TSP Talk Ep57. Understanding Finance

[00:00:07] - [Speaker 0]
Good day, everyone. It's James Davis from the Paxate Academy again, and this time I've got Michelle from Lenten Partners. How are going, Michelle?

[00:00:14] - [Speaker 1]
I'm going well. Thank you. It's nice to be here.

[00:00:16] - [Speaker 0]
Well, I'm excited to have you on, but I've always got to ask the question of where in this wide world are you based?

[00:00:24] - [Speaker 1]
In this wide world, I'm currently sitting in Sydney.

[00:00:29] - [Speaker 0]
Nice. Yeah. I'm glad to have you joining me because it's going to be a bit of a different topic that I think a lot of the partners typically avoid this area because it's not in their sort of genius zone. We'll be talking a lot about finance and accounting. And to dive in and start, I want to talk about CFOs because as an industry, not many of us have CFOs, but we're used to sort of working with them and the people that tell us no a lot of the time and causes a lot of headaches.

[00:01:02] - [Speaker 0]
I want to hear from you, like, what is a CFO? What's a good one and what do they actually do?

[00:01:09] - [Speaker 1]
Sure. And it's not in the no department, in case that needed clarifying. Really what the CFO should be doing within a corporate environment and also how we provide our CFO advisory services is that really the job of a CFO is, in my view, it's to tell the stories behind the numbers. And that's to help the organisation achieve its plans, its goals, have those markers, those canaries down the coal mine when something isn't going to plan and allow the business to redirect. And yes, it's about managing risk, does sometimes mean saying no, but it's also around how to drive the business forward most efficiently and most effectively.

[00:02:00] - [Speaker 1]
Really what the CFO's role should be is to really provide that commercial and strategic finance support. So it's not so much about what has happened, it's about what's going to happen.

[00:02:12] - [Speaker 0]
That's very fascinating. Because I think most of us mentioned the word finance there, like most of us combine finance and accounting together. Are they the same things?

[00:02:26] - [Speaker 1]
Look, honestly, I'm probably the worst person in the world to talk about kind of the semantics of titles. Because yes, sometimes finance and accounting can get used interchangeably. I call myself an accountant. That's what I was originally trained to do. I obviously work within finance.

[00:02:44] - [Speaker 1]
Within a corporate environment, what you tend to have and I guess broadly the two kind of discipline streams within finance teams is you've got the teams that are involved in financial control. And that's about, again, about what has happened. And then you've got a stream which is involved in the business partnering and the commercial analysis, also called FP and A, which is financial planning and analysis. And those are kind of the two streams. One broadly is looking backwards and saying this is what's happened and hopefully telling you why what's happened happened.

[00:03:24] - [Speaker 1]
And then there's the business partnering which goes, okay, what are you trying to achieve And how do we use the numbers and use the data to achieve those goals? So that's kind of broadly the distinction as I see it. And then you've got all the kind of tax, again, is its own speciality, which sits outside of that, which again, sometimes when people are talking about accountants, they assume all accountants know about tax. And I can assure you that that's not true. We know enough to be dangerous, but smart tax guys and women, there's a reason why they get paid so much for their expertise.

[00:04:04] - [Speaker 0]
And I think what you just said there with the different disciplines, I think most of the partners, the SMBs, they usually have their accountant and it usually is that sort of tax side. They're more of a tax agent a lot of the time. So what I often see is the partners relying on that accountant to tell them whether they're doing well in business. Are they the right people to be asking those questions?

[00:04:32] - [Speaker 1]
Look, and I don't want to generalise because there are some great commercial tax accountants. But I think really when you're asking about that forward looking finance expertise, that is where you need your CFO advisory or your commercial finance people. Because similar in any of our disciplines, whether that's technology, whether that's marketing, whether that's sales, you have different disciplines within that. And I think particularly when you think about the problem that an organisation has got to solve at a particular point in its evolution, do work with start ups, but we work more with scale ups. And a scale up just has to operate differently to a start up or a steady state business has to operate differently from a fast growth business.

[00:05:29] - [Speaker 1]
And you've got to understand the different dynamics and the different finance lenses that need to be put in place and to give advice at those particular points in time for an organisation. And for, you know, we work with a lot of founders and to work with the founders and leaders of that organisation to help them move forward.

