1 00:00:00,040 --> 00:00:02,920 I think the philosophy behind scaling boils down to really two 2 00:00:02,920 --> 00:00:04,600 things. Number one, do you have a good 3 00:00:04,600 --> 00:00:06,640 business model? And by that I mean, do you 4 00:00:06,640 --> 00:00:09,880 create value for someone, right? If you're serving food, you 5 00:00:09,880 --> 00:00:11,360 know, let's imagine you're running a restaurant. 6 00:00:11,360 --> 00:00:14,160 You read value for someone by making them happy because they 7 00:00:14,160 --> 00:00:15,440 get a great meal at your restaurant. 8 00:00:15,440 --> 00:00:18,240 If you make a great shirt, it needs to fit your customer. 9 00:00:18,240 --> 00:00:20,400 If you make software, your customer needs to like using 10 00:00:20,400 --> 00:00:21,960 your software to make their life easier. 11 00:00:22,120 --> 00:00:24,160 If you make a video game, the video games got to be fun. 12 00:00:24,320 --> 00:00:26,920 So that's number one. Your product needs to create 13 00:00:26,920 --> 00:00:29,000 value for someone in the ecosystem, right? 14 00:00:29,000 --> 00:00:31,720 It needs for whoever your customers that that's the first 15 00:00:31,720 --> 00:00:32,880 thing. If you don't create value, the 16 00:00:32,880 --> 00:00:35,560 bigger you get, the worse off you are making everyone else in 17 00:00:35,560 --> 00:00:38,400 the world. And #2 is that your internal 18 00:00:38,400 --> 00:00:41,480 operations need to be designed to work well as you get bigger. 19 00:00:41,480 --> 00:00:44,440 Lots of companies have a great product or great service, but 20 00:00:44,440 --> 00:00:47,840 they have not set themselves up internally to scale beyond just 21 00:00:47,840 --> 00:00:49,680 being a small company. So you really have to think 22 00:00:49,680 --> 00:00:52,680 about how do I engineer the inside of my company, the way 23 00:00:52,680 --> 00:00:55,440 people work, the systems they use, the technology, the data, 24 00:00:55,640 --> 00:00:58,080 so that we can continue to grow. Before we dive back into today's 25 00:00:58,080 --> 00:00:59,800 conversation, I want to share something important. 26 00:01:00,040 --> 00:01:02,480 This episode includes a pay partnership with Better Help, a 27 00:01:02,480 --> 00:01:04,599 platform designed to make starting therapy easier. 28 00:01:04,760 --> 00:01:06,840 I know from my own journey as a leader and entrepreneur that 29 00:01:06,840 --> 00:01:08,240 life can sometimes feel overwhelming. 30 00:01:08,480 --> 00:01:10,440 There are seasons, severe stress, uncertainty, and 31 00:01:10,440 --> 00:01:12,720 pressure build up, and you need a safe space to process it. 32 00:01:12,720 --> 00:01:14,440 All that superior therapy comes in. 33 00:01:14,640 --> 00:01:17,120 Therapy isn't only for people facing technical challenges. 34 00:01:17,400 --> 00:01:20,560 It's a space to reflect, grow, and find better ways to manage 35 00:01:20,560 --> 00:01:22,720 stress, relationships, and personal goals. 36 00:01:22,920 --> 00:01:25,680 It takes courage to seek help, but it's also one of the 37 00:01:25,680 --> 00:01:27,960 smartest investments you can make in your mental and 38 00:01:27,960 --> 00:01:29,920 emotional welcoming. 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So if you feel like you'd 50 00:01:53,600 --> 00:01:56,200 benefit from talking to a. Therapist Visit betterhub.com 51 00:01:56,360 --> 00:01:57,880 forward slash. King James, that's 52 00:01:58,000 --> 00:02:01,920 betterhub.com/kingjames to get 10% off your first month of 53 00:02:01,920 --> 00:02:03,560 therapy. Once again, this is a paid 54 00:02:03,560 --> 00:02:05,560 partnership with Better Help and I encourage you to take that 55 00:02:05,560 --> 00:02:07,000 first step. If you've been thinking about 56 00:02:07,000 --> 00:02:09,440 it, sometimes the best investment you can make these in 57 00:02:09,520 --> 00:02:13,400 yourself. We are live, ladies and 58 00:02:13,400 --> 00:02:16,880 gentlemen, we once again welcome to the Kingdom's podcast and 59 00:02:17,160 --> 00:02:20,560 Diary of a CFO. And today I've got with me a 60 00:02:20,560 --> 00:02:25,600 cheapo VIP fights in Autofila Delfield United States of 61 00:02:25,600 --> 00:02:31,680 America Mac Walker Nick of Eagle Rock 10. 62 00:02:32,480 --> 00:02:35,160 And we're not. Sure, because my whole name yet 63 00:02:35,200 --> 00:02:38,680 but. Where the action begins The 64 00:02:38,680 --> 00:02:41,000 referee. The Octagon is Donald Trump. 65 00:02:41,120 --> 00:02:43,960 Are you ready? I'm ready. 66 00:02:44,800 --> 00:02:48,080 Well, let's, let's, let's give you your flowers. 67 00:02:48,240 --> 00:02:52,120 So ladies and gentlemen, Nick Jade is not just a typical 68 00:02:52,120 --> 00:02:55,680 finance guest. He is a Habit MBA, a former 69 00:02:55,680 --> 00:02:59,720 McKinsey consultant, a former private equity investor, a turn 70 00:02:59,720 --> 00:03:03,880 around CEO and CFO who has killed multiple companies beyond 71 00:03:03,880 --> 00:03:06,800 $100 million. He has rebuilt broken 72 00:03:06,800 --> 00:03:12,720 businesses, his lifted profits, you know from 10% to 35%. 73 00:03:13,000 --> 00:03:17,440 He has transformed product culture, revenue engines and 74 00:03:17,440 --> 00:03:20,920 decision systems with surgical precision. 