The Role of a Fractional CFO – Greg Brown, Cardinal Finance

The Role of a Fractional CFO Greg Brown Cardinal Finance

[00:00:00] Thanks everybody for coming out. Um, we, uh, we started hosting this event series, we’ve called it our Chart Charting Opportunities Event series. We started hosting this back in October with the goal of providing resources, tools, connections, um, for business owners in the Charlotte marketplace. So, um, we’ve hosted a number of events, obviously our seventh event here, um, from valuation to, um, health and wellness, to charitable planning and estate planning.

Uh, this month we have, um, a long time friend of mine, uh, Greg Brown, to talk to us about why a fractional CFO or when a fractional CFO starts to make sense for a company and then what you, what you should expect out of that relationship, right? So, um, we make a hire. We should obviously have expectations of the value that we’re gonna receive from it.

I’m gonna go ahead and make a plug for next month as well in case somebody forgets or leaves [00:01:00] early. Um, next month we’ve got a fantastic speaker as well. We’ve got a, um, another friend of mine, Andrew Asher. Andrew Asher runs a company called Lucid Bots. Um, they started off producing, uh, drones for window cleaning.

Um, and they’ve now moved into bots for, uh, pressure washing. Um, and they will continue to expand their portfolio of robotics across mainly blue collar industries, um, that help alleviate some of the stress and hard work that those folks have to do. Um, so, um, Andrew’s a brilliant person, um, will be a great speaker.

So, but for today, Greg and I just wanted to sit down and talk. ’cause as businesses cross a certain threshold, it starts to make sense for them to stop managing their finances on their own. So, um, Greg’s here to talk to us and. Um, educate us about what that timeframe starts to look like, um, and then what value you and others, um, as a fractional [00:02:00] CFO provides.

So Greg, thanks so much for showing up. Well, I appreciate the opportunity to be here. A little worried there at 3 35 morning, 3 35. Yeah. I texted you. I let you know I didn’t forget you, you weren’t 20 minutes early, so Yeah. Anyways, but thanks for coming tonight. I appreciate it. Sure. Um, apologies in advance to those on this side of the room.

I’m gonna have to, I have to be a little cockeyed to be able to see the slides, so I love you just as much as those people. Um, and I also, by the way, I have two friends and client and former client here. So Becky Lorenger and Pam Montag, they surprised me with their attendance today. So you may hear them disagree vehemently with something I say here and say that’s not how it is.

But I would invite both of you at any point, like if you want to add something to whatever I’m talking about here as sort of the trade offs of a fractional versus full-time or whatever, please feel free to do that. Um. I, I wanna start. We all ca we all advises, right? And I wanna acknowledge mine upfront so that you’ll understand as I talk about [00:03:00] how I view this, mine might not be a universal perspective, right?

So my background, I’m an accountant by training generally you’re gonna find al people in this world are going to by training, probably be an accountant or a finance person. And there are differences. I’m an accountant by training. That factors into how I view some of these things. Um, my career has been half on the investor side, angel and venture capital investing, and the other half as a CFO inside of companies, either privately backed or early stage public companies.

But again, that’s something that colors my experience and my perspective on some of these things. Typical for me, clients are usually five to $50 million a year businesses founder led. Right. So these aren’t, it’s not hired in management team because there was some private equity firm that came in and I’m usually dealing, you know, [00:04:00] the CEO of the company in my client base.

It. That’s typically some the person who started the company. Right. Um, they’re typically focused on building equity value versus, oh, this is a generational, uh, you know, my dream is that 20 years from now my daughter’s gonna run this company. They’re usually looking to build to some sort of liquidity event in three to five years, something like that.

Um, and that time horizon can change, but they’re usually focused on building value of their enterprise. Um, what’s a CFO, right? I thought just start with that and make sure, so this is the person on the management team who has the kind of, the overall responsibility for financial oversight for the company.

Right. Um, that’s probably pretty obvious for people. I’m not gonna slide read on that one. Um, lemme make sure it’s a quick disclaimer for Greg. He doesn’t have a happy [00:05:00] trigger finger. We need an updated clicker. Um, so, okay, we’ll, um, he’s in good shape, alright. He’s not, he’s not overly excited today. Yeah.

Here’s, here’s what, here’s what A CFO isn’t. All right? So we’re not talking about I need somebody to come in and pay the bills, invoice my clients. There are pe gonna be people in the organization who’d be, who should be doing that. But that’s not, when I talk about A CFO, that’s not what I’m speaking about.

It’s not somebody to come in and like teach your staff how to do like debits and credits, teach them accounting fundamentals. Right? There’s certainly some training that that person can provide to people in accounting, but you know, the. You know, this isn’t in lieu of them having appropriate educational background in accounting.

Um, this isn’t somebody, you know, sometimes what the bi, you know, every, every [00:06:00] business owner who I get introduced to and we have a conversation about, so tell me like, you know, Ricardo, what problem are you looking to solve in your business? What had you, you know, it’s not, oh, I just need somebody to, you know, when vendors are unhappy, they’re not getting paid.

I’m just tired of taking those phone calls. I need somebody. That’s not what we’re talking about. Okay? This is, and they’re also not a magician, right? I can’t, if your business is fundamentally broken, um, if it’s, you know, you happen to be a restaurant over owner during covid, like, there’s not gonna be a lot of help that A CFO is gonna provide in terms of making that business viable.

Um, some, some signs that you might need a CFO. Um, you know, it could be, I, I’m gonna start in the bottom right, if you’re, if you’re losing a lot of sleep, right? Just over, and these could be financial or non-financial issues, but just like, gosh, you know, I’m worried about these things. Either I just don’t know [00:07:00] what’s going on.