[00:05:54] - [Speaker 0]
And with those different dynamics, so say a lot of our partners are established businesses and have been typically doing this for ten to twenty years. They're in that sort of steady state as you mentioned. What should they be looking to do from that forward thinking perspective?

[00:06:13] - [Speaker 1]
Look, I think the first thing that, and we're talking to a lot of businesses at the moment in terms of those, and use this phrase before, these canaries down the coal mine to help you look forward. Most businesses, particularly these days, they've got a lot of data, but what they don't have is the insights. And you can't look at everything. And so I think for a business, the first thing that you really want to do from a financial perspective is work out what are the key drivers within your business? What are the things that change or can be changed that directly impact on your performance?

[00:06:52] - [Speaker 1]
The other thing that we spend a lot of time working with businesses on and even really established businesses sometimes aren't looking at their numbers in this way. So not all revenue is created equal. And what I mean by that is a dollar of revenue in one particular product or service line or sub product or sub service line does not drop the same amount of gross margin into the business. And we come across a lot of businesses that aren't segmenting their revenue and understanding what the different drivers of that revenue are and the different costs of that revenue. And so a lot of those businesses still aren't really focusing on their gross margin.

[00:07:35] - [Speaker 1]
And that's so key, separating out those costs that go into your gross margin versus your net margin. And the third thing, particularly at the moment, is making sure that the businesses have real clarity around what is cash and what is profit. Because I'm sure, you know, we've all heard the phrases that there's many a profitable business that's gone out of business because they ran out of cash. And so knowing how to manage both of those aspects and have visibility of both of those aspects are really important.

[00:08:12] - [Speaker 0]
I'm glad you brought up those both because that's typically what I see as problems in a lot of the partner base is they understanding their gross margins. They're not understanding their operating costs either. So a lot of established metrics in this space. But that cash flow is what I see gets a lot of people tripped up as well because they're so used to looking at the bank account, I've got cash, that's how I'm winning. But when you start scratching the surface with like what's your liabilities and things like that, people get very lost.

[00:08:51] - [Speaker 0]
So that financial acumen is quite low. So when you're engaging with say someone like yourself, are you just giving them the numbers or what's the sort of story that you're telling them through So these

[00:09:08] - [Speaker 1]
the first thing that we're doing when we start working with a client is we work through a diagnostic tool called the high performing finance team. And what that does is it looks at how the business is currently being supported, not just from an individual team member's perspective, but around the sources of their financial information. Quite often what we find when we go into businesses is that you've got the sales team quoting one set of numbers, marketing team quoting another set of numbers, the founder having, we call it corporate mythology, these numbers that have always been talked about within the business as being this customer gives us this amount of margin or this amount of revenue. When you actually scratch around, they may have done, but that was five years ago. The profile has changed since then.

[00:09:59] - [Speaker 1]
And so we really try and delve into what's the single source truth for each of these numbers. When we're talking about revenue, we all need to be talking about the same source of information. We also look at how involved the finance team or person or anybody really is involved in setting the strategy of the business and reporting against performance. And all of those different pieces that really elevate how your finance function is supporting the business. And as you said, a key part of that in terms of the reporting is around the storytelling for the business.

[00:10:42] - [Speaker 1]
And so when you're reporting on the numbers, so what? Like when you're looking at a report, what does that mean you're going to do? Because there's no point just looking at a report unless you're going to take action on it. And that action may be, hey, we need to keep doing the same thing and make sure we keep doing the same thing in this area. But this area over here, we need to change things because we're not achieving what we thought we would achieve.

[00:11:07] - [Speaker 1]
And if we don't, we're not going to deliver on our financial goals. And so that's what I mean by telling the story of the business in the numbers.

[00:11:18] - [Speaker 0]
What resonated in that for me was the call out to like assessing the finance team and a lot of time, a lot of partners will either have that one single person or they'll have some outsource with a bookkeeper or an accountant. All that time that internal person, especially when it's smaller, it's the poor wife that ends up doing the doing it. And a big shout out to all those wives that are doing the books for the for the owners. Well, that's the thing. I'm glad you brought that up because a lot of them don't want to do it.

[00:11:59] - [Speaker 0]
They're actually just doing it because they're making sure that there's food on the table. I see it time and time again where they're just doing it because the owner isn't doing invoicing, they don't have a strong practice of monthly invoicing and then no one's following it up to make sure that cash is actually coming in. And there's a lot of those fundamental practices that aren't there. But as you were describing that sort of health check and then looking at the numbers, most people in the finance department in our industry aren't actually trained in finance. So how can they give the insights like some people that are actually trained on this sort of stuff?

