Build a Business Growth Strategy That Stands Out

Loral Langemeier: Hey, this is Loral. Welcome back to Loral's Real Money Talks, and it's a podcast where we join once a week and we talk about money. How do you make it? How do you keep it?

How do you invest it? And why you need an integrated team? It's the most vital part of the financial services industry because most of the financial services experts are segregated intentionally for fees and commission, not on your behalf and not on your family's legacy or any generational wealth. So, any comments, any questions, you can always head over to Ask Loral A S K L O R A L.

Ask a question, make a request, and I would love to come back with guests in those areas or topics myself to deliver you to and through a podcast today, I have someone with me who's made a lot of money into different areas, and I think it's going to be really fun for a lot of you. Do you want to get a pen and paper? I have Michael Barbareta with me, and he is in. I'm going to say the Boston area.

You'll hear it come out in his little accent. Start in the financial services space, and I actually want to start your story with the financial services part of the story, just because we make fun of it because it's so segregated and there's just no learning. I always call it park and pray. People can park their money with Financial Planner and pray to God something happens with it.

So talk a little bit about you starting in the traditional, and then how you actually moved to fractional CFO and the amazing work you're doing today with small businesses. Great, Michael Barbarita: thank you, thank you. Thanks for having me too, Larry. So, yeah, Loral Langemeier: thank you.

Yeah, Michael Barbarita: so so I started out in my career in private industry, but wanted to wanted to own a business and and be in business for myself. I I didn't want to. I didn't like the politics in corporate America, and I just wasn't built for it. So I I myself and some partners bought a specialty ski retail store, one single store called Ski Town USA.

We were in the Boston area, and we grew the company from two and a half million to 8 million in five years by utilizing business strategies that our competition wasn't doing. For for a quick example, one of the strategies that we employed was what's called what I call a risk reversal, where the seller in the transaction takes most or all the risk. So the problem the customer had in the ski industry, is they really didn't know if the ski they were being sold by some hotshot ski salesperson that was flexing the ski in their face was the right ski for them until they got up in the mountain and tried it out.

So we had what we call the ski guarantee: ski the ski three times, don't like it, bring it back for a brand new pair, and keep bringing it back until we get it right. And my employees thought I was crazy. No one was doing this, and my employees thought I was crazy. And one of the reasons why no one was doing it is because once a ski gets skied on, it's like driving a car out of a showroom.

It depreciates dramatically. Loral Langemeier: So I know that well. Yes. Michael Barbarita: So, but and my and my employees had visions of 1000s of pair of skis coming back and us losing a ton of money, but my my view was is that all the skier really wanted, because I understood the skier, was a great ski experience.

That's all they wanted, because nothing ruins their day more than a rotten, stinking ski experience. And so all they wanted was a great experience. So we sold 8000 pair of skis the first year we implemented this risk reversal, a 25% increase from the previous year. Only eight came back.

Next year we sold 11,000 pair. 14 came back. So that's how that you know, and by implementing strategies that our competition wasn't doing was was the the key to success in building that business. Then I went I went into the frozen cookie dough business.

Afterwards, I bought some recipes from a husband and wife team, and Loral Langemeier: love that one. Michael Barbarita: And and and grew that company, and then finally sold it to a frozen desserts distributor in the Boston area. And then I took stupid pills. I must have taken stupid pills because all the things that I did by doing what the competition wasn't doing, in when I entered the medical business because I wanted to serve the aging population.

When I went into the medical business, I did exactly what my competition was doing, everything from soup to nuts, protocols, everything you could think of, and it and it cost me dearly. I totally fell on my face, went right out of business, and so after that, 30 days after that, I started Next Step CFO because I learned so much from my experiences in success and in failure, that I wanted to share it with other small business owners and help help guide them through some of the turbulent occurrences that can happen in business today.

Loral Langemeier: So go back to the so those first two, which are my two favorite logs, because I don't know if you knew I. A huge ski family here in Lake Tahoe area. Skied my whole life, still ski, and then cookie dough, my favorite junk food. So I love that your two favorite things are things I love, and you know them well.

But when you said you took a stupid pill, what did you leave behind in strategy? What did you like? Not remember that you had just done in two very different industries. I mean, the food industry and the skiing industry have not a lot in common besides there's a customer.

