Any entrepreneur can have the best mission in the world and the best intent, but if you don’t manage by the numbers, you may wake up one day finding out that the business managed you. On today’s show, Brooke Lively from Cathedral Capital sits down with Doug C. Brown to discuss how businesses can grow their revenue and elevate their businesses by managing their numbers. Brooke is the CEO and Founder of Cathedral Capital and the author of a great book called From Panic to Profit. Join Doug and Brooke in this discussion and learn why looking at the numbers helps you grow and elevate your business and keeps your business from owning you!
Listen to the podcast here:
Elevating Your Business Through Numbers With Brooke Lively
We got a great episode. It’s one of my favorite topics to talk about. It’s one of those things that business owners don’t want to deal with most of the time but it’s so critical to their business, and that is running your business by the numbers and in this case, the financial numbers. We have Brooke Lively coming on. She owns a company called Cathedral Capital and she’s out of Fort Worth, Texas. She has a fractional CFO business. In other words, if you’ve been looking for a professional who understands finance and understands business and how to integrate that through your company to anchor the numbers and have the company anchored by numbers, you don’t necessarily need to go out and hire a full-time chief financial officer and go through all of the headaches that could be associated with that. You could hire competent people for a fraction of the cost. That’s why it’s called fractional CFO. They don’t tend to work full-time because they don’t need to in most businesses.
Somebody who understands finance and can interface with your CPA and any financial people that you’re dealing with to help minimize your taxes, help grow your revenues in your company because you know I’m all about that, and increase the profitability in the company. Brooke’s an interesting lady. She has a cool background. I recommend you check her out on LinkedIn or go to her website, which is CathCap.com. Type her name, Brooke Lively, into Google and you’ll find it. We talk a lot about numbers in this. We talk about the ups and downs of not managing by the numbers. She gives some great examples and I give some examples of clients that I’ve worked with as well of, if you don’t pay attention in a matter of 6 to 8 weeks, your business can get out from underneath you. Also, how to understand cashflow and run rate every 6 to 8 weeks and how you can manage the business with far less stress. You’re going to enjoy this one. Let’s get to the interview.
I’m here with a smart lady. Her name is Brooke Lively and she owns a company called Cathedral Capital. They are out of Fort Worth, Texas. We’re going to talk about one of my favorite subjects, which is managing your company by numbers. I know some of you out there may be going, “Oh, no.” The reality is you can have the best mission in the world and the best intent, but if you don’t look at the numbers in your business, you won’t know the real story. If you don’t manage by the numbers, you may wake up one day finding out that the business managed you. Brooke, welcome to the podcast. It’s a pleasure having you here.
Thank you for having me. It’s exciting to be here.
You wrote a great book called From Panic to Profit and all kinds of different books. Brooke, aside from the fact that you got books out on this, why do most businesses need to manage their business by the numbers? I’m always harping on this on the sales side. Optimize your sales, restructure and grow your revenue, numbers, measurements, but why is it so important?
Let’s be frank, most people start their business because they’re passionate about something or they’ve got a great skillset. It is rarely because they want to run a business. All of a sudden, you find yourself owning this company and things are getting more complicated. If you’re not looking at the numbers, if you’re not looking at things like the amount of cash you have and how long that’s going to last, the business is going to own you or there’s not going to be a business anymore.
I was working with a medical company and they were doing $40 million a year. I got on the call with the CEO one day. We were coaching together. I asked him, “You sound down today.” He’s like, “Something is wrong in my business. I can’t figure it out.” I said to him, “Tell me what’s going on.” He goes, “For some reason, I can’t see this cashflowing through the company the way it’s supposed to.” I said, “Let’s take a look at your books,” so we did. Long story short, he was being embezzled for the sum of $2 million from his chief financial officer in the company. He wasn’t looking at the numbers as intently as he should have, so he didn’t know the story. Do you find if people look at the numbers that they catch the story a lot earlier, so instead of a $2 million loss that was happening, it might have only been a $200,000 or a $20,000 loss?
More than anything, if you can find those few numbers, get control of those, and look at them on a regular basis, you will have your finger on the pulse of your business. We tend to think that there are six, but you need a handful of numbers. You’ll be able to know as things are coming up when something’s off-kilter.
That’s not a big number. What is 1 or 2 or 3 of the 6?
