The Power of Cash Flow Over Profits with Fred Cary

[00:00:00] I do get a lot of pitches from business leaders, but when somebody who comes with a model

[00:00:06] and fuck average B legendary crosses my path, yup, I gotta talk to it.

[00:00:11] Fred Kerry joins me, he's the CEO of IdeaPros, this is a bonus episode of the Business

[00:00:18] of Tech.

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[00:01:08] Fred thanks for joining me.

[00:01:10] Well I am really happy to be here looking forward to this.

[00:01:13] Now I'm going to start with a headline because anybody who's got a cool model like fuck

[00:01:17] average B legendary, that feels like a great place to start.

[00:01:22] What do you think of how that came about and how you apply that philosophy?

[00:01:28] By the way, it's a registered trademark.

[00:01:30] The trademark office thought me worthy of having that probably because I swear so much.

[00:01:36] Well done.

[00:01:38] It came about really trying to find it in your face way of telling people what it takes

[00:01:44] to make.

[00:01:45] We have so many of us want to have extraordinary lives.

[00:01:50] We will want to have the best of everything.

[00:01:51] Be able to travel when we want work as little as we want, have the best house, the best

[00:01:56] are the best wife or husband and all this kids and a great dog that isn't barking people.

[00:02:04] But the reality is to have that extraordinary type of life you got to do extraordinary

[00:02:09] things.

[00:02:10] And most of us go through every single day not doing anything that's out of the ordinary.

[00:02:15] We live in what I call like bricks and our comfort zones, which was anything but and we

[00:02:22] need to step outside of that.

[00:02:24] And so my challenge to people with that statement if you want to be legendary by one extraordinary

[00:02:31] thing to do every day, it could be like a little extraordinary thing.

[00:02:35] Like I always wanted to be somebody in tech, but I don't have any training whatsoever.

[00:02:42] I take the first pair to do something to move your life along so you can have that extraordinary

[00:02:48] life.

[00:02:49] And so that's the birth of that phrase came from that, you know, going to do every

[00:02:56] thing every day and you're going to have it and I reached out.

[00:02:59] You've clearly done a bunch of things.

[00:03:00] You've found it more than 10 companies.

[00:03:02] So I would feel like there's kind of a pivotal moment in your journey that kind of shaped

[00:03:06] your approach.

[00:03:07] What would you like to say?

[00:03:08] Yeah, that's the moment.

[00:03:10] You bring out failure repeatedly.

[00:03:15] You know, try to do something that had never been done before and not getting you right

[00:03:21] the first time.

[00:03:22] Like Elon Musk three SpaceX failures and betting the farm still on the fourth one would have

[00:03:28] never heard of Elon had the fourth one killed and just continued to go for it.

[00:03:34] You know, it was the realization that pain is part of the process.

[00:03:39] So Fred, you know, I think a lot about failure and I really appreciate you focusing there

[00:03:43] because in a way like the best thing that could happen is somebody be successful.

[00:03:47] That's the best.

[00:03:48] And the second best thing would be failing fast because you can move on but the worst

[00:03:54] is when you fail slowly and you may not even know it's happening to you.

[00:04:00] How would you know?

[00:04:01] How do you know failure to make sure you know it's happening and you go job?

[00:04:07] Yeah, recognizing failure begins with recognizing your own flaws and understanding that just

[00:04:14] because you believe something the market may not agree with you.

[00:04:18] The people that have these long slow burned failures that end their careers are people

[00:04:24] that can accept the fact that they were wrong in the way they decided to go for something.

[00:04:32] And so the fast failure happens when you're flexible enough, when you can give it best enough

[00:04:39] to follow that flow of the market river if you will wherever it leads you.

[00:04:45] Filling to do that means that long slow burned failure leads to the natural death.

[00:04:51] In prepping to talk to you because we're really fascinated to understand your philosophy

[00:04:56] on business.

[00:04:57] One of the things you really emphasize is the importance of hash flow over profits.

[00:05:02] I find that kind of striking because it's an interesting approach.

[00:05:05] I appreciate the idea of managing cash flow.

[00:05:08] Obviously you can take that to a real extreme.

[00:05:11] We both know that a cash flow business without profit isn't the goal because you got a great

[00:05:17] cash flow but no profit.

[00:05:19] Walk me through your thinking and how you balance it and where your emphasis is for us.

[00:05:27] Yeah, generally especially entrepreneurs with smaller businesses,

[00:05:31] one, two, three million dollar businesses, we're looking at the paper that's showing us

[00:05:38] all the contracts and deals that we're getting in.

[00:05:41] And we're thinking that this is amazing.

[00:05:43] We're doing great but a lot of times the cash from those business doesn't come in

[00:05:49] when the contract does.

[00:05:51] So when we're looking at, oh on paper today, on my P&L, I'm doing really well.

[00:05:57] But in my bank account, I have $78.