75 00:03:21,160 --> 00:03:25,960 Today, Elites Eagle Rock CFO Services helping founders in the 76 00:03:25,960 --> 00:03:31,200 5 to 50 million revenue range run elite level finance systems 77 00:03:31,200 --> 00:03:33,280 without the Fortune 500 price tag. 78 00:03:33,840 --> 00:03:38,000 He describes himself as someone who likes hard problems and 79 00:03:38,000 --> 00:03:41,640 clears answers. This conversation is with 80 00:03:41,640 --> 00:03:44,800 founders, operators and leaders who want sharper thinking, 81 00:03:44,840 --> 00:03:46,960 stronger margins and better decisions. 82 00:03:47,480 --> 00:03:50,560 Ladies and gentlemen, once again welcome Nick Jane to the 83 00:03:50,600 --> 00:03:53,480 Kingdom's pocket. How are you, Sir? 84 00:03:53,640 --> 00:03:57,280 I'm doing great and thank you so much for the very kind and 85 00:03:57,480 --> 00:04:01,080 illustrious introduction. Wow, wow, wow. 86 00:04:01,080 --> 00:04:02,680 They call me the king of interest. 87 00:04:02,800 --> 00:04:06,640 You're you're right to global top 2% in the world for a 88 00:04:06,640 --> 00:04:09,320 reason. And of course, yeah, it's good 89 00:04:09,320 --> 00:04:13,720 to have the best of the best. You know, one, yes. 90 00:04:14,680 --> 00:04:17,399 Described me as a modern day business philosopher. 91 00:04:17,680 --> 00:04:20,680 So as a modern day business philosopher, I have that 92 00:04:20,680 --> 00:04:24,880 responsibility of gathering the best and the brightest minds of 93 00:04:24,880 --> 00:04:28,520 my time, of my era, you know, documents. 94 00:04:28,840 --> 00:04:30,840 The third leadership. And of course, you know, in 95 00:04:30,840 --> 00:04:33,480 audience we say if it was not documented, it was not done. 96 00:04:33,720 --> 00:04:36,600 So don't hate the player, I hate the game. 97 00:04:36,720 --> 00:04:39,760 Let's tell your origin story. You actually trained in the 98 00:04:39,760 --> 00:04:42,720 mathematics and physics. And of course, you earned an MBA 99 00:04:42,720 --> 00:04:46,520 from Harvard and entered private equity and consulted. 100 00:04:46,840 --> 00:04:51,880 What Ellie believed about decision making shapes how you 101 00:04:51,880 --> 00:04:57,120 applied as a CFO and as ACEO. Your background is actually 102 00:04:57,120 --> 00:05:00,040 mathematics and physics, right? And of course, you've got that 103 00:05:00,080 --> 00:05:02,000 MBA. You had to have it. 104 00:05:02,240 --> 00:05:04,440 And of course, you got into private equity, you got into 105 00:05:04,440 --> 00:05:07,680 consulting. But what was it early on that 106 00:05:07,680 --> 00:05:12,320 made you make that decision to get into the world of finance? 107 00:05:12,360 --> 00:05:15,400 And of course, like what philosophies do you have that 108 00:05:15,400 --> 00:05:17,200 still guide your decision making today? 109 00:05:18,760 --> 00:05:23,000 Sure. So it's, look, even as a child, 110 00:05:23,040 --> 00:05:26,720 I really cared about kind of two things, understanding how things 111 00:05:26,720 --> 00:05:31,280 worked #1 and #2 quantifying them, right? 112 00:05:31,280 --> 00:05:33,280 I was the guy who, you know, when you're walking along the 113 00:05:33,280 --> 00:05:37,200 sidewalk, counting the number of breaks in the sidewalk to figure 114 00:05:37,200 --> 00:05:39,440 out, hey, to each one we're walking 10 meters. 115 00:05:39,440 --> 00:05:42,680 Each one is half a meter apart. That means that they are 20 116 00:05:42,720 --> 00:05:45,320 tiles in the sidewalk. I always wanted to understand 117 00:05:45,320 --> 00:05:49,040 how fast balls dropped, why they bounced, How does the TV work 118 00:05:49,040 --> 00:05:51,280 right. I disassembled my first TV when 119 00:05:51,280 --> 00:05:54,120 I was 12 years old. So that worked and continued on 120 00:05:54,120 --> 00:05:56,400 in college where as you met, where as you mentioned, I 121 00:05:56,400 --> 00:05:58,720 studied math and physics. And the cool thing is I 122 00:05:58,720 --> 00:06:02,480 realized, you know, sometime in college that companies are in 123 00:06:02,480 --> 00:06:06,440 some ways like big machines, OK, They have rules that make them 124 00:06:06,440 --> 00:06:08,200 work. They need to like, not just from 125 00:06:08,200 --> 00:06:10,680 the financial side, but there's ways that they work internally 126 00:06:10,680 --> 00:06:12,640 in terms of culture. And these things. 127 00:06:12,640 --> 00:06:15,280 If you can think of them as a system or machine, you can 128 00:06:15,280 --> 00:06:17,800 understand how they work well and how to create a lot of 129 00:06:17,800 --> 00:06:19,840 value. And that's what I did, you know, 130 00:06:19,840 --> 00:06:21,640 trained in early my career in private equity. 131 00:06:21,640 --> 00:06:24,480 Private equity firms are really good at generally making the 132 00:06:24,480 --> 00:06:27,280 companies they own more valuable through better operations, 133 00:06:27,280 --> 00:06:29,040 better expansion, helping them grow. 134 00:06:29,320 --> 00:06:31,040 And that's really what I've done throughout my career. 135 00:06:31,040 --> 00:06:35,840 Think of companies as machines or as things that fall, and 136 00:06:35,840 --> 00:06:38,920 maybe not machines, but things that have rules that have laws 137 00:06:38,920 --> 00:06:40,160 that they follow. And if you're good at 138 00:06:40,160 --> 00:06:43,120 understanding those laws, then you're really good at making the 139 00:06:43,200 --> 00:06:45,040 the machine better, the company better. 