I think the philosophy behind scaling boils down to really two
things. Number one, do you have a good
business model? And by that I mean, do you
create value for someone, right? If you're serving food, you
know, let's imagine you're running a restaurant.
You read value for someone by making them happy because they
get a great meal at your restaurant.
If you make a great shirt, it needs to fit your customer.
If you make software, your customer needs to like using
your software to make their life easier.
If you make a video game, the video games got to be fun.
So that's number one. Your product needs to create
value for someone in the ecosystem, right?
It needs for whoever your customers that that's the first
thing. If you don't create value, the
bigger you get, the worse off you are making everyone else in
the world. And #2 is that your internal
operations need to be designed to work well as you get bigger.
Lots of companies have a great product or great service, but
they have not set themselves up internally to scale beyond just
being a small company. So you really have to think
about how do I engineer the inside of my company, the way
people work, the systems they use, the technology, the data,
so that we can continue to grow. Before we dive back into today's
conversation, I want to share something important.
This episode includes a pay partnership with Better Help, a
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yourself. We are live, ladies and
gentlemen, we once again welcome to the Kingdom's podcast and
Diary of a CFO. And today I've got with me a
cheapo VIP fights in Autofila Delfield United States of
America Mac Walker Nick of Eagle Rock 10.
And we're not. Sure, because my whole name yet
but. Where the action begins The
referee. The Octagon is Donald Trump.
Are you ready? I'm ready.
Well, let's, let's, let's give you your flowers.
So ladies and gentlemen, Nick Jade is not just a typical
finance guest. He is a Habit MBA, a former
McKinsey consultant, a former private equity investor, a turn
around CEO and CFO who has killed multiple companies beyond
$100 million. He has rebuilt broken
businesses, his lifted profits, you know from 10% to 35%.
He has transformed product culture, revenue engines and
decision systems with surgical precision.
Today, Elites Eagle Rock CFO Services helping founders in the
5 to 50 million revenue range run elite level finance systems
without the Fortune 500 price tag.
He describes himself as someone who likes hard problems and
clears answers. This conversation is with
founders, operators and leaders who want sharper thinking,
stronger margins and better decisions.
Ladies and gentlemen, once again welcome Nick Jane to the
Kingdom's pocket. How are you, Sir?
I'm doing great and thank you so much for the very kind and
illustrious introduction. Wow, wow, wow.
They call me the king of interest.
You're you're right to global top 2% in the world for a
reason. And of course, yeah, it's good
to have the best of the best. You know, one, yes.
Described me as a modern day business philosopher.
So as a modern day business philosopher, I have that
responsibility of gathering the best and the brightest minds of
my time, of my era, you know, documents.
The third leadership. And of course, you know, in
audience we say if it was not documented, it was not done.
So don't hate the player, I hate the game.
Let's tell your origin story. You actually trained in the
mathematics and physics. And of course, you earned an MBA
from Harvard and entered private equity and consulted.
What Ellie believed about decision making shapes how you
applied as a CFO and as ACEO. Your background is actually
mathematics and physics, right? And of course, you've got that
MBA. You had to have it.
And of course, you got into private equity, you got into
consulting. But what was it early on that
made you make that decision to get into the world of finance?
And of course, like what philosophies do you have that
still guide your decision making today?
Sure. So it's, look, even as a child,
I really cared about kind of two things, understanding how things
worked #1 and #2 quantifying them, right?
I was the guy who, you know, when you're walking along the
sidewalk, counting the number of breaks in the sidewalk to figure
out, hey, to each one we're walking 10 meters.
Each one is half a meter apart. That means that they are 20
tiles in the sidewalk. I always wanted to understand
how fast balls dropped, why they bounced, How does the TV work
right. I disassembled my first TV when
I was 12 years old. So that worked and continued on
in college where as you met, where as you mentioned, I
studied math and physics. And the cool thing is I
realized, you know, sometime in college that companies are in
some ways like big machines, OK, They have rules that make them
work. They need to like, not just from
the financial side, but there's ways that they work internally
in terms of culture. And these things.
