where cash is ultimately gonna be, it's inevitably gonna be wrong, right?
• 5:43
  SPEAKER_01: Uh and and that comes with with time and iterating, uh, but you'll be 80% right.
• 5:49
  SPEAKER_01: Right.
• 5:49
  SPEAKER_01: And so, you know, as you sort of, as you sort of move forward, uh, you'll begin to hone those that skill set even more.
• 5:56
  SPEAKER_00: Do you feel like um I think it's really interesting you say only forecasts out 12 to 13 weeks?
• 6:01
  SPEAKER_00: I feel like looking ahead was a skill that I had to acquire as uh my big business acumen grew.
• 6:08
  SPEAKER_00: I was looking at everything just retroactively and saying, well, based on the last year, here's what I can anticipate tomorrow.
• 6:15
  SPEAKER_00: Why do you pick that 12 to 13 week range?
• 6:18
  SPEAKER_01: It's really just it's just kind of the the sweet spot because once you get beyond 12 to 13 weeks, your ability to forecast diminishes.
• 6:27
  SPEAKER_01: So there's kind of this law of diminishing returns around it.
• 6:31
  SPEAKER_01: You know, most people have pretty decent visibility into their next three months, right?
• 6:36
  SPEAKER_01: But if you ask them what their revenue is going to be, you know, at the end of the year, eight months from now, they're really gonna struggle with that, right?
• 6:44
  SPEAKER_01: Because the pipeline turns significantly depending on the lead cycle and how long it takes to sort of generate new business, it just becomes more of a guessing game.
• 6:53
  SPEAKER_01: And so the predictability factor lessens and so it just becomes less accurate.
• 7:00
  SPEAKER_01: And I think people appreciate being able to look forward by any measure, right?
• 7:06
  SPEAKER_01: So, you know, third 13 weeks, 12 or 13 weeks um is is kind of the the sweet spot that I found for for most uh clients.
• 7:17
  SPEAKER_01: Some clients I actually do take out.
• 7:19
  SPEAKER_01: I'll I will do a you know sort of a rolling 12-month um cash forecast for them, but always caveat it and I say, we're really gonna look at these first 90 days because that's what's gonna ultimately matter.
• 7:34
  SPEAKER_01: So I think it's just around sort of prediction, higher degree of confidence in the numbers.
• 7:39
  SPEAKER_00: I mean, that goes right in line with what I tell people to do right off the bat.
• 7:42
  SPEAKER_00: I'm like, we're gonna pick a number and we're gonna stick to it as a revenue goal.
• 7:46
  SPEAKER_00: Um, so while you're looking at, hey, what do you think cash flow is gonna look at?
• 7:50
  SPEAKER_00: I'm like, you got to pick a sales goal and I want to go 20% higher than you think you can hit because we need to start seeing if you do start to claim these goals and chase after them, is that something that um you actually are able to achieve?
• 8:04
  SPEAKER_00: And I think that that 90 days is such a great time frame to see what you're capable of.
• 8:08
  SPEAKER_01: Yeah, and it's it's it's amazing just how the the light bulbs start to go off with uh with with clients, right?
• 8:15
  SPEAKER_01: So I have a client that you know literally we're on the phone once a week and I'm sharing with him his revenue numbers for the month.
• 8:24
  SPEAKER_01: Again, all backward looking, right?
• 8:26
  SPEAKER_01: All retroactive.
• 8:27
  SPEAKER_01: And I said, John, you absolutely need a cash flow model for this business, right?
• 8:33
  SPEAKER_01: Because it's gonna allow you to deliver better decisions.
• 8:38
  SPEAKER_01: You know, you're not gonna make sort of short-sighted decisions because you're gonna have a much better sense for where your business is going ultimately.
• 8:47
  SPEAKER_01: Uh and this also sort of translates into what you can pay yourself when to hire, right?
• 8:54
  SPEAKER_01: And so you can bake all these things into the model, right?
• 8:57
  SPEAKER_01: If you're you know your labor costs in month three are gonna be higher because you intend to bring someone on in month three, go ahead and bake that into the into the model, right?
• 9:08
  SPEAKER_01: And see how that sort of reflects on your on your cash.
• 9:11
  SPEAKER_01: And so you just begin to make decisions.
• 9:13
  SPEAKER_01: You know, I always say bookkeeping is retroactive, right?
• 9:17
  SPEAKER_01: What you really need is someone in your corner who can be proactive, forward-looking for the business because it just enables you to make better decisions.
• 9:27
  SPEAKER_00: Well, and having that person who can come in and take the emotion out of it, I know that's been huge for my clients and was huge for me when I was running Lawson House was this idea of, you know, even you saying, hey, if you hire someone in month three, and I'm like, well, the whole business could fall apart by then.
• 9:40
  SPEAKER_00: And having somebody who can walk alongside you and say, that's not actually true though, Susie.
• 9:44
  SPEAKER_00: And you've planned for this and you've got room for that, it just gives you the freedom and having somebody who non-emotionally says, No, I'm looking at this with you, I can validate that for you is so helpful.
• 9:54
  SPEAKER_01: Yeah, I I mean, I think that's that's spot on.
• 9:56
  SPEAKER_01: And and really kind of understanding your expense structure for a month, right?
• 10:00
  SPEAKER_01: If you understand how much you spend on the business in a typical month, and then you factor in three to six months of cushion that you want to maintain in your bank account at any given time.
• 10:15
  SPEAKER_01: So that the business did turn completely south, right?
• 10:18
  SPEAKER_01: You at least know you've got kind of this three-month cushion.
• 10:21
  SPEAKER_01: And it varies by client and the type of client, right?
• 10:24
  SPEAKER_01: So if you're more of a recurring revenue type of model, then that's far more predictable.
• 10:29
  SPEAKER_01: You may want to lean more toward the three months, right?
• 10:32
  SPEAKER_01: If your business is much more cyclical and you have lots of ebbs and flows just in terms of revenue and expenses going out the door, then you may want to lean toward six months.
• 10:43
  SPEAKER_01: You know, you'd be amazed at just how many clients don't even know what one month of spend means for their business, like how much they're actually spending in their business.
• 10:51
  SPEAKER_01: But if you start there as kind of the the foundation, and there's also this element of there's a subjective element to how much cash should I keep?
• 10:59
  SPEAKER_01: And, you know, really it's what allows you to sleep better at night, ultimately, right?
• 11:05
  SPEAKER_01: I mean, we can run all these formulas all day long, but uh, you know, for you it may be a lower number than it is for me.
• 11:12
  SPEAKER_01: And that's just something that you just have to grapple with, but you have to have a basis of objective data to make those decisions.
• 11:19
  SPEAKER_00: I love that.
• 11:20
  SPEAKER_00: Jason, thank you so much.
• 11:21
  SPEAKER_00: Everybody tune in next Monday.
• 11:23
  SPEAKER_00: We'll be talking about some myths around taxes.
• 11:26
  SPEAKER_00: Um, so you're not going to want to miss it.
• 11:28
  SPEAKER_00: Jason is has helped my clients so much wrap their arms around taxes and has made sure that April 15th is not the worst day of the year for them.
• 11:36
  SPEAKER_00: So excited to have you back next Monday.
• 11:38
  SPEAKER_00: And until then, sell well.