EP-197 Master Class in Growth: Strategy Secrets for Fractional CFOs and Entrepreneurs - Michael Barbarita

Speaker A: Welcome to the Unconventional path entrepreneurship and innovation stories and ideas. I'm Balaam Yousitz.

Speaker B: And I'm Mike Wasserman.

Speaker A: Mike, today's guest is Michael Barbarita. He started and runs a fractional CFO business for small to medium sized companies that focuses not only on providing a broad spectrum of C level CFO services, but also strategies for growth for companies that have limited cash flow, which almost all small companies have limited cash flow. So I thought it was a great conversation we had.

Speaker C: Cool.

Speaker B: I think listeners are going to want to pay attention to some interesting strategies for entrepreneurs, uh, to improve their financial foundations. And I think you'll also want to pay close attention because I think this is a masterclass in entrepreneurial accounting, finance and growth strategies. So if your world is one, you know, again, where kind of um, your costs are high, um, you're not quite sure what your, your financial footing is going to be, where you're not sure about things like pricing, um, and growth strategies, that this is going to be a great episode for you to listen to because Michael's got lots, uh, of cool insights that he's going to share with us. So let's get right to your interview, Bela with Michael Barbarita.

Speaker A: Michael, welcome to the podcast.

Speaker C: Thank you very much, Bayla. Appreciate the opportunity.

Speaker A: Yeah. So, uh, Michael, let me ask you a question. You've had a pretty long career, done a bunch of different things as I read in your bio. And when you go to a, uh, social event, a non work related social event and you get introduced to someone and after that introduction, that person says to you, Michael, very nice to meet you. What do you do? How do you answer that question?

Speaker C: Business owners hire me to double and triple their profit using business and financial strategies that their competition isn't doing. That's how I was.

Speaker A: That was bingo. I think that's the most concise answer I've ever gotten to that question. And so then if the person says, well, what does that mean? I don't understand what that means. Michael, explain that to me.

Speaker C: Okay, so we are a fractional CFO firm. Uh, so, uh, and we combine it with strategic implementation. You see Bela, if, if you're, if you're going, if you're going for a job, if you're a CFO and you're going for a job in the Fortune 500, you must understand business strategy. Otherwise they don't, you don't get hired. But for some, but for some reason, fractional CFOs get away with, not with only understanding the numbers and only Presenting numerical historical stuff and as well as I don't want to put them in a box because CFO by, by virtue of being a CFO, you're always forward looking. So that's the advantage versus like CPAs who are more historical. Yes, CFOs are more forward looking. So we are doing that and my, my brethren do that. Great. Um, but a lot of fractional CFOs don't have the, the strategic knowledge, the business strategy knowledge. Um, and so when we talk about forecasting and certain events happening and the events don't look very favorable, they don't know how to make that favorable for the most part. I mean they can once again they, they could suggest financial things on how to improve cash flow and those types of things. Absolutely. But how do you get more business? Okay, you know, what other pricing strategies can you use? What, what, um, how do you follow up with, with uh, with prospects, those types of things. That's what I get into. I get into how to increase your business. How to increase business. Yes, I get into, I get into that a lot with the strategic side.

Speaker A: That's a great differentiation. Uh, so as you were saying that I'm thinking to myself, uh, most of the times, not always, but most of the times People use fractional CFOs or fractional marketing people there tend to be small to medium sized businesses because they feel they're not big enough to hire a full time or they really can't afford a quality full time cfo. So they go fractional services. Makes a lot of sense. But at the same time this notion about not uh, focusing on the strategic part or not not bringing how many of them don't bring the strategic part to the table. I wonder if that's because the CEOs, the people who are hiring these fractional folks don't really think about that. They look at, they look at a fractional CFO as okay, this person's going to take care of my books, make sure I don't go to jail and you know, make some projections for me and that's all I'm expecting from them.

Speaker C: I hope they don't look at it like that because they should be expecting a lot more because um, whatever ideas the CEO has can always be pressure tested and, and improved upon. And so that's what we do. So if the. By the way, I love when the CEO comes up with ideas. It's awesome. Uh, but, but they need to be pressure tested a uh, and they need to be expanded upon if the opportunity exists to expand upon them. And that's where the CFO comes in. As more of a business advisor as well as a financial expert. When you understand the financial ramifications of a strategy, you're more valuable because the traditional business coach will call it lack of a better word. Um, they don't understand. They know the strategies probably, but they don't understand the financial ramifications of implementing that strategy, which is what the CFO combined with strategic implementation does.

Speaker B: Right.