Um, or I know what’s going on, but I think it’s outta control. You know, your profit, you’re profitable, your business is profitable, right? Your financial statements always show that you’re profitable, but you never have cash and you don’t know why. Probably is the most important part. It’s possible to have a profitable business, but always be tied on cash.

But if you don’t know why, then you need to understand the why. Um, you know, upper right inability, you, you feel like you can’t make important decisions because you don’t have the data that you need to have, right? So just this indecision and feeling like I can’t move forward with things because I’m just not sure that.

I really understand the, the financial data around my business to decide, Hey, should I open up, can I afford to open up another location? Anything like that? So, Greg? Yes, sir. Question. Um, so business [00:08:00] owner comes to you, they’re doing 5, 7, 8, $10 million a year in revenue. Um, they’ve got somebody on staff that handles the books, right?

They’re doing the QuickBooks, they understand that everything’s clean. Um, but they’ve heard from all their friends that their, their, their friends have a business and they have a fractional CFO. I need a fractional CFO too because I have a successful business. Um, they bring you in, they don’t know what they need.

What’s that interaction like? Right? They just think they need one. Like how do you help them determine whether or not it’s now the right time for you? Do you just kind of go through that checklist or how do you approach that? Um, I don’t have anything nearly that formal. I don’t have a lot of checklists, no checklist.

Um, so honestly, what I do is, you know, so you have a meeting, you know, you’re the prospective client. We sit, we talk, I ask you things like why, you know, why, why do you think, what prompted are you trying to solve? What, what prompted you to have [00:09:00] this conversation with me? And it could be something like, my bank’s really mad at me, right?

Or, you know, a friend told me that I should have somebody like you. I’m not sure why. Or you might have great clarity. The, um, generally what I try and do so we could, I feel like we could have five more hours of conversation and not get a lot closer to what you really need. Then I can get out of that first 30 to 60 minutes.

So I usually just find, try to find something that is, I. A way for us to start engaging with one another. Like, hey, like what if we picked a little project, something that would be useful to you to have done. I’ll work on it with you. We’ll get to know each other better. I’ll get to better understand your business.

There’ll be a deliverable that has some value for you. And then at the end of that we can Okay, maybe, maybe just fundamentally we don’t work well together. Yeah. Right. If we do okay, maybe we work [00:10:00] well together, but you don’t really need me on an ongoing basis. Like it was just this one time thing. Um, so I try and find a way to have some engagement to really get to a better understanding versus a long drawn out, trying to scope something.

Um, would you say there’s a pattern of the things that you just pointed out earlier? Um, most people come to me because they are, uh, profitable business with no cash or they’re trying to, to ramp up another location. Is there. Is there a sticking point that you notice that more people come to you with out of that list?

Or is it kind of all over the board? It’s all over the board. I think some of it, so my two, um, I’m gonna answer your question. I think an under, to understand the context, my two, um, let’s say largest sources of referrals are from CPA firms and banks. [00:11:00] Um, you know, the bank typically isn’t making that referral because everything’s going so well.

Right. The bank, it, it, and that doesn’t mean that the business is doing miserably, but they’re not, they’re not getting the information they need. Like there’s some sort of stress in that relationship, right. That has them say, Hey, maybe you know. Maybe you could use somebody like this. Oh, Greg. Yeah. Yeah. We would both be happier if you would do this.

Yeah. Um, I would say on the CPA firm side, that’s probably more about, um, often these are, these are gonna be businesses that are having some business success, but they feel like they’re seeing a business owner that doesn’t have the data available to them or the in-house sophistication necessary to support some business decisions that they need to make going [00:12:00] forward.

And most of that’s gonna be growth based business decisions, right. The business can continue to grow, but they keep choking on themselves and they can’t get past that spot. Call Greg. Yeah. Right. We feel, we feel like we’ve seen them stuck at this spot. Um, and the CPA firm isn’t, you know, they’re not designed to be there every month.

Yeah. Right. So, um. So you have a choice, right? If you’ve, if, if as a business owner you’ve decided I need a CFO, you Alright? There are, there are different ways to solve it and let’s sort of generally call them, you could go fractional. You could fractional meaning part-time, right? Or you could, you could say, I’m just gonna hire a full-time CFO.

And I don’t think it’s a, I think there are trade-offs, right? There’s no, it’s not like, oh, this is a hundred percent good and there are no negatives associated with it, right? On this path or vice versa. Um, clearly there’s a cost differential, [00:13:00] right? And that’s meaningful. Um, you know, I think so on the plus side for why go fractional, it’s gonna be cheaper.

You may be able to access a higher level resource than you would be able to access if you were hiring full-time. Right? That I think that is absolutely the case. You will, on the plus side, you’ll get breadth of perspective. That’s gonna be different than if you hire a full-time for, uh, for example, you know, think back to, you know, back when the onset of Covid and, and, um, you know, Becky and I were able to talk about, well, what are, like, what are your other clients doing?

Right. If I had been, if I was her full-time CFO, I would’ve no. Like, all I know is what Becky’s business is doing. Yeah. Right. Um, there’s also an [00:14:00] ability to speak more freely, and I’m gonna cite, so when Pam and I worked at, so the owner of the business where Pam and I, uh, worked together, it was interesting.

He came, he articulate, very self-aware, and he, he said to me the reason he wanted a fractional. Was he wanted somebody in the CFO chair who wasn’t a hundred percent dependent upon him for, for their income and therefore would be very open with him, him about what they thought. Right. Wouldn’t be filtering their thinking based on, I have to preserve my employment here.

Um, now I have, that’s only happened to me once, that somebody came out and said that. Um, but I think it’s true. It is easier to be, you know, if you’re not there all day, every day, it’s, you know, [00:15:00] maybe easier to be the agitator sometimes if you think that’s what’s needed. So stay right there with me for a second.