Michael Barbarita: Okay. Well, first of all, I was in a little bit of a fog in the medical business. Just just generally speaking, it was new to me. By the way, I never skied before before I bought the ski business, so being being new to something wasn't really intimidating to me at all, but I was in a little.

I must have been in a little fog. I didn't analyze this until after I failed. That in the businesses I was successful in, I didn't. I did what my competition didn't do.

I implemented business and financial strategies that my competition didn't didn't do. Whereas when I was in the medical business, I did exactly what my competition was doing, almost verbatim, in every way, from from marketing to messaging and so forth. It it was just it was just the wrong way, wrong approach to take to something that was you know, I'm not going to say it was incredibly common, but it was you know fairly fairly common facility, medical Unknown: facility. Michael Barbarita: So that that was that was it.

In a nutshell, it's no question about it, no doubt about it. That was the reason. That was the reason why I succeeded twice and failed once. Loral Langemeier: So talk about your conversion models a little bit, and yeah, and you have some five compelling different models.

Yes, Michael Barbarita: yes. So let me let me explain. When I was doing research for my book, Powerful Business Strategies, I I determined and and found through my research that the key to successful marketing was to get into the mind of the prospect. Okay, how do you?

But how do you do that? And so, what as I as I did my further analysis, I discovered that there were two major emotions: the problem the customer has that they don't want, the solution they want they can't find. So, based on that, I created what's called the conversion formula, which is a formula that converts prospects into your into your sales process, or prospects into from your sales process into sales. And essentially, it's four.

There's four parts of the conversion formula. The first part is captivate. Captivate is the problem that the customer has and doesn't want. They got this problem.

It's usually with the industry, by the way. It's usually some problem that they're stuck on. Like for example, in the trades, a lot of people in the industry are stuck on the fact that they don't return calls, that they don't they don't follow up. They show up.

They don't show. Well, that's right. Day one, you know, it's a prayer. It's a novena that that they'll show up.

So those problems. So it's those types of problems that we help the business owner identify with the industry. But that makes up the captivate identifying that problem that they have they don't want. Second is coming up with your unique solution.

So you captivate them with the problem. You fascinate them with the unique solution, and then now you've got their attention. So now you educate them, and you educate them by explaining why your solution to that problem is superior to the competition. And then fourth, the fourth component is offer is the offer, and the offer has to be a compelling offer, which I'll explain in a second.

But those those are the four components of the conversion formula. And if when we did it, for example, in the ski business, you know the problem the customer had was that they didn't really know if the if the ski they were being sold was the right ski for them. Don't know the proper ski. Don't know if the ski being sold is right for you.

Our solution is, you know, the ski guarantee. And then we went on to explain the ski guarantee, and then we gave the offer. So let me give you the five components of a compelling offer, so that I'm not leaving the audience hanging because anybody can say, you know, the the fourth component is a compelling offer that has to be so irresistible that the customer won't turn it down. Anybody can just say that, but here are the five components that make up a compelling offer.

The first is scarcity and urgency. Scarcity is a limited quantity, whether it's a limited number of meetings that you have, or a limited quantity of of widgets doesn't matter. Whatever it is, you have a limited quantity, whether they're widgets or whether it's time. Urgent urgency is this offer ends on Friday, so whatever offer.

You make it ends on a certain. It only has a certain amount of time for that offer to be active. That's scarcity. So that's number one: scarcity and urgency.

Number two is risk reversal, like we did in the ski business, where the customer, where the seller in the transaction takes most or all the risks. Normally, it's in the form of a guarantee, but doesn't quite have to be. But normally it is in the form of some type of guarantee. And the more aggressive you can get, like we got pretty aggressive.

I mean, no one, you know, it's funny. No one even copied it after it was working. That's how aggressive it was perceived. And then, so that's risk reversal.

That's the second component of a Capelli office. The third is adding more value to the product or service. So when I was in the frozen cookie dough business, the problem the customer had-notice I always go back to that-the problem the customer had, the problem the customer had was they didn't want to waste valuable. They wanted to sell cookies as an add-on sale, but they didn't want to waste valuable oven space baking them.