Let’s start with the most important one, and it’s your cash. Cash is king. We all know this. It’s the oxygen for your business. You cannot move forward and operate if you don’t have cash. We think that the first and most important number for any business to look at is your cashflow forecast. How much cash are you going to have at the end of every week for the next 6 to 8 weeks? We want to look 6 to 8 weeks out because when you’ve got six weeks before you’re going to have a cash crunch and before you’re not going to make payroll, you’ve got time to do something about that. We can try moving bills around, sell something extra, delay a bill, or go to the bank and get an increase in our line of credit. If you find out six hours before payroll that you can’t make payroll, you’re sunk.
Believe it or not, I’ve been there. In some of the early businesses I did, I got to the end of the week and I’m looking at the bank numbers going, “Geez.” What did I do? I went and I grabbed my credit cards, stripe them through, and pulled cash off the credit cards at a high-interest rate, by the way. Never mind the 3% upfront. The reality is that if we don’t watch our cashflow numbers, we won’t have enough time to react. That’s the deal. All of you reading, 6 to 8 weeks cashflow analysis and understand where your numbers are going and what you have so that you can maneuver without or at least with little stress. That’s cool. What would be another one? I’m so curious about all this stuff now.
Can we talk about your area of the world, marketing and sales?
You may have a different idea for this. Every company’s a little different, but when we look at the marketing and sales process, there are a whole bunch of things that we want to track. We want to track the conversion cycle and we want to know what our conversion percentage is at every yes because your sales pipeline is a series of yeses, correct?
If it’s done correctly, yes.
We want to look at all of that. We want to look at things referral rates by source, conversion by source, and all of that, what’s important to us, and what we think is the predictive number. I said we had six numbers. Four of them, look ahead and tell us what’s coming up. Two of them, help us get back on track. When we’re talking about marketing sales, we’re looking at sales calls booked. If the sales calls number is not where you think it’s going to be or is not where you think it should be, let’s say you think you should have three sales calls a week and you’re only having one. That means you’re going to have a cash crunch next month. We started with the cashflow forecast. It gives you 6 to 8 weeks. Now we can see clearly a month out that sales isn’t working.
It never ceases to amaze me when I look at numbers that you’re talking about within companies. They’re like, “We have feast or famine going on in our sales.” It always comes back to, “Let’s go back to the basics and track what’s going on.” The reason you’re having a feast or famine is because of X, Y, or Z that’s going on in that sales conversion cycle. People think, “That’s genius.” The reality is, it is genius if you do track it. It’s detrimental as all heck if you don’t. I firmly agree that people need to be tracking the conversion cycle numbers. By the way, that tells you if you’re having a challenge. To the extreme, I had a client, for example, they were a $48 million company. They couldn’t grow and couldn’t figure out why. They were stuck. I looked at the company and at the lead flow. From the time the lead was given to the salesperson until the time they contacted that potential client, I started looking at those ratios. What I discovered was, 62% of the time, the salesperson was not going after the client.
No, it’s crazy.
Are these people on commission?
They were, but the challenge was the company was producing so many leads.
They couldn’t even begin to cover them all.
They were cherry-picking the easiest fruit off the tree and they will not let us go by.
I would do the same thing.
As a sales professional, you want to make money.
Move the easy ones through. Don’t work the hard ones.
To your point, it would not have been caught without looking at the sales or the conversion cycle of the sales. Ratios tell people stories. When I went back to the CEO, I said, “I got some bad news. I got some good news. What do you want to hear?” He wouldn’t believe me. He’d be like, “There’s no way my sales team is doing this.” I’m like, “Here’s your data.” I gave him the spreadsheet. He called me back the next day and he goes, “We got to fix this problem.” I’m like, “Yeah.” Here’s the crazy part, Brooke. Once that went into the first contact and we could get it into what we call stage three in the conversion cycle, it closed 34% of the time. What ended up happening in taking this one ratio, we adjusted a couple of other things. The company in two years went from $48 million to $110 million in sales per year.
They just needed more salespeople.
Firstly, we cut back on the leads and we tied the compensation to the first contact because before, they were just tying it to close sales. That started getting the accountability we wanted within the sales team. On the back end, that saved them money because money out minus money in equals something. If we can get that profitability higher, which we did by cutting the actual lead cost, all of a sudden, they had some additional cash that they could work with on other things. Once that was stabilized, we then started it escalating the lead flow and putting in a hiring top sales professionals’ program with them, and they kept scaling. It was wonderful. I got a little surprise for all of you. You might be sitting thinking, “We’re talking numbers. I don’t want to deal with all of that on my own.” You don’t have to because Brooke’s company provides what we would affectionately call in the industry, a fractional chief financial officer or financial officer that will come and be part of your company without you having to hire them. Do I have this correct, Brooke?