Speaker A: Right. Now you used the word pressure tested. Uh, what do you mean by that? Give me some examples.

Speaker C: Well, uh, in other words, uh, I guess if a CFO says he'd like to do a, uh, drip campaign. All right, let's just say, uh, as a follow up method to prospects and to notify, uh, and to remind existing base, uh, that you have, uh, you know, that you, that you're here, that you exist. Uh, because people forget, um, and so I would ask what the purpose is and, and sometimes I'll get well, because everybody else has one or you know, it seems to be a great opportunity to follow up. I'd say, okay, what type of messaging do you have? And uh, when I look at the messaging, it's what everybody else has. So let's pressure test that, see how it works. But then I would recommend other messaging. And we have formulas, uh, we have what we call a conversion formula, uh, that provides that, uh, that type of m, you know, that more uh, successful type messaging.

Speaker A: Yeah. So one, one of the questions I have is let's say you start a campaign like that.

Speaker B: Yeah.

Speaker A: Uh, what are the, what are the different ways that you can measure the results? And then you get back a number, you say it was X percent effective. Well, is X good? Is it average? Is it excellent? How do you help people sort through that as well?

Speaker C: Well, if you've never done it before, we can use benchmarks for other, you know, based on people in the industry. Uh, we have access to that. Um, but uh, if they have done it before, we can measure it against what they've done before. But, but it's interesting because a drip campaign is a different set of metrics because you have open rate, uh, and then you have click through rate as the, as the identifier. And when your open rate is good, but your click through rate isn't, there's something wrong with, with your positioning of the link. Yeah. And, and the message. The body. The, the body, not the headline, but the body.

Speaker B: Right.

Speaker C: If your open rate's low, the, the headline's mess. Right. So there, there are different Ways to determine, uh, you know, the. The. The, um, effectiveness of drip campaigns or any type of email campaign, basically.

Speaker A: So what did you call that? A drip D. R.I.P.

Speaker C: yes. Yeah.

Speaker A: I've never heard that before. Yeah.

Speaker C: Oh, okay. So what a drip campaign is. It's. It's an automated sequence. Automated sequence of communication, usually in the form of email, not always, but usually could be a text, uh, campaign. It could, uh, which is a form of communication that can be. That can be automated. So any form of automated communication that goes to either prospects or, uh. Or. And. Or existing customers. You see, here's the thing, Bailey. People forget. You, uh, know, I had. I've had. I've had clients, like, let's say. Let's say in the. In the, uh, tree business. And. And I showed my client how, uh, people who used them in 2020 haven't used them since then. And he said to me, well, they. You know, they remember us. I said, no, they don't remember you. And by the way, you offer other services than you. That you. That. That you perform for that particular customer. And so by dripping on them constantly, um, you know, weekly or so, or maybe even even bi weekly, just keeping in touch reminds them that you exist and reminds them that you, um, know, maybe we did use them back in 2020, and they did a good job. Oh, they also do this service. Oh, let me ask about that. You see what I mean? It's like. Yes, business owners have a gold mine within their own databases, and they don't realize it.

Speaker A: Yes.

Speaker C: And so they. That's what a drip campaign does. Yeah.

Speaker A: You know, it's interesting you brought that up about your database of existing customers. I ran a business, uh, for a number of years, owned and ran a business for a number of years, and we sold very, very, very expensive sporting, uh, goods. Uh, bicycles. Very, very expensive bicycles. And before I got there, they did not collect the name of the customers.

Speaker C: Right.

Speaker A: The dealer. The store that sold the bicycle had. Had the customer's name, but we, the producer of the bicycle and the manufacturer did not have the customer's name because that's valuable.

Speaker C: Very valuable. Very valuable.

Speaker A: So. So what we did was we. We started. We started a program where we had a warranty card that needed to be filled out at the time of the transaction, at the time the bicycle was sold. Now, of course, some person selling the bicycle doesn't care about that, so we had to incentivize them to fill out that card. So we gave them a little tchotchke for everyone. They filled out a little Logo T shirt or bike racing jersey or something for everyone that they filled out. But now we have that customer's name and address. And then we started a campaign where we came out with auxiliary products logoed and branded in the name of our bicycle that these people wanted to get because they were proud of having one of these products. Right. Um, and these were people. The highest concentration of these bicycles we sold could be found on a Sunday morning riding around Central Park. Uh, all the Wall street guys had them. Right. So, so that's the, My point is that's the clientele. But it goes to reinforce your point about that customer database is really important. You've already had it, hopefully a good experience with them. You already know them mine that use it.