Um, so 10 to $50 million, mostly family run businesses, right? You’ve said it before. Um, sometimes that’s gonna come with my brother-in-law sits as the. Finance person or my, um, anybody. Spouse is the bookkeeper. Spouse is the bookkeeper. And man, if I bring Greg in, or if I bring somebody in in that seat, how much is that gonna disrupt the apple cart?

Right. So how, um, what’s your response? Because it is a sticking point, right? Um, somebody’s in that seat, they’re there because they’re family more than they’re qualified. Yeah. How do you help people through that challenge? Um, you talk about it, right? Ultimately the business owner can do what they want. Yep.

Right? [00:16:00] So if, can you coexist with that person? Yeah. Yeah. I mean, you, you have, I mean, that’s part of, that’s part of the charm of working with entrepreneurs, right? Or one element of the charm of it. Is it sometimes that, you know, gosh, um. Yes. My underqualified son is going to be working in accounting, Craig.

Mm-hmm. That’s just how it is. Right. Um, gotcha. You know, and we can, we can talk about, well here’s how that impacts your organization. Yeah. Right. Are you, you know, if you’re, if you’re willing to accept that we’re gonna have probably one more person on payroll than we would really need to. Right. If you say, that’s just something I want to do, um, we’ll work with that.

And that’s not, um, I think you have to be prepared to be comfortable with some of [00:17:00] those things, to be in a fractional role to be working with these companies. If that’s just intolerable, you say, I need, you know, I can’t tolerate that. Yeah. Then being a fractional probably isn’t a good fit for you, to be honest.

Well, sometimes it’s not even family member. Right. Just they were employee number three. Been here forever. Yeah. We love them. Yeah. Um, you know, all sorts of things, which basically makes ’em family, right. ’cause they’ve been through all the tough times with them. Yeah. I don’t care what happens. I don’t care.

That person will always be in this company. Yeah. Little Johnny, no matter what Johnny’s here, as long as he wants to be here. Right. Yeah. Okay. Like, like got it. Right. Um, and maybe that’s, we’re struggling to, because companies evolve and their needs evolve and maybe it’s, we’re struggling. Like this person really in this company where we are today, they might have had a role that they could execute very well when we were $2 million a year.

But at 20 million a year we’re struggling with it. Right. Um, [00:18:00] and in if it, uh, in different settings, you might just say, that’s just how it is and we gotta evolve. Yeah. Right. But it might be. I get it. This person’s been here since day one and they’re always gonna be a part of the company until they decide they don’t want to be.

Yeah. Um, so back to fraction. Yeah. So there, I think there are some, I think there are some downsides, right? I think there are some trade offs. If you go fractional, um, you as a business owner are gonna compromise on the ability to set priorities, right? I think that’s pretty obvious. Becky can, you know, Becky can, for the list of things that I’m doing for Lakeside, say this one’s the most important.

But there may be days, you know, Becky can’t say, you must set aside that thing for Pam to work on my thing. So she’s gonna lose some immediacy, um, on that. Um, you may have, you may have bandwidth [00:19:00] issues on big projects, right? If I’ve anybody. If you’re dealing with a fractional CFO who has a reasonably full client roster, they’re not going to have, you know, they may have less, um, flexibility to take on a big project than if you had a full time.

It’s sort of e might be easier for them to offload and also may not be a long-term solution. Right? You, you may, uh, look, if we’re, we’re at 30 million today, we’re gonna build this business to, I want to be at a hundred million three years from now. Somewhere in the next three years, you’re probably gonna have to make a full-time CFO hire hire, right?

If you’re really, if you’re really going to get there, right? Um, so you may, you may be, if you achieve your plans, if you achieve your goals, you, you may be guaranteeing yourself at least one [00:20:00] more transition in that role, right? So on that note, I mean, um, from fractional CFO to full-time CFO, uh, and you talk about the commitment that the CFO’s making to you, are there CFOs that have like 50 clients and then CFOs that have like five clients, is it fair to ask that as you graduate through it?

Or are CFOs kind of similar? Where, and I don’t know what the average client load is, what is it? 10, 20, 30? Um, yes, I think there are. Um, there are some that have, I know some that have maybe two or three Right. And tend to be very time intensive with, so they’re spending one or two days a week, 40 hours. Yeah.

They’re spending 40 hours a month. Yeah. Per client, something like that. Um, I know in my case I’ve got six or eight. Yeah. And I’m sort of uh, 10 to 20 hours, right? Yep. Per month across there. I think that’s pretty [00:21:00] normal. Um. If there’s, if it’s somebody who’s sort of catering towards small businesses, they may have more and they’re really kind of doing more bookkeeping to accounting work.

Yeah. They may be calling themselves a CFO, but they’re running payroll and they’re, um, and maybe more sort of accounting execution oriented. So you could run through a three or four different CFOs before you get to a, if you wanted to. Right. You could start off, if you’re a one to 5 million person, go find somebody that serves a lot of clients, can help you get through some of the early stage stuff and then you graduate and continue to move on.

Yeah. Yep. Um, but I think it’s totally fair if you, if you feel like as a business owner, if you say, Hey, this is something I wanna explore. Absolutely. Ask that question. How many other clients are you serving? Right. How many hours a month are you already committed for? Um, don’t, don’t feel shy about that.

Right. That’s fair to [00:22:00] ask. And. Honestly as a service provider, like I don’t want any misunderstanding with regard to expectation. So, you know, I would want to understand if, if Pam’s really needing, feels like she needs 40 to 60 hours a month, I’d much rather understand that than find it on the front end.

Then find that out, you know, three weeks into an engagement when she wants to know, how come I wasn’t there Tuesday, Thursday, and Friday. Yeah. Right. And of course I’m gonna try and work some of, I’m gonna try and make sure that we have that expectation on the front end. Yeah. Right. That we’re aligned.

