A Beautiful Brand: Financial Guidance for Entrepreneurs with guest & finance expert and CFO
Natalie Copper, CEO of Copper8 Strategies, LLC, joins Jessica Eaves Mathews on her podcast to discuss why she's passionate about enabling business owners to take control of their business finances.
Jessica Eaves Matthews
Copper, eight strategies and she's also the creator of the finance Fight Club blog. She describes herself as a business super nerd, and she spends all her spare time thinking about financial strategy. You sound like me, I spent all my time thinking about intellectual property. But she Natalie is passionate about enabling business owners to take control of their business finances, which is so important, and I think it's something people avoid for as long as they possibly can often when they launched. Natalie has an MBA that she earned while working a full time job pregnant with her first child and in the last year holding that child while she finished her degree which is incredible. And she worked in corporate finance at Starbucks and in philanthropic investing prior to founding Copper eight strategies. Congress Yeah, I you because your name is cooked and I was like I keep getting confused. I want to say
Natalie Cook
I didn't think about that with a cook.
Jessica Eaves Matthews
I wonder what I looked at your name before I was like, wait, no, that's not the same stops like it's Cooper. No copper. So anyways, no one will forget it now copper eight strategies. And Natalie has traveled the world and currently lives in the Pacific Northwest with her husband, two kids, five chickens and one puppy and I just learned they just moved to a new property with acreage and so you have room to for your whole clan to spread out which is amazing. So I'm just super happy to have you here. Natalie, you and I've had some really stimulating interesting conversations and I feel like what we both do is something that intimidates people often when they're founding a company or a business, but they're two of the most important things to address and deal with. And so I'm super happy to have you here. Thank you for giving us some of your time and your expertise today.
Natalie Cook
Thanks so much for having me. I love doing these things. And I'm just excited to talk to you. So
Jessica Eaves Matthews
I'm excited to talk to you too. Well, first of all, before we jump into it, we've got some really good stuff to talk about today. But before we jump in, can you just tell people what copper eight strategies does?
Natalie Cook
Yeah, so copper eight strategies is a financial services firm. We focus on CFO so fractional CFO support for businesses that are scaling or thinking of selling in the next five years. And then we also provide advisory services and product based services for other businesses that might need some back end financial support.
Jessica Eaves Matthews
Okay, awesome. So can you explain to people what a fractional CFO is?
Natalie Cook
Yeah, so businesses need a CFO CIO, Chief Financial Officer and we have made it to you don't need a full time one. Typically, businesses don't need one until they're 2530 50 million in annual revenue. It's just too expensive, not worth the cost of hiring. And so we've made it as you get a fraction of us, but a CFO for those that are unfamiliar with the financial terms. We're a forward looking strategy person where the right hand of the CEO we help make strategic financial decisions using the backwards looking data that your accountant or controller would put together.
Jessica Eaves Matthews
Awesome. That is super interesting. I'm going to follow up on that as we start digging into some of the questions. I always think when I hear about these fractional pieces, positions that have really come about in recent years, which I think is brilliant, it reminds me of a timeshare, like for people to sort of conceptualize it and so you're not having to pay for the whole piece of property but you do get the benefit of it, you know, for for a portion of the year so I feel like that's what this is but in services forms I think it's really brilliant. And I know more lawyers are starting to sort of package them selves that way as well, which I think is super creative. It's it's such a it's such seems to be like a very perfect fit for companies that are emerging and growing. Working on scale, but don't quite need the full time employee yet for Yeah, it was like
Natalie Cook
yeah, I like to say every business needs a financial strategist. It's just a dependent depends on what size you are to what level of financial strategy you might need.
Jessica Eaves Matthews
And and this is different than just so that just in case people have these questions, it's different than having like a CPA. So can you explain to people why like, obviously having a CPA in a bookkeeper all of that's important as well, but what what do you do that's different than what a CPA would do?