Speaker C: Right.

Speaker A: Develop it. And so many businesses don't do that.

Speaker C: That's right. The long term value of a customer is much better than just the first sale that you made with them. So.

Speaker A: Absolutely.

Speaker C: Yeah. And, and, and people forget. People forget, especially today where they're bombarded with stuff left and right. They, if they did business with you six months ago, let's say they put a, they put a roof on their house with a roofing company, they forget who the roofing company is easily. Right, easily. And that roofing company might, might sell siding, that roofing company might sell windows, gutters, all.

Speaker A: Uh, Right.

Speaker C: And, and that those people might need it, but they might go somewhere else because they forgot about you.

Speaker A: Yes. So Michael, if, if you had a, characterize, uh, the sweet spot for a, ah, company to use your services. Tell me a little bit about what their size is. You know, maybe annual revenue, number of employees, maybe if there's any industry specific things that you do.

Speaker C: Well, half of our business is in the trades. So we do extremely well with trades. That's you know, painters, plumbers, electricians, general contractors, carpenters, uh, arborists. I talked about that a little earlier. Uh, as well as junk removal, uh, roofing, all those types of trades. So we deal mostly with the trades and they're doing anywhere between 500,000 and 2 million, usually sometimes a little more in volume. Uh, they have anywhere from 4 to 30 employees. Um, and they're uh, stuck, simply stuck, uh, you know, because they can't grow anymore because they're doing all the work and they can only do so much of it. Um, but like I said, you know, they're stuck in the day to day grind. Uh, their crisis management people, they turn into crisis management people. Uh, and um, they, they don't have any time to really uh, work on the Business. And, uh, by working with us, we give them an opportunity to work on the business, and we show them how to free up their time if that's the problem. Uh, and we show them how to scale.

Speaker A: So if I'm listening to this, um, and I'm a small business owner, what are the warning signs for me that I should get a person I should call next step cfo? What are those warning signs?

Speaker C: Well, number one, uh, if you have cash flow problems, uh, that's number one. Um, number two, uh, you don't understand how to read financial statements, because what we do is we help you. Uh, we develop metrics, which are financial parameters that evaluate the performance and productivity of a business. And those metrics help you understand financial statements better instead of actually, uh, understanding the financials like an accountant would. Uh, so that, um, we also do forecasting. If you need to understand what the future looks like financially, we do that, and then we help you implement business and financial strategies that your competition isn't doing. So if you feel like you're. You feel like you're stuck, your growth rate is anywhere between minus 5% and 5% a year. Um, you know, and you're feeling. You're feeling like you can't go beyond that, that's. That's the time to call us.

Speaker A: Got it, Got it. So let's say I did call you, and I said, hey, Michael, uh, I think I might be able to use someone like you. Uh, take me through what the next steps would be. What would that, you know, the early parts of that engagement look like?

Speaker C: Well, what we would do is we would, uh, we would put you through what we call our business assessment, our pathway to profit assessment. And what that would do is that would take you from what we call unconscious incompetence to conscious incompetence. Okay. Because what happens is that you think you're doing everything right, and then you go through this assessment, and it's hard to answer the questions. And you know that those. Those answers to those questions are important. That's when that, uh, that conscious incompetence starts to permeate. And then, um, and, uh, after the assessment, you could see where the weaknesses are in your business.

Speaker A: Yeah. Yeah. So when. When you look at, you know, some of your past customers, are there one or two or three things that many of these small businesses, uh, really need help with and really don't do well

Speaker C: for the most part? It's actually a couple things. You know, one of them is they don't manage their cash well. That's M. That's number, that's one. That's not necessarily number one, but that's one. Number two is if I was to look at their websites and their competitors websites, and I'm not saying websites are the end all and be all. Okay, hold on there. But if I was. But it's a way for me to compare one against another. They look, they look exactly the same. They message exactly the same. Great service, highest quality, great prices, great location. Been in business since 1910. Uh, that's what everybody says. And the customer doesn't care about that. The customer only cares about themselves and the problem they have, they don't want. And if you can address the problem that they have that they don't want with the solution they want, they can't find, that's when you make a conversion.

Speaker A: Right?

Speaker C: Right.

Speaker A: You know, it amazes me, uh, sometimes these smaller businesses, uh, how little time they spend on their website or how outdated their website is. And I, uh, I don't know about you, but when I'm, when I'm, when I get introduced to some new company or I hear about a new business or a business I maybe I want to hire to do something, the first place I go is the web and look at their website.

Speaker C: Right.