It is. Our theory is that there are a lot of companies out there that need the strategic help that a CFO could give them, but they can’t afford to pay $150,000 a year to have that person on staff. They don’t need them 40 hours a week. They just need them a few hours a week, so that’s what we do. We give you the few hours a week that you need to grow and scale your company.
Let’s take a company that’s doing $7 million a year. Instead of hiring a full-time person with benefits and all of the potential up and down things that could happen with an employee, for a percentage of that, they could hire somebody who’s already skilled in that area. Somebody that could fit right into the system without them having all the overhead.
One of the great things about us is we make sure that our CFOs have access to a great team. Every client that comes on, not only do they get their CFO but we have analysts on staff that we can tap and pull in. We’ve got accountants, people who can do technology integrations, and real strategists. We’re able to build a team and pull in the particular skillset that we need because what your company needs changes on a month-to-month basis.
The budget has to be a little bit flexible. That’s an interesting point. You know well enough now to know that I’m baiting you to give her a call. The reason I’m doing that is because I know how important this is. When I was at a company doing somewhere around $800,000 at the time, we weren’t paying as much attention to that anchoring on the financial officer side that we should have. I got a call on November 18th and it said to me, “You got to spend about another $200,000 or you’re going to have to come up with another $150,000 in taxes,” because we were growing that year. How am I going to spend $200,000? If I had been watching things from a 6 to 8-week basis, I could have seen this coming.
If you had been working with a CFO who talks to your tax accountant quarterly or every four months, then we would have been all year long pulling aside the money for the taxes. We would rather you pay taxes than you buy stuff you don’t need to get rid of profit.
The thing is, if one’s not paying attention and they’ve invested a lot in software projects and things like I did, I needed more write-offs at the end of that because I was building to scale the business at that point. I got it stabilized. What ended up happening was I wasn’t clear enough on the numbers, so I invested a lot of money in, but I didn’t have the tax money to pay at the end of the year. I had to figure out how to reduce that down or come up with additional money. When I got into that situation, the key is you got to sell your way out of it or you got to do something in the capacity of what you do and get professionals to help you. I did both and I did fair okay.
It still was an awful conversation in November, wasn’t it?
Yeah. I don’t have hair now and that’s part of the reason I don’t because of the stress. I’m a big proponent for businesses and it doesn’t matter what size business you are at. If you’re doing $1 million or $15 million, if you’re not paying attention to this, I can tell you horror story after horror story what I discover on my side, for people who aren’t watching their numbers, if you’re not doing this, you’re losing money and you don’t realize that you’re losing money. You’re not able to take care of either the tax benefit or ways to lower your taxes. It might put the company and the owner in a higher tax bracket for something. They may not be structured right. That’s what I’ve learned. There are all kinds of things. The bottom line is, you’re bleeding money if you don’t have a chief financial officer looking over your books. It’s not that much money when it comes down to it because it’s an immediate ROI, probably year one, at least from what I noticed.
When we come into a company, we can make a change in the first couple of months. It pays for us.
In the first 60 days, you get a breakeven or better ROI for most people.
Not all the time, but most of the time.
I always figure it this way. Do we want to give it to the government or do we want to give it to something else that we really want to give it to? You’ve written several books and they’re good. I recommend people to go out and get your book. I always like to get this in early. Brooke, you were going to give away a gift to our audience. Would you tell them what it is?
I am happy to do that. The first number we talked about was your cashflow. How much cash are you going to have at the end of every week for the next 6 to 8 weeks? A lot of people are like, “I don’t know how to do that.” QuickBooks says they have this cashflow that it spits out. That thing is a piece of junk. Do not try to use the cashflow forecast in QuickBooks. It’s going to be a spreadsheet. We have built a spreadsheet that I’m happy to give away to anybody that wants it. If they go to CathCap.com/ceocashflow, you can download one. It’s got all the instructions on how to use it.
Get it now.
It’s simple and easy. All the formulas are baked down.
Everybody who follows this podcast knows that I’m passionate about the numbers. The reality is that, I always say business is easy once you remove the people.
What people struggle with more than anything else is how to manage, teach, and build up their team.
If they’re not looking at their numbers and don’t know what the numbers are, if you will, then they go out and do things like hiring a person. They’ll overcompensate them because they think they have this cash here.