Natalie Cook
Yeah, so a CPA, and I think it's so confusing because there are CPAs that do CFO support and bookkeeping and all that, but the actual role of a CPA is to file your taxes and provide some tax strategy. So they're trying to help you save money on taxes. It's not that I don't care about saving money on taxes. But my view is the whole forward looking so I'm helping you think through how to increase your revenue, how to make sure all your expenses are driving revenue and being optimized cutting expenses that are unnecessary, getting really in the weeds and your gross margin and what's working like for a product you know, do you have how are you going to source all of that and really thinking through all of those decisions? A CPA is only cares about maybe your quarterly or annual p&l and how to find those taxes. And then a bookkeeper is putting all the things in the right spot,
Jessica Eaves Matthews
right. They're just sort of data entry and categorizing. And so they're all important but what you do, I think, is something that that gets very overlooked, you know, unless you're working unless you're like in an accelerator or incubator program and you've got advisors who are making you think about these things from the start and you're having to put together a business plan and a pitch. This stuff I think tends to get overlooked. And do you find that you have to go in often after the fact and sort of clean up messes and identify money leaks and areas of financial risk? Yes,
Natalie Cook
that's most of what I do. I do a lot of forecasting, cash flow forecasting and a lot of like the oversight of how do we build a process so that things don't happen? So when you get a certain point in your business, you need like an expense policy. Well, HR does the expense policy from the HR risk, but it will help think through it from the process risk capturing all those dollars back right. And those are those are just things that we're constantly looking at i in terms of cleanup, yeah, I've I've helped to at least four or five companies in the last year, get new bookkeepers boarded and saying like actually the way that you're doing all your bookkeeping is not working. So we need to get a better system. For that overlap gets really confusing, because I don't actually do the bookkeeping, but I have to know enough.
Jessica Eaves Matthews
Yeah, data has to be there. Right. Exactly. Yeah. So that's important. Everybody makes sure you have someone who's entering the data. But then you definitely need someone so it's sort of the difference between being in the weeds and then the 30,000 foot level.
Natalie Cook
Yeah, exactly. The other thing I'll add to when it because I think this gets really confusing for people is even if you're entering all of the data, and it's all correct, there's different levels of complexity when you get to a certain point in your business where a bookkeeper may not notice. So one example when you need to switch from like cash basis accounting accrual basis, which I don't want to get technical in that but yeah, when you reach a certain point, you just it's not a good idea to continue to do cash basis accounting, and a CFO is going to help you make that decision.
Jessica Eaves Matthews
Why is that? Because I think that might be something people are curious about a cash basis, obviously is as you receive the payment you look at accrual is, it's on the books, but you haven't necessarily collected right?
Natalie Cook
Yes, exactly. So I'm the biggest for One really good example. So product based businesses, when you're on an accrual method, you are tying that sale, you're tying the cost of that sale to when the product is sold. So you're not saying oh, I bought a million dollars of inventory. So I spent all of those costs of goods in October. If you are cash basis, you would just put that in October on your p&l. And then you would have like $0 and December so your gross margin would be like 100% You know. So the accrual allows you to pull down those costs as you sell product so it matches the expense with the time of the sale and it just makes your books look clean. You can actually analyze the data.
Jessica Eaves Matthews
Right, it actually gives you a better picture of what's happening all year in your business and yeah, that's, that's helpful. So one question I think that I'm curious about is what? What one piece of advice or maybe a couple pieces of advice would you give a founder or business owner on how to set things up when they're starting to make sure that their financials are properly managed and tracked? Because I think that's something again, that gets overlooked. It's very similar to the IP side what I do, what advice would you give someone if they're listening and they're they're literally just starting, but their plan is to grow, right? They want to build something big, but
Natalie Cook
yeah, I'm not there yet. There's two pieces. One is, no matter what you do now, in 18 months or two years or at another half a million in revenue, things are gonna break down. So just know that's going to happen. So don't try to make it. So you don't need to have the system that a million dollar company has when you're making six figures, you just don't. That's awesome. You don't need to wait for those things to come up. And then the second one would be if you're the tactical piece is a do the work to make sure everything is categorized correctly. You can fix it later. But if you never put the data in there, then it doesn't exist. It's gonna come back to bite you like you file your taxes, organize your books, even if it's a little bit wrong, just do it.
Jessica Eaves Matthews
Right. And that way at least you you got a start and it can be fixed and revised and tweaks. Yeah. From the from the KPI perspective. So KPIs if something that not everybody understands what they are, especially when they're they're first launching So can you explain what they are? And then you know, when you're launching like, what are the sort of the key KPIs that you think people should be tracking from from the beginning?