Speaker A: And I'm going to make a decision based on, on that first impression.

Speaker C: Right.

Speaker A: Am I going further or am I looking for someone else? So I really think that messaging that you talk about there is really, really critical.

Speaker C: It's critical. It's critical because what I call what everybody does is, I hope so, marketing. Because if you say you have great service, the customers say, well, I hope so, why would I do business?

Speaker A: Right, Right, right. Uh, everybody does.

Speaker C: Right. So everybody has, I hope so, marketing. And so that's the starting point of how I look at things. When I, you know, when a customer makes an inquiry, I look at their website. It's not that the website, because their website dictates how they even orally present themselves. Great service, highest quality, lowest know that, that kind of thing. Uh, it's also reflective in how their staff communicates. Great quality, lower server, greatest service, lowest price, all that's the same stuff. It's all jargon. And the customer doesn't care about that. The customer's saying, I hope so. Like, God, why would I do business with somebody who does not have high quality or great service?

Speaker A: Right.

Speaker C: Right.

Speaker A: Now one of the things you mentioned was cash management, um, and, and uh, cash flows associated with that. So walk me through some, some of the things, some of the mistakes that People make and what can be done to fix them?

Speaker C: Well, some of the mistakes that people make, like, automatically. And, you know, this might sound like routine, but it. It just isn't. Timing of invoicing that's a mistake. Not understanding that you want to get the cash from the customer first before you pay your trade. That. That. That dynamic, that's incredibly important. Um, when I was in the ski business, uh, I always negotiated terms with my vendors so that I could pay for them after my big sale. Not before, but after my big sale. So, uh, for business owners need to understand their cash cycle. Okay. Even if they're in manufacturing. I don't care what you're in. Uh, you have to understand your cash cycle. And there's ways to combat it. Like in the trades. Sometimes when I get new clients, they don't take deposits from customers. Well, that's, uh, it sounds commonplace, but it isn't. And so you have to take, you know, those deposits so that you could. Because you have to understand your cash cycle. You're buying the materials before the customer is paying the job. You want to buy the materials, hire the subs when you've already been paid on a third, a half, or all of it. Um, so it's really important to understand your cash cycle. And we get into that very heavily with the client, um, so that we have an understanding of the cash cycle and how we can improve it.

Speaker A: Got it, Got it. Um, and have you seen businesses where, you know, the profit loss statement looks great, looks like they're making tons of money, but they're out of money. They don't have any cash all the time.

Speaker C: And, uh, you know, cash has hiding places. That's what I like to call it. Cash has hiding places in receivables. It has hiding places in inventory. It has hiding places in prepaid expenses. Some people pay for trade shows a couple years in advance, wondering where the money went. But they pay, right? You know, they pay for the booth and all that kind of. They, you know, they pay for insurance up front. Uh, so pre.

Speaker A: Yep. Yeah, but, Michael, they gave me a 5% discount if I paid two years in advance.

Speaker C: Yeah, but where are you now? You're in the pool house. And by the way, you can still negotiate. That's the other thing I find, is that here you are. Here are some companies doing thousands of dollars with a vendor. Thousands and thousands and thousands. Right. But they're not asking for anything. I used to get b. I used to get $10,000 from every supplier. 10 top 10 suppliers. I used to get $10,000 in advertising money. Not from their regular co op programs. They have other, uh, budgets that they have that they keep in case they want to support a particular retailer. And I used to get 10 grand a year from 10 different vendors. A hundred thousand dollars of advertising money from my suppliers. People don't ask. All, uh, I did was ask. I had a dog and pony show at the Vegas trade show that every vendor I invited to come in. And um, I went to their booth, I should say, and I made a presentation on why they should participate in my program.

Speaker A: Yeah, yeah, Excellent.

Speaker B: Ask.

Speaker A: If you don't ask, you're gonna ask

Speaker C: for free freight sometimes. That's right. You do all this business and you have to have backup suppliers so that if they, if they play hardball, you're gone. And that's big.

Speaker A: Right, right. Yeah. I myself have stumbled a couple of times because I had a sole source supplier.

Speaker C: Right, right.

Speaker A: And we, and something can happen around the world and all of a sudden from that place don't come anymore. Right.

Speaker C: It's already happening now.

Speaker A: Right, right, Exactly.

Speaker C: That's right. There's no question about that. And, uh, we always have to be prepared with, uh, backup suppliers. And if you are a retailer, you have to understand the real value of a brand. Because sometimes I remember many times I did not have the top name brands. I, um, did not have Solomon ski boots. I did not have some of the top name brand. But I was fine without. I was fine. I thought I was going to tank. I was fine.