Would it be normal for somebody to walk in and say, Greg, I’ve got somebody on staff that I feels like is really good, but I don’t think they can get me to an exit. Um, I wanna sell my business in two years. Can you come help us get ready to, to sell? Would that be a normal engagement or was that an outsized engagement as a kind of a different structure than what you would be accustomed to doing?

Um. Are you? So are you. It wouldn’t be unusual [00:23:00] to have someone articulate that as the reason why they’re looking to engage with a fractional CFO. They might say, this is why I need a fractional CFO. I’ve got, you know, they may use different titles, but let’s say I’ve got an accounting team in place, my historical financials, like I have no, I have no worries about the, the quality of the data and all that sort of thing.

We don’t have any sort of forward looking finance function, right? And as I look out and say, Hey, I wanna sell my business three years from now, I need to roadmap that and then execute it, right? That may be their reason, their stated reason to, this is why I am looking for A CFO. It also could be, Hey, I don’t, I’ve already got this team in place.

I don’t really want to change any of that. I just want some sort of, um, I want you to be an, I want an advisor. Yeah. Not necessarily an every month CFO related to [00:24:00] this specific objective of mine. Yep.

Um, so this is, again, keep in mind my biases, right? And the client, the kinds of companies that I’m used to working with. This is within my, within this world. This is my viewpoint. These are my viewpoints of what, what the right fit is or some of the, the ideal attributes of a fractional CFOI, you know, bias acknowledge, I think accounting oriented rather than finance oriented, um, anybody’s.

So you’re really talking about this person should understand both accounting and finance, but it’s a question of where are they grounded? And I think. The organization. I think this person needs to understand the debits and credits in a really detailed way because they may not, not be re, they may not be [00:25:00] executing those things on an every month basis, but they need to be the resource for the organization, right?

When the accounting people inside the organization have debits and credits questions and How should I record this thing? And they can’t say, I don’t really know, you know, I’m, I’m more of a finance person. Uh, I, I was an investment banker, but I don’t really know how to record depreciation expense. Right.

As chat GPT. Yeah. Yeah. Like, so I think, I think for companies in this category, accounting orientation versus I used to be an investment banker, um, is the right way. I think I, this one, I feel I’m adamant about this one. You want somebody who’s, if you decide, you. You want to explore a fractional CFO, you want somebody who’s in that market intentionally.

There are, if you decide, if you decide I want to talk to fractional CFOs, and you start, you, you’ll, you’ll get, you’ll get a [00:26:00] lot of names, right? Doing fractional work is something that is very natural for someone who’s sort of between full-time roles to do, to keep themselves busy, generate a little bit of cash flow, all that sort of thing.

The problem is, let’s presume that they’re really good, right? They’re gonna find an, they’re gonna find a full-time role, like before your need for them is gone, right? You don’t want to engage with a fractional CFO 60 to 90 days later that while they’re looking for full-time roles, right? Or you don’t even, you don’t want one who’s working with you because they’re auditioning for a full-time role with you.

Right. So I think it’s important. Find someone who’s in this market intentionally. This is what they do, this is what they want to do, versus it’s what I’m doing because of the circumstance that I find myself in. I think that’s, it’s a better path to a satisfactory long-term [00:27:00] relationship. Um, somebody who’s been where you are today and where you want to be.

Right? So they, and what I, I’m talking about like generally in a company environment, like if you’re a $20 million a year company today, and you feel like three to five years from now, look, I wanna be at 40 to 50. You want some, like, you want somebody who’s been in that range. You don’t. So somebody who has spent their whole career in billion dollar organizations, they’re not gonna know how your company should look and feel at this stage, right?

Like, what, what’s, what’s the norm? How do you get, they, they don’t know how to get to from 20 to 40. They’ve never been anywhere lo less than a billion dollars of revenue. Right? So somebody who’s been kind of in the neighborhood that you’re in, um, more hands on. You want somebody who’s hands on in orientation versus just a manager, right?

This should be somebody who isn’t afraid of logging into your accounting system. [00:28:00] And, um, somebody who’s used to working with founder CEOs, right? Versus I’m used to working with, you know, just a bunch of MBAs on a management team, right? Because that can be, that’s a be a very different thing. Yeah. Um, for my client base, I, you know, those kind of companies, if they, if they weren’t my clients, I would tell them find somebody who’s experienced around financing and exit transactions.

If you are trying to build a, build something to exit, find somebody who’s been through that before. Um. Yeah, they should be able to give you a list of engagements where they’ve worked themselves out of a job. Right. Either if, if the model works, the business should have, like, there should have been, let’s say business growth to where they needed a full-time CFO.

I helped them find one. I no [00:29:00] longer do work for them, or I do, I have much lower scope engagement or Awesome. We had an ex, you know, we got to the point, we executed the sale of the business. Everybody’s happy. There should be a list of, there are some former clients who are really happy with me. Right. Um, and they should be able to speak about financial topics in a way that a non accountant can understand it.

Right. It’s, it’s super important. I think it’s really important for an a finance person to be able to talk to the organization. About financial concepts in a way that’s comfortable for them and creates understanding for them. If you want your management team to be in tune with your financials and helping drive towards the financial goals that you’re looking for, they need to understand it.

Right? And it, and Frank, I would have a conversation about a finance topic [00:30:00] with William in a different way than I would, you know, knowing his finance background than I would have with the, uh, production manager at a manufacturing company. Right. We may, we may need to be talking about gross margin, right?

But I’m gonna, I’m gonna, that conversation’s gonna have different vocabulary with William than it’s going to have with that production manager. And I think that’s, I think the ability to do that is important. Greg, I’ll comment on that one. That was a blind spot for me. I just got booked. He says he’s not a magician than he is.