So what we did is, despite the fact that our opening order averaged only $50, we gave them a free convection oven with the with every opening order. Why? We had we understood the long term value of a customer. Number one.

Loral Langemeier: Awesome. Michael Barbarita: Okay. And and we understood that we were solving their problem at the same time. So, and also we believed in our product.

I should say that. That's that's a very important point, by the way. Believing in your product. So, so that's we did that.

That opened so many doors. It's because it solved the problem they had. Plus, they could use, yeah. Plus, they could use the convection oven to, I don't know, bake lima beans or whatever they did, right?

So that, so that was the, so that third component. We added more value to our product by offering the convection oven. The fourth component is packaging and bundling products together. When I was in the ski business, we every Tom, Dick, and Harry, everyone packaged skis, bindings, poles, boots, maybe maybe boots.

They'd add, but at least those three components: skis, bindings, and poles. Everybody did that. But what we did is we added one more thing. We what we did is we took the most popular ski graphics went to the clothing department and matched the Parker pant, sweater, and hat combinations flewing out the door.

They were packaged together. Once again, packaged is a perception of value. So when you can package things together, that's a compelling offer. So that was the fourth one.

The fifth one is being indifferent to the outcome. That is very difficult for business owners. In other words, you're disconnected to the sale because once you're connected too much to the sale, the prospect picks up on it, and it has that kind of that used car theory, the salesman theory to it, where they're out for themselves and not really out for the customer, Loral Langemeier: for you, right? Yeah.

Michael Barbarita: And so being indifferent to the outcome is really is really important. And the other important component of that, kind of an offshoot, is you got to get away from the transaction and get into the transformation that your product has, and that your product will result in. It's important to stay there with the transformation. Loral Langemeier: The Michael Barbarita: transaction is the dollars.

All right. Everybody wants to get into the transaction, and everybody wants to try to object counter objections relative to the transaction. Counter objections with the transformation that takes place, and so that's the other component of compelling. Loral Langemeier: So when you're working with a new client, so like think about one of your latest new clients, as as you're coaching, mentoring, guiding, you know, the new business owner that you have in these five, where do you find the the hardest disconnect?

Is it the indifference, or is it definitely is it the indifference, or is it the risk reversal? Because I could almost go both ways. I could think that the risk reversal you could would be just as challenging. Michael Barbarita: You could.

I think that that being indifferent to the outcome is definitely the hardest that I've found because there's just too much. I need to make a sale. I need to make a sale. I got to make a sale.

I'm making a sale. I'm here to make a sale. That kind of thing. That's not good.

That that get the the the customer can pick up on that, and it's difficult for business owners to to do that. That takes practice. Yeah, you know, my my indifferent line is whether you work with me or someone else. There are five steps that you must take in order to be successful.

There are four actually four characteristics that you must have in order to be successful. So that, and whether when they work with me. Someone else, you know. That's that.

That's that indifference. So, but but risk reversal would be second. You're right. Risk reversal would be second because it's very difficult.

Everybody thinks like my employees thought. You're out of your mind. You're going to lose a ton of money. There's going to be a ton of returns.

Look out below. Loral Langemeier: You know, Jim Collins wrote a book called "Good and You Know Good Enough. It's the 8020 rule. So, what's your you also speak to that?

So, speak on your perspective on the 8020, and then my yes energy. I wrote a lot about it too because perfection's poverty is a whole chapter in one of my books, Michael Barbarita: right? Loral Langemeier: He's 80% good enough, but what's your perspective? And I'm going to say spin on that conversation.

Michael Barbarita: Yeah. So first of all, no one is ever wrong about the 8020 rule. I just want to make that that point. But it's you know most people, most of my clients, and most people in business, they that the 8020 the way the 8020 rule applies to business is that 20% 80% of your sorry, 20% of your customers make up 80% of your revenue.

We have a different spin on it, like you said. We look at it where 20% of your activity makes up 80% 80% of your revenue is driven by 20% of what you do every day. That's it. Okay, 20% and that 20% we've narrowed down to seven things.

So the first thing is now this is that 20% that drives 80% of the revenue. The first is leads. You got to get high quality leads, but not any lead. It's got to be a high quality lead.

