Cash Flow is King! | 7 Figures Club Podcast

Transcript

7 Figures Nation (00:00)

Seven figures nation. Welcome to another episode where we bring you the experts and the professionals who are going to share the tactics, the tools and strategies to help you generate seven figures of cashflow and profits into your business. Join that very small percentage of business owners that build their dream business and their dream life. Today’s guest is Dan DeGolier.. Dan has decades of expertise helping entrepreneurs and growing businesses, or excuse me, growing businesses and helping them gain greater insight into their business through finance, accounting, data visualization, solution. He has worked alongside leaders of companies to help them understand their finances and their cashflow, obtain capital needed to grow, which also is important with your cashflow and navigate financial intricacies from startup to scale up. Dan, welcome to the show. There are over 32 million businesses in the U.S. and over 90 % of them will never break seven figures in annual sales.

So how do we as entrepreneurs or aspiring entrepreneurs break into that seven figures club? This podcast will relentlessly share the secret strategies and tactics I’ve used to create three multi seven figures businesses and bring in even more successful entrepreneurs than me to share their inspirational stories and tactics to success. You can create your dream business and life right now. So buckle up and let’s go.

Dan DeGolier (01:21)

Thanks for having me Leo, happy to be here.

7 Figures Nation (01:25)

We’re excited to learn a little bit more about these important metrics. And I think for a lot of business owners, when they’re trying to understand what are my key performance metrics in terms of some of the financial numbers, and oftentimes just putting that to the side and hoping the bookkeeper is figuring things out for which they’re not. And so this is going to be a really important conversation. Everybody’s going to need to take a lot of notes and probably listen to it a couple of times. But before we jump into these important areas of expertise, you’re going to be sharing with us.

Tell us a little bit if you could about your story, the path to entrepreneurship, any key events, and also any adversity maybe you found along the way on this entrepreneurial journey that you’ve been on.

Dan DeGolier (02:08)

Yeah, sure. Thanks so much. So, you know, I started out in public accounting, which was an interesting ⁓ extension of my education, but I was really focused on innovation and technology and growth and disruption. so ⁓ early in my career, I kind of moved over towards tech and towards software and technology companies. But I always had an interest in entrepreneurship. And so I loved working with with entrepreneurs.

and just found myself in a situation where I had, ⁓ you know, been, been working a couple, ⁓ kind of, you know, 50, 60 hour a week jobs and, and then had taken a role, ⁓ with a, a full-time CFO of a pretty early stage company that, ⁓ quickly I realized they didn’t really need a full-time CFO. needed, they needed my skillset. They needed, ⁓ help with.

with things like financial modeling and cashflow forecasting and fundraising. But it really wasn’t a situation where they could afford nor did they need a full-time CFO on their team. So that’s when I kind of had a light bulb moment and said, wouldn’t it be interesting to do this for several companies? So I started working with several companies at a time as a part-time or a fractional CFO.

And it was a pretty good model. so I started scaling it. I added more people to my team. Now we’re just about 40 people total from, yeah, from CFO to VP finance controller, county manager, senior accountant, financial analysts who focus on our data visualization solutions, things like that. So, yeah, kind of, I wouldn’t exactly call it accidental, but it wasn’t like it was a hundred percent intentional until I realized.

7 Figures Nation (03:38)

That’s a decent sized team.

Dan DeGolier (03:58)

this is a cool model. Let’s scale this.

7 Figures Nation (04:01)

Interesting. So your background is in some regards as a chief financial officer and you work for different companies and that and other types of roles. And so you’re working for a startup and you’re realizing, yeah, they really don’t need the full time, but they definitely need your skillset and all of the expertise that you bring to the table, but in more of a part-time position. And as you look around at a lot of the different businesses out there,

You know, what are the businesses that really fit that mold? Obviously you’re publicly traded company. You’re really big organization. You gotta have a full-time CFO, but I think there’s a lot of misunderstanding of how effective a fractional, you know, CFO can be. And maybe even talk a little bit about the difference between just a regular accountant for a business bookkeeper versus a fractional CFO.

