Episode Transcript
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Scott Ritzheimer (00:00):
Hello, hello
and welcome. Welcome, once
again to the start, scale andsucceed. Podcast the only
podcast that grows with youthrough all seven stages of
your journey as a founder andif you have had enough success
to lead your organization longenough and again successfully
enough to hit milestones likeyour first million or your
first 5 million or even 10million or 50 million, you
(00:23):
have probably discovered whatI did through those different
phases, and that is thatorganizations get bigger, not
necessarily better. And withall that growth, especially
when it comes quickly, comesproblems, a lot of problems,
and oftentimes financialproblems. And I have found, in
my experience, maybe otherthan people, problems,
financial ones are the mostfrustrating, because they're
(00:46):
just there and they you know,you can try to get around
them, but if you don't solvethem, they keep coming back
and they keep coming back andthey keep coming back. And so
if your revenue, you'relistening today, and your
revenue and your profit, oryour revenue and your cash
flow don't seem to match,right? You're bringing way too
much money coming in to keepso little of it, then you're
(01:08):
you're in the right place,because with us today is Tom
Dillon. And Tom is a seasonedfinancial strategist and the
driving force behind FRACfinance with years of
experience as a fractionalCFO. Tom specializes in
helping small and medium sizedbusinesses to unlock growth
through data driven financialmanagement, cash flow
optimization and strategicinvestments. His mission is to
(01:31):
demystify complex financialconcepts, empowering
entrepreneurs and executivesto make confident, informed
decisions that fuel long termsuccess. His insights help
entrepreneurs and executivesget the cut through financial
noise, focus on what drivesprofitability and make
strategic decisions withclarity and confidence. And
he's here with us today. TomI've had this question rolling
(01:55):
around my mind the last coupleof weeks, and I think you're
the perfect person to answerit, so I'm gonna say it this
way. I don't think thatorganizations have financial
problems, at least at thecore. I think that they have
decision making problems thathave financial consequences.
And I would love to hear, doyou agree with that, or how do
(02:15):
you see it differently?
Tom Dillon (02:17):
I do agree with
that. And Hey, Scott, it's a
pleasure to be here. I reallylove what you do for the
community and really helpingfounders move from that kind
of visionary gut feel decisionmaking into more of the kind
of data driven decisionmaking. And so to answer your
question, yeah, I absolutelyagree with you. It's it's
(02:39):
really not having a goodunderstanding around the
impact of those decisions,they feel like a lot of
founders move from that kindof gut feeling of this feels
like we're making the rightdecisions. And a lot of times
early on in the phases and thejourney of building a company,
you have to operate in thatvacuum of the void of no data,
(03:01):
but then you start to get thedata, and then you really want
to utilize it. But we felt sogood, and we've gotten thus
far. Why would we change? Sothis visionary kind of
transition into more of a, youknow, a leader of executives,
needs to transpire, andsometimes, and we see that at
the detriment of thesecompanies. And so, yeah, I
(03:24):
100% agree with you, and a lotof times those decisions
revolve around, you know,maybe a bloated team that
needs some trimming. That'snot happening. Maybe it's that
there's not really a stop gapwith regards to a budget. If
we hit this level ofprofitability or cash flow,
maybe we need to take a pause,revisit and really look and
(03:45):
lean on our team leaders toreorganize. So those are just
a couple of examples of thingsthat popped into my head as
soon as you asked the questionof, you know, some of these
decisions around, you know,the hiring, the margins, not
product, those are all inswirling around my head as
well. Yeah, yeah. Itdefinitely leads to the
detriment.
Scott Ritzheimer (04:05):
Yeah. So the
way that I like to kind of
articulate this to folks isit's kind of like flying, and
when you first you get yourpilot's license, which I don't
have, I took one course andrealized that's a very bad
idea for me. The checklistjust crushed my soul, but it's
better crushing your soul onthe ground than crushing all
(04:26):
of you in the air. So Idecided not to do that. But
basically, when you firststart, you're authorized to
fly by sight, right, visually.And so you look out the window
and you see the roads and thelakes and everything, and you
know where to go and and inmany ways, that's how we start
businesses right? Theintuition that we have doesn't
come out of nowhere. Itdoesn't just like emanate from
(04:46):
you. It's how you'reprocessing all the information
that you see and experience ona daily basis. But you get big
enough to where you're flyingin the clouds, you're flying
high enough you can't see thatanymore, and it robs us of the
data that our gut used to makethose good decisions. Yes. So
it's a really big deal. Now,when we go to try and cross
that bridge to okay, how do wemake database decisions?
(05:08):
There's, there's some, I foundsome pretty big problems from
a financial perspective. Andone of the things that I've
seen really great CFOs do, andthis includes fractional CFOs,
is to come in and basicallymake that financial data
accessible so that we can makebetter decisions and and so
(05:29):
one of the you listed off acouple of these already, but I
want to dig into it a littlebit deeper. How do you see
founders and their teamsrelate to data differently
after you've worked with themand helped them give get
access to that data, versusbefore?