I didn’t know the look for that quality when I hired a CFO. It wasn’t on my radar that it would be helpful if the bean counter didn’t talk in their own terms that they spoke in terms that would work across the board, um, across my executive team, across mid-management, and all the way down to somebody on the production floor, I would say for, I would [00:31:00] double down on that quality if I were to look for somebody again.

Um, which I wouldn’t have to fix, but I know to seek that. So I would really, yeah. Thank you for that. Um, here’s kind of what, here’s what you can expect an engagement to look like. Like if you’re thinking about, well, what, what would it be like to be working with a fractional CFO? You shouldn’t have to make any long-term commitments, right?

You just shouldn’t have to. You should be, you can get a month to month engagement. Um, it’s going to, it’s gonna be something like that monthly fee. It’s gonna be something like that, hours per month. There’s gonna be something about, if there’s some big project that you know, Hey, look, if, if, if we’re going to, there’s an m and a, we’re selling the business, that’s gonna require a lot more work.

And so, yes, there’ll be some mechanism where I have to pay you more for that time. And then that last one don’t, so this would not be in, [00:32:00] this would not be in the initial terms of the engagement, but as a business owner, I would encourage ev I would encourage you. So in your mind, so I’ve had a number of clients who ultimately we’ve sold the business and all that sort of thing.

In every case, the business owner ended up, um, either via inclusion, my inclusion in the equity structure, or just giving a transaction bonus. There’s typically. Some sort of financial reward for this person in making that thing happen. Right. And it doesn’t have to be all worked out in the agreement. It’s, you certainly don’t have to talk about it upfront, right.

It’s probably something, Hey, Ricardo, you and I have been working together for three years and you know, you become comfortable that, you know, I’m now not just some consultant, but I’m a part of your team. Right? And so you start thinking about me that way, but, um, that typically would come later. Um, [00:33:00] so William wanted me to talk about some success stories.

I also threw in some failure stories by the, well, by the way, on the next slide. Um, so, and these just some things that have gone well, right? Um, you know, a number of these we ended up selling. Yeah. That EdTech company where I was there from start, they, they were able to, with a fractional CFO get from.

Inception of the company to selling for over $60 million. Uh, so can you pause there for a second? Um, so inception of company to $60 million. So why did they bring you in at inception? Uh, inception because they were, they started as a business unit, a, uh, $2 million a year business unit inside of another company that had to be spun out.

So there was a transaction that needed to happen. And so they weren’t starting from Yep. No clients, no employees. Yeah. Um, there were multiple clients who, um, [00:34:00] you know, have successfully gone through, sold their business, monetized for the ownership. Um, my point of bringing this up is these are things like, you can get to these things.

Don’t, I don’t want you to think that you can’t get there without, uh, that a fractional can’t get you there. Right. Um, so distributor who then, this one was a little bit of distress, right? So company who, their, their reason for contacting me, their big problem was our existing, our existing, our bank said we gotta be out in 120 days, right?

They’re just for whatever, like, uh, now the good news is when I talk about that breadth of perspective, I have a lot of clients who deal with a lot of banks, right? So, you know, any fractional CFO would, right? Like, we’re not starting from zero. I got some people I can talk to [00:35:00] and maybe we can make something happen there.

Um, the fourth one for me was super interesting. So helping a client understand the business they’re in. So I have a client who’s a buy here pay here auto dealer. Um, for those of you who don’t know what that is, that’s a used car dealer who. Like they keep the loans rather than selling them off. So that client thought of himself as an auto dealer.

In reality, he’s a finance company. He happens to sell vehicles to generate consumer receivables. Right? His answer to, so he was struggling financially, his answer was always, I just need to sell more cars. Like, wait a minute. The, the problem is you’re making 48 month loans to your clients and you’re borrowing money with an 18 month term.[00:36:00]

So like you have, your source of capital isn’t matched to, to the loans you’re making. Therefore, of course, like you’re all thinking, of course he’s gonna be upside down from a cash point of view. If he. Borrowing money on 18 month terms and loaning it out on 48. Right. He didn’t under, like, he was engaged in this business, had a multimillion dollar portfolio loans and didn’t understand that.

Right. He was really good at selling cars, um, which wasn’t a good thing. Well, which every, every time he sold a car, like, I was like, you gotta stop selling cars no more until we fix this. Right. We gotta have a different source of capital. Yeah. But it happens. Like he was, and his story isn’t like it happens.

Right. He had a used car dealership, he was really good at selling cars and he thought, well, why should I let these other guys make money on the loans? Yeah. I’ll start keeping those loans. Right. Well, you [00:37:00] just, you just changed the business you’re in. Yeah. Right. Um, he wasn’t thinking about it as a lender.

Uh, he just thought, why should I let somebody else collect the 20% interest on this note? Um, that’s so, that’s so standard, right? I mean, so many people, they start a business, they’re good at what they do. Uh, they don’t necessarily understand the financial aspects of what they do. Um, and so they go from being an excellent, um, craftsman to now running a business and the finances as it grows, it becomes problematic because they don’t understand the financial aspects of the business.

And that’s when they need to step in and say, I’ve outgrown my ability to manage the finances. I need your help. Yeah. When, when every look, every, it’s almost universally true. So if I meet a client who’s struggling financially, let’s say they feel like they need, they need their financial performance to be better.

Like they’re all trying [00:38:00] to save money, like they’re scrutinizing office supply spend to the nth degree, that’s how they’re trying to sale, solve their $3 million a year problem. The, you know, less staples, less staples. I don’t like, I don’t think your $3 million a year problems in office supplies. Right. It really, and so let’s, let’s, uh, how about you?

We need you to focus on these five things, right? First of all, your problems probably in gross margin somewhere, right? But you need to trust that the organization isn’t gonna be wasteful on this. Like, we need you focusing on fixing gross margin. Yes. Right? Um, and gross profit because we need a certain revenue level, obviously.