Once you have leads, now you have to work on your conversions. What is your conversion rate into your sales process? That is, that's not close, but then into your sales process, whatever that Unknown: is. Michael Barbarita: And then third is what your closing rates and managing those to make them better, more effective, increasing.

The fourth one, a lot of people kind of take it take for granted, and that's client retention. It's one of the once again, it's one of the seven steps that business owners should take. 20% of what they do every day that drives 80% of their revenue. Client retention.

Some many times, my clients think that once they get a client, they get to keep them by default. It just doesn't work that way. You have to work on client retention. Next is increasing the average dollar per sale of your of the of your customers.

Increase your average dollar per sale. Then you're going to increase the number of times that they buy or frequency of sale. That's the sixth step. And then the seventh step, you have to control costs.

Now, when as CFOs, you might think we're maniacs about controlling costs. We we control. We want to control costs. We want to cut unnecessary spending.

Lots of business owners have all these subscriptions that they don't even use, and they're still paying for. I see that all the time. We we stop all that, but you can only bring your costs down to zero. Revenue can go to infinity, and so that's why we we focus more, and that's why the seven steps are really about revenue generation for the most part, except for that last step.

Loral Langemeier: But like your point earlier, like I was in corporate America for just a minute, and sounds like you were in there for just a minute, and the biggest driving, I think, shift is the way we were trained to be an employee for a company. It's all about the cost, right? It's cost and budgets. Yeah.

When you drive it as an entrepreneur, it's 100% about driving and generating revenue. Absolutely. So I love the model and I love the the sequence of priorities. Michael Barbarita: Excellent.

Yeah. Well Loral Langemeier: done. So, talk about the. I hope so marketing.

Yeah, I just think that that's actually could be a fun T-shirt. I like that you say it that way. I've heard it. I've heard it in that frame, but that's a that's a great way that you say it.

You Michael Barbarita: didn't trademark that idea, did you? By the chance, Laura. Because I not yet. Not yet.

Pretty quick. Complete quick to that. We better get to it first. first.

No, not that. Yeah. So I hope so. Marketing.

So remember how you know we identify the problem the customer has it doesn't want with the solution they want they can't find. That is totally different messaging than 95% of your competition. What 95% of your competition is doing is what I call I hope so marketing. Their messaging like largest selection, best service, most convenient.

Well, the customers when they hear best service, well, I hope you have the best service. Why would I do business with somebody who doesn't have the best service? We're the most professional. Wait, wait, wait a minute.

I hope you're the most professional. Why would I do business with someone who's not professional? So they're saying at the end of each of these statements that are so commonly used, it's ridiculous. Go to any website, go to any social media post, go to anywhere.

You'll see largest selection, lowest prices, best service, most convenient, most professional, highest quality. We're the fastest, the largest in the state. We're specialized. We're insured.

We're family-owned. All that is. I hope so. I hope so.

And so that's what I hope so marketing. 95% of the people who are marketing out there, the companies that small business owners that are marketing out there are using I hope so marketing, and it's and it doesn't it doesn't do anything. It's like everybody else is using it, it's jargon. So that's what we think, and that's what we found.

Loral Langemeier: And then, how do you counter that with the conversion? Go back to the conversion. Yeah, the five conversion formula and the five Michael Barbarita: steps to a compelling author. Good, Loral Langemeier: I like it.

So, when you work with clients, Michael, are you working with them for six months, a year? Do you just come in and fix them? And I just want to clarify for our audience: this is also like fractional CFO services, which you know it's interesting because I love when financial and money people talk like marketing people because they go hand in hand if you're trained well. That's Michael Barbarita: right, absolutely.

And so, what, what, what, what we because we combine the financial with the strategic, that's how we differentiate ourselves from regular fractional CFOs. It's you know if you're going for a job as a CFO in the Fortune 500, you if you don't know business strategy, you don't get the job. You're not you know you don't even you shouldn't even apply. Forget about getting a job.

So, but fractional CFOs for some reason get away with that, and so we combine both the the CFO financial with the strategic, and we combine them both. And when we're working with clients in terms of longevity that you mentioned, we usually work long term. We've we've had we've had we have several clients that we've worked with for over 10 years. A statistic that we have is that 53% of the clients that we work with on a monthly basis for three years or more increase the value of their business by a million dollars or more.