If you can think of them as a system or machine, you can
understand how they work well and how to create a lot of
value. And that's what I did, you know,
trained in early my career in private equity.
Private equity firms are really good at generally making the
companies they own more valuable through better operations,
better expansion, helping them grow.
And that's really what I've done throughout my career.
Think of companies as machines or as things that fall, and
maybe not machines, but things that have rules that have laws
that they follow. And if you're good at
understanding those laws, then you're really good at making the
the machine better, the company better.
And that can be true. I run a shoe company and a
trucking company and a software company, and each has different
rules to the game. But at the end of the day, they
still all follow certain rules and principles that if you're
good at figuring them out, you can do a great job at improving
those companies. So you were actually served as a
turn around CFO and the CEO across trucking software
e-commerce and that includes businesses that have scaled past
the $100 million Mac. So what the most found is
misunderstand about the philosophy behind scaling.
Sure. I think the philosophy behind
scaling boils down to really two things.
Number one, do you have a good business model?
And by that I mean, do you create value for someone, right.
If you're serving food, you know, let's imagine you're
running a restaurant. You read value for someone by
making them happy because they get a great meal at your
restaurant. If you make a great shirt, it
needs to fit your customer. If you make software, your
customer needs to like using your software to make their life
easier. If you make a video game, the
video games got to be fun. So that's number one.
Your product needs to create value for someone in the
ecosystem, right? It needs for whoever your
customers that that's the first thing.
If you don't create value, the bigger you get, the worse off
you are making everyone else in the world.
And #2 is that your internal operations need to be designed
to work well as you get bigger. Lots of companies have a great
product or great service, but they have not set themselves up
internally to scale beyond just being a small company.
So you really have to think about how do I engineer the
inside of my company, the way people work, the systems they
use, the technology, the data, so that we can continue to grow.
Growth hacking right there. So you actually spent years in
private equity and of course, institutional investing.
What do professional investors see inside businesses that
founders often ignore until it's too late?
I think professional investors, so I think the biggest
difference between founders and professional investors is
founders tend to have a great vision, right?
They're the ones who built the company, have often made them,
you know, very, very successful companies, professional.
But the founders have really only been in that one company
for most of their career. They haven't looked around and
seen in what it's like other companies are like and what good
looks like. They may have a great product
team, but they don't know what great looks like on a finance
team or HR or marketing, right? They're just used to seeing what
they're seeing. Professional investors on the
other hand, have looked across hundreds or thousands of
companies and they can say, look, McDonald's may be great at
marketing, but Taco Bell may be great at social media and
Wendy's may be great at Square Burgers, right?
So you need to, what professional investors do really
well is taking the best stuff from different circumstances
that they've seen and then try and implement the best of all of
those things at one company. So it's not just good product,
but good it can be, has to be good at marketing, good at
running HR, good at running finance, good at running
manufacturing, etcetera. Wow, that actually feels like
the work we did, we do in audit, you know, you are auditing
different entities and of course you you're getting the knowledge
across the board and that actually puts you in a position
where and you understand how things operate across different
ecosystems, different industries, different entities,
right. And you're able to provide well
informed advisory to the operators, to the management, to
the leadership of, you know, businesses.
But you know, many founders actually think that they
understand cash flows because they review the reports.
And there's something I'm fond of seeing revenues, vanity
profits of sanity of cash is king.
Cash is reality. So in your view, what is the
difference between looking at the numbers and actually
possessing financial intelligence?
Between looking at the numbers and doing what?
Sorry. And having financial
intelligence. Sure.
So look, finance, like understanding finance and
business is a skill and an art or a science, no different than
let's say, painting or being a doctor of physics.
It's a skill, right? Everyone knows how to add and
subtract. You learned that in high school.
But not everyone can master understanding what the numbers
mean, right? Everyone knows you know what
blood looks like, but a doctor understands how to save your
life in a way that at least I don't, right.
So being good at finance and thinking about business
optimization is a learned skill. And it's a practice skill.
You can learn a little bit from books, you can learn a little
bit from experience. You can do learn it a little bit
from doing, but it is a skill and a lot of businesses often
don't, they haven't hired someone who has that skill.