140 00:06:45,040 --> 00:06:47,400 And that can be true. I run a shoe company and a 141 00:06:47,400 --> 00:06:50,120 trucking company and a software company, and each has different 142 00:06:50,120 --> 00:06:52,280 rules to the game. But at the end of the day, they 143 00:06:52,280 --> 00:06:55,000 still all follow certain rules and principles that if you're 144 00:06:55,000 --> 00:06:57,880 good at figuring them out, you can do a great job at improving 145 00:06:57,880 --> 00:07:03,080 those companies. So you were actually served as a 146 00:07:03,080 --> 00:07:08,280 turn around CFO and the CEO across trucking software 147 00:07:08,320 --> 00:07:12,480 e-commerce and that includes businesses that have scaled past 148 00:07:12,480 --> 00:07:16,800 the $100 million Mac. So what the most found is 149 00:07:16,960 --> 00:07:22,600 misunderstand about the philosophy behind scaling. 150 00:07:23,840 --> 00:07:25,280 Sure. I think the philosophy behind 151 00:07:25,280 --> 00:07:27,280 scaling boils down to really two things. 152 00:07:27,280 --> 00:07:29,360 Number one, do you have a good business model? 153 00:07:29,560 --> 00:07:32,560 And by that I mean, do you create value for someone, right. 154 00:07:32,600 --> 00:07:34,680 If you're serving food, you know, let's imagine you're 155 00:07:34,680 --> 00:07:37,080 running a restaurant. You read value for someone by 156 00:07:37,080 --> 00:07:39,040 making them happy because they get a great meal at your 157 00:07:39,040 --> 00:07:41,040 restaurant. If you make a great shirt, it 158 00:07:41,040 --> 00:07:43,320 needs to fit your customer. If you make software, your 159 00:07:43,320 --> 00:07:45,600 customer needs to like using your software to make their life 160 00:07:45,600 --> 00:07:47,160 easier. If you make a video game, the 161 00:07:47,160 --> 00:07:49,200 video games got to be fun. So that's number one. 162 00:07:49,200 --> 00:07:52,120 Your product needs to create value for someone in the 163 00:07:52,160 --> 00:07:53,960 ecosystem, right? It needs for whoever your 164 00:07:53,960 --> 00:07:55,760 customers that that's the first thing. 165 00:07:55,760 --> 00:07:58,040 If you don't create value, the bigger you get, the worse off 166 00:07:58,040 --> 00:07:59,920 you are making everyone else in the world. 167 00:07:59,920 --> 00:08:04,000 And #2 is that your internal operations need to be designed 168 00:08:04,000 --> 00:08:06,640 to work well as you get bigger. Lots of companies have a great 169 00:08:06,640 --> 00:08:09,560 product or great service, but they have not set themselves up 170 00:08:09,640 --> 00:08:12,760 internally to scale beyond just being a small company. 171 00:08:12,760 --> 00:08:15,240 So you really have to think about how do I engineer the 172 00:08:15,280 --> 00:08:17,920 inside of my company, the way people work, the systems they 173 00:08:17,920 --> 00:08:21,200 use, the technology, the data, so that we can continue to grow. 174 00:08:23,280 --> 00:08:27,200 Growth hacking right there. So you actually spent years in 175 00:08:27,200 --> 00:08:30,280 private equity and of course, institutional investing. 176 00:08:30,760 --> 00:08:35,559 What do professional investors see inside businesses that 177 00:08:35,559 --> 00:08:38,679 founders often ignore until it's too late? 178 00:08:41,159 --> 00:08:43,880 I think professional investors, so I think the biggest 179 00:08:43,880 --> 00:08:46,520 difference between founders and professional investors is 180 00:08:46,520 --> 00:08:48,200 founders tend to have a great vision, right? 181 00:08:48,200 --> 00:08:50,640 They're the ones who built the company, have often made them, 182 00:08:50,920 --> 00:08:53,560 you know, very, very successful companies, professional. 183 00:08:53,560 --> 00:08:56,040 But the founders have really only been in that one company 184 00:08:56,040 --> 00:08:58,200 for most of their career. They haven't looked around and 185 00:08:58,200 --> 00:09:00,840 seen in what it's like other companies are like and what good 186 00:09:00,840 --> 00:09:02,280 looks like. They may have a great product 187 00:09:02,280 --> 00:09:04,440 team, but they don't know what great looks like on a finance 188 00:09:04,440 --> 00:09:07,920 team or HR or marketing, right? They're just used to seeing what 189 00:09:07,920 --> 00:09:10,120 they're seeing. Professional investors on the 190 00:09:10,120 --> 00:09:12,440 other hand, have looked across hundreds or thousands of 191 00:09:12,440 --> 00:09:14,800 companies and they can say, look, McDonald's may be great at 192 00:09:14,800 --> 00:09:17,880 marketing, but Taco Bell may be great at social media and 193 00:09:17,880 --> 00:09:20,720 Wendy's may be great at Square Burgers, right? 194 00:09:20,720 --> 00:09:23,040 So you need to, what professional investors do really 195 00:09:23,040 --> 00:09:25,920 well is taking the best stuff from different circumstances 196 00:09:25,920 --> 00:09:28,520 that they've seen and then try and implement the best of all of 197 00:09:28,520 --> 00:09:31,440 those things at one company. So it's not just good product, 198 00:09:31,440 --> 00:09:33,480 but good it can be, has to be good at marketing, good at 199 00:09:33,480 --> 00:09:35,880 running HR, good at running finance, good at running 200 00:09:35,880 --> 00:09:40,960 manufacturing, etcetera. Wow, that actually feels like 201 00:09:40,960 --> 00:09:45,200 the work we did, we do in audit, you know, you are auditing 202 00:09:45,360 --> 00:09:48,760 different entities and of course you you're getting the knowledge 203 00:09:49,000 --> 00:09:52,240 across the board and that actually puts you in a position 204 00:09:52,240 --> 00:09:55,840 where and you understand how things operate across different 205 00:09:56,160 --> 00:09:59,480 ecosystems, different industries, different entities, 206 00:09:59,760 --> 00:10:03,000 right. And you're able to provide well 207 00:10:03,000 --> 00:10:08,760 informed advisory to the operators, to the management, to 208 00:10:08,760 --> 00:10:11,000 the leadership of, you know, businesses. 