[00:12:41] - [Speaker 0]
And that's a big disconnect that I wanted to call out.

[00:12:44] - [Speaker 1]
Yeah, no, can be a big disconnect there. But interestingly enough, one of the things that we often find during the health check, because most of the clients that we're working with, they'll have whether it's a bookkeeper or a junior accountant, whether it's insource or outsource, kind of doing the zero reconciliations and the invoicing and all that kind of thing. And then they'll have their tax accountant. And particularly with that bookkeeper or junior accountant, they have so much insight into what's happening in the business and no one's actually asking them. And so when we do the initial financial health check, we'll talk to the tax accountant and we'll talk to the bookkeeper or junior accountant in house.

[00:13:31] - [Speaker 1]
And quite often we will be uncovering insights from them that just haven't been leveraged properly within the business. And that's one of the key things we do when we start working with a business is we're extracting more value from the resources you already have in place. Because we understand how to speak finance to the tax accountant and to the bookkeeper. We understand what questions to ask, where to push when we're not getting the information we want, which the founder of the business or the leader of the business may not know they can ask those questions. Or conversely, may be asking a question that the person they're asking it to just isn't equipped to answer.

[00:14:14] - [Speaker 1]
And then there's just building levels of frustration on all sides, but no solution. And so we are the conduit between the business and the finance team. Because we're not there to replace the tax accountant or the bookkeeper. We're there to get, you know, the real kind of juice and efficiency out of those resources.

[00:14:34] - [Speaker 0]
And like you said, that CFO role is the forward looking and you can't forward look if you don't know status?

[00:14:42] - [Speaker 1]
100%. And the first thing we will do, well, of the first things we'll do when we're working with the business and we get an idea of this when we're doing the health check, is to make sure we're working with clean data. We make sure that we understand the cash, we understand the P and L, the gross margin, the net margin. Things are being coded consistently. Timing is being recorded so that we can see the gross margin and the net margin in the right time periods.

[00:15:12] - [Speaker 1]
All of those kind of things you can't look forward and you can't give insights until you've actually got that piece right.

[00:15:21] - [Speaker 0]
I'm going to change speeds a little bit because as we start to talk about looking forward, the word budget comes up a lot. What is a budget?

[00:15:31] - [Speaker 1]
So really, it's your roadmap. There's so much chat about, know, should you be doing a budget just once a year? And what's the difference between a budget and a forecast? And, you know, what's the point in doing a budget or a forecast anyway at the moment because everything's so uncertain and nobody knows what's going to happen. So why bothering?

[00:15:53] - [Speaker 1]
Are And I'm always kind of amazed at the businesses that are managing to survive without a clear budget or a clear roadmap. And just in terms of that technical distinction between a budget and a forecast, technically a budget is something you do once a year and is your clear financial targets that you're line in the sand when you start the year that you're going to measure yourself against. But the forecast is actually far more useful, particularly with SMEs. Corporates, particularly kind of bigger multinationals, listed companies, all that kind of thing. Yes, they've got to report to the market.

[00:16:31] - [Speaker 1]
They've got to report to kind of, you know, their boards and they do have to have that line in the sand. But for SMEs, your forecast is far more useful because you don't want to be updating it every week, every month, but you do want to be flexing it for when significant things in your business change and to counter the thing that we sometimes get around uncertainty. And, you know, we just don't know what's going to happen in terms of our customers or what's going to happen in terms of our suppliers. That's fine. I get it.

[00:17:06] - [Speaker 1]
We don't know in a binary sense. But say you do lose a key customer or your key supplier changed their terms or changed their prices. If you've got a robust financial model that's underpinning your forecast, you can tweak that assumption and you can understand what the ramifications of that change has on your business and on the financials and on your cash and on your ability to pay your staff and all of those things that are really fundamental to a business. And you can make the changes you need to quickly. And so that's it's not about providing certainty.

[00:17:42] - [Speaker 1]
It's about providing clarity and allowing you to make quick decisions.