[00:06:01] The reality is the very first thing and the very first thing I tell any CFO that I bring

[00:06:06] on board to work for me is don't let me run out of money.

[00:06:09] That's what you get.

[00:06:10] When you start focusing on your cash flow then you can utilize your skills in the finance part

[00:06:18] of things to make sure that business keeps growing robustly.

[00:06:21] The problem is even worse when you have a really well performing business but let's suppose

[00:06:27] your technology company and your month after month you're doubling.

[00:06:31] And so now you're looking at this $10,000 invoice statement and you're doing a

[00:06:40] rape for it but you're using last month cash pay for this month's expenses.

[00:06:46] And if you got twice as much business in the following month that that cash is not going to

[00:06:51] pay for the expenses that you're going to have as you're growing to that level.

[00:06:54] So always be mindful of the cash you have in the bank, the cash that coming in despite what

[00:07:00] your P&L says.

[00:07:01] Get a great P&L and run out of money and be out of business.

[00:07:04] Interestingly, a lot of the managed services world leans very heavily into monthly recurring

[00:07:08] revenues. Beary, that would be a really good way.

[00:07:11] What are some of the ways that you emphasize with entrepreneurs that they should be

[00:07:16] tactically managing cash flow?

[00:07:20] You get somebody involved sooner rather than later that understands it.

[00:07:24] That's what I'd say.

[00:07:26] Right now you can find a fractional almost anything and you're able to do that historically but now

[00:07:32] there's fractional CFO services. They're pretty sophisticated accounting services that

[00:07:39] are affordable and help you manage that.

[00:07:42] And if you haven't had any experience in that, you can learn about it but in the meantime

[00:07:47] bring in a professional help you manage that cash flow.

[00:07:50] So you understand a little bit more about it took me 10 years to figure out

[00:07:55] Davidson credits on why they seemed opposite to me what they really were.

[00:07:59] And so it's a learning curve with me.

[00:08:01] I get somebody tracks to help you.

[00:08:03] You're slightly adamant to really get it then.

[00:08:05] I still feel like I'm constantly learning private and law statement.

[00:08:10] CFO by the approach, you're working a lot with companies and the approach is not just consulting

[00:08:15] but you're trying to engage in development strategy and the lodge process of those startups.

[00:08:20] What are you looking for in the most successful organizations

[00:08:25] to measure that they are these are the ones that are going to do really well or are.

[00:08:30] Yeah and with me, historically we've taken people at the idea stage so most of the time there

[00:08:38] aren't any organizations. There's somebody with a really good idea.

[00:08:43] 90% of the time which we change after we get involved but we really come in as a co-founder.

[00:08:50] You're right at the very beginning you have a really good idea.

[00:08:53] You want to execute on it. You're about to spend a half a million dollars or more trying to

[00:08:58] build a company around it and we step in as you co-founder and we take a minority interest.

[00:09:03] We cover everything on the build that needs to take place.

[00:09:07] We train here as an entrepreneur so what I really look for is a pretty good idea

[00:09:12] with a really great entrepreneurial spirit.

[00:09:15] Somebody that can give it when things are working out right somebody that will learn

[00:09:21] somebody that never gives up. Somebody has really a lot of determination and somebody who can

[00:09:28] embrace failure on the Germany towards success. Are there any sort of consistent traits about those

[00:09:34] entrepreneurs that you've seen? Are there things that you always find there or they're

[00:09:40] guaranteed, almost nothing's guaranteed but like if those things are there we are much

[00:09:44] higher or lower rate of success.

[00:09:47] Yeah. The biggest thing surprisingly is timing and there's been a study down at Harvard about

[00:09:56] two dozen companies that were really well capitalized like 100 million, 200 million,

[00:10:01] greater million dollars from the Medju capital. Really great management teams,

[00:10:05] really great product ideas, lots of money and they looked at the ones that failed and

[00:10:11] looked at the ones that succeeded and in large part of the overriding factor was coming in at

[00:10:17] the right time for something shocking lead to me. I didn't even consider that as a real possibility

[00:10:23] although I had to happen to meet once. So I look for number one, is this a good idea

[00:10:30] at the right time? And then number two was characteristics of that entrepreneur are such that

[00:10:38] number one, they have to hate where they are. Like most of our entrepreneurs, they're not the

[00:10:42] 20-something that just got out of their grad school. There are people from 30 to 55 years old

[00:10:49] that they're in corporate America, they're doing really well in their jobs. We've had some

[00:10:54] people coming in there or making $750,000 in corporate America a year and they hate where they are.