209 00:10:11,280 --> 00:10:13,520 But you know, many founders actually think that they 210 00:10:13,520 --> 00:10:16,200 understand cash flows because they review the reports. 211 00:10:16,560 --> 00:10:19,920 And there's something I'm fond of seeing revenues, vanity 212 00:10:20,320 --> 00:10:22,880 profits of sanity of cash is king. 213 00:10:22,960 --> 00:10:26,800 Cash is reality. So in your view, what is the 214 00:10:26,800 --> 00:10:29,040 difference between looking at the numbers and actually 215 00:10:29,360 --> 00:10:31,360 possessing financial intelligence? 216 00:10:34,240 --> 00:10:36,200 Between looking at the numbers and doing what? 217 00:10:36,200 --> 00:10:39,080 Sorry. And having financial 218 00:10:39,080 --> 00:10:41,560 intelligence. Sure. 219 00:10:41,560 --> 00:10:45,480 So look, finance, like understanding finance and 220 00:10:45,480 --> 00:10:49,480 business is a skill and an art or a science, no different than 221 00:10:49,480 --> 00:10:52,200 let's say, painting or being a doctor of physics. 222 00:10:52,200 --> 00:10:54,880 It's a skill, right? Everyone knows how to add and 223 00:10:54,880 --> 00:10:56,400 subtract. You learned that in high school. 224 00:10:56,400 --> 00:10:59,280 But not everyone can master understanding what the numbers 225 00:10:59,280 --> 00:11:01,880 mean, right? Everyone knows you know what 226 00:11:01,880 --> 00:11:04,360 blood looks like, but a doctor understands how to save your 227 00:11:04,360 --> 00:11:06,480 life in a way that at least I don't, right. 228 00:11:06,480 --> 00:11:09,160 So being good at finance and thinking about business 229 00:11:09,160 --> 00:11:12,080 optimization is a learned skill. And it's a practice skill. 230 00:11:12,080 --> 00:11:14,080 You can learn a little bit from books, you can learn a little 231 00:11:14,080 --> 00:11:16,000 bit from experience. You can do learn it a little bit 232 00:11:16,000 --> 00:11:19,800 from doing, but it is a skill and a lot of businesses often 233 00:11:19,800 --> 00:11:22,600 don't, they haven't hired someone who has that skill. 234 00:11:22,600 --> 00:11:25,160 And The funny thing is they don't know what good looks like, 235 00:11:25,240 --> 00:11:27,200 right? Because they haven't seen like a 236 00:11:27,200 --> 00:11:30,800 world class CFO the way they, or world class COO or see chief 237 00:11:30,800 --> 00:11:33,560 human resource officer the way it would run at a billion dollar 238 00:11:33,560 --> 00:11:36,160 company, because that's often not where they started. 239 00:11:36,240 --> 00:11:38,520 And you often don't get to experience that working with 240 00:11:38,520 --> 00:11:40,480 those people till you're, you know, very, very late in your 241 00:11:40,480 --> 00:11:42,080 career. And so that's why it's really 242 00:11:42,080 --> 00:11:45,080 important for a kind of smaller and mid sized companies to think 243 00:11:45,080 --> 00:11:48,680 about the fact that no matter how smart I am, number one, I 244 00:11:48,680 --> 00:11:53,360 can't do it all and #2 I may not have an area of expertise in 245 00:11:53,440 --> 00:11:55,480 finance or marketing or whatever it is. 246 00:11:55,480 --> 00:11:57,080 And so I should hire someone who does? 247 00:11:59,440 --> 00:12:03,760 Interested and, you know, incomes the fractional CFOs. 248 00:12:05,560 --> 00:12:09,360 So you often speak about small businesses blind blind on cash 249 00:12:09,360 --> 00:12:11,160 flow. Why does this happen even in 250 00:12:11,160 --> 00:12:13,240 companies generating millions of revenue? 251 00:12:13,720 --> 00:12:17,800 And what are the early one in science leaders should never 252 00:12:17,800 --> 00:12:21,360 ignore? Sure. 253 00:12:21,360 --> 00:12:24,960 So I think there's two or three things that are different that 254 00:12:24,960 --> 00:12:28,600 people miss about cash flows #1 is that profit is not 255 00:12:28,600 --> 00:12:31,920 necessarily equal to cash flow. And this is particularly 256 00:12:31,920 --> 00:12:36,040 important in working capital businesses like retailers or 257 00:12:36,240 --> 00:12:39,280 manufacturers or shippers. That's number one. 258 00:12:39,360 --> 00:12:44,080 Number two is there are aspects of cash flow that are sorry and 259 00:12:44,080 --> 00:12:46,760 #2 is you have to think about reinvesting in your business and 260 00:12:46,760 --> 00:12:49,360 maintaining your business. So a lot of businesses, they 261 00:12:49,360 --> 00:12:52,080 require you to keep putting money into them to repair, let's 262 00:12:52,080 --> 00:12:54,120 say, your factory or to buy more inventory. 263 00:12:54,120 --> 00:12:55,880 And a lot of companies don't think about that. 264 00:12:55,880 --> 00:12:58,000 But hey, even though I'm profitable, I got to take a 265 00:12:58,000 --> 00:13:00,800 large portion of those profits and reinvested in the business. 