[00:17:48] - [Speaker 0]
I guess the important distinction is especially if I use the budget word again, I often find that a lot of SMEs are they avoid budgets because they see this is rock solid thing that as soon as you put it down on paper, you're locked to it. You've got all this responsibility and accountability, but what you just said there around actually it's visibility, this is a maturity journey as well. You're not going to go straight to a really good forecasting, really good budgeting on the first time.

[00:18:18] - [Speaker 1]
Yeah, it's like anything really. Your objective shouldn't be perfection, particularly the very first time you do a forecast. It's a model that's going to evolve as your use of it evolves, as your learnings evolve, as the business evolves. It will change. And it's certainly not this sort of set and forget mentality when it comes to approaching planning.

[00:18:44] - [Speaker 1]
It's a discipline.

[00:18:47] - [Speaker 0]
So it's a rhythm, isn't it? Like you said before, there's no point just seeing those reports if you don't actually action it or if you're not reviewing it frequently enough to make those fast decisions. You've done that as a throwaway exercise and there is no value in that. Yeah.

[00:19:05] - [Speaker 1]
And you know, what we quite often find is that, you know, the bookkeeper or the accountant within a business, they're sending reports to the CEO or to the management, but they're not doing anything with them. So why are we even producing them? Either we need to work out what we're going to do with that report when we get it or stop reporting. Like it's a waste of everyone's time. It's true.

[00:19:31] - [Speaker 1]
It's true. Right?

[00:19:32] - [Speaker 0]
It's we do the same thing with our clients often when we send them useless reports and they don't read it, like we spend all this time doing it. Why bother? Yes. Yeah. 100%.

[00:19:44] - [Speaker 1]
Building

[00:19:49] - [Speaker 0]
a good picture of understanding as we're going through this conversation, you've got a lot of experience in this area and especially in the SMAs, what do you see the things that most SMEs are doing wrong?

[00:20:07] - [Speaker 1]
I think that there's a couple of key things. One, a lot of the SMEs that we work with, and again, a lot of our SMEs are founder run businesses, I'd say over 95% of them. And the decision making and those key points of failure all rest with the founder. And that is a really dangerous place for a business to be in. Even if the business is thriving, and actually kind of particularly if the business is thriving, a lot of those disciplines aren't put in place.

[00:20:48] - [Speaker 1]
And the unfortunate reality is that people do get sick and they are unexpectedly out of the business for a period of time. That's kind of the negative side of things. But also we work with a lot of founders in preparing their business for sale. And if you are going to sell your business, I'm telling you it cannot be a founder reliant business. It cannot be reliant on specific people within that business because you will not get the valuation that your business deserves for all of the effort that you've put into it all of those years.

[00:21:23] - [Speaker 1]
The business has to operate without you That's one of the key things a potential acquirer will be looking at when they're looking at your business and looking at whether it's an attractive asset to buy in. And the other thing as well is if you are going through that process, not all of those processes succeed. And so if you go into that process, it's very resource intensive for the founder or for the CEO. And if you pull yourself out of that business for, say, three months and then you have to come back into it And I can guarantee you, and I've seen this happen before, there are so many things that have fallen over. And usually it's the pipeline because the founder is involved in most of the selling, right?

[00:22:02] - [Speaker 1]
And so suddenly your pipeline has disappeared. And not only have you had a potential transaction not work, which is you've got to get over that piece of it. But then you've also come back to a business with declining revenues because no one's been looking after the pipeline and the business development whilst you've been involved in this transaction. So that's a key thing. And obviously it stretches far beyond just finance, that process of making the business less founder reliant.

[00:22:34] - [Speaker 1]
But part of what we do is help the CEO with that process of letting go, making sure they have the financial framework for decision making, making sure everybody's looking at the same data, making sure everybody understands how those decisions are made so that they can be delegated. And so that's one of the key things that we look at with businesses that we start working with, and one of the key failures of small to medium sized businesses.

[00:23:06] - [Speaker 0]
Yeah, I all of that too. And I think what you said around that sort of the owners making gut feel decisions. And once you've get into the ten, twenty year mark of being around, you've made some good decisions, but that doesn't make and it's great, sound, repeatable decisions that are sustainable and profitable. And I can directly say in our industry, the average EBITDA is 6%.

[00:23:41] - [Speaker 1]
Really skinny margin of error.

[00:23:43] - [Speaker 0]
That's not great financial decision making, is it? At that point?