Dan DeGolier (04:54)

Yeah, sure. I’ll start with that last part first. So the difference is a CFO is going to be very strategic. ⁓ We like to describe it. CFOs are looking forward. They’re looking through the windshield where accountants are generally looking through the rear of your mirror. They’re strategic. You need good accounting to start with, right? You’ve got to have good, accurate books ⁓ in order to do the analysis on that and understand where you’re going.

And so I think that CFOs are, they oversee accounting, but they also see finance. They understand you’re looking at your margins and your growth prospects and your pipeline and funnel and where you’re going, I think is a critical piece for the CFO. And I’m sorry, I forgot the beginning of the first.

7 Figures Nation (05:41)

No, no worries. Let’s let’s repeat what you just said there, because that is very powerful. Essentially, what you said is accountants in their role are looking at the rear view mirror. They’re telling you, hey, here’s what’s happened. Here’s the numbers. So you’re tax return. Right. What happened here? Why is your profit bars? mean, so they’re telling you what happened. And what you’re explaining is the CFO is forward looking, looking through the windshield and be like, hey,

Dan DeGolier (05:59)

short.

7 Figures Nation (06:11)

There’s some obstacles coming here. We need to be aware of this. We need to a forecast and make the right decision.

Dan DeGolier (06:18)

There’s

opportunities to accelerate growth and things like that.

7 Figures Nation (06:27)

Yeah, no, that’s extremely important, understanding that. And then the other question that this leads to that we were talking about earlier is, so what’s the distinction? How do you know if you need a full-time CFO versus a fractional CFO? And I think this is an important question.

Dan DeGolier (06:47)

Yeah, I think a lot of companies ⁓ maybe don’t know what a really qualified CFO is really capable of. A lot of times it’s not unusual to have somebody who’s a controller with a CFO title, somebody who’s a really good accountant and they’re probably, maybe they’re pretty good at financial planning analysis, FP &A. ⁓ But I think, ⁓ you touched on it earlier before we started, which was

you know, a four year, a really qualified CFO is going to cost you 400K a year all in between benefits and taxes and, and maybe some equity sharing and things like that. So a lot of companies can’t afford that, ⁓ that person on their team. And frankly, that person may not, you know, if a company that’s under, you know, 30, 40, $50 million in revenue, they probably don’t, ⁓ you know, they’re, they’re probably, there’s not enough for them to do on a strategic, from a strategic standpoint.

But by utilizing a fractional person, somebody who’s very qualified, who is worth, you know, 400K a year, but you’re only paying for a fraction of their time. So maybe you’re paying for, you know, 20 or 30 or 40 % of their time, and you’re able to get that person on your team, they’re just not full time, but they’re able to lead your accounting organization and your FP &A organization and things like that on a, you know,

two or three day a week basis.

7 Figures Nation (08:11)

Yeah, exactly right, Dan. So for those business owners listening, maybe some of them in the startup phase, some of them were established, but they’re looking to grow and they’re trying to assess, you know, I know a lot of them, they might have bookkeepers, they might have a CPA who does their taxes and maybe even does, you know, the P &L financials on a month to month basis. What would a fractional CFO specifically

what are some of the things they would do on a month-to-month basis ⁓ that would be completely different from what that accountant, bookkeeper, controller CPA is doing.

Dan DeGolier (08:49)

Sure. Well, again, it’s going to be a very strategic sort of role. They’re going to be analyzing the numbers. They’re going to understand. They’re to be able to find opportunities and obstacles, as you mentioned, in what’s happening with the business. And they’re going to really be monitoring those KPIs and understanding what are the key performance indicators that the company needs to be paying attention to. What are the drivers for the business? Every business is a little bit unique. What are those drivers? What are those KPIs?

What are the pieces ⁓ that need to fall into place in order for you to scale your growth?

7 Figures Nation (09:23)

That’s huge and just a value bomb you just dropped on everybody. You might have key performance indicators in terms of your sales and conversions, but there are also key performance indicators in terms of your financial numbers. As you know, with all of your experience, what are some of those key components that a lot of businesses, obviously every business is different. What are some of those KPI numbers that really, you know, small business owners should be paying attention to?