[00:11:03] So the first thing I look for is hate. Like I really, I am not satisfied, I'm successful financially

[00:11:10] and I'm working up the corporate ladder but it's not where I want to be. So I look for that pain

[00:11:15] that really desire to change my life because if you have somebody who wants to change their life,

[00:11:21] you're going to work extra hard and make a laugh. If you have somebody who wants to side hustle and

[00:11:26] choose where it goes, they're not going to put in sweat equity. It needs to take,

[00:11:31] to go ahead and be successful. And the last thing I look for is somebody that's consistent with the

[00:11:39] core value system of our own organization. These people are literally in bed with us. If you have

[00:11:45] somebody that is way different in their approach towards business and to the approach to

[00:11:51] metadion, empathy and how to treat their clients or customers that they don't shit well.

[00:11:58] They're going to disrupt our own internal organization. Those are the key factors for us.

[00:12:04] Now when we were talking before we were live, you started saying, I'm not a technologist and

[00:12:08] actually the reason I want to talk to you was because of the entrepreneur angle. And while you

[00:12:13] are familiar with the IT services space, that's not technology is not your thing, which is exactly

[00:12:18] why I wanted to talk to you because I actually love bringing in people that have deep expertise

[00:12:24] that is adjacent to our space, not necessarily deep into it. And I want to put out a premise

[00:12:30] and that we tell ourselves a lot in technology and I'd like you to get your reaction to.

[00:12:37] We constantly keep telling ourselves that what we're doing is incredibly valuable now

[00:12:43] because every company is a technology. What's your reaction to that state?

[00:12:52] None of those companies knows their technology come. So you can't sell stuff,

[00:12:59] you can't sell your pool products and with great expertise, you need to find out what the

[00:13:06] pain points are of your customers or your clients. You need to be selling pain and you need to

[00:13:12] selling solutions that address the issues that they have. When you go out and buy a brand new car,

[00:13:18] you don't know how the pistons work or in many cases even how many cylinders there are in the

[00:13:23] vehicle. Certainly you don't know how the transmission gets all set up and everything. That's all

[00:13:27] the technology and which is none of the reasons people buy car. Same thing when you as a technology

[00:13:33] company go address people that have needs for your stuff, find their pain, get their emotional

[00:13:39] connection with what they are, those pain points are and then solve the pain points. People just

[00:13:45] want to hear I'm going to improve this by 25%. I'm going to eliminate your potential for fraud

[00:13:52] by 99%. Get the things that they're concerned about instead of saying oh, they're technology so

[00:13:59] let's go sell technology. No, sell pain, sell solutions, sell the things that the CEOs of

[00:14:05] those companies stay up worrying about at night. Then later on you got the ticket and you can talk

[00:14:10] about the technology with their own technology, especially. So we're taking a quick moment to look

[00:14:15] to the future. You're working across a lot of different industries and I'm going to ask this saying

[00:14:20] specifically broadly what friends that are coming out, the you thing are going to impact the

[00:14:26] entrepreneurial world over the next couple of years. A AI is already changing the way we

[00:14:35] do everything everybody's telling I'm using AI in my business but the AI five years from now

[00:14:42] could be scary itself. We don't know where it's going, we don't know about what type of jobs

[00:14:48] it's displacing. I do know already in my own company there are very sophisticated reports that

[00:14:53] that we do that used to take four months and with AI tools that we've built we can do them happen

[00:14:59] and we still need to have human resources review them and understand it's like an x-ray

[00:15:05] and a radiologist right? And I need the radiologist anyway but you may not need the x-ray

[00:15:11] technician. It's the same thing with AI, the people who are generating reports for me now

[00:15:17] may not be needed at least not as many of them but we do need that senior folks to

[00:15:23] review them and I think that the big game changer across all industry is AI where it's going to

[00:15:31] lay, where it's going to end up we don't know but certainly everybody needs to be looking at

[00:15:36] that every day and see how it can make their organization better and see how the failure to

[00:15:42] use it can make your competitors swallow you up before you even realize it.

[00:15:47] That's why I think this is an interesting space to look into because the matching the expertise

[00:15:51] to the entrepreneurs is the trick. Fred Kerry is an entrepreneur and business thought leader

[00:15:56] with over three decades of experience in creating transformative strategies that have generated

[00:16:01] business billions in corporate value. He is the CEO of IdeaPros,

[00:16:05] Fred if people are interested in finding out more where can they get in touch?

[00:16:10] Well people can get a whole new in a couple different ways.

[00:16:13] You can just go to ideapros.com become a free member we have about 100,000 members on

[00:16:18] their entrepreneurs from all walks of life that we get three advice to every week. Also on

[00:16:24] Instagram and official Fred Kerry, C-A-R-Y, have about a half a million followers on there

[00:16:29] give you advice every single day for free and if you have something really pressing this is the part

[00:16:34] that my collective assistant hates. Something that you feel is really important and you want

[00:16:39] help with Fred at IdeaPros.com reach out to me and I'll answer your email and see if I can help

[00:16:45] this has been fantastic. Thanks Fred. Thanks a lot. I appreciate it.

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