Natalie Cook
Yeah, so KPI for people that aren't familiar with the terms key performance indicator. When you're first starting, you really have to look at what does success look like for you in the next six to 12 months. So you don't want to rewrite them every six to 12 months. I think that's something people overlook is I need to have all these KPIs or they just don't know what they are. So do zero, go to the middle ground with choose like three. And I would say look at the lagging indicators. So those are the ones that are going to come after the fact that you want to look at and those are really where the financial metrics come in are your total revenue, your gross revenue, your gross profit, which is your revenue minus your cost of sale, or cost of goods sold, and then your net income, and those are the three those are the three financial lagging indicators that I would start with from a leading indicator perspective, it would depend on your sales how your sales funnel works. So it would be let's think of email marketing is just an easy one to kind of have people let's say you send 1000 emails a month. Well, how many of those are getting clicked and opened and sold? That's what you would kind of look want to look out for leading indicators and then at some point, you'll get sophisticated enough where you'll be able to predict those lagging indicators with the leading ones. My advice would be understand your business model understand your sales cycle. And then set some simple ones and track them. But the biggest thing is people just don't track them. Yeah, don't take the time.
Jessica Eaves Matthews
And I feel like there are platforms that like I feel like we're gonna have, you know, people listening to this that are on Shopify, for example. So they do have some, I think some ability to track that for you. In in their system. So get to know the platform that you're selling from, because that information might be available. Yeah, you know, to you to track that information. Okay, that's super helpful. I know that's something that I didn't understand when I first launched my various businesses and I didn't even know what a KPI was, even as a lawyer. And so, you know, over over the years, you learn these things, but I think that's something that that a lot of people don't understand. So, would you say what would you say is the biggest mistake that you see founders, or business owners make with regard to their finances or their financials? Just not tracking it? Or is there something more specific than that? You
Natalie Cook
You can you can go pretty far and not track your financials, but you can't recover from mismanagement of expenses. So the biggest mistake I see is that people what I've just noticed after you know, 35 clients and lots of other busy business, p&l viewed is that people manage their business finances the same way they manage their personal finances, especially in their first business. And I think and and you can't get away from that. So whatever is ingrained in you and your personal finance will show up. And if you are a big spender in your personal life, you're going to be a big spender in your business and is not going to go well. So that's the biggest mistake is just overspending, thinking you need fancy things when you don't you don't wait till you have the cash to pay for the thing that you want. And set goals like I think, you know, say okay, I'm not going to buy this thing until you get $100,000 of revenue or I'm not going to do this thing until XYZ or just not even thinking through what those expenses how they're going to bring revenue in. I think that's a huge mistake people make is they think I feel like I'm building my business by doing an activity or by buying a thing, when they've never tied it to how it's going to generate revenue.
Jessica Eaves Matthews
Right. It's, I feel like you have to constantly be thinking of what the return on investment will be for whatever you're spending money on. And if it's not revenue generation. You have to really think long and hard about whether it's something you should be spending money on. Right, right.
Natalie Cook
Right. I think, you know, I got I got this question. The other day, too, is like, Well, what about like security software and insurance? And I'm like, well, those generate revenue because they're protecting your revenue. So Right. They're not actively out there selling you. That's not the issue, but they're protecting you from you want to make that revenue as much as possible. So the two metrics for success I think, I'll add one more thing is, especially when people are starting out is taking on debt is just, you know, it's one thing to sell finance and say, Okay, I'm going to put in this amount, and I'm gonna get to this point. But I've just talked to people recently, they're like, Well, I had all this success. So now I should take on $50,000 or $100,000 of debt. And it's like, you don't actually have to do that you already have a sustainable business sitting in front of you, right. And I've seen that happen. Over and over again. And I think we just live in a culture of like, that's normal, and it's totally fine. And I it just gets people to a lot of trouble.
Jessica Eaves Matthews
Do you find that that's also the case with investors that people just think that that's what they're supposed to do is go find investors and they end up giving away? Maybe more of their company than they should have when they could have probably bootstrapped like you're saying from revenue and just operated in a lean way and not ever needed that investment money?
Natalie Cook
Absolutely. I think. I think there's also even to go a step further. There's just so many businesses that just don't need investor funding. They have to have it or that extra funding is the level of success. That's all
Jessica Eaves Matthews
like closing a seed round and that means somehow you're you're successful.
Natalie Cook
Yeah, exactly. And so I mean, you can I just seen so many I like now I just can see it and it's painful to like look at a PAL and be like, you have a profitable business sitting right in front of you. And you were wasting it. Yeah. And that's hard. And so yeah, fundraising when you're not ready, or you don't need to write thinking it's the right thing to do taking on debt when you don't need to not fundraising and then just you know, not thinking clearly about how you're spending your money.