Yep. Um, and then, you know, uh, I’ll say with a distri, you know, another case where helping, no, helping a business owner understand their [00:39:00] profitability and working capital needs by product line, right? This is a distributor who’s selling things. Um. A variety of things through a variety of channels. Some they get paid upfront, some they get paid over a long period of time.

All this. And, and they didn’t, and they were doing well. So the, the success of the business sort of was enabling them to not pay atten, pay a lot of attention to how much working capital certain channels were chewing up. Right? Like when you’re paying half the, when you’re paying the com, when you sign a 36 month deal, it pays monthly over 36 months.

But on that type of deal, you’re paying your sales organization upfront on the commission for half the deal. Um, you’re chewing up working capital. Right. And they didn’t like, it just wasn’t, the cash flows from the different lines of business weren’t clear to them. Yep.[00:40:00]

Their engagements that don’t work. Right. I’ve had. Um, you know, these are each descriptions of former clients, right? But there are some things that you can’t fix. Like financials are, financials are wrong. What does that mean? You know, um, I had a client who just like we, we found ourselves always in discussion.

He would say, the financials are wrong. I’d say, tell me how, William, tell me what, what do you mean by that? He said, I know we’re making money, but the financials always show that we’re losing money. I like, you know, we like that business owner. And I, were just never able to get past that, that discussion and right around, I said, look, I don’t like, we have a disagreement on this.

Clearly you need a different voice. Like, I can’t, you know, and it may be my failure in communication, [00:41:00] whatever it is, but. I’m not able to get you what you need, which is an understanding of this. And I don’t have a different way to explain it than what I, you know, I’ve tried three or four different ways.

We’re not getting there. Yeah. Um, do you separate your, did you exit that relationship yourself or do you rely on them to exit that relationship? Or does it kind of depend on how it goes? Um, um, I found myself firing people before. Yeah. Yeah. I’ll tell, well, we’ll, we’ll do for each of these. So first one I fired myself.

Um, can we say the other way you fired them right. Rather than you fired them. Okay. Yeah. I fired them. Yeah, if you want. Yeah. Always feels good. Um, second one, I’m, I’m mid struggle. I’m trying to fire myself. No, it’s, it’s, it’s, it’s a client who fundamentally believes that I need to be able to train. [00:42:00] They’re accounting staff that has no, um, no basic level understanding of accounting.

Yeah. Right. And I can’t, uh, I just, like, I don’t, I can’t deliver, you know, two years worth of accounting education. I just can’t do it. Yeah. Right. You can. It’s not what you’re hired to do. No. Right. Yeah. Um, industry is permanently impaired. Right. I had a client, so A CFO can’t fix this. Like, I had a client whose business was providing SER is providing services tomo on premise services to automotive dealers.

Their revenue is very much tied to inventory levels. So they’re doing some work on, like they’re doing work on the vehicles on a lot. Well, COVID that went to near zero and COVID taught auto, auto dealers carry far less inventory than they used to. Right. CFO can’t fix that. And if you [00:43:00] still need, so he’s, that business still requires a human being to go to a lot, but they can’t, the number of available cars to service is far lower than it used to be.

You CFO can’t fix that. Right. So it’s an imp it’s just an impaired business. This isn’t just, you don’t understand it. It is permanently impaired. Um, sometimes you get, sometimes you get a business and so on that one, i, I exited, I said, look, you need to reduce cost level and I need to be part of it. Wow.

Right. Um, lots of times there are businesses where, and there are multiple here for this fourth one, um, sometimes there just isn’t a willingness to make change. Right. You like, look, we understand Seth, we understand the situation with the business. All that sort of like, you know, this is what needs to happen.

If. Yeah, if the business owner is either unwilling to make the [00:44:00] change or I’m just unable to create the understanding that’s necessary for Seth to be willing to make, and it could just be my failure in communication, right? But if it’s not working, then, you know, there’s no reason for me to continue to extract money everyone, like, and not make Seth’s situation better.

Um, and then lastly, I’ll say founders, it it, it never founder CEOs, I’ll say, without commitment. And, and what I mean by that, it without commitment to make things better where you find yourself always, like we’re always last minute scrambling to pull together financial statements for a board meeting because you can’t get the info.

You know, as a fractional CFO, I can’t get the information that I need in a, on a regular basis because sometimes like, Hey Becky, I need you to explain this transaction to me so that I know how to record it, right? Because. I’m not there every day. You sent you wired $50,000 to somebody. I don’t know what it [00:45:00] was.

Right? Until you answer that question, I don’t know what to do with it. Right. And so sometime, you know, sometimes, and this isn’t Becky, by the way. Okay. She’s very good about that. I’m aware. But sometimes that business owner, it’ll be the night before the board meeting, the business owner is ready to sit and talk about that, right?

And now we’re scra now, now we’re scrambling to get the financials done and like, and we just find ourselves in this repetitive loop. Um, doesn’t work, right? You know, it, it’s a failure. It’s somehow a failure to establish the right relationship, right? My fault, their fault, whatever. It’s, yep. So, um, we hire you, you start next month.

Um, our expectation should be you’re coming in for, um, leadership team meetings on a monthly basis. Um, is that correct? I mean, are you part of leadership? I mean, um, how often are you coming into the office? [00:46:00] Um, how are we getting that level of engagement from you? Are you fully remote? Um, how does that work?

It varies client by client. Yep. Some, um, some, I’m very much, um, very much part of the management team. Like with Becky’s company at Lakeside in their, in the, the weekly leadership team meeting, I’m there. Right. Physically, virtually, um, mix, typically virtually, but it’s a mix. Yeah. Um, there are clients who don’t integrate me as fully into the management team, and that’s okay.

