Improve Profitability and Cashflow with The CFO Project's Adam Lean

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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. Stick around to the end of the show; we'll reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.

And with us right now, we've got Adam lean. Adam, you are the president and founder of the CFO Project, and you're the host of the P Is For Profit Podcast. Thank you so much for joining us. I'm super excited to be here. Thanks for having me, Josh. So I have a listen. I'm

0:51
a huge fan of having a great CFO and in we're going to talk about your businesses. You know, it is So if there's a business owner and you're kind of varying levels, at what levels should you be engaging with someone that can kind of work through numbers with you? Now, I'm going to argue, Adam, and I don't know, if you're going to argue against me, I'm going to argue that that's something you probably want to do a lot earlier than, then the average business owner is that at the very least, you work out a way to have a conversation, at least, you know, kind of get your numbers in order, even if you're just honestly acting as like a freelancer and you're, you know, hoping to expand just a little bit. It's time if that's my argument. Now what you aren't, you couldn't possibly argue against that could you know Absolutely, I mean, every business owner has to understand their numbers. And that can come in a variety of ways you can you can hire a CFO, you can hire other people, you can hire an internal controller bookkeeper, accountant. The end of the day the business owner has to understand their numbers. Here's the problem though most business owners don't really understand their numbers. And they think that because they have a an accountant or bookkeeper, that the accountant or bookkeeper His job is to help them understand their numbers. It's not their their accountant, your accountant and bookkeepers job is to record what happened in the past and to make sure you're in compliance for tax purposes. Most bookkeepers and accountants, they're not going to help the business owner. So the fact remains a business owner has to have somebody that helps them understand the numbers and know what to do every single day in order to improve the profit and cash flow in the future. And I mean, quite simply, that's why businesses big businesses have CFOs or chief financial officers, the CFO of of Amazon helps the CEO and other members of leadership to know what's going right and what's going wrong and what to do about it. Well, business every business needs somebody like that, but most businesses can't afford a CFO So what what we've done is we've actually taken the complexity out of this. And we have a simple system where we give you a CFO to meet with on a monthly basis, and they'll show you what's going right and what's going wrong, and what to do about it. And our entire mission is to improve the profitability and cash flow of the business.

3:19
Now, okay, well, I think you got everyone's attention. So, let's, let's take a little bit of a history lesson. Where did you come from?

3:28
Oh, yeah, so I used to be an accountant. I graduated from college in 2005. And an accounting degree, became an accountant in Atlanta and loved when I work, hated being an accountant. Because you know, an accountant, your your recording literally what happened in the past is really boring to me. I wanted to work in the business and that helped a business grow and, and so in 2006, I started on the side and e commerce business. And, you know, there was a lot of I would say, it was easier to start In e commerce, business sales and sales, but there was a lot of challenges to because it wasn't. It's not as easy as it is today. But then again, back then we didn't have that much competition either.

4:10
And I should point out, Adam, that you were a senior accountant at Six Flags of all places. Yes.

4:16
Yeah. That's awesome. I love where I worked. Yeah, I was the only accountant that was ever trained to volunteer to be trained to work on the right to work and operations on rides during busy days, just because I wanted to get out of the office. Yeah, it was a fun place to work. I just didn't enjoy being an accountant.

4:35
Yeah. And so from there, you started you founded your own company.

4:39
That's right. Yeah. I mean, while I still had my day job at nights and on the weekends, I, I built an e commerce business. Well, by 2008, I was able to leave my day job to focus on my e commerce business because it was growing so much. I mean, in terms of sales, it was growing like gangbusters, yeah. But by 2009 2010 sales were still growing. But my profit and cash flow was getting tighter and tighter every single month. I had an accounting background, so I understood what was going on. And I was able to sort of take steps to fix it. But around the same timeframe, I started working with other people that started businesses. They were experiencing the same types of problems, sales were probably going up, but they just didn't see the money in the bank account. You know, where did it go? So I started helping them understand where it went. And it sort of dawned on me business owners. They don't want to deal with the numbers. They didn't get into business to deal with numbers. They got into business because they they were experts at a craft are experts at a trade. Yeah, but think about a plumber. Who knows plumbing starts a plumbing business. It's not because a finance person wakes up one day says you know what, I want to start a plumbing business. Right? So most businesses in this country are started by people who are experts at the craft of the business, not numbers, but the fact remains regardless if you want A business, a restaurant, a manufacturing plant a doctor's office, you still have to do two things you have to make cash flow. And the number one way to the best letters, there's there's multiple ways to create cash, the best way is to create a profit. So those are the two main focuses create cash and to do that, you have got to make a profit. Now,

6:26
so I mean, this all sounds very ideal what what is typically happening so if a company is like going through some growth, why might they experience cashflow issues?