266 00:13:01,160 --> 00:13:03,080 That's typically called your reinvestment rate. 267 00:13:03,120 --> 00:13:06,560 And #3 you have to think about, I started this business by 268 00:13:06,560 --> 00:13:08,400 taking money from somewhere. It could have been for my 269 00:13:08,400 --> 00:13:09,760 savings. It could have been from venture 270 00:13:09,760 --> 00:13:11,160 capital, it could have been from banks. 271 00:13:11,360 --> 00:13:13,160 And at some point, I got to pay those guys back. 272 00:13:13,320 --> 00:13:15,360 And that's going to take away from my cash flows too. 273 00:13:15,640 --> 00:13:17,480 So how do I think about that as well? 274 00:13:21,560 --> 00:13:25,640 Well, so ideally, you know, no decision that a company's made 275 00:13:25,640 --> 00:13:27,480 emotionally, whether you're hiring someone, whether you're 276 00:13:27,480 --> 00:13:29,640 firing someone, whether you're selling a customer, those 277 00:13:29,640 --> 00:13:31,840 decisions, nothing should be made emotionally, right? 278 00:13:31,840 --> 00:13:34,440 Emotions are for your personal life, ideally not your 279 00:13:34,440 --> 00:13:36,560 professional life, because the moment you start making 280 00:13:36,560 --> 00:13:39,200 emotions, decisions emotionally, you're not necessarily doing the 281 00:13:39,200 --> 00:13:40,720 right thing. You're reacting quickly. 282 00:13:40,760 --> 00:13:44,440 So I think the biggest thing that founders or CE OS or 283 00:13:44,440 --> 00:13:46,920 executives, it doesn't have, it can be really any titles, it can 284 00:13:46,920 --> 00:13:51,880 be junior people as well. Is think about number one is why 285 00:13:51,880 --> 00:13:54,320 is this? Why is what I'm doing good for 286 00:13:54,320 --> 00:13:56,680 my organization? Just ask yourself this. 287 00:13:56,680 --> 00:13:58,840 I actually have a little piece of paper on my computer that 288 00:13:58,840 --> 00:14:01,440 says, is this good for my organization? 289 00:14:01,440 --> 00:14:04,200 Number 2 is think about the risks of the decision you're 290 00:14:04,200 --> 00:14:06,200 making. And some risks are OK, some 291 00:14:06,200 --> 00:14:08,880 risks are not. And #3 ask yourself, did I 292 00:14:08,960 --> 00:14:13,240 actually do any quantification? Did I spend 30 seconds doing 293 00:14:13,240 --> 00:14:15,400 some math here? Because if you didn't spend 30 294 00:14:15,400 --> 00:14:17,840 seconds doing some math, you're probably making an emotional 295 00:14:17,840 --> 00:14:20,040 judgement. And a very simple example is if 296 00:14:20,040 --> 00:14:22,600 you're hiring someone and you're going to pay them $50,000 a 297 00:14:22,600 --> 00:14:26,240 year, ask yourself, they're going to cost me $50,000 a year. 298 00:14:26,240 --> 00:14:29,680 Are they going to make me $55,000 a year more in profit? 299 00:14:29,800 --> 00:14:31,520 If the answer is no, it's a bad decision. 300 00:14:31,520 --> 00:14:34,520 And you just have to spend that 30 seconds doing very, very 301 00:14:34,520 --> 00:14:36,720 simple math sometimes to make sure that you're thinking about 302 00:14:36,720 --> 00:14:39,120 this rigorously and not emotionally. 303 00:14:41,120 --> 00:14:43,600 Interesting. The numbers always have to add 304 00:14:43,600 --> 00:14:48,000 up. So fractional CFO versus full 305 00:14:48,000 --> 00:14:52,320 time CFO. You're actually frequently asked 306 00:14:52,680 --> 00:15:00,560 when do you hire a fractional CFO or what time is a full time 307 00:15:00,560 --> 00:15:08,440 CFO resourceful for a company? What practical thresholds do you 308 00:15:08,440 --> 00:15:11,480 use to advise founders when making the school? 309 00:15:13,760 --> 00:15:16,400 Sure. So I'll start by giving a 310 00:15:16,400 --> 00:15:18,360 preface and then I'll answer your question directly. 311 00:15:18,360 --> 00:15:21,200 So a lot of people use the title CFO to mean different things. 312 00:15:21,200 --> 00:15:23,760 And a lot of companies as CFO's just the person who's managing 313 00:15:23,760 --> 00:15:27,680 your accounting and cash flows. And that is not usually a ACFO 314 00:15:27,680 --> 00:15:30,480 that's a treasure or controller, even if they he or she has the 315 00:15:30,480 --> 00:15:32,680 title of Chief Financial Officer. 316 00:15:33,160 --> 00:15:36,240 A good CFO does 4 things. They handle, they manage 317 00:15:36,240 --> 00:15:39,440 accounting, they manage cash, that's called treasury. 318 00:15:39,760 --> 00:15:42,520 They manage FP and a financial planning analysis, which is 319 00:15:42,520 --> 00:15:45,360 thinking about the future. And #4 they manage the capital 320 00:15:45,360 --> 00:15:48,000 structure, re business, debt, equity financing, etcetera. 321 00:15:48,760 --> 00:15:51,240 So good CFO needs to be able to do all of those four things. 322 00:15:51,240 --> 00:15:54,760 And I think that a business is, if they're ready to hire a full 323 00:15:54,760 --> 00:15:57,880 time CFO when two things are true, number one, they actually 324 00:15:57,880 --> 00:16:00,080 need all four of those aspects to run their business. 325 00:16:00,080 --> 00:16:02,080 For example, if they're thinking about debt or equity or if 326 00:16:02,080 --> 00:16:05,960 they're thinking about future forecasting, they need acfo #2 327 00:16:06,400 --> 00:16:10,000 is when they're willing to hire somebody who's really good. 328 00:16:10,120 --> 00:16:12,720 So the problem in the CFO market is you have a lot of people that 329 00:16:12,720 --> 00:16:15,160 you can kind of get cheaply, but they're really controllers and 330 00:16:15,160 --> 00:16:17,760 treasurers and they're not true chief financial officers. 