Right. Where like, maybe I’m not a part of the weekly, like I have one that once I attend once, once per month, they have weekly leadership team meetings. They have one that’s finance oriented that they bring me into. Um, so they tend to do their le their weekly, their monthly rhythm is a certain top, a certain subject area every week, [00:47:00] right.

Operations, marketing, finance. Yeah. So I, I’m not showing up for the, for the operations centric weekly meeting. Yep. Right. It’s not a good, not a good use of their money or my, you know, my time. Yep. Um, there are clients who, um, where I’m re, where I’m really an advisor to the owner more than a member of the management team.

Sometimes that’s what the owner wants. Um, and so, um, again, it it’s all kind of depends and, and there are some clients where the, the relationship is virtual. Their business isn’t here or their business is virtual or, um, but typically, you know, I, I want to be in the office. On a, on some sort of regular basis.

That’s how you establish relationships with people. Yeah. Right. And being able to be together and, um, [00:48:00] once in a while and give somebody crap about the funny shoes they’re wearing. Um, you don’t get to do that on Zoom. Yeah. Um, Greg, I need you to come in and do X, Y, Z and then six months later it turns out that we have a special project or we have an opportunity to make an acquisition, or we have an opportunity to do X, Y, Z.

And so the scope of engagement needs to change from what it previously was. We need your help fill in this void for us. So that’s a fairly standard response. And you change the scope of the engagement to make that acquisition and then you scale back down. Yeah. So, and it’s part of, it’s part of why, so I mentioned on an earlier slide, you should be able to get a month by month, a month to month engagement with somebody.

And it’s part of why I want that as a service provider too, rather than. Trying to define, okay, here’s a six month thing, and like, it makes it real easy. So when, um, you know, when Seth says, Hey, I want you to start working on this thing. Everything’s month to month, I can say, that’s great. I’d love [00:49:00] to do that for you.

That one’s out of scope. Like, are you cool if I bill you, you know, on an hourly basis for the extra time on this? Right. Or if it’s something I feel like I could scope, hey, 5,000 bucks for that. Are you good with that? Right. Um, but it, it, I, as a service provider, I like the month to month because it, the doors always open to have those conversations if you feel like you need to.

So, and the client can as well, like, Greg, I don’t, I don’t understand why we’re paying you $5,000 a month. Yeah, right. How much time are you spending here? Um, Greg, my bank told me I should call you because, um, I’m not getting the information that I need. Um, I’m supposed to meet with them tomorrow. Um, can you get it done for me?

Um, expectation for helping them start to get things in order, right? Obviously it’s not tomorrow. Um, scope, how long does it take you to come in and plug in and start to deliver the value they need to achieve the things they [00:50:00] want to do? And I know it depends. Yeah. Um, but is it a month? Is it three months before you can start to get ’em on some rhythmatic approach to handling their finances in a more, uh, structured manner?

I’d say between one and three. Something that I often, and I’m trying to remember if I did this for both Becky and Pam, I know I did at TCG, I don’t remember at Lakeside. Um, something I like to do is, is as a part of that first, typically first, let’s say 30 to 45 days is I’m doing the work, but at the end of it, deliver an assessment of some sort and say, here, you know, here’s some, like, here’s what I’ve been doing for the first 30 to 45 days.

Here’s some observations, right? Here’s some, you know. Uh, here’s some suggestions. Here’s my perspective. Here’s what I think we should prioritize working on over the next 30 to 60 days. Um, but you should, you should be able to as the, I think the business owner, [00:51:00] CEO should feel progress within 60 days. If they don’t, something’s wrong.

Um, I can’t remember. Do you have more slides? I do. Okay. I have one more. Um, so here’s what I would suggest if any of you, so I’ll start. This is not a Greg Brown advertisement. I don’t have available time to take on another client, so we’ll get that outta the way. Um, this whole thing, um, if you feel, if you think, if you find yourself thinking, Hey, I think I might need one of these fractional CFO types, here’s what I would do.

Um, ask other people who have visibility of your financials what they think. Right. Your banker would have an opinion about this. Your CPA probably knows if you have a business with some investors in it, ask them what they think, right? You might have some business advice. Like what do you think? Um, the good news is like they’ll also probably have interaction with others, right?

To be able to [00:52:00] say, so if they say yes, they’ll probably say, and I have two, you know, here are a couple of names, right? I have other clients who’ve used these people and they seem to be happy. Um, if you go down this path, talk to multiple candidates. Don’t the relationship’s super important. You can find a lot of people who have the technical skills.

Just the relationship matters a lot, right? You need somebody who, um, they gotta pass the cringe test on your phone, right? When they, you can’t be like, God, I hate talking to that guy. You know? Um, so it’s gotta be, it’s gotta be somebody that you feel comfortable with. Um. So talk to multiple clients and ultimately it’s gotta be somebody who, it’s super intangible, just somehow makes you feel more at ease.

Right? Um, you, you feel like, Hey look, I’m gonna feel a little more serenity having that person as a part of my organization. Or at least I feel like I’m gonna get that versus just [00:53:00] sort of this, yeah. I don’t know, whatever. Like somehow that, that person should be bringing you some calm. Yeah. Yeah. Makes sense.

That serves my last slide. I thought so. Um, any questions? If not, I would just start peppering him with questions myself. So, Joan, I’ll let you go. FEMAs first. Sorry, Gerald, for our global audience that’s dialed in via live stream, I was gonna repeat the Yeah. Okay. Rephrase the question. Um, so for people, for service providers that, um, a frac or a bookkeeper or CPA firm that all of a sudden says they’re expanding into fractional CFO work.

We think you need our services. How would you differentiate yourself from that type of new engagement? So here, here’s, um,

I had a CPA firm who wanted me to come, me and my little business to become a part of their business. And that wasn’t interesting to me [00:54:00] because like, I don’t, um, not every one of my, if, if I were part of that CPA firm, every one of my clients for any audit or tax need they had, I’d be like, well, you should talk to our firm.