Jessica Eaves Matthews
Okay, that's that is all gold. That's such good advice. Okay, so then, once a business is operating, how do you know if the business is healthy?
Natalie Cook
Yeah, I love this question. I pretty stoked about this. So I'm coming out with a free financial health assessment. It's really simple. You plug in your three years of financials and it gives you an overview. Oh my gosh, yeah. So awesome. You before you watch this episode, and you can put it in there and and people
Jessica Eaves Matthews
okay, yeah. Awesome. We'll share that link. That's very cool.
Natalie Cook
Yeah. And then this morning actually went through with my insurance. Agent key want to look in a little overview how to know whether, you know businesses here viewing are healthy. And so we looked at things I think, if you're in in we talked about stages of business, so let's just take for example, your operating. You're growing, you're not running off of investor money. So you should have some sort of positive net income. So I think the things that you would want to look at are your gross margin and whether it how that is progressing over time, so it should be getting better over time you should be getting a slightly more gross margin and there will be dips right because you will be if you're building a product, you're gonna start changing some of the packaging a little bit and you're gonna have some investment here and there. So you're gonna see it go, I'm just making up numbers. But let's say you have 30% gross margin, it's going up to 35%. It might fluctuate a little bit, but over time, it's continuing to improve so that's a super healthy business. Okay?
Jessica Eaves Matthews
And that's true to like, as you grow you, you can use the MOQ the minimum quantity requirements for whoever is manufacturing your goods. If you can order more, you're obviously getting things at a better price. So that also helps increase your your gross margins.
Natalie Cook
Yeah, exactly. And then the next number we're gonna look at is your net income. And that's the revenue minus all of your expenses over whatever period of time we're looking at. And that again, I My personal preference is that people have like at least a 10% net income or a path to that they're there or not, depending on what phase of business they're in. I work with quite a few investor backed companies that are negative thing comes for a long time. Yeah, we can come back to what that looks like. There's slightly different but that to me is if and that's that's usually over the course of 12 months they have a positive net income. A lot of businesses fluctuate because of seasonality though. Net income one quarter and a huge positive net income every quarter, but over a year it's pretty even
Jessica Eaves Matthews
it evens out. Yeah. So people may be wondering, is, is net income the same as net profit?
Natalie Cook
Yes. I actually wrote in my finance Fight Club blog, I wrote a whole adjust your
Jessica Eaves Matthews
blog is excellent. By the way. We tell people what the blog is before we move into that to the difference between those two things.
Natalie Cook
It is called finance Fight Club and my goal with it is to have interesting content about finance that people can actually make strategic decisions using says what's on Investopedia which is boring and technical and make your eyes glaze over that. Yeah, half the time. I'm like, I don't think that's right. Like it's not it's not right, though. Yeah, so I love writing and that's been a great outlet, but I just wrote a blog about profitability and and and that profit is not real. There is actually no number on your p&l or balance sheet or cash flow that says how profitable you are. And it's really hard for people to grasp that and yours to grasp it as a CFO because I just was like, where's the profit? Everyone talks about profit? Yeah. And and so I so it's a combination of things. It depends on what stage your businesses it depends on what goals you have. It depends on owner pay, I think is a huge part of how healthier businesses depends on whether or not you want to sell and what it looks like to sell your business and who wants to pay it and so the things that I look for for Financial Health are you can look at EBITA which is earnings or depreciation.
Jessica Eaves Matthews
Yeah. If anybody ever watches I feel like Mr. Wonderful talks about that on Shark Tank. I don't know if people know what that is. But maybe you want to really quickly explain what it is because that's a really important number. Yeah.
Natalie Cook
So it's earnings before interest, taxes, depreciation and amortization. And if you don't, I'm not going to get into all of those. things. But it's basically like earnings where you take some things in input, pull some things out to kind of make it look, real. Depreciation and amortization are fake numbers on your p&l, they're gonna make up so that's what it's pulling out. Um, it's a good measure. It's what most investors want to look at. And most buyers want to look at. The other one that I think is more accurate is free cash flows. It's very similar, but it trips people up because you have all these like things called tax shields, and it's like, why isn't a financial analyst just doing it for me, and really, they should, um, it's a little bit more true, what it shows his cash how cash flows in your business. And so it's a little more accurate. The other one I like is financial ratios. And there's a whole bunch of those, but there's the current, your current ratio and your debt to asset ratio are pretty clear. So huge huge amount of debt and your assets can't cover your debt. That's a big red flag right? There but the main one is cash. So healthy is your business with cash. Are you able to pay all your bills every month? Are you paying yourself? Do you have cash reserves? You're doing those things with cash? You're probably pretty healthy and low risk. Okay. Yeah, it depends. Again, it depends on the stage of business growth, high growth, startups are going to have a huge amount of cash, really negative net income. Right. Steady state businesses have been around for 15 years. are probably going to have a big cash reserve. Let maybe hold them some inventory, a healthy amount of and then they're probably going to be looking at inventory health versus cash. And they're gonna have positive net income, and then they're gonna be really closely playing with their gross margin because those are the levers they can pull in their business.