And The funny thing is they don't know what good looks like,
right? Because they haven't seen like a
world class CFO the way they, or world class COO or see chief
human resource officer the way it would run at a billion dollar
company, because that's often not where they started.
And you often don't get to experience that working with
those people till you're, you know, very, very late in your
career. And so that's why it's really
important for a kind of smaller and mid sized companies to think
about the fact that no matter how smart I am, number one, I
can't do it all and #2 I may not have an area of expertise in
finance or marketing or whatever it is.
And so I should hire someone who does?
Interested and, you know, incomes the fractional CFOs.
So you often speak about small businesses blind blind on cash
flow. Why does this happen even in
companies generating millions of revenue?
And what are the early one in science leaders should never
ignore? Sure.
So I think there's two or three things that are different that
people miss about cash flows #1 is that profit is not
necessarily equal to cash flow. And this is particularly
important in working capital businesses like retailers or
manufacturers or shippers. That's number one.
Number two is there are aspects of cash flow that are sorry and
#2 is you have to think about reinvesting in your business and
maintaining your business. So a lot of businesses, they
require you to keep putting money into them to repair, let's
say, your factory or to buy more inventory.
And a lot of companies don't think about that.
But hey, even though I'm profitable, I got to take a
large portion of those profits and reinvested in the business.
That's typically called your reinvestment rate.
And #3 you have to think about, I started this business by
taking money from somewhere. It could have been for my
savings. It could have been from venture
capital, it could have been from banks.
And at some point, I got to pay those guys back.
And that's going to take away from my cash flows too.
So how do I think about that as well?
Well, so ideally, you know, no decision that a company's made
emotionally, whether you're hiring someone, whether you're
firing someone, whether you're selling a customer, those
decisions, nothing should be made emotionally, right?
Emotions are for your personal life, ideally not your
professional life, because the moment you start making
emotions, decisions emotionally, you're not necessarily doing the
right thing. You're reacting quickly.
So I think the biggest thing that founders or CE OS or
executives, it doesn't have, it can be really any titles, it can
be junior people as well. Is think about number one is why
is this? Why is what I'm doing good for
my organization? Just ask yourself this.
I actually have a little piece of paper on my computer that
says, is this good for my organization?
Number 2 is think about the risks of the decision you're
making. And some risks are OK, some
risks are not. And #3 ask yourself, did I
actually do any quantification? Did I spend 30 seconds doing
some math here? Because if you didn't spend 30
seconds doing some math, you're probably making an emotional
judgement. And a very simple example is if
you're hiring someone and you're going to pay them $50,000 a
year, ask yourself, they're going to cost me $50,000 a year.
Are they going to make me $55,000 a year more in profit?
If the answer is no, it's a bad decision.
And you just have to spend that 30 seconds doing very, very
simple math sometimes to make sure that you're thinking about
this rigorously and not emotionally.
Interesting. The numbers always have to add
up. So fractional CFO versus full
time CFO. You're actually frequently asked
when do you hire a fractional CFO or what time is a full time
CFO resourceful for a company? What practical thresholds do you
use to advise founders when making the school?
Sure. So I'll start by giving a
preface and then I'll answer your question directly.
So a lot of people use the title CFO to mean different things.
And a lot of companies as CFO's just the person who's managing
your accounting and cash flows. And that is not usually a ACFO
that's a treasure or controller, even if they he or she has the
title of Chief Financial Officer.
A good CFO does 4 things. They handle, they manage
accounting, they manage cash, that's called treasury.
They manage FP and a financial planning analysis, which is
thinking about the future. And #4 they manage the capital
structure, re business, debt, equity financing, etcetera.
So good CFO needs to be able to do all of those four things.
And I think that a business is, if they're ready to hire a full
time CFO when two things are true, number one, they actually
need all four of those aspects to run their business.
For example, if they're thinking about debt or equity or if
they're thinking about future forecasting, they need acfo #2
is when they're willing to hire somebody who's really good.