[00:23:49] - [Speaker 1]
Yeah, and you know, it doesn't take much to go wrong for that to be a loss making business. Obviously, the higher the top line is, you know, higher dollar value that 6% is, but it really isn't much margin for error. And I think that too, if I circle back to before around like a lot of owners make,

[00:24:13] - [Speaker 0]
they're making their financial decisions about the cash in the bank. And what you're saying around like, not really understanding liabilities and things. What techniques are there to properly look at cash flow? So there's always that trigger word of cash flow. Where do we look at that?

[00:24:32] - [Speaker 1]
Look, simplest way that I talk about it is what money isn't yours? What money is yours and what money is not yours? And some people manage it by having different bank accounts. I'm not a huge advocate of having lots of different pots of bank accounts because I think it just becomes hard from an admin perspective. But I think you've got to be really clear about what money belongs to you as a business and what money belongs to the ATO, for example, or to your employees because you're withholding tax on each of your payrolls and you've got to pay over the super, but either it's quarterly or monthly.

[00:25:17] - [Speaker 1]
And so that's not your money. So if you're making decisions based on what is in your bank account at the beginning of a quarter before you've paid out those quarterly liabilities, it's very dangerous. And then also for businesses which take payments from their customers in instalments and get paid upfront. And I'm always, cash flow management, I'm always trying to get businesses to collect more money upfront so they're not effectively being a bank for their customers. But you also have to be really clear that you've collected that money upfront.

[00:25:53] - [Speaker 1]
You still need to deliver the service. That money isn't really yours until you deliver the service. And so I think rather than talking about accruals and liabilities and all those things that with a lot of people it's kind of the mindset around finance. I just stick my fingers in my ears and la la la it. If you think about it in really simplistic terms, what money is yours and what isn't yours?

[00:26:21] - [Speaker 1]
And I think that's the first piece in starting to unravel that.

[00:26:26] - [Speaker 0]
I think that's some great insight. Yes, I think you're right. Most people do put their fingers in their ears when this is, it comes to financial talk.

[00:26:35] - [Speaker 1]
They just don't wanna hear that, no.

[00:26:38] - [Speaker 0]
Exactly. And I think there's a lot of power as well of like taking your fingers out of your ears and actually listening to this stuff. It's very naive and ignorant when we're running a business to ignore that side.

[00:26:54] - [Speaker 1]
It is though, you know, with a lot of founders that we're working through, we're helping them through an inflection point in their business, right? And they are needing to do things differently tomorrow to how they've been making decisions all the way up to today. And it's a really scary thing to do as a founder. And particularly because the business has succeeded because you have been doing things in this way up until this point. And you know, yes, they might not be best practice, but the business has succeeded and thrived and more importantly it still exists.

[00:27:32] - [Speaker 1]
And you know, we all know the stats for business failure in early years, right? And so it might feel very logical from the outside to go, well of course you have to do X, Y and Z. But one of the really important things I think we've got to bear in mind whenever we're managing anyone through change, whether it's a leader, whether it's a team, whether it's your employees, whether it's your customers or suppliers if you're changing business processes, is the logic won't convince them. They've got to feel safe about the change that is being made. So a lot of the work that our CFOs do is just building that relationship with the CEO and showing them the steps to get to that point to change.

[00:28:16] - [Speaker 1]
It doesn't happen overnight, like you were saying about building the forecasting process, right? Things have to change, but there is also an approach to that change that can be more comfortable and feel safer than, know, beating someone over the head with a big stick.

[00:28:35] - [Speaker 0]
How long does that change typically take, do you see?

[00:28:40] - [Speaker 1]
Look, it really depends on the business, not just the lead. Fundamentally, it depends on the leadership within the business. It also depends on the employees as well. But you know, if you're a business with employees, they also have to embrace that change. And it really depends on how much needs to be changed.

[00:29:00] - [Speaker 1]
I always find it really interesting that we get some new clients come to us who, some of them come to us saying, oh, I know it's all a mess. I know it's all broken. I know I know so much that's got to be fixed. And invariably, they're the ones that are a bit more self aware. And there's ironically less that needs to be fixed than the ones that come to you and go, we got to this point in the business, I've been told I need to come and see someone like you, but I think it's kind of working all fine.