Jessica Eaves Matthews
So if you are a product based business and you have to continually be ordering inventory is it how do you balance the need for I know part of it is just demand but I feel like one mistake product based entrepreneurs make is they order too much inventory. And so what what advice would you give a product based entrepreneur about that?
Natalie Cook
It depends on what you're selling. So I'll give Let's talk about food. For example, food is hardest because you have expiration dates that you're up against, right. And you have to get the product in the stores before whatever the limits are for their expiration date. So it has to go I don't really know I'm making this up, but it has to be in Albertsons before. They have to have a year left before it gets in the store so that they can hold the inventory that gets really complicated really fast. Because once you're up against those expiration dates you you got to liquidate inventory. So right you have to really pay attention to that. So when it comes to inventory, it's very specific to your business, how you're selling, how the terms are going and match it to that. And then with a other types of products that can sit on the shelf for a long period of time. The challenges that you want to look at are do you need to update the product? You don't want to sit on something if you're going to update it every year like think of iPhones, you don't want two years of iPhone inventory would do you no good, but nobody wants it anymore. Right but you might want maybe they've I don't know what Apple does, but maybe they preorder six months of inventory because they might be able to sell out. And
Jessica Eaves Matthews
they probably wait I know that is from their KPIs and having someone like you advising them all
Natalie Cook
exactly right. So it gets, I think product based businesses that piece is the once you've got cash under control, and all your expenses under control. It's just inventory management, which is the simplest part, but it's very complicated. And then your supply chain and then you're up against well how do we expand? So it's it's a constant thing that you are measuring and it grows over it changes over time.
Jessica Eaves Matthews
You know, I'm curious, if you have product based clients that come in, do you ever as a part of your service actually help them determine strategically what their pricing should be? I mean, do you do you get into that with them?
Natalie Cook
I love pricing Pricing is so fun. Um, I do pricing analysis all the time. Here's my spiel on pricing if you want. It is it is way more art than science. Yeah. So what I provide is the limits don't go below this limit on your price. Here's all the discounts that you can build in. Here's your strategy. So if you want to be a premium brand, don't build in discounts you don't want to display all that high, right? We want to talk the only thing that we might you might want to talk about with discounts is like do you need to liquidate inventory and therefore go to the TJ Maxx is in the Ross they're gonna take a huge cut. Or we're gonna like talk about
Jessica Eaves Matthews
Yeah, with Costco. Right.
Natalie Cook
Those are those are things where the limits come in. And then a lot of research on your competitors. Yeah, what they're charging.
Jessica Eaves Matthews
And do you do that as well? Yes. Okay.
Natalie Cook
We kind of just pull the whole thing together and then advise, but what I think I my financial analyst said this beautifully once she was like, I think people think you're magic and I'm like, yeah, it's kind of true with pricing. It's a lot more magical.
Jessica Eaves Matthews
The sweet spot you're interviewing for. Yeah,
Natalie Cook
well and then not only that, it's I can't I can't predict what people are gonna pay. We just have to. I think the the barrier is that people understanding pricing is I can put anything all day long into a spreadsheet and help but at the end of the day, people are gonna, they're gonna pay and what they're not going to pay so you can ask for $10 for a piece of gum and you may never get it. Exactly. And so you have to pay such close attention to customer data. So what we do is is set up those those things for especially earlier companies that are like I have no idea how to price Yeah, later sage they understand what their customers are willing to pay.
Jessica Eaves Matthews
Right. They have that trailing information to tell them what what people have produced.
Natalie Cook
Yeah. Is a lot more on the gross margin. Like okay, well what are the lowest amounts that you can pay? And then how do we get volume discounts.