So the problem in the CFO market is you have a lot of people that
you can kind of get cheaply, but they're really controllers and
treasurers and they're not true chief financial officers.
True chief financial officers tend to be very, very expensive
people because they may cost you a half $1,000,000, but they're
going to generate $510,000,000 of profit for you and they know
that, so they charge more money. So I think the the second thing
is when you are, when you are ready to hire CFO, don't get
some, don't full time CFO, don't go cheap.
Get somebody really good who understands all four aspects of
their job and can create value in all four aspects.
If you're not, you're basically paying, you know, money for a
very expensive accountant. And accountants are great.
That's a part of that's part of running businesses, but it's not
sufficient to be ACFO. It's only one out of four things
that a great full time CFO needs to be able to do.
Interesting. So you actually talk about the
Fortune 500 pay books for $10 million companies.
So you suggest that smaller companies kind of don't be
company operates and systems. Which systems actually transfer
well and which ones become bureaucratic?
Sure. I think the systems that
transfer well number one are many of the same technology.
So needing ACRM, for example, for your sales and marketing
team, needing an ERP for your or start an accounting system for
your accounting, like using enterprise grade technologies,
which are now very affordable for small businesses.
You can get them for, you know, 10 to $20.00 a month for all
these systems nowadays for. So that's number one, make sure
you get a lot, a lot of the same technologies because they're
very, very affordable for really any business that's making more
than $1,000,000 revenue a year #2 is data systems, right?
Any good business needs data systems.
You can use whatever fancy word you want, data lakes, data
warehouses, CSV files, but you need some sort of system to
store the data of your organization in a way that other
people around your organization can access it.
Think about it, analyze it, and look at, hey, what happened and
what could happen. And then the third system that I
think a lot of small businesses can copy is how to manage people
effectively. This includes the hiring, the
promotion, the management and the termination of employees.
I think that there's right ways to do it.
These are well researched ways that you can read from
publications, from PhDs. You can see them in the internal
memos that have been leaked of like large companies.
But there is a right way to manage human capital.
And you don't have to reinvent how to do hiring right?
Like a funny way to, you know, I'll give a, a practical
example. The wrong way to do hiring, and
this has been known for about 30 or 40 years now, is to interview
someone and just ask them. Tell me about your resume.
Tell me about your five year goals.
That has 0 predictive value. There's no value to doing that
interview. You wait wasted half an hour of
the interview each time and 1/2 an hour of your time.
The right way instead is to ask that give them a technical quiz
number one on their the subject matter of their job.
So you know, for an accountant, ask them accounting questions
and make rank them based on the actual technical skills they
show. And #2 ask them to solve a real
problem. And that can be, it's called a
case study method. So you ask them to solve a real
problem relevant to their job in real time in front of you or as
a piece of homework. And that shows a level of
critical thinking and ingenuity that the typical tell me about
your, you know, the last 20 years, your resume and why you
studied English or math or accounting doesn't do at all.
And yet most businesses still do what's called the unstructured
fit interview, even though it's not actually predictive at all.
And this has been known for 40 years.
It's, it's, it's really crazy how recruitment methods differ
across board, right? But you definitely need to test
the skill set. But that there is a philosophy I
have on this podcast. It's called mindset skill set,
tool set. That is when you're hiring
people, when you're collaborating people, you need
to find a way to evaluate their mindsets, then the skill set and
of course the tool set. I'd like for you to speak to
that framework. That is the mindset, the skill
set, tool set framework. In the course of hiring.
Yeah, I like that I'm, you know, much more about just, I think,
mindset. Most people, you know who show
up to work tend to be reasonably positive human beings, otherwise
they wouldn't have survived in the real world.
So a lot of, you know, my assessment when I hire people
is, do you have the technical skill set #1 and do you have the
willingness to solve and ability to solve novel problems?
Because every problem you encounter, almost every problem
you encounter in life is novel. It's new and you need to have to
figure out how to go solve it yourself without your boss
needing to tell you how to do it every single day.
Yeah, very important. We need people, critical
thinking skills and problem solving skills.
You actually have so much experience and in terms of the
technology it helps with decision making.