Dan DeGolier (09:50)

Yeah, I mean, every company is a little bit different and every industry is going to have their specific APIs. But if I’m speaking broadly across ⁓ a wide number of industries, I think things that matter are your sales pipeline. What does that look like? What is coming down? Your cash flow is critical. ⁓ Are you hitting your goals when it comes to cash flow ⁓ on a month over month basis? Your gross margins, obviously.

⁓ And that’s, you know, by product line or by service line or whatever, ⁓ whatever the components are that drive that, you know, gross margin is the starting point. of ⁓ course your growth rate, especially revenue and EBITDA. ⁓ want to, know, those growth rates are critical. you know, across other industries, I’m happy to talk a little bit about some specific industry KPIs that are common. But again, I want to emphasize that

every company is going to be a little bit different as far as what their their KPIs and that’s where a CFO comes in where they can really, you know, take apart those, you know, peel back those layers of the onion, take things apart to understand what are the true drivers.

7 Figures Nation (11:00)

No question because it’s so so impactful because if you start focusing in on the EBITDA number for example in your year over year growth and you can make some changes because you’ve got a good fractional CFO that can guide you on that be like hey if you made this change this change your EBITDA now increases you know by three or four times and now the value of your business just really exponentially increased and obviously that’s important to the business owner the entrepreneurs is paying attention to that.

Dan DeGolier (11:30)

But depending upon the business, like depending upon who it is, I mean, that may be not the most important driver, maybe revenue, maybe from a valuation perspective, some companies revenue may be more important and maybe you need to be investing in more capital. If you’re manufacturing company, there might be some capital investment that needs to be made. So that’s going to going to affect cashflow, but it’s also going to be long-term thinking. So, you you’ve to balance the short term with the long term when it comes to what your biggest drivers are.

7 Figures Nation (11:59)

Great point. So you could be in a position like you’re saying there where actually, you know, you do have money that you could increase your EBITDA on your overall valuation, but you’re going to actually win a lot bigger if you take that money and those profits and reinvest it back into growing the company, especially in the manufacturing. So yeah, really good point there.

Dan DeGolier (12:16)

sales and marketing, right? mean, you might, you know, you’re gonna have you’re gonna have a spent. So, you know, capital doesn’t necessarily affect EBITDA because it’s, you know, the D and EBITDA is depreciation. And, and so it’s more of a cash more of a cash effect. you know, investing in your sales and marketing organizations in your in your R &D, those are the things that are long term bets to drive to drive future growth. you know, you’ve got to you’ve got to weigh the pros and cons of

of your long-term goals and be very clear on what you’re trying to accomplish.

7 Figures Nation (12:48)

And in that regard, where facts are important, numbers are important, understanding these dynamics, very important, but stories, stories teach us better than anything. Are there any case study examples that you can think of? You know, don’t obviously need to mention names or anything like that, but any case studies where you see like, hey, you know, there was this company, they had these issues or they had this opportunity. And as a fractional CFO, here’s what was able to take place.

And here were the amazing results because case studies are just such a powerful way any any case studies examples you could think of or give an idea of share.

Dan DeGolier (13:27)

Let me think for just a moment. ⁓ There’s ⁓ plenty of situations where a company is thinking about an exit. The owners have owned the company for a number of years and they’re like, okay, ⁓ now we get some people are starting to sniff around and taking an interest in things. And you realize, ⁓ my books are not GAP. They’re not a cruel basis. They’re not generally accepted accounting principles.

And ⁓ we also don’t have really clear forecasts. an investor or buyer in this case, ⁓ investors and buyers are similar, whether they’re buying all the stock or some of the stock. ⁓ And so they’ll bring us in and saying, yeah, we need this fixed. We need to have really clear, accurate financials that can be audited. And we need to be able to ⁓ understand what our forecast ⁓ looks like and what can we

what can really accomplish. So we can tell that story to that buyer about what they’re really buying and be ready so they can move very quickly to populate that data room and be prepared to ⁓ execute on that transaction. And so that’s probably one of the biggest case studies we’ve seen is companies that say, ⁓ we’re not really ready. We need to get ready.