Tom Dillon (05:44):
That's really good
question. So let me tell a
story first and then providean insight. If that's okay.
Love it. Okay. Um, so we, wecame in a few years back, but
it's just such a perfect storyfor for this question. We came
in, and we were brought in tohelp this company that was a
(06:08):
little distressed. They werestarting to have some cash
flow issues. They were lookingat getting some lines of
credit, term loans, etc. Andwe ain't paused and asked the
question, Why? Why do you needto take on this debt? We've
seen it ruin so manycompanies. Are you leveraging
it for growth? Are youleveraging it for survival?
Very good distinction. If anyof you, founders or business
(06:31):
owners that are out there needto ask yourself, that's the
question to ask before you doso. And so when we asked that
question, we started torealize that when we met with
the other executives on theteam, they all had different
answers and differentproblems, and they clearly
weren't talking to each other,and they all had solutions to
(06:52):
their current problem. And soI think to your point in
pulling in that analogy offlying by site, flying by
data, the instruments that youhave at hand that you have to
rely on. What is the feedbackthat you're getting from all
these technical tools as youfly in these clouds? Well, the
founders and or businessowners, they need to leverage
(07:15):
their team, the departmentheads, the executives on their
team. Those are theinstruments on the plane that
are telling you how tonavigate through these clouds
that you can't see and useyour normal gut feel and that
sight of the senses that hasled that led you this far, and
so when we went in there itwas, it was this kind of the
(07:37):
void that, you know, thevacuum of a lack of data that
people were trying to makedecisions in, and then it was
connecting them. And so all wedid was say, Hey guys, you you
guys are a phenomenal team.We've met with all of you. We
think you're you guys are allexceptional. But there's a
communication breakdown here.And it's not that it wasn't
(07:58):
being communicated because itwas they had their leadership
meetings, but they all wantedto say their piece, and they
all wanted to make right. Theydidn't want to listen to the
overall underlining issues andsolve the, you know, the
actual, you know, fundamentalproblems, where sales and
marketing were saying, hey, weneed more qualified leads and
(08:20):
marketing saying, or salessaying we need more leads and
marketing saying we need morequalified leads and etc, etc.
You know, you know the storyof how that goes on, and then
Ops is saying we need to hiremore people for this growth.
And so the problem was, wasconnecting all those kind of
stories, but it really justrevolved around two things.
One was having a rollingforecast where we can update
(08:43):
and see it in real timearound. Here is my issue. How
does it affect the future?Most importantly, cash number
number two was, it was the itwas the audio learners, or
versus virtual visual visuallearners. Perfect example,
(09:04):
most of the team, they neededto see the dashboard. They
needed to see the KPIs inwhich one they were being
benchmarked against, but alsotheir team was being
benchmarked against so thatthey could understand not
just, Hey, here's performanceand how we get might be paid,
because without all of itstied to comp, a lot of it
should just be tied tomanagement. The team wins, you
(09:26):
know, and if this person wins,we all win. And so once we
were able to make theimplement those two things,
which was the leadershipconversations, led to actual
implementation of fork rollingforecasts that allowed us to
understand what problems liedahead, and then collaborating
as a team of how to solvethem, utilizing those actual
(09:49):
KPIs, the key performanceindicators, the things that
move the needle in everydepartment head in which
they're kind of benchmarkhands that was transformative
and. That's what we did, andwhat we were able to leverage
into to your exact question.You know, you have these
problems. There's bad decisionmaking. But how do you
implement, how do you getpeople to listen effectively?
(10:13):
And so there's a lot ofdifferent, you know, it's the
ego management personality,the different learning types
in terms of, you know, maybesomeone has linguistic
intelligence, another personhas a processing so different
brains, right? And thenbasically being able to pull
all together and say, Allright, here are the tools
we're going to use to helpyou. So that was really
(10:33):
powerful for that.
Scott Ritzheimer (10:35):
It's so
good, and it highlights what I
think is a really importantchange, and that is that we
have to move to this being ateam sport, right?
Understanding and implementingfinancial data in an
organization of this size andcomplexity is a team sport,
and that creates a couple ofdifferent challenges. And one
is, is actually prettypractical, but a lot of
(10:56):
founders, early on play theirfinancial data pretty close to
their chest, right? It it ithas a lot to do with their
personal income and profits.You know, can be very taboo in
some organizational cultures.How do you know what
information to share with theteam and what if anything, to
withhold?