[00:29:26] - [Speaker 1]
And they're the businesses that you start kind of picking up a few rocks and looking under the covers and you're like, oh, actually there's quite a lot that needs to be changed here'. It really depends on the business and what needs to happen. That's why we start all of our engagements with new clients with this initial financial health check. Because in our initial discussions with clients, quite often they'll say, well you must have worked with lots of businesses like us, so can you just give me a sense of what we need to do and obviously how much it's going cost and all that. And it's a really tricky one because even though a business might look and smell the same from the outside, it's not until you've actually gone in with a little bit of debt that you can actually give that real guidance.

[00:30:12] - [Speaker 1]
And so this first piece of the process really helps with that, but very much from both sides.

[00:30:19] - [Speaker 0]
I can back that up from my experience. I was laughing along and giggling because as you're describing that, I've lived through all those situations and the thing I always come back to with finance a lot of the time when I work with the partners, a lot of their issues are from poor pricing. Their margins are just wrong because they're not pricing it well enough. And it typically takes me eighteen months to two years to get them to actually raise their prices.

[00:30:47] - [Speaker 1]
It's scary because you think I'm going to lose customers if I raise my prices. But ironically, you may need to lose some of those customers to actually improve your margins. That's not a bad thing.

[00:30:59] - [Speaker 0]
And from my experience, especially in this industry, typically when we raise it, usually 95% stay anyway. So it's very small percentage that go and like you said, typically it's a good thing but also they're probably going to leave anyway. So you're right. It's all based on this sort of emotions and logic. There's no logic on this side because if there was, you'd already be doing it as an owner.

[00:31:30] - [Speaker 0]
Like, you'd already be more financially savvy. You'd be more engaged in this. And I think being aware of that it is emotional thing from the start helps then engage with people that can actually help you properly. I'm learning a lot from this session today. As we look forward again, so we've smashed out all our fundamentals, we've got that in place, we're using some forecasting.

[00:32:07] - [Speaker 0]
What else do we utilise to look forward into the future? Like where does finance really come into play when we're an SME, we're trying to look into the future. What else do we use this sort of thinking for?

[00:32:21] - [Speaker 1]
Look, I think some of the big things are around what are your ultimate goals as the business owner? Where do you actually want to finish up here? And for a lot of our business owners, is around selling the business, and that of changes some of the dynamics in terms of how you want to structure and shape your business. Similarly, we help a lot of businesses expand overseas. And we also work with a lot of family businesses and working with that succession shift from the older generation to, you know, I always chuck a little bit, the younger generation who are quite often in their 50s.

[00:33:06] - [Speaker 1]
But it's true, right? Because you've got the patriots or matriarchs in their you know, early seventies still hanging on and the kids who are in their forties or fifties kind of going, it's time. And that's another dynamic as well. And I think that, again, particularly with founder run businesses, because that's a lot of our client base, it's that alignment of business goals with what you actually want to get out of the business. Because with some of the businesses, it's about the founder doing less on the tools and day to day.

[00:33:48] - [Speaker 1]
And what are the financials of that look like? And what are the processes we need to put in place to enable you to do that? Again, in terms of the succession planning, maybe they want to move to a point where they're starting to pass the baton either to senior management internally or to the next generation if they're not thinking about selling the business. And so that might be a phased exit for the founder. Like, what does that mean?

[00:34:15] - [Speaker 1]
So all of the forecasting and all of that seeing into the future, forward looking lens, all these phrases that we use, You have to know what your ultimate goals are and that's really how you use it.

[00:34:35] - [Speaker 0]
That can be super difficult to do on your own as a founder of trying to work out what am I trying to achieve and getting outside help does make that a lot easier because there's no emotions from someone. And often for a founder owned business, it does go back to your own personal finances. And I think far too many people are relying on that sale of the business. Like in our industry, we're seeing a lot of people in their mid to late 50s starting to get ready to thinking about selling. But they're not in a personal financial position to sell.

[00:35:21] - [Speaker 0]
So they're all very desperate to get really high valuations that just aren't going to happen. I think this is where that planning starts to come in play to actually break that down and make it achievable then.

[00:35:35] - [Speaker 1]
Yeah. And also, think when you're setting that forecast and those goals, it can get really easy to get tied up in vanity metrics around, oh, I want to 10x my revenue or whatever it is. And it's really important to make sure they're actually goals that you want. Because going back to that margin question, there's no point 10x ing your revenue. If you're getting kind of like a 5% out of each of those dollars that you're 10x ing, that's just a whole bunch of effort for no real value.