6:39
Yeah, that's a good question. So and that's that's a common question is that most business owners are seeing all this sales, they're working a lot. Yeah, their salespeople are selling. They just don't see the money. And a couple things are happening. And we'll walk through an example to sort of paint a picture so let's say it was a our plumbing example. Somebody owns a plumbing business, they sell a $5,000 job to a restaurant to redo their plumbing. Well, they the plumber says, you know, gives the restaurant owner an estimate for $5,000. The restaurant owner says yes, I'll do it $5,000 and then the plumber gets to work. They, they pay the plumber has to pay his people to do the job. Whatever materials and supplies are used to do the job, let's say that was $2,000. And he's hoping to make a $3,000 profit. So he pays his employees he does. He buys the materials and all that he spends $2,000. There, the client hasn't paid yet. They just agreed to the estimate. So they do the job. They finished the job the plumbers out of $2,000 because he's already had to pay his people in this in the materials and suppliers. But let's say the restaurant takes 90 days to pay that $5,000 invoice.

7:57
On paper, the plumbers made a $3,000 profit But in the bank account, he has negative $2,000.

8:05
Because he had to pay his labor and suppliers. So imagine doing this for 40 jobs a month. Now, it just multiplies. Where does that money come from? And what if the restaurant owner goes out of business and never pays that? That $5,000 invoice? So that's just one example of why you can have be profitable on paper but never see, never have cash. Hmm. And the opposite needs to happen. You need to have cash, regardless if you have profit, profit in the bank or not. Yeah, obviously we want to make a profit but

8:41
so where does so does the CFO just provide clarity? Is that the biggest thing?

8:46
I think the CFO provides three things that helps the business owner understand the number. So clarity, yes, understand the numbers, what's going right, what's going wrong. And then the second thing is they just constantly analyze the financial strain. weaknesses. And this is something that a financially trained person does on behalf of the business. So behind the scenes, were analyzing here's, you know, if you if you change these, this price or if you hire this person or, or increase this or did this, then you know, you could see an increase. We're constantly analyzing things on behalf of the business owner. And then the third thing, the most important thing is we propose corrective actions we help the business owner create a plan to actually fix it, to actually do something that's, that will improve, move the profit and cash flow needle, because most business owners, they're honestly they're, they're working too much in the business and not on the business. That plumber is that person spending their time working in the business, getting sales and filling the sales and managing our chain. And they're just fighting fires all day and they're working a lot, but they're not saying much for it because they're not working on the business doing the things That will help improve cash and profit. Yeah.

10:04
So and I think a lot of folks might say, well, hiring the CFO, that sounds really expensive. And right now, I'm a little bit earlier stage in business, and I'm not, I'm just not sure if I have the money to make that investment.

10:18
You're absolutely right. Most businesses under $5 million in sales don't need a CFO, but they need somebody. And so that's, that's actually where we come in. We're not customized CFOs we're not virtual or fractional CFOs. We have a very specific system, a four step system. Yeah, that we do with each of our clients, which allows us to scale and allows us to charge much, much less we charge a flat fee per month, and we'll do the same for things for you. But those same four things involve helping you come up with helping you understand your numbers, analyzing the financial strengths and weaknesses of your business and knowing what to do about it. So we'll do those three main things. CFO, you know, a big CFO does, but we'll do them at a at a price that's reasonable. And we only take on clients who were 99.9% confident that our fee would be a Dorf in comparison to how much additional profit we can help the client. Yeah, yeah. Here's an example of that. We started working with a marketing agency about three years ago, who was doing about 1.1 point 3 million in revenue, but they had a loss that year, quarter of a million dollars. And the owners were working a lot on increasing sales. I thought sales was the way out of it and sales does cure a lot of problems. But that wasn't their problem. Once we started working with them, we realized that their their margins on some of their services were really low. We had them stopped working. We said stop focusing on sales and start working on the improving some efficiencies in the margins. And we were able to help the company laugh. I mean, they're still client last year, they did about $350,000 $250,000 in profit. So they went three years ago from negative 250 to 1003 50. Wow. Largely, they didn't increase sales all that much. Wow. I mean, and I guarantee you are fee was a tiny, tiny, tiny, tiny fraction of that. Yeah.