Speaker A: Yes.

Speaker C: I supplemented it with something else. I promoted something else. I saw where it was better. I, I made the comparisons and I sold it.

Speaker A: Right, right. You know, I, when I was in the, in the bicycle business, I used to say that, um, a customer walks in the door, they've already decided they're going to spend $8,000 on a bicycle and the salesperson is going to direct them to which one they buy.

Speaker C: Right.

Speaker A: That was 80% of the customers. I mean 20% came in knowing this, uh, is what I'm buying. There's nobody talking me out of it. This is what I'm getting. But 80%, they had 8,000 bucks burning a hole in their pocket and they were going to buy a new bicycle.

Speaker C: Right.

Speaker A: And, and this salesperson was going to direct them to which one they buy.

Speaker C: Right.

Speaker A: So that's another thing that again, we used to spiff the salespeople.

Speaker C: Yeah.

Speaker A: Uh, to incentivize them. They were making, at that time, they were making 15 bucks an hour.

Speaker C: Right.

Speaker A: So you don't have to spend a lot of money to, to get their attention.

Speaker C: Uh, right. No, well, we were in the same position and I'm a lot older. Uh, my guy, my, my people are making five and six dollars an hour. So uh, yeah, so the scripts and granted everything is relative, but um, that we, we had the Spiffs as well. They're very, they're very important and.

Speaker A: Very important.

Speaker C: Yes. And we want to make sure that the person that has 8,000 to spend spends the 8,000, not 3,000. Right. You know, that's the other thing.

Speaker A: Go, go for the Full Monty as they say.

Speaker C: That's right.

Speaker A: So one of the other things you mentioned was sort of um, time management and a lot of these, uh, small business owners are, are stuck working in the business, putting out fires and not sort of working on where the business is going. What new things can we be doing? Not, not looking forward. Right. They're looking, looking at the crisis that's landed on their desk at this moment. How do you sort of help them sort through those things?

Speaker C: Well, uh, we asked them to take one week and identify everything they do in that one week. And we have them talking to their phone so it's not burdensome. Okay. And so when they talk it to their phone and they get the file over to us, we can convert the file into uh, language and put it in a Word document and so forth and we can identify what they're doing. And many times when a business owner sees what they sees what they're doing after the fact, they're able to and ah, with our guidance that we're able to question it. We're able to question it and then they're able to see it. That, that really could have been done by somebody else. And so it's, it's an opportunity to show them the skill set associated with delegation. And if you can't delegate it, there's outsourcing opportunities.

Speaker A: Mhm.

Speaker C: So, but, but the main thing that we do is we let the business owners see themselves, how they perform that last week and what they did and what consumed their time. And then we discuss how to go about, uh, you know, making sure that that particular job or opportunity is delegated. Not all the tasks now, we're not able to do it with all the tasks, but the business owner is shocked, uh, how much time we can free up.

Speaker A: So is there a rule, a rule of thumb of how much time I should be spending working in my business versus how much time I should be spending working on my business?

Speaker C: Well, what we do, uh, Bela Is we use the 80, 20 rule. So uh, we have, uh, what we call the seven step pathway to profit formula. And those seven steps are, uh, the 20% of activities that drive 80% of the revenue. That's what we found. Um, and so the business owner or the business has to work on leads. Not just any lead, but the right leads conversions, which means the lead going into your sales process, whatever that process is, closing rates. And, and, and understand, see, data is very important. You got to understand how many leads are coming in, you're going to understand how many convert, you got to understand how many, how many close. You have to understand your client retention rates because just little tweaks in these areas have a compound effect on the total package. So we got leads conversions, closing rates, client retention, average dollar per sale, frequency of sale, and we have to control our costs. Those are the seven steps that business owners should work on that drive 80% of the revenue. It's 20% of the work that drives 80% of the revenue. And if they focus on those and they free their time up to do those activities, that will make a huge difference in their business drive that top line.

Speaker A: Got it? Got it. Very good point. Let me ask you another question. One of the things that I think for many businesses is a challenge is pricing. How do I price my product? Uh, do you have some thoughts on that?

Speaker C: Yes, yes. So value based pricing is critical. You can't, A price against competitors, that's not good. B, you can't do a markup and say, all right, that's the price. Because I need to make this. You have to understand the value you deliver and add more value so that the price, uh, reflects that value. And that's how you really should. It's value based pricing. Because what happens is if you, if you price against the competitors, oh, we're middle of the road. I love when people say that, right, we're middle of the road, or we're, we're not the highest, but we're not the lowest or right, we're not the highest, but we're in that like middle or uh, second tier where we're not the highest, but we're just under the highest. That's really pricing based on competition. Where you might be, you might be like middle of the road, but you might offer the most value.