[00:36:15] - [Speaker 1]
You're far better off keeping your revenue static and upping your margin, right? And not killing yourself in the process. But it's also about what it is completely about what you want to achieve and making sure they're your goals, not, you know, sitting there and being able to say you beat so and so down. It's like the neighbors thing, isn't it? You know, there's no point saying that you've done better than the Joneses if you never wanted what the Joneses had in the first place.

[00:36:44] - [Speaker 1]
So and that applies as much for business as it does for for personal assets and attributes.

[00:36:50] - [Speaker 0]
That call out because everyone in the industry, if they're a million dollar company, all I hear is, oh, we'll get to 2,000,000 in three years. If you're two to three, well, I'll get to 5,000,000 in two to three years. There's those brackets. And and and having that sort of not just tying it to personal purpose to actually go and achieve it, but actually having someone to help break that down, set some reality into it. Because if you've been a million dollar business for the past four or five years, it's unlikely unless you make dramatic changes that you're actually gonna get to that 2,000,000, and it is just that vanity thing.

[00:37:25] - [Speaker 0]
So getting that help to break it down is super.

[00:37:30] - [Speaker 1]
Yeah. And that's why when we're doing the forecasting, we spend most of our time, particularly if a business hasn't done it at all before, is breaking down those business drivers. Like if you are going to jump from $1,000,000 to $5,000,000 is that going to be more customers? Or is it going to be higher pricing? How many salespeople do you need to actually deliver those increased customers?

[00:37:54] - [Speaker 1]
What's the pipeline to actually get a new customer? Are you going to make changes in that whole customer journey? Would it be better if you're actually retaining your customers instead of churning your customers? There's all of those fundamental drivers that help you see how you're going to get to that 5,000,000, if that's something that you want. You can't just say one to five, oh, I'll just do five times as much as I'm doing now because there are so many variables in terms of that.

[00:38:27] - [Speaker 0]
And facetiously, I'll say hope isn't a strategy. It

[00:38:33] - [Speaker 1]
is not. But it doesn't necessarily deliver you what you need.

[00:38:41] - [Speaker 0]
Well, I mean, you could talk about this for a very long time, but I think everyone's probably getting sick of hearing our voices, I reckon.

[00:38:51] - [Speaker 1]
Oh, how rude.

[00:38:52] - [Speaker 0]
But to wrap up, we've covered a lot of ground. What you really want to get people to really focus on for their takeaway? And if they're listening to this and they've heard all the things that we've been saying they're doing wrong, what's the pragmatic step to take that first step to get started on improvement?

[00:39:12] - [Speaker 1]
Look, I think that the first step is just to understand that what got you here isn't going to get you there. And so what do you need to bring into the business from an advice perspective or from a team perspective to actually get you to that place? And do you understand the building blocks to get you to your goal? And then I think going back to our, you know, head in the sand, fingers in your ears kind of mentality. I think it's really important to kind of understand that you've got to move beyond that and that looking at your financials and looking at shifting your perspective from, you know, it being a historical thing that you look at to having it be the roadmap to get you where you need to go is a really important shift.

[00:40:11] - [Speaker 0]
I think that's some great wisdom to wrap up. And I think I'd really reiterate, as a business owner, you can control your own destiny by leaning the financials. You don't need to be an accountant level trained person to do this. But like you said, pull the fingers out of theories, start learning.

[00:40:34] - [Speaker 1]
And

[00:40:34] - [Speaker 0]
there's so much power and control that you get out of that.

[00:40:40] - [Speaker 1]
And I think just on that control point, one thing I just want to mention, particularly in the environment, the current economic environment that we're in today. And it feels it's feeling really scary for a lot of businesses because there's so much out there that's uncontrollable. Focus on the things that you can control. And that's how you get past that sense of overwhelm and back into feeling like you're in control of your business

[00:41:03] - [Speaker 0]
That's some great advice. So really appreciate you jumping on. It's been an awesome session. I've learned a lot and hopefully hopefully the people who've been watching along, listening along have as well and opens up some freedom from their chaos. So thank you so much for joining me today, Michelle.

[00:41:25] - [Speaker 0]
No doubt we'll get you back on in the future.

[00:41:30] - [Speaker 1]
Bye. Bye.