331 00:16:17,960 --> 00:16:20,480 True chief financial officers tend to be very, very expensive 332 00:16:20,480 --> 00:16:23,120 people because they may cost you a half $1,000,000, but they're 333 00:16:23,120 --> 00:16:26,160 going to generate $510,000,000 of profit for you and they know 334 00:16:26,160 --> 00:16:29,280 that, so they charge more money. So I think the the second thing 335 00:16:29,280 --> 00:16:32,480 is when you are, when you are ready to hire CFO, don't get 336 00:16:32,480 --> 00:16:35,080 some, don't full time CFO, don't go cheap. 337 00:16:35,080 --> 00:16:39,080 Get somebody really good who understands all four aspects of 338 00:16:39,080 --> 00:16:41,920 their job and can create value in all four aspects. 339 00:16:41,920 --> 00:16:44,680 If you're not, you're basically paying, you know, money for a 340 00:16:44,680 --> 00:16:46,880 very expensive accountant. And accountants are great. 341 00:16:46,880 --> 00:16:50,320 That's a part of that's part of running businesses, but it's not 342 00:16:50,320 --> 00:16:52,800 sufficient to be ACFO. It's only one out of four things 343 00:16:52,800 --> 00:16:55,280 that a great full time CFO needs to be able to do. 344 00:16:57,600 --> 00:17:00,960 Interesting. So you actually talk about the 345 00:17:00,960 --> 00:17:04,079 Fortune 500 pay books for $10 million companies. 346 00:17:04,480 --> 00:17:08,200 So you suggest that smaller companies kind of don't be 347 00:17:08,200 --> 00:17:12,400 company operates and systems. Which systems actually transfer 348 00:17:12,400 --> 00:17:15,880 well and which ones become bureaucratic? 349 00:17:17,280 --> 00:17:18,880 Sure. I think the systems that 350 00:17:18,880 --> 00:17:21,960 transfer well number one are many of the same technology. 351 00:17:21,960 --> 00:17:25,200 So needing ACRM, for example, for your sales and marketing 352 00:17:25,200 --> 00:17:28,760 team, needing an ERP for your or start an accounting system for 353 00:17:28,760 --> 00:17:32,160 your accounting, like using enterprise grade technologies, 354 00:17:32,160 --> 00:17:34,480 which are now very affordable for small businesses. 355 00:17:34,480 --> 00:17:37,520 You can get them for, you know, 10 to $20.00 a month for all 356 00:17:37,520 --> 00:17:40,520 these systems nowadays for. So that's number one, make sure 357 00:17:40,520 --> 00:17:43,160 you get a lot, a lot of the same technologies because they're 358 00:17:43,160 --> 00:17:46,120 very, very affordable for really any business that's making more 359 00:17:46,120 --> 00:17:50,360 than $1,000,000 revenue a year #2 is data systems, right? 360 00:17:50,400 --> 00:17:53,280 Any good business needs data systems. 361 00:17:53,280 --> 00:17:55,800 You can use whatever fancy word you want, data lakes, data 362 00:17:55,800 --> 00:17:59,960 warehouses, CSV files, but you need some sort of system to 363 00:17:59,960 --> 00:18:02,720 store the data of your organization in a way that other 364 00:18:02,720 --> 00:18:04,880 people around your organization can access it. 365 00:18:04,880 --> 00:18:07,560 Think about it, analyze it, and look at, hey, what happened and 366 00:18:07,560 --> 00:18:10,520 what could happen. And then the third system that I 367 00:18:10,520 --> 00:18:14,840 think a lot of small businesses can copy is how to manage people 368 00:18:14,840 --> 00:18:16,680 effectively. This includes the hiring, the 369 00:18:16,680 --> 00:18:19,520 promotion, the management and the termination of employees. 370 00:18:19,920 --> 00:18:21,800 I think that there's right ways to do it. 371 00:18:21,960 --> 00:18:24,360 These are well researched ways that you can read from 372 00:18:24,360 --> 00:18:27,760 publications, from PhDs. You can see them in the internal 373 00:18:27,760 --> 00:18:30,120 memos that have been leaked of like large companies. 374 00:18:30,360 --> 00:18:32,840 But there is a right way to manage human capital. 375 00:18:33,240 --> 00:18:36,040 And you don't have to reinvent how to do hiring right? 376 00:18:36,320 --> 00:18:38,800 Like a funny way to, you know, I'll give a, a practical 377 00:18:38,800 --> 00:18:40,960 example. The wrong way to do hiring, and 378 00:18:40,960 --> 00:18:44,200 this has been known for about 30 or 40 years now, is to interview 379 00:18:44,200 --> 00:18:46,200 someone and just ask them. Tell me about your resume. 380 00:18:46,200 --> 00:18:47,640 Tell me about your five year goals. 