Jessica Eaves Matthews
So and that is so helpful, it does help define your profit margins, right. So that's, that's useful for as a product based entrepreneur, you know, you're always thinking in terms of, you know, how do I stay within my margin, or how do I meet my margin? You know, well, I'm sourcing, you know, the component pieces and the manufacturing and the distribution costs of packaging costs, advertising all of that and, and so the pricing is such a critical part of that. And, and understanding that and having a strategy for it, so that's awesome. Yeah, I feel like if you don't have it, the next thing you'll have to design is something where people can come to your website and plug in there. Information to be told your pricing is too low or you need help with your pricing. This is you're going to go bankrupt.
Natalie Cook
Oh, that would be great. I know a researcher I should just start writing white papers on pricing. Yes. Yeah.
Jessica Eaves Matthews
Yeah. That's awesome. i That's That's okay. That's super interesting. Okay, so um, so then what are what would you say are the the keys to so say, say somebody's launched and they're starting to make sales and then they're now wanting to scale like they really want to hit the accelerator? What what are the keys to preparing to scale financially? What what kinds of things do people need to understand?
Natalie Cook
I think the biggest one is what what is scaling mean for them? So what are the goals that that means sometimes, and scaling can mean all sorts of different things I think often like for I'm sure from you and our perspective, when we work with people when they say scaling, we think immediately think of venture backed PE backed business of $10 million sitting in the bank. You could just be a steady state business that's just like ready for your next stage for growth for expansion and growth. Yeah, my my metric that I use is if you're growing more than 6% year over year in your gross revenue, you're scaling. Okay, that's helpful. Under that I kind of think of as steady state now. I'm sure someone disagrees with me on that. But that's my view if like that's high growth. Yeah. business grows every year sometimes you grow get contract a little bit and then you grow a lot the next year and that's right. Um, so that's one thing is knowing your goals. And then the second is get organized. You have this is where if you don't have thing and tax in place, like you're going nowhere, so you get to a place you get a fractional CFO, set the goals, you set those clear KPIs, and you keep building the KPIs. And then you start to optimize for revenue growth, where you're saying, okay, all these expenses, they're not driving revenue, we're gonna cut them we're gonna spend you optimize your team. You optimize your sales process. So one of the things that I do specifically with lots of customers or clients is reveal their sales teams and how efficient they're being. So if you're getting all these conversion rates, then you need six people on your sales team to meet your revenue. Right? Three you have or you have 13 And you're only getting this five of those people have to go or they got to be trained better
Jessica Eaves Matthews
or they Yes, yeah. Or they got to step up their game and yeah, okay. All right. That's good. That's super helpful. And I appreciate the the understanding for people listening that that scaling does not necessarily mean that you are, you know, a tech company that's venture backed or private equity backed and is about to, you know, go international or something scaling as you say, it's just it's just a measure of it's just a matter of growth at a certain percentage, okay, per year. Okay, so on the other. So scaling, I think is I think scaling is everybody's objective generally when you launch unless you're just like a small mom and pop store or something you don't have, you know, the intention to to expand but for product based businesses in particular scale. I think has to be one of your goals. Yeah, you gotta I mean, I definitely have I know people who are very happy just keeping it small. But the other goal aside from scaling could be getting acquired or selling. Right. So what are the keys to being prepared for a sale? And is it different than being prepared for scaling? What are the differences? Yeah,
Natalie Cook
I think they're overlapping, right? In some degree in that you, from my perspective, from the finest perspective is you have to be really clear on your value and in order to be clear on your value, you have to have incredibly clean bookkeeping. Like those have to be done. And so I think the biggest thing that I've noticed when people say oh, I want to be in that track to get acquired is they're ill prepared for how long that's going to take it's going to take two to five years, like you are just not gonna wake up tomorrow and be like, I'm ready to sell my business and then get, it's just never I don't think it may happen. I know like, I mean, venture backed companies, that's their whole track is to get acquired, you know, 99% of them are trying to get acquired, so they're building the processes all the time, but none of them and you're thinking well at some point I want to sell well you need to do today is understand what value are today. Which takes getting clean financials in place getting right yeah, is understanding your sales process. Right. And then you look at your value what could some What What would someone purchase your business for today, and then what you want to be purchased for and then figure out what the gap is. And it takes you two years to correct that gap minimum. Yeah, I've also just heard many, many horror stories of books not being cleaned up before an acquisition and so you have to go back and get audited and that cost money. It's expensive
Jessica Eaves Matthews
to be a deal killer, right? In a big way.