Speaker A: Right.

Speaker C: So why you price middle of the road? So you really have to understand the um, value you bring and add more value when you can. Because the more value you add, the more justification you have for a price increase or to be Higher priced in the market or to be the highest priced in the market. So it's all based on, uh, value, the value deliver. And by the way, a lot of business owners don't understand the value they deliver.

Speaker A: Yeah, so that's a, that's a good point. How do, how do you help them understand that value? What things can you do to sort of determine what that value is?

Speaker C: Okay, we have something we call the position of market dominance. And what it is, it's simply. It's simply two steps of our conversion formula. Our conversion formula is four steps, but it's the first two steps, we call it captivate and fascinate. Captivate is the problem the customer has, it doesn't want. Fascinate is the solution they want, they can't find. So when we are working with a customer on adding more value, we are identifying the problems that customers have with that particular industry and how we go about solving them better than the competition. And so we work on the problem and then we work on a solution. Because the solution might, might have to change some logistical things that are going on in the logistical systems that are going on in the company. Right. So that's what we focus on. We focus on a position of market dominance, problem and solution, and that's how you add more value. Because here's the thing though, Bela. Business owners right now might have a strong position of market dominance. They don't use it. They fall into the trap that everybody's looking for the lowest price. It's just not, uh, true. It's just not, uh, some people are. But you don't want those people. Give those to the competition. That's what.

Speaker B: Give those.

Speaker C: Let them have a heart attack over those customers.

Speaker A: Amen. Amen. Let's let your competitor have those.

Speaker C: I love doing that. I love it. Oh, let him do it. Oh, let him have that one.

Speaker A: Right, right.

Speaker C: Because he's got. They got. They're gonna get smoked on that.

Speaker A: Yeah, excellent. Excellent. Yeah, yeah. You always have to understand what parameter you're going to compete on.

Speaker C: Right?

Speaker A: Is it. Is it price? Is it customer service? Is it something. But you better figure out what it is and you better know what it is, and then be the absolute best on that metric.

Speaker C: Absolutely.

Speaker A: Excellent. Hey, so if I'm listening to this podcast and I say to myself, hey, I want to call up Michael and I want to see if he can help me grow my business, uh, how do people get, get in touch with you?

Speaker C: Well, they could call me at, uh, 781-326-3822, and I'm in the Boston area. But they could also go to my website, nextstepcfo.net, they can download a free copy of my book Powerful Business Strategies. They could go to the contact page of the website and ask to speak with me.

Speaker A: So tell me a little bit about your book.

Speaker C: Yeah, so, uh, you know, back in, uh, 2021, I'm going to say so early 2021, I realized that fractional CFOs don't really focus on or help business owners implement, not just learn, but implement business strategy, especially business strategy that their competition isn't doing. So, uh, that's what prompted me to do research for my book. I think I have about 13 business strategies in the book. I also have a financial section. And, uh, it's free. There's no, there's no, it's not on Amazon or any of that. It's all just internal. Um, it's my contribution to the world. And um, so I, as I was doing research for the book, I discovered all these different, different things, different strategies, different methodologies, things that your 95% of business strategies used today are identical to your competition and they don't work. These are the 5% that do. That's what's in the book.

Speaker B: Got it.

Speaker A: Got, uh, it. So people can get that book on your website.

Speaker B: Yes.

Speaker C: Just go to nextstep cfo.net. yep.

Speaker A: Excellent, excellent. Very good. I will make sure that information is in the show. Notes. Hey Michael, uh, is there, I want to start wrapping this up. Is there anything that I, uh, haven't asked you that you'd like to share with our listeners?

Speaker C: Well, I'd like to, I'd like to quickly just go through the conversion formula with you.

Speaker A: Yeah, sure.