381 00:18:47,880 --> 00:18:51,240 That has 0 predictive value. There's no value to doing that 382 00:18:51,240 --> 00:18:52,800 interview. You wait wasted half an hour of 383 00:18:52,800 --> 00:18:54,760 the interview each time and 1/2 an hour of your time. 384 00:18:55,040 --> 00:18:58,960 The right way instead is to ask that give them a technical quiz 385 00:18:59,080 --> 00:19:01,920 number one on their the subject matter of their job. 386 00:19:01,920 --> 00:19:04,000 So you know, for an accountant, ask them accounting questions 387 00:19:04,320 --> 00:19:06,960 and make rank them based on the actual technical skills they 388 00:19:06,960 --> 00:19:09,960 show. And #2 ask them to solve a real 389 00:19:09,960 --> 00:19:12,080 problem. And that can be, it's called a 390 00:19:12,080 --> 00:19:14,240 case study method. So you ask them to solve a real 391 00:19:14,240 --> 00:19:17,800 problem relevant to their job in real time in front of you or as 392 00:19:17,800 --> 00:19:19,840 a piece of homework. And that shows a level of 393 00:19:19,920 --> 00:19:23,720 critical thinking and ingenuity that the typical tell me about 394 00:19:23,720 --> 00:19:26,120 your, you know, the last 20 years, your resume and why you 395 00:19:26,120 --> 00:19:29,120 studied English or math or accounting doesn't do at all. 396 00:19:30,240 --> 00:19:33,400 And yet most businesses still do what's called the unstructured 397 00:19:33,640 --> 00:19:36,800 fit interview, even though it's not actually predictive at all. 398 00:19:36,800 --> 00:19:38,440 And this has been known for 40 years. 399 00:19:39,760 --> 00:19:46,160 It's, it's, it's really crazy how recruitment methods differ 400 00:19:46,160 --> 00:19:49,960 across board, right? But you definitely need to test 401 00:19:50,000 --> 00:19:52,720 the skill set. But that there is a philosophy I 402 00:19:52,720 --> 00:19:56,000 have on this podcast. It's called mindset skill set, 403 00:19:56,000 --> 00:19:58,720 tool set. That is when you're hiring 404 00:19:58,720 --> 00:20:00,800 people, when you're collaborating people, you need 405 00:20:00,800 --> 00:20:04,840 to find a way to evaluate their mindsets, then the skill set and 406 00:20:04,840 --> 00:20:06,920 of course the tool set. I'd like for you to speak to 407 00:20:06,920 --> 00:20:11,000 that framework. That is the mindset, the skill 408 00:20:11,000 --> 00:20:14,800 set, tool set framework. In the course of hiring. 409 00:20:16,480 --> 00:20:20,920 Yeah, I like that I'm, you know, much more about just, I think, 410 00:20:21,160 --> 00:20:23,000 mindset. Most people, you know who show 411 00:20:23,000 --> 00:20:25,720 up to work tend to be reasonably positive human beings, otherwise 412 00:20:26,320 --> 00:20:28,000 they wouldn't have survived in the real world. 413 00:20:28,280 --> 00:20:30,720 So a lot of, you know, my assessment when I hire people 414 00:20:30,720 --> 00:20:34,640 is, do you have the technical skill set #1 and do you have the 415 00:20:34,960 --> 00:20:38,920 willingness to solve and ability to solve novel problems? 416 00:20:38,920 --> 00:20:41,280 Because every problem you encounter, almost every problem 417 00:20:41,280 --> 00:20:44,600 you encounter in life is novel. It's new and you need to have to 418 00:20:44,600 --> 00:20:46,760 figure out how to go solve it yourself without your boss 419 00:20:46,760 --> 00:20:48,640 needing to tell you how to do it every single day. 420 00:20:49,920 --> 00:20:52,360 Yeah, very important. We need people, critical 421 00:20:52,360 --> 00:20:55,240 thinking skills and problem solving skills. 422 00:20:56,200 --> 00:21:03,120 You actually have so much experience and in terms of the 423 00:21:03,120 --> 00:21:07,120 technology it helps with decision making. 424 00:21:07,120 --> 00:21:12,720 I has actually come to stay. So before we let you go, I'd 425 00:21:12,720 --> 00:21:17,040 like for you to touch on what you think AI is going to 426 00:21:17,160 --> 00:21:21,200 influence in terms of the business landscape in the shorts 427 00:21:21,200 --> 00:21:23,840 to medium term. Sure. 428 00:21:23,840 --> 00:21:27,600 So AI is here to stay. And there's I think there's 429 00:21:27,600 --> 00:21:30,720 three types of users, OK, Number one are people who are using it 430 00:21:30,720 --> 00:21:32,880 primarily as a chatbot and there's a research tool. 431 00:21:32,880 --> 00:21:37,120 So tell me about Pokémon or tell me about the oil industry, 432 00:21:37,120 --> 00:21:39,440 Nigeria. So people use it as a research 433 00:21:39,440 --> 00:21:41,440 tool and primarily as a chat. But that's level 1. 434 00:21:41,720 --> 00:21:45,840 Level 2 are people who are using AI tools to do work. 435 00:21:46,560 --> 00:21:49,960 So you let's say take a general purpose AI tool like Claude Code 436 00:21:49,960 --> 00:21:52,840 or something like that and use it to do work for you, write 437 00:21:52,840 --> 00:21:55,880 documents, build models, send emails, etcetera. 438 00:21:55,880 --> 00:21:58,920 That's kind of level 2 And Level 3 are people who are building 439 00:21:58,960 --> 00:22:01,880 agents that autonomously work without the human interacting 440 00:22:01,880 --> 00:22:04,640 and being in the loop at all or very minimally in the loop. 441 00:22:04,640 --> 00:22:06,840 So the humans not chatting with the robot, the robot is out 442 00:22:06,840 --> 00:22:11,360 there doing things people level 1 is not so useful anymore. 443 00:22:11,360 --> 00:22:14,520 Everyone can pull up chat sheet to your Gemini or Claude on 444 00:22:14,520 --> 00:22:16,720 their browser and go do stuff on it. 445 00:22:16,920 --> 00:22:19,920 The value is being created by the employees, whether junior 446 00:22:19,920 --> 00:22:22,480 senior who can do work at level 2 and Level 3. 447 00:22:22,840 --> 00:22:25,400 I, for example, I think my I'm mostly at the level 2 level 448 00:22:25,400 --> 00:22:28,520 right now where almost anything I do, whether I'm writing 449 00:22:28,520 --> 00:22:31,560 emails, whether I'm creating code, whether I am creating 450 00:22:31,560 --> 00:22:35,680 Excel models is being done by AI now autonomously. 