7 Figures Nation (14:48)

No, no, there’s a lot of people listening right now. They’re probably in that boat. And one of the key words that I keep hearing you say, and I’m seeing this become more and more a factor that people are starting to pay attention to, but they don’t understand how to do it is forecasting, forecasting cashflow, forecasting growth, forecasting all the important metrics that you need to be paying attention to foremost, in my mind is probably cashflow. How does that work? How do you forecast accurately and

And how powerful and important is this to be integrating into your quarterly assessments as you look at it?

Dan DeGolier (15:26)

Cash is everything, right? I say that cash is oxygen for a business. Companies that are growing, if they run out of cash, they’re still dead in the water. You have to really understand the visibility around that, whether you’re growing just by bootstrapping and through cashflow, or whether you’ve got outside debt or equity or a combination of the two, you’ve got to really be able to have the headlights turned on, the brights on.

to be able to ⁓ know, to make your decisions, how they’re gonna affect cashflow. So if you are gonna invest, as I was mentioning earlier, investing in sales and marketing and R &D, ⁓ you’ve gotta have a real clear visibility as to how that’s gonna affect your cash. And you’ve gotta have, you know, the forecast, you have multiple scenarios, right? You gotta have kind of your primary sort of middle to runway sort of goal, but you wanna have a downside scenario. What happens if you lose your biggest couple of customers?

What’s your upside if you suddenly see a bigger pipeline and you’ve got to then produce, whether it’s services or product, how do you meet those goals? how is that going to affect your cash flow? you have access to an AR line of credit or other debt facility or ⁓ investors to execute on a growth strategy? You’ve got to be prepared for different scenarios because you don’t know what the economy and the market’s going to throw at you.

7 Figures Nation (16:51)

No question. Forecasting is just such a powerful tool. Are there different cashflow forecasting softwares that fractional CFOs use to make this easier? Are there a lot of ⁓ Excel spreadsheets that are put together where you’re all kind of working out of that? How do these reports actually come to fruition?

Dan DeGolier (17:15)

I would say historically, ⁓ most companies use Excel. An Excel spreadsheet allows you to run different scenarios, but more and more we’re seeing companies start to look at more modern tools. We’re leaning pretty heavily into our data visualization solutions. We’ve branded it ⁓ Insights by Ascent CFO, in which we were able to put that logic into ⁓ a modern BI type infrastructure.

and able to do forecasting ⁓ in there where you’re pulling real-time data from your accounting system, from your CRM, maybe from your HR systems, and have a clearer visibility into your business across the entire business. know, Excel works for a lot of companies still, but we’re starting to see ⁓ more more evolution of that to more modern tools.

7 Figures Nation (18:09)

Very, very incredible. Yeah. Got to leverage technology. No question about it. Let’s, let’s.

Dan DeGolier (18:14)

We haven’t

even talked about AI yet, right? mean, you know, that’s, that’s going to change things too.

7 Figures Nation (18:19)

What do you what do you forecast as a fractional CFO CFO expert? What do you think ⁓ AI is going to be able to do to, you know, make this even more effective in terms

Dan DeGolier (18:29)

Yeah, I mean, I mean, it’s so it’s moving so rapidly. I think there’s so much so much opportunity there when it comes to how AI is going to influence the CFO’s office. ⁓ You know, I think that a lot of a lot of roles are going to change throughout organizations. ⁓ As as you leverage that tool, I think there’s always going to be a need for humans to to do the to do the things that need to be done. But ⁓

Yeah, we’re definitely paying close attention to what’s happening in that universe and how it’s going to affect how we can, you can really leverage that those, these modern tools. ⁓ But it’s still pretty early, I think, even though it’s moving far rapidly than the dot-com explosion, the internet explosion in the early 2000s.