Right? And that same CPA firm who’s now offering, um, who’s now offering fractional CFO services probably is also offering wealth management and some other stuff. Right? And I, I think that, um, separation of those things so that there’s. The flexibility for your CFO to say, you know, the right fit, the right fit for you from a tax advisory point of view or what have you, is really X.

So I, for example, I have a CPA firm that probably half of my clients use, but it’s not a hundred percent because they’re not the right fit for a hundred percent of my clients. For, sorry. For a global audience again. Does geography [00:55:00] matter? Um, or can you serve people nationally? Yep. Um, so my clients tend to be Carolinas based.

The, um, those outside the Carolinas where they’ve had success, it’s typically been, you know, that’s coming because there’s someone in that firm who I know, right? It might be, I used to work with this person I used, but there’s some relationship, right. Other than that, they’re Carolinas face. You’re right Gerald.

You know, there is. Um, if I started doing remote work for somebody in Kansas City, I don’t know local bankers, I don’t know local CPAs, I don’t, um, my, I think my ability to be useful to them is somewhat impaired because of that. Um, there are national firms, right? So there are sort of national platforms where people, individuals [00:56:00] who, Hey, I wanna start doing some fractional CFO work.

You can sort of affiliate with a national platform that finds engagements for you, right? So there are, those do exist. Um, personal opinion, uh, I, I’m just gaining, I don’t think there’s anybody in the room who’s affiliated with one of those nationally or globally. Audience might be globally, there might be somebody on, yeah.

Okay. So, um, again, my bias is I’m doing this on my own and I’m doing it on my own for a reason, but. So think about if you, if Gerald, if you were gonna wake up tomorrow and decide you wanna do fractional CFO work, you could either do it on your own or you could do it as a part of a national platform and give 30 to 40% of your revenue to that platform provider, right?

And just show up and do the work. Um, if you had, if you were talented and had the ability to source your own clients, no way you’d go with that platform, right? [00:57:00] So I think if you, personal opinion, the folks I’ve run into from the na, from the sort of big broad platforms, um, I, if I were a business owner, I’d be hiring somebody who was doing it independently.

’cause for that, I, I think, I think it’s a better bet to get the person I want. Craig, um, question Ricardo. No. Um, so I keep going back to, uh, the existing finance team, right? Like I keep going back to the son-in-law or whatever. Um, so progression, they typically, first step’s gonna be they’ve outgrown their ability to do their own bookkeeping.

Yeah. Um, so they bring in a bookkeeper and they see they’re a part-time or a full-time bookkeeper, and then they’ve got a controller and then, and then it’s the CFO after the controller and they’ve got all those folks on the team and you’re basically part-time managing [00:58:00] them and being the direct link to the business owner.

Is that where we are? Not, not always. So I’ll give you, I’ll give you the path for one of my current clients. Yep. By the way, they’re lovely people. The name is Akala, they’re looking for a controller. So if anybody in the global audience would, uh, like to put their hat in the ring for that role, um, I’d.

Welcome talking to you about that. Yeah. The, so I met, when I met them, they had no full-time employees who would say I’m an accountant. They had administrative people performing accounting tasks, right? Because they’re, they’re billing clients and they’re paying bills and whatever, but nobody would like, nobody there would say, and they were, you know, I don’t know, eight, $10 million a year revenue and all that sort of thing.

So we, um, kinda the progression from that was somebody who worked for me, uh, accounting manager type, started doing some part-time work for them. They needed some, a little more professional [00:59:00] accounting resource. Um, so they were there and I was there as their fractional CFO, right. Trying to help, um, orchestrate some of this.

We made, we made a full-time hire in accounting about a year ago. We’re in the process of, so it’s full-time internal accounting person. Me as the fractional CFO, there’s still some admin people doing accounting tasks. We are, hi. We’re now hiring a controller. Um, decided to put that person in place and then build out the accounting team underneath that controller.

Um, but we’re, you know, that business is doing, you know, $35 million a year revenue, um, on a CFO one, one full-time accounting resource and some admin people doing things like posting payables. Right. But there there’re

I feel compelled to add. [01:00:00] It depends, right? It’s when, as a business owner, when you’re thinking about it, so if Becky, let’s say that Seth and Becky have businesses that have exactly the same revenue level, the nature of their businesses might be such that the accounting needs are wildly different. It Seth’s business.

Is online commerce selling widgets at a dollar 99 a piece. He’s, he’s having tens of thousands of transactions, right? Versus Becky’s business that’s selling thing, you know, selling software licenses at an average of $250,000 a piece, relatively few transactions. It’s really, the accounting work is about number of transactions, not about dollar level.

So when you hear, if you’re talking with folks, you know, or you hear somebody like me saying something like, well, for a $30 million review business, this is, it depends, right? It depends what industry you’re in. Because, [01:01:00] you know, a $30 million e-commerce seller of relatively low price goods is a whole lot of accounting work, right?

Versus somebody who’s selling million dollar pieces of equipment. Yeah. So, um, thanks so much, Greg. Um, surprisingly we ran outta time. Um, or we’re up against time or however you wanna say it. Um, so now you get to have a drink. Now I do. Um, I feel a little selfish. I was up here having a drink. That’s all right.

Yeah. But, um, anyways, thanks everybody for coming out. I mean, again, remember next month, uh, Andrew Asher, uh, lucid Bots. Uh, we’ll be here to talk about robotics and AI and what’s happening in that space and how it’s moving into impact businesses of all kinds. So, um, please stick around. Um, have a drink, chat with your Greg for a few minutes.

Um, and thanks so much again for coming out everybody. Thanks Wayne.