Speaker C: It's real quick. It's four steps. I've already given you the first two parts. The first two parts of that position of market dominance. Captivate problem the customer has it doesn't want fascinate. The solution they want, they can't find. The third component is educate. And we educate. Uh, what we educate on is why our solution is superior to the competition. And then the fourth step is an offer that needs to be so compelling that the customer can't turn it down. And very quickly we have five components to a compelling offer. Scarcity and urgency. So there's only five left or this offer ends on Tuesday. So that's an example of scarcity and urgency. Risk reversal. That's also very compelling. When I was in the ski business, I had um, uh, uh, a ski guarantee where the customer could, uh, if we, if they bought a pair of skis from us, they could try it three times, and if it didn't work, they could return it, uh, for a brand new pair. And that worked famously because we turned the risk from them to us. Risk reversal. Incredibly compelling. Third, um, adding more value to your product or service. We talked about that earlier, how adding more value is a compelling offer. You add more value to your product service. Fourth is packaging and bundling. Products and services together. That is compelling. When I was in the ski business, everybody packaged skis, bindings, and poles. But what they didn't package is clothing. We took the most popular ski graphics, went to the clothing department and put together a hat, sweater, bib, and parker packages together. And we were the only one who did that in the industry. And they sold like hotcakes and no one ever copied us. Um, so packaging and bundling also differentiates you from your competition because they probably don't have the same package and bundle.

Speaker A: Right, right.

Speaker C: And then the fifth component is just being indifferent to the outcome. So if you're a salesperson and you're not indifferent, the prospect's going to realize that you're out for yourself. But if you're indifferent to the outcome, uh, that makes it. That's very compelling.

Speaker A: Hey, Michael, that was a great way to kind of wrap up this podcast. Those were some, some great, excellent points, and I think it's a great overall summary of what we talked about. I really appreciate you being on the podcast and I really enjoyed our conversation today. Thank you very much.

Speaker C: Likewise. Thank you, Bayla. Thanks for having me. Bayla.

Speaker B: Really interesting interview. Thanks. Um, there was a lot of useful information for entrepreneurs in this. Unpack this for a second for us and kind of what were your key takeaways from your conversation with Michael?

Speaker A: So I think one of the important things here is sort of the difference between a cfo, a chief financial officer, and an accountant or an accounting firm. Um, account accountants. Very important. And all companies have to have them. You know, they're the ones who do the debits and the credits and sort of count the money that comes in, count the money that goes out, make sure everything's on the up and up, make sure you're paying your taxes the right way, etc. Very important function. Almost every company that I know of has somebody doing that. A, uh, CFO is a much more strategic level person. Right. A, uh, CFO can help a company get a view of their financial condition and provide. And provide them with some strategic advice or to move them on to the next step. It's super important. And oftentimes companies don't do that. I have an accountant. It's doing stuff and sort of. So the company, from a financial perspective is sort of bobbing around in the ocean like a cork. And you really want to have some sort of guidance and direction. So I think this is really, really important skill, uh, to have inside the company. And this is one way of getting it. Because CFOs are expensive. Um, you're not going to get one for $70,000 a year. It's going to cost you a lot of money. So doing a fractional one is a great approach for that, uh, to get that skill into the company and to get that expertise in there, because you only probably need it a few days a month. Other important thing that I think came out of this conversation. We've talked about this in the past, and that's cash flow.

Speaker C: Uh, right.

Speaker A: It's. I liken it to your checking account at home. I always have to have cash in my checking account because if I don't, I can't pay the bills. The same thing is true for a company, and that's cash flow. And there are some great strategies for managing your cash flow. Sometimes it has to do with the terms that you negotiate with your vendors and your customers, meaning when do you have to pay the bills? When do people have to pay you? That can make a huge difference in your cash flow. Accountants oftentimes do financial statements. Financial statements. I sort of liken to, um, you know, number one, it's a summary of what happened, and it's sort of like your tax returns. Once a year, I do my tax returns, or a company does them quarterly. And that's just sort of a synopsis of what's happened over that period of time. But cash flow is what's going on on a daily basis. And sort of think about it like the amount of money you have in your checking account at home. A CFO can also help you with pricing. Um, and I think pricing is something that's really important. It's not just about taking your cost of goods and multiplying by some number. There's a lot of strategy to pricing, and understanding your cost is important, but also understanding how pricing is going to position you in the marketplace against your competitors is also really important. So, anyway, those were some of the things that I thought about. Mike, what, uh, did you think about?

Speaker B: Yeah, um, again, agreed with all those points, Bayla. And one thing to build on with what you said and this is a point that really flashed to me when I was listening to the interview. Um, and I think most entrepreneurs know this, but I'm not sure everybody does because I see so many times when it's just not, um, kind of clear with people is a lot of people are. There's still some people that view accounting, as you said, it's like you drop off your receipts, they make sure that they pay the bills, they tell you how much money you have at the end of the month, and they pay your taxes. Right. And they just view it as this transactional relationship.

Speaker C: Oh.