I has actually come to stay. So before we let you go, I'd
like for you to touch on what you think AI is going to
influence in terms of the business landscape in the shorts
to medium term. Sure.
So AI is here to stay. And there's I think there's
three types of users, OK, Number one are people who are using it
primarily as a chatbot and there's a research tool.
So tell me about Pokémon or tell me about the oil industry,
Nigeria. So people use it as a research
tool and primarily as a chat. But that's level 1.
Level 2 are people who are using AI tools to do work.
So you let's say take a general purpose AI tool like Claude Code
or something like that and use it to do work for you, write
documents, build models, send emails, etcetera.
That's kind of level 2 And Level 3 are people who are building
agents that autonomously work without the human interacting
and being in the loop at all or very minimally in the loop.
So the humans not chatting with the robot, the robot is out
there doing things people level 1 is not so useful anymore.
Everyone can pull up chat sheet to your Gemini or Claude on
their browser and go do stuff on it.
The value is being created by the employees, whether junior
senior who can do work at level 2 and Level 3.
I, for example, I think my I'm mostly at the level 2 level
right now where almost anything I do, whether I'm writing
emails, whether I'm creating code, whether I am creating
Excel models is being done by AI now autonomously.
So I'll type something in, it'll go create the the actual work
for me and it'll iterate on. It'll if populated with real
data and more importantly it will think about the quality of
what it put out. So in the background, for
example, I have a Claude code building a, an analytics tool
for me. And it built it like to several
hours ago. But now it's thinking about,
hey, how is this actually good enough for what we needed to do?
And the answer it came to is no. So it's just repeatedly fixing
it over and over and over again. And I'm not involved at all.
I'll come back at sometime like 3 or 4 PM today and it'll, it'll
have hopefully a pretty good product for me.
Oh wow, I love that. I love that.
But a couple of what I see websites have actually banned me
from using AI agents. I'm like what?
Like this guy should wake up. I'm not going to mention, but
then I've been banned for using AI agents.
But that's just what I'll say. So let's put you through the
Ring of Fire. 5 questions, quick answers, and we'll call it a
wrap. Number one, what is 1 financial
metric for every founder must check weekly.
One Financial metric every founder must check weekly.
Gross margin, what is the increment?
What is the margin on the actual stuff you're selling?
Interesting #2 What is the biggest money mistake you see?
Smart founders repeat. Not understanding how to read
all three of their financial statements.
My interest and stuff. So what is the best decision you
have ever made on the pressure? To not make a decision right
there and to come back in 24 hours when I wasn't under
pressure because I made terrible decisions under pressure.
So I'm thinking the fact that I realized I was spread, the fact
I was stressed out, I'm going to make a bad decision and was said
like, no, I'm going to come back in 24 hours.
I'll tell you a. Joking.
Seriously, that's the best decision I made under pressure.
I once went to a club in the UK and I saw reaching on the wall.
Bad decisions make good stories. So #4 #4 what is one book that
has shaped your philosophy about leadership?
How to Win Friends and Influence People by Dale Carnegie.
It's a very old book, 100 years old.
That wasn't very fair. It just teaches you something
very simple about like how people.
Think I love. That a little.
Bit about human nature which I liked.
OK final question, what is 1 belief founders buzz delete if
they want a skill. Well that's hard.
I think The Dark Side of Valuation by Aswan Damodaran.
It is a technical book on how small, on how startups should
get better and like. It is not meant for established
companies for but for hyper growth small companies.
OK, fantastic. Like I love to say when a person
shares the time with you, they share their life with you
because the SI unit for measure in life this time.
So thank you very much Mick Jane today and of course, love and
respect to you. Do you want to leave a shout out
to everyone before you leave? Of course, from me it's goodbye.
Yeah, just I would love if people check out our business
eaglerockcfo.com. We are the I think the best
analytics firm for small and medium businesses and helping
them make become more profitable literally next month.
OK, fantastic audience. It's goodbye for me.
Always go for something in your life, conceive beliefs, try to
thrive and achieve. God bless.
Thank you.