12:24
Yeah. So it's, it's more than just because I think anybody can look at where the money is going each month, and say, Hmm, do we really need to spend that? Do we really need to spend that? So how does the CFO provide more clarity than just like, why are you spending money here? Or, you know, it's, uh, you know, I guess I want to help someone who's thinking, well, this just sounds obvious. You're just going to ask me, why am I spending this money and I'm going to justify it and I can't if I can't justify it, then we need to cancel it. And in most cases, we don't even recommend cutting costs. Now. Think about it. You you cut your Costs all the way to zero. You're I mean, what,

13:03
you're still probably not going to make a profit. So the biggest, the biggest win for business is to improve cash flow, right? The bank account Ah, and most of the end, of course, we want to control expenses, obviously, but and control what's going out. But we want to get more money coming in the bank account. And there's multiple ways to do that. But here's the thing. We we create a custom scoreboard for our clients, we never show them the income statement or balance sheet if they want to look at it. They have access obviously to their books, they can look at it. Most businesses don't, because they're confusing. The income statement of the balance sheet cash flow statement. They're confusing. Now, here's the thing. Most of the things that a business needs to track aren't even on there. Most of the things that a business needs to track to get money in their bank accounts not on their things like how are you going to get leads how What percentage of those leads turn into clients? What percentage of those clients can you retain each month? What percentage of those clients purchase again? And how many times do they purchase all of those things feed into our numbers or metrics that we measure, and we help the client build this out that that measures sales. So when you pull up your income statement and say, Oh, I made $300,000 in revenue last month, you know, that doesn't tell you what, what you need to do or how next month is going to shake out. Doesn't even tell you how well you did last month. I mean, it is. I mean, so the financial statements are great for accountants, because I need them but they're not great for business owners business owners have to understand their numbers and know what to do to improve profit and cash flow. And so that's why we create this scoreboard is an easy to understand report. Yeah, color coded red, green or yellow now haha What's going on? Right, and what's going wrong and what to do about it?

15:02
So it sounds like Adam, that you make these, you know, kind of some of the benefits of a CFO accessible. And so, you know, is it is it what kind of pricing Do you guys offer? I mean, how does that work?

15:14
Yeah, so it's a flat fee per month. And we, we don't really advertise the pricing, because we like to get on a call with a potential client to make sure it's the right fit. We want literally we this is this is a relationship business, we have to you, the client has to like us, we have to like the client, and we have to be confident that we can help the client improve their property, cash flow, so we get on the right fit call. And then we'll we'll most likely offer to do an assessment on their business as it is now so we can see where it's at. And we'll show the client here's, here's some red flags and you know, opportunities for growth. And here's a plan of action that we think you should take, then we'll say, all right, based on this, here's what we can do for you. What we're confident we can do for you, and here's how much it will cost. And we practice what we preach if, if, if you're going to spend money in your business, regardless, regardless if it's on us, or employees or marketing or insurance or pay rent, it has to provide a return on investment. So we make sure that happens. And so we'll show you here's what we think we can do. Here's how much it will cost. What do you think? And then the client decides if it makes sense.

16:25
Nice, nice. Awesome. Well, Adam told me about the peace for profit podcast.

16:31
Yeah, so

16:33
yeah, we have a we have a podcast called peace for profit. The idea is that it's called P is for profit because we want to make profit. Super simple. Yeah. And that's the that's the frustrating part with accountants and bookkeepers in other finance people is they make they make profit, understanding how to get a profit so complicated, and they talk about things that don't matter to the business owner. And and Though they think it is because accountants focus on the financials to the lens of taxes, which is great, you have to have an accountant to do your taxes if you don't do it yourself. So you have to have an accountant but but they're not their job is not to make things simple. I wish they would, you know, they're not trained in that. They're they and quite frankly, most accountants don't understand business either. They understand numbers, I mean, I you know, I am I went to, I got an A have an accounting degree. Most people that I got an accounting degree with, I know that I keep in touch with I mean, they they know, tax law, they know they understand the financials and the journal entries and, and, and all that, that I wouldn't trust them to run any any business.

17:52
I love all the accountants out there listening, but you would probably agree with me if you're if you're listening to something like this, you probably understand business enough to Know that most accountants don't make it step one.

18:02
Yeah. Right. Right. So as a business yourself, um, tell me about your growth and kind of how you've been able to grow and scale your company.

18:12
Yeah. So that's, that's a good question.