451 00:22:35,760 --> 00:22:38,720 So I'll type something in, it'll go create the the actual work 452 00:22:38,720 --> 00:22:41,920 for me and it'll iterate on. It'll if populated with real 453 00:22:41,920 --> 00:22:45,120 data and more importantly it will think about the quality of 454 00:22:45,120 --> 00:22:48,080 what it put out. So in the background, for 455 00:22:48,080 --> 00:22:52,840 example, I have a Claude code building a, an analytics tool 456 00:22:52,840 --> 00:22:54,800 for me. And it built it like to several 457 00:22:54,800 --> 00:22:56,280 hours ago. But now it's thinking about, 458 00:22:56,280 --> 00:22:59,120 hey, how is this actually good enough for what we needed to do? 459 00:22:59,120 --> 00:23:01,920 And the answer it came to is no. So it's just repeatedly fixing 460 00:23:01,920 --> 00:23:04,160 it over and over and over again. And I'm not involved at all. 461 00:23:04,440 --> 00:23:07,240 I'll come back at sometime like 3 or 4 PM today and it'll, it'll 462 00:23:07,320 --> 00:23:09,600 have hopefully a pretty good product for me. 463 00:23:10,600 --> 00:23:12,160 Oh wow, I love that. I love that. 464 00:23:12,360 --> 00:23:15,760 But a couple of what I see websites have actually banned me 465 00:23:15,760 --> 00:23:18,440 from using AI agents. I'm like what? 466 00:23:18,520 --> 00:23:21,680 Like this guy should wake up. I'm not going to mention, but 467 00:23:21,680 --> 00:23:23,680 then I've been banned for using AI agents. 468 00:23:24,040 --> 00:23:28,000 But that's just what I'll say. So let's put you through the 469 00:23:28,000 --> 00:23:33,480 Ring of Fire. 5 questions, quick answers, and we'll call it a 470 00:23:33,480 --> 00:23:35,680 wrap. Number one, what is 1 financial 471 00:23:35,680 --> 00:23:38,680 metric for every founder must check weekly. 472 00:23:40,400 --> 00:23:43,000 One Financial metric every founder must check weekly. 473 00:23:45,800 --> 00:23:47,880 Gross margin, what is the increment? 474 00:23:47,880 --> 00:23:50,040 What is the margin on the actual stuff you're selling? 475 00:23:51,240 --> 00:23:54,360 Interesting #2 What is the biggest money mistake you see? 476 00:23:54,360 --> 00:23:58,280 Smart founders repeat. Not understanding how to read 477 00:23:58,280 --> 00:24:00,120 all three of their financial statements. 478 00:24:00,800 --> 00:24:04,840 My interest and stuff. So what is the best decision you 479 00:24:04,840 --> 00:24:09,240 have ever made on the pressure? To not make a decision right 480 00:24:09,240 --> 00:24:12,480 there and to come back in 24 hours when I wasn't under 481 00:24:12,480 --> 00:24:15,120 pressure because I made terrible decisions under pressure. 482 00:24:15,120 --> 00:24:18,840 So I'm thinking the fact that I realized I was spread, the fact 483 00:24:19,200 --> 00:24:22,080 I was stressed out, I'm going to make a bad decision and was said 484 00:24:22,080 --> 00:24:24,040 like, no, I'm going to come back in 24 hours. 485 00:24:25,840 --> 00:24:26,760 I'll tell you a. Joking. 486 00:24:26,760 --> 00:24:28,800 Seriously, that's the best decision I made under pressure. 487 00:24:31,240 --> 00:24:34,080 I once went to a club in the UK and I saw reaching on the wall. 488 00:24:34,520 --> 00:24:42,800 Bad decisions make good stories. So #4 #4 what is one book that 489 00:24:42,800 --> 00:24:45,720 has shaped your philosophy about leadership? 490 00:24:47,040 --> 00:24:49,680 How to Win Friends and Influence People by Dale Carnegie. 491 00:24:49,680 --> 00:24:51,640 It's a very old book, 100 years old. 492 00:24:51,640 --> 00:24:53,720 That wasn't very fair. It just teaches you something 493 00:24:53,720 --> 00:24:55,160 very simple about like how people. 494 00:24:55,160 --> 00:24:58,440 Think I love. That a little. 495 00:24:58,480 --> 00:25:00,360 Bit about human nature which I liked. 496 00:25:01,440 --> 00:25:04,720 OK final question, what is 1 belief founders buzz delete if 497 00:25:04,720 --> 00:25:09,560 they want a skill. Well that's hard. 498 00:25:11,720 --> 00:25:14,520 I think The Dark Side of Valuation by Aswan Damodaran. 499 00:25:14,520 --> 00:25:18,480 It is a technical book on how small, on how startups should 500 00:25:18,480 --> 00:25:21,800 get better and like. It is not meant for established 501 00:25:21,800 --> 00:25:24,160 companies for but for hyper growth small companies. 502 00:25:25,080 --> 00:25:28,680 OK, fantastic. Like I love to say when a person 503 00:25:28,680 --> 00:25:30,280 shares the time with you, they share their life with you 504 00:25:30,280 --> 00:25:32,720 because the SI unit for measure in life this time. 505 00:25:32,880 --> 00:25:36,200 So thank you very much Mick Jane today and of course, love and 506 00:25:36,200 --> 00:25:37,680 respect to you. Do you want to leave a shout out 507 00:25:37,680 --> 00:25:40,400 to everyone before you leave? Of course, from me it's goodbye. 508 00:25:41,800 --> 00:25:44,240 Yeah, just I would love if people check out our business 509 00:25:44,240 --> 00:25:48,160 eaglerockcfo.com. We are the I think the best 510 00:25:48,160 --> 00:25:50,720 analytics firm for small and medium businesses and helping 511 00:25:50,720 --> 00:25:53,360 them make become more profitable literally next month. 512 00:25:54,680 --> 00:25:57,400 OK, fantastic audience. It's goodbye for me. 513 00:25:57,440 --> 00:26:00,440 Always go for something in your life, conceive beliefs, try to 514 00:26:00,440 --> 00:26:03,080 thrive and achieve. God bless. 515 00:26:05,240 --> 00:26:05,840 Thank you.