Speaker B: Um, and one of the things that I've learned, again, sometimes the hard way, um, is that in a growing, profitable, sustainable small business, the finance and accounting, the marketing, the hr, the operations, these are all highly integrated. Right. And some of the things that Michael was talking about, right. Maybe in terms of pricing, right. Which is usually a marketing function. But if you're a financial person and your marketing person aren't aligned on, um, the relationship between price and revenue and, and between revenue and profit margins, you're missing huge opportunities here to improve the financial viability or the operational viability of your business. So I'm a big believer in kind of hug your accountant. Right. Maybe not physically, but mentally. Right. And find a strategic partner. Um, and again, whether this is outsourced or fractional or, uh, done on a contracting basis, but make sure you've got somebody that sees finance and accounting integrated with the other functions of your business to help you develop a strategic approach to growth that allows you to growth in a financially profitable way. Think about these functions as mixed together and not separate. Your accountant should be asking great questions of you. Right. If you're, if your accountant is really a, ah, CFO type of person, right. And a strategic person, they should be asking you questions about your pricing. They should be asking questions about your cost and your margins.

Speaker A: Right.

Speaker B: They should be asking you questions about how much it's costing you to ship. They should be talking to the HR part of the organization in terms of what's your labor cost per unit and things like this. All these things fit together. And the better job you can do as the entrepreneur or founder of getting these parts of your business to fit together, the greater likely you have, you had greater likelihood you have a kind of long term, sustainable, um, financial success. And these people are often hard to find. I was really lucky in the third business that we found that we found a partner like this to kind of act as our cfo. Um, again, it was a contract deal, right? We, we paid him by the hour. Right. But he really helped us get our act together. And he worked with our lawyer and he worked with our HR person. Right. So everybody was, uh, on the same page and that when we did that, we went from kind of break even or losing money sometimes to, to consistent financial growth and performance, profitability. So Michael, uh, struck me as one of those people. And one of the lessons I've learned that I love to share with people who want to be an entrepreneur is getting them to understand that when you go to business school, you learn about. If you go to business school, you learn about, you take an accounting class, you take a marketing class, you take an HR class. Right? And these things are supply chain class and these things are viewed as separate. And my experience is that that couldn't be further from the truth in a small business that these things are all linked and somebody's got to be able to understand how they fit together and

Speaker C: help you with that.

Speaker B: So, okay, I'm off my soapbox now. But that's what struck me about Michael is that he struck me as one of these person people that gets it and that you want to have somebody like that on your team when you're starting a business.

Speaker A: I don't know.

Speaker B: Any thoughts on my rant, Baylor?

Speaker A: Yeah, very much agreed. Uh, with your rant, Mike. Uh, one other thing I want to add. I think one of the important elements of a cfo, a really good CFO is they're forward looking, uh, they're gonna, they're gonna look out into the future and you wanna have conversations with them that say, you know, and either you or they say, you know what, in a, in, in a two years we're gonna need to buy a new building because we're gonna be out of space. Well, what are the things that we start to need to do now so that we're prepared to, to be able to buy a new building in two years. So the CFO can help you with that financial planning and a financial forecasting out into the future that says, hey, you're gonna have to be able to put certain amount of percentage down. We're gonna have to get a loan. In order for us to get a loan with the bank, we're gonna have to have our books audited. Uh, there's a whole bunch of things that they can help you anticipate and do that forecasting for you so that as you need to grow in the future, you're not going, oh, darn, we should have done that two and a half years ago and prepared ourselves for this moment in time, you can be prepared for it so that when you get there, you're ready. So I think that was another real key differentiation and a really key element of the skill that a CFO can bring to bear.

Speaker C: Love it.

Speaker B: Great guest, great interview, Bela. Great summary on your part. What do you think? Wrap this up? Yep.

Speaker A: Let's wrap this one up, Mike.

Speaker B: All right, listeners, thanks for joining us today for yet another interesting interview from the world of entrepreneurship. Um, we hope you found it, uh, thought provoking. And if you have questions about what we've discussed, as always, please feel free to get in touch with us. Our email address is bayla and mikemail.com

Speaker A: and finally, if you enjoyed the podcast, please hit that like or follow button on your favorite podcasting app. Uh, you can also find the podcast on YouTube now. Hey, and if you know someone that would be a good guest, uh, let us know and, uh, we'll reach out to him and see if we can convince them to be a guest on the show. So until next time, signing off from upstate New York. See you all soon.

Speaker B: Thanks, Bela. I'm fired up over here in Munster, Germany, as usual, and I hope to see everybody next time.

Speaker C: It.