18:15
We, we wanted to, you know, we wanted to create or I wanted to create a business with a very specific vision. And that was to give business owners typically smaller business owners, the same type of resources that a big business gets. I mean, most business owners in this country and most most

18:40
businesses or in this country are

18:42
ran by small business owners, all the medium sized business owners.

18:47
According to the Small Business Administration, half of all small businesses never see their fifth birthday. They just go out of business. I mean, think about one out of two businesses will not be here in five years. That's great. crazy to think about, they need help. And my mission is to help them with an easy and simple way. And so that's really been my goal. And so we've gotten some good, good, financially minded people that have what I call heart of a heart of a coach in the heart of a teacher, too, you know, those are those are, those are CFOs that we certify. They work with our clients. And, and, and that's the goal, and we want our clients to understand how to improve their profit and casual and actually do it.

19:37
Mm hmm. And so what does your structure look like you have a lot of you have a lot of CFOs as it were, that, that take clients through a process, but like, what what does your company look like? And you know, where where have you kind of taken it to?

19:54
Yeah, so I mean, it started out with me, do you know getting getting clients and servicing them myself? From then, a couple years ago, I started hiring other CFOs and getting other CFOs on my team that had the same type of passion. And so, you know, will we still get clients? You know, and then we, we assign them to the best CFO that matches that, that company. So for example, we have a, we have a CFO, that's an e commerce expert. So most e commerce businesses go to that person, there's somebody else. That's more of an expert in service based businesses, like, like heating and air, car mechanic shops, you know, things like that. We have somebody that that specializes in that. But But we all work together as a team, we help each other with our clients. Because we want to make sure that we're doing the best job for our client. Yeah,

20:50
yeah. And then, you know, in terms of like, where people like where, what do you do to grow your business and where do you go clients come from

21:02
so

21:04
many different ways word of mouth referrals. Building relationships, and, and getting referrals from those relationships. I mean, you know, the podcast.

21:21
I mean, there's there's several different ways but yeah.

21:26
Okay. And I mean, in terms of like plans for, like, do you have to do paid advertising? Or do you primarily focus on content I saw obviously, looks like you do great content use that as a magnet but, you know, in networking is always nice. But you know, anything beyond those things? No.

21:44
I mean, I would like to, honestly, I think digital marketing I used to in any commerce store, you know, so yeah,

21:50
I mean, I would spend, you know, up to someone's $50,000 on Google ads and Facebook ads. I know the power of it.

21:59
But Not there. Yeah, I would love to be. Yeah. And but I but primarily, right now focus on networking, relationship building and content building. Mm hmm. Yeah. Excellent.

22:12
He's gonna help me get there love to talk.

22:14
Sure. Let's chat. We could we could probably work something out. Awesome. Well, Adam, what is the I see you've got a couple of real you definitely have one cool freebie. Tell me about the video workshop that you offer. pro bono.

22:27
Yeah, so the CFOProject.com/video. Or if you just go to the CFOProject.com and click on how it works, there's saving goes to the same place. Basically, it's just a 20 minute video that shows exactly what we do and how we do it. And then it gives you an opportunity to schedule a call with me or one of my other CFOs for 20 minutes just to talk about your business and to see what's going on and see if we may be a good fit because what we're not high pressure people we only want to work with people that want to work with us. Yeah. Like, and so if it's a good fit, we'll tell you how, what the next steps are and, and

23:08
we'll go from there. But yeah, the video is the best place to start the CFO project comm slash video.

23:14
Awesome. All right, well, Adam Lean again, you're the president, founder of the CFO project, again on the web at the CFOProject.com. You can go to the CFOProject.com/video, watch the free video that Adam is talking about. And then of course, right now in your podcast player, the P Is For Profit Podcast. And so I think you're up to 20 some 27 episodes, so congratulations. Thanks. and uh-

23:41
I still feel nervous when people tell me they've listened to it because it's like oh.

23:47
Horrible. Oh my gosh, they listen, they get bad don't listen. Whatever you do, do not listen to the early episodes. Well, actually, it was different. It was Jennifer who was hosting for quite some time. But don't my the podcast, I've been doing the longest Is the Savings Angel Show. And so that one if you go and listen to the first few episodes of that you're like,

24:07
oh, man,

24:09
how did this guy stick with it? Yeah, yeah. Awesome. Adam, thank you so much. I really appreciate. Thanks for having me. Appreciate it. Yeah, for sure. Take care.

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