Natalie Cook
Yeah. And then last, it's really just like if you're selling you the products that your business sells, you have to know who's going to purchase you. Right want so I'm sure you run into this too with with IP is like are they purchasing you for their your IP or your trademark or are they purchased for a secret recipe that you have or your brain presents?
Jessica Eaves Matthews
There's lots of customer lists or yeah,
Natalie Cook
there's tons of reasons why people would purchase your business and it's probably not what you owner are thinking you're gonna sell.
Jessica Eaves Matthews
Exactly. Yeah. Okay, that's, that's super helpful. It is like IP is definitely you know, we I talk about that a lot with my clients because if you don't have your intellectual property, secured, identified, secured, protected properly, that is a deal killer, because that is what they're buying. I mean, generally by the time you're at a point where you are trying to sell it's because you have an established brand. And so it's very much tied to either your your brand and branding or your secret sauce or, you know, the proprietary, you know, trades secrets, that it's all that's all intellectual property. So that really goes hand in hand with the financial you have to have those things buttoned up and cleaned up like you're saying, to be taken seriously. I feel like in the process, if you've got someone who's interested in buying, if you don't have those things in place, I think that's a major red flag for someone who who's looking to purchase. So okay, so what steps can businesses take then to improve their financial so say, maybe they're not yet in a position to hire you? And they want to get there but they're not there yet. So what What strategies can they put in place now, to begin improving their financials until they're able to hire someone like you?
Natalie Cook
Yeah. And then at the very least, is build a calendar for financial review. So that means like, block your calendar for half an hour every month. Sit down and look at the prior month financials and like that you're already like lightyears ahead of a lot. Of Business owners if you're just Yeah, do that every month. So that's step one. For l the prequel to that is if you're not a bookkeeper or get a bookkeeper. I feel like I don't know that needs to go without saying but it doesn't often.
Jessica Eaves Matthews
It needs to be said. file your
Natalie Cook
taxes. If you haven't filed your taxes. I've had a bunch of people recently that have outdated taxes so I'm always surprised by that. But but so do those things. Those are really important things. But then, yeah, so set aside a time every month to review your financials, start creating budgets, build a budget and a forecast even if it's like I don't I don't care what tool you use. It doesn't matter. I think people get so bogged down with the tools like get a notebook and just be like, What do I think October revenue is gonna be? Right? Yeah. Be sophisticated. It doesn't have to be Excel spreadsheet. So start with that. Start creating budgets and working on a budget if again, if you are struggling personal financials, get that in place, it will help your business not gonna hurt your business. So those are helping to start working on and then you can build up the complexity there where then you go to like, Okay, six months from now, you've been reviewing your financials, you're set you're you're in the routine, and then build API's and sarca I also think my big advice is these things take time these habits take time. It's, it's really hard to get in the rhythm of doing something once a month because once a month in our brains, it's not every day,
Jessica Eaves Matthews
right? Stop building a habit. Yeah. And
Natalie Cook
so just start there. Or you know, if it helps do weekly reviews, your cat log into your bank account every day, right? If nothing. Just don't forget to pay attention to it.
Jessica Eaves Matthews
Right Yeah, exactly. I think that's so critical just to see what's coming and going and the status of things. That's such good advice. Yeah, I just I'm having visions of like all these these products, you could sell courses for people who are not quite ready to hire you yet.
Natalie Cook
I am gonna do a forecasting retreat in November. Oh, you are? Am Yeah. Okay,
Jessica Eaves Matthews
we we need info on that. That sounds amazing. Okay, cool. Well, so, so, say somebody is doing this. At what point is it time do you think to hire a fractional CFO like you?
Natalie Cook
Yeah, so I I've played around with this a lot. And I've learned from my own mistakes of of offering client things when they're not ready. found. I found a million in revenue is a good starting point to think about it. It's not always the right time. Some of my some businesses don't, you don't need that tall, three to 4 million in revenue. Okay. But I think if you are all struggling with paying yourself, you're overwhelmed with your financials, you're ready for someone else to take over. I've met a lot of business owners that they're doing something not finance related, but they have a finance background and they're probably okay for a little while. But if you don't have a finance background, and you're willing to kind of be coached and taught Yeah, probably ready for a CFO.