7 Figures Nation (19:19)

Yep, no question. Pay attention, AI is going to be something that really ⁓ moves the needle and. Exactly right. Businesses that harness it, those are the ones that are going to see incredible progress and results and those that don’t will not. Let’s end with this. You talked about the importance of exit strategy and at the end of the day that the.

Dan DeGolier (19:26)

Don’t get left behind.

7 Figures Nation (19:44)

What you’re what you’re explaining to everybody is understanding the financials on these numbers. This is how you get that result. This is how you have that exit that you want to. If you could distill it down to a few key things to focus on for everybody listening on what are some of the key things that you would look at to increase your overall value where you can have an exit because far too many businesses are not creating an exitable business. And I think there’s just

They just don’t know what they don’t know.

Dan DeGolier (20:16)

Yeah, you know, I hate to beat a dead horse here by cash flow, know, cash flow, don’t run out of cash, don’t run out of cash, don’t run out of cash. And also and growth, understand what is driving your growth. Like take the time to understand the KPIs that are really going to help you grow both your top line and your bottom line. If you’re planning to exit, companies want to see growth and they want to see healthy margins.

7 Figures Nation (20:44)

Unbelievable. So many value bombs that you shared with us today. And this is not a passive podcast, This is a podcast for action takers, for entrepreneurs who are building exitable businesses. And there’s probably a lot I’m saying, here’s a few things I don’t know here. Maybe I really need to consider looking at a fractional CFO. What action can they take today to start looking at that option and figure out filling in a lot of the leaks that they might have in their business?

Dan DeGolier (21:15)

I mean, you know, there’s, ⁓ we’re a national firm. We support companies nationwide. So feel free to reach out to us, but also ask other entrepreneurs in your community who they’ve, who they’ve worked with and who they’ve found, found success with. But, ⁓ you know, engaging, engaging in fractional CFO can be a really viable option for a lot of companies. As you mentioned, public companies are generally too big, but

We’re generally targeting companies anywhere from 2 to 3 million to $75 million in revenue. So it’s a very viable option across lots of different industries to get the kind of expertise you need. Whether you have a really solid accounting team and you just need to have that CFO layered on top or firms like ours will have a full stack of people from CFO down to senior accountant and happy to ⁓ plug in a whole team to be as cost effective as possible.

7 Figures Nation (22:09)

Incredible. So if you’re a business owner listening right now and you’re in that two to three million annual revenues up to 75 million, you’re looking to grow. You’re looking to create an exit will business. You’re looking to improve cashflow and implement all of the experience. Then you can go to a cent CFO. That’s a cent CFO.com and look at some of those options. And then if for whatever reason, you know, it’s, not a fit for your specific type of business.

Do look at fractional CFOs because it’s an affordable and such an effective way to grow your business, improve cash flow. And just these are things that are not readily available. They’re not going to be necessarily implemented by a new MBA student that you hire. Like you need somebody with experience who’s been in the trenches building business, which is exactly what Dan and his team have been doing.

Dan DeGolier (22:57)

Yeah, thanks so much. We also put a lot of content out on LinkedIn. It tends to be the place where we share much. So feel free to follow Ascent CFO on LinkedIn. We put out ⁓ what we hope is valuable content frequently.

7 Figures Nation (23:12)

Amen. Yeah, I love LinkedIn. Gary Vaynerchuk still says it’s the number one unutilized platform that business owners need to be utilizing. So if you’re not active on LinkedIn, that’s definitely something you need to be doing. You need to be sharing content and sharing your core competency with the world on LinkedIn. And then, you know, following the right people, the right organizations like Ascent CFO and learning, because that’s what this game is. It’s learning and getting a little bit better every single day, every single week, every single month.

and year after year you’ll see the results. Well thank you so much for being a guest on the show today, for sharing so many value bombs. Again, it’s Ascent CFO. Check it out. Implement Fractional CFO in your business. Thank you, Dan.

Dan DeGolier (23:53)

Thanks so much Leo, appreciate it.

7 Figures Nation (23:57)

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