So the other 47% you know, they don't have a couple of characteristics that are necessary for business owners to succeed, like being decisive, being an action taker, being ready to prepare for change, knowing that, knowing that they that in order for them to get the next level, something has to change the ability to adapt to that comment. That's difficult for business owners. And then finally, we have a very easy step-by-step process. If they can follow a step-by-step process, then that would be another way to be part of that 53% Loral Langemeier: And on the financial side, where do you find you spend most of the time?

I mean, obviously this is in the sales and marketing category, but are you really spending time in their accounting departments, in their you know helping them calculate margins, profits? A lot of them don't know how to do a lot of those things. So how much of the CFO side are you really doing? A Michael Barbarita: lot of it.

So what what we do on the CFO side of we're all over cash flow, okay. So we we we help the business owner. We can improve cash flow fairly quickly. We have a program called 90 Days to Fast Cash, and it it could it it can absolutely explode their their cash flow.

That's that's number one. In addition to cash flow, we identify the critical metrics in the business. You mentioned gross profit; that's one of them. We so we we identify that those critical metrics to make sure that so because business owners don't like to read financials, so we the metrics we Loral Langemeier: don't know how is what I find is we don't know how right Michael Barbarita: and that's okay.

But the the metrics help them understand the financials better without going and looking at all the numbers and trying to put piece that all together. So the critical metrics, we tell them the story the financial statements are telling them, so that they understand the story that the financial statements are telling them. And of course, we do forecasting. That's a big thing for us because what forecasting does, Loral, is it answers the can I afford it question because everybody has it.

Can I afford a new truck? Can I afford a new manager? Can I afford another employee? Can I afford a new location?

You know the can I afford it? And the business and cash flow forecast that we prepare answers the cash flow the the can I afford it question with incredible accuracy. Loral Langemeier: I love that. Now you have a five-minute quiz test.

Michael Barbarita: What it is? Talk about yeah. So Loral Langemeier: assessment. Michael Barbarita: We like to call it a diagnostic because it diagnoses.

It's it's five minutes, and what the you you're going to answer a few questions, and the output is six business strategies and financial six business or finance and or financial strategies that your competition isn't doing, you get to pick the best one, and get a free step by step implementation roadmap of that strategy. Loral Langemeier: I love it, and so for all of you that would like to do that, I know personally I'm going to do it. I'm going to tell Michael. Personal email, and he's going to send it to me.

But it'll be on the show notes below. So to follow Michael and to be able to take that that diagnostic, I'm calling assessment. You want to grab that in the show notes below as well. If you ever have any questions, you go to askloral.

com. A s k l o r a l. And Michael is your book on Amazon. Talk a little bit about your dimensions earlier.

Michael Barbarita: I I I give it away. I give it away, Loral, on my website nextstepco.net. You can download a free copy.

It's my contribution to the business world. I I I Unknown: never put Michael Barbarita: it on Amazon or anything like that. Loral Langemeier: Oh wow, interesting. All right, any last words for those that are out there struggling?

I'm going to go for manage the cash flow and increase your cash flow. Okay, don't Michael Barbarita: don't keep doing what your competition is doing. Loral Langemeier: Yeah, yeah, and you know a lot of people always looked at my career and said, you know, you you stand alone all the time, and it's like, now I've partnered with a lot of people and I do a lot of different joint ventures and affiliates, but we stood in our distinction for a very long time, and we'll still stand on it.

So fantastic, Michael! I appreciate you being here, and congratulations on your success. Great, just I'm going to say simple, but I can see the the layering effect of your formula. But simple for people to at least get conceptually, and then they need to hire you and take your firm with them on their journey back to some better cash flow and doubling their revenues.

Michael Barbarita: Thanks for having me, Loral. I appreciate it. A lot of fun. A lot of fun.

Loral Langemeier: Thank you. And all of you that are listening, subscribe to our channel if you have not done that yet. Click that notification button. So every Friday when we come out with a new podcast, we it'll be coming into whatever device you listen to.

And again, ask Loral A S K L O R AE L. Ask questions. Make a request. We'll be back next Friday.

Have a great week.