Tom Dillon (11:15):
Wow, great
question. Surprisingly, I
haven't been asked this beforeon, you know, publicly, in a
podcast, internally, we havethese conversations. So it
really boils down to what andthen when. And I think in
every team could be differentin terms of the when, but I
think the what should be, youknow, pretty, pretty
(11:39):
commonplace, synonymous acrossthe board, around for us, it's
performance. Here's the thing,high level, I'm just going to
say everything transparencywins, but with exceptions, and
we'll go into that right now.So when it comes down to
performance, it's sharing itall. It's being transparent,
(12:00):
just like the forecast and thein the KPIs, the dashboards,
all of that. Here's the onethat's kind of taboo to some
people, cash burn or yourrunway, yeah, share it with
your executive team, right?You're not going to be sharing
this with you know, middle,lower level employees who that
(12:21):
might scare and they think, ohmy gosh, this is frightening.
I don't have the ability to,you know, bet on these people
in a secure way. I just signeda lease that's expensive, and
I thought I was signing up fora huge opportunity here and
now, it sounds unstable, butfor the executive teams, if
you don't have someone thatcan help you navigate and
(12:42):
problem solve during your youryour cash burn, time periods
where things are gettingtight, maybe there's
seasonality where you do needa line of credit, and you need
to figure that out of how toget past that until you grow
to a size, or maybe you'llnever be at the at the size,
but you have to manage it. Youwant to share all that, those
different perspectives and howyou can navigate it, are
(13:04):
instrumental. I've seen suchcreative solutions come out of
the most unlikely areas withinyour operators. And so for
that, you share, you know,your cash position, your
performance, and then for us,the when. So it's the what,
and then it's the when andwhen for us again, it's that
rolling forecast. This ismonthly your leadership
(13:27):
meetings. It's shared, bestshared ahead of time, but
shared and then executed uponin terms of what are the
solutions if there's problemsor congratulating and you
know, given the the proud kindof cheers for the people who
have really been crushing it.And so that opportunity of the
(13:48):
when now the what not to sharethese would be, I mean,
executives, a lot of them haveaccess to HR, not all of them.
But, you know, salaries, anykind of sensitive HR stuff,
big hypothetical scenarios oflike, oh my god, if we lose
our biggest client, we're donefor not necessary. It's
(14:12):
obvious. But like, we don'tneed to sit here and play
scenario analysis and scarepeople. And then there's the
one thing about like, ifyou're going to be having
those conversations with yourboard or an investor, yeah,
keep those private. If you'reraising capital, you know the
investors need to know whattheir downside risk is. Your
team, your employees. Don't.You know the success and
(14:34):
failure rates of startups.It's you know, if someone's
signing up and they don'tunderstand the inherent risks
associated with startups. Imean, shame on them, but like
in terms of managing people,egos and productivity of
people, yeah, you know, youdon't want to play out those
scenarios that's going to endup having your top talent head
(14:54):
for the hills.
Scott Ritzheimer (14:57):
Yeah. I
agree on all this front. And
so I think one of the thingsthat that could be missed with
a casual listen is howimportant it is to shift from
what we do with financialreporting typically, which is
what happened, to what youkeep saying, and rightfully
so, is actually using it toforecast what will happen,
because you can't make anydecisions to change what has
(15:19):
happened. You can only makedecisions as a management team
about what will happen. And sogetting in that habit and
building the skill like itdoesn't come automatically.
And this is where someone likea CFO or fractional CFO is
really helpful. Like, justbecause you want to have a
rolling cash forecast doesn'tmean that you know how to do
that. And so making sure thatthat is done well and it's
(15:41):
reliable to the extent thatthat's possible, is a really,
really important skill todevelop as a team. I couldn't
agree more on all fronts thereTom this conversation could go
for a very long time, but Iwant to get to one question
I'm dying to hear your answerto before we let folks know
how they can get in touch withyou and find out more
directly. But that question isthis, what would you say is
(16:03):
the biggest secret that youwish wasn't a secret at all.
What's that one thing you wisheverybody watching or
listening today knew?
Tom Dillon (16:13):
That you don't
need to be a financial expert
to run a great company, butyou do need to stop pretending
like it doesn't matter. Thinkthat's the biggest secret that
I could possibly share withpeople to have it resonate and
and hopefully take actionbecause of it.
Scott Ritzheimer (16:36):
Yeah, so
true. So true. So tell us just
quickly. What do you folks dothere at frack finance? And
where can we find out more?
Tom Dillon (16:44):
Yeah, so we're a
corporate finance advisory
firm boutique, and so wereally help companies that are
in their journey of eitherbuying, growing or selling a
business, and ultimately inthat growth phase it is. You
kind of think of it asoutsourced finance and
accounting type work, and wereally help companies grow and
(17:05):
and that's really our focus,both on organic and inorganic
growth. And so growth throughacquisition, buying, buying
companies as well. And so youcan find us best, to find me
on LinkedIn, and then also youcan also reach us on our
website@frakfinance.com, whichis F, R, A, K, finance.com
Scott Ritzheimer (17:27):
Fantastic,
Tom, thanks so much for being
on the show. It was a realprivilege and honor having you
here today, and for those ofyou watching and listening,
you know your time andattention mean the world to
us. I hope you got as much outof this episode as I know I
did, and I cannot wait to seeyou next time. Take care.