Jessica Eaves Matthews
Okay. Yeah, that's I you know, I there's a lot of thought leaders out there who have said, you know, you never want to be the smartest person in the room, in your business. And also the things that are not your strength, you should definitely delegate to people who are really, really good at it. And so, I think it's a good thing to think about doing probably sooner than later. Because like for me, I think you know, that's that's definitely I'm I'm just not like the finance person, and I love the legal but it would be better for me to have a partner in that, you know, somebody that that I can trust that, you know, understands my objectives and can sort of keep me on pace. I feel like so often though, we're all we all kind of come from I don't know if you deal with like the emotional or mental like mindset side of it. But I feel when it comes to finances, there's a lot of shame. There's a lot of embarrassment. So how do you deal with that? Like, what do you say to people who maybe are feeling like Oh, my God, I, I need help and I'm so embarrassed to let someone behind the curtain and my business because I have not been doing any of this. What would you say to them?
Natalie Cook
I mean, one I've seen it all and there's no judgment, like no judgment whatsoever. It doesn't. Everyone has made every mistake in the book, and you're no different than other people. And I don't mean that to just those mistakes, and it's normal and running businesses really hard. I run my own business. It's really hard when finance businesses and I see their struggle, so there's no shame. We just work on little things at a time. Yeah, that's the big pieces. It's it's small change over time. And I can't come in and one month make this massive, massive difference, right? We can keep working on I have one of my favorite clients and I shouldn't say that but I have a favorite client. A friend of mine has lots of favorite clients. I love them all but one particular we've been working together for a year and she is just now going to pay herself.
Jessica Eaves Matthews
Wow. Yeah, that's not unusual.
Natalie Cook
No, it's not and he's gonna get paid herself pricing.
Jessica Eaves Matthews
Wow. See, that's such an important conversation to have that clear. She would not have figured that out without your help. I'm sure
Natalie Cook
it was little changes over time it was we got all these things in place and then it was time to like, let's look at your pricing again. And that difference in pricing is what she's gonna pay herself.
Jessica Eaves Matthews
So for a client like that, how often do you meet with her?
Natalie Cook
She's not a she's an advisory client, not a fractional CFO client, so we met monthly for six months. And then now we do quarterly meetings. Okay. But my finance my fractional CFO clients all I meet with them every other week. I don't Okay. All of them, regardless of and they can choose not to but that's our structure.
Jessica Eaves Matthews
Yeah. Okay, awesome. So, then the next question would be and I probably this is a depends I suspect there's like no hard answer for this. But what should a business owner budget you know, for monthly financial support, like what you provide? Yeah,
Natalie Cook
so if you're a bigger company, and you're thinking, Okay, I need a fractional CFO. I like to think of it as a full time CFO is going to be 200 to $3,000 a year salary plus benefits, that's out maybe 1% of your revenue. So if you're wanting a million dollar business, you may be are almost ready to hire. Depending on the complexity, there's lots of businesses that go much later, or need one much sooner. I would budget just 1% of your revenue on financial services. Now, again, early early stage is going to be well more went way more than your revenue.
Jessica Eaves Matthews
Yeah, yeah. Just because you don't have a lot of revenue yet.
Natalie Cook
But that's a general rule. So if you think of 1% of your revenue, and you're over the million dollar mark, you're kind of close to what you might be spending on all of your financial services.
Jessica Eaves Matthews
Right, right. Okay. Helpful. Okay, awesome. So I this has just been amazing. I mean, we're getting close to almost an hour of conversation. I feel like I could talk to you for another two hours about this and just pick your brain but I I'm so thrilled to know that you're out there and you're such a wealth of information people definitely I encourage you guys to subscribe to her finance Fight Club blog. It's excellent. And, and now I love that people can go do this assessment on your website, you're going to share a link with that to kind of get a sense for how healthy your businesses and so this has just been so useful. I will share your link to your main website as well for people so that they can reach out to you. And I hope we can talk again like this is just such a meaty conversation. I feel like there's so much we could cover. But hopefully this has given people like a really good framework and some and a good starting point at least to know what questions to ask and what issues to explore for themselves. So Natalie, thank you so much for joining us today. You You're just awesome. And and I'm excited to see how many people reach out to you because I think you're gonna get some interest based on what we're talking about. Because this is like for me, I this I want to just hand this over to somebody else. I'm sure there are a lot of people that feel that way. So there'll be not that you can fully wash your hands and vote but just to have somebody like you in their corner to you know, to help them navigate this stuff I think is such a such a gift. So anyways, so thank you so much for joining us today and we will see you next time and everyone else. Look for the links below so you can reach Natalie and you can subscribe to her blog. And I'll see you guys on the next episode. Take care