I met this great guy and he was doing about $800,000 a year. He’s like, “Brooke, I’ve staffed up because we’re going to hit $1 million this year.” I’m like, “Fabulous. I totally support that.” We work with a ton of companies on the Inc. 5000 list. We’d love fast-growing companies. He starts talking to me about his team. I go through and start making notes. All of a sudden, I figured out he had $2 million worth of people. He had enough people on his staff. We work with a ton of service-based businesses. They don’t have inventory, per se. They have billable hours from their staff. He had $2 million worth of billable hours from his team. He told me he staffed up to do $1 million. I cut half the staff and he’s like, “Why were they all telling me they were so busy?” I was like, “Because you were holding them accountable for anything. They were sitting in their office binge-watching Netflix. Did you think they were going to complain about the sweet deal they had?” We fired half his team and he made a profit that next month. Talking about paying for yourself.
This is the power of looking at the numbers. This is the power of understanding the story behind the numbers. I’m constantly on top of people that I work with or people ask me about, “What are your numbers? Let’s look at your numbers.” I can tell whether they’re going to grow or not by the fact, can they show me the numbers? With a particular software product that’s putting out a cashflow, the process is not that clear or robust. Even though it’s a primary business, it’s not their primary business. They’re selling software per service. You got to pay attention.
Brooke, it’s a great story. I’ll share one back. This might make you laugh, too. I talked to a gentleman. He grew from $3 million to $17 million in one year. He was growing in this year. He called me and he was in a panic. I said, “What’s going on?” He said, “I can’t figure this out. We’re probably 60 to 90 days out of business.” They installed utility poles, so I’m like, “Did you buy a bunch of new trucks and all this other stuff?” He’s like, “No, not that. I just can’t figure this out. I’m looking at the checkbook and the bank accounts, and I don’t see the money.” I’m like, “Let’s look at your books.”
That’ll be a common theme with you. You’re like, “There are these things called books.”
They have things in there called numbers. I’m a sales revenue growth expert. I’m not a number-crunching guy. You put a spreadsheet in front of me and I go, “I’ll look at it,” but I want somebody to interpret it for me. That’s where a lot of owners get in trouble because they won’t take the time to understand what the numbers mean. I look through the numbers and I go, “Whoa.” He goes, “What?” I said, “I see $11 million uncollected over 180 days.” He goes, “What are you talking about?” I said, “Right here.”
“Right here on your balance sheet.”
This is why I’m saying use a professional and others. I asked him a question, “Who’s doing your books?” He said, “It’s my daughter’s friend.” I said, “Who’s collecting your money?” He said, “It’s the same person.” We ended up putting somebody similar to yourself in that position and they cleaned it up. They collected the money within 90 days. The clients were saying, “I have been trying to send a check to you, but I couldn’t get a clear answer on where to send it to.” It was crazy. They’re in business now and doing fine. They watch their numbers. If they had you or your company and the people in your company, this never would have happened.
We wouldn’t have been $11 million in before someone discovered it.
Brooke, how can people get ahold of you or your company?
Brooke, I always like to ask this type of question at the end because I never tell people I’m going to ask it. Forgive me if I catch you off guard a little bit, but you can recover on this one quickly. If you could be a superhero other than yourself for a day, it doesn’t matter if it’s past or present, you could pick somebody and you could be that person, who would that be? What would you do to better the world today?
I’m the daughter, sister, and niece of an attorney. We’re going to have to lawyer this up. We’re going to have to ask some clarifying questions. You started with a superhero, and then you said person. Is it a superhero or is it any person?
Pay attention, folks. This is someone who’s listening to questions and you know I’ve been a big proponent on that as well. If you could be a person, whether it’s a superhero, fictitious, or real person from the past or even today, who would that be?
I have tap-danced this around long enough that I should have come up with some answer, but I haven’t. When you initially said superhero, I’m like, “What superhero would I want to be?” I could be Wonder Woman with the Lasso of Truth. That would be cool. Also, the invisible airplane and cloak.
Wonder Woman’s great because she’s a powerful symbol for women, the movies that she puts out, and she lives in truth. If you think about it, that’s what you do on a daily basis. You hold companies to the truth.
We take a mirror and we reflect back on reality. This is where you are. There’s no judgment to it. There’s no, “You should be better or you should be different.” It’s, “This is where you are. Where do you want to go? Let’s figure out how to get you there.”
The last question, if somebody’s sitting there going, “This is a good idea. I probably should give you a call, but I’m not sure I need you. I need you but I’m not sure I can afford you,” or something with that, what would you say to that person that goes, “I’m not sure that I need this?”
Don’t come through and kill me when I say this, Doug, because you’re going to be like, “Really?” I’m going to say just call me because at the end of the day, I’m an extrovert and I love talking to people. There are a ton of people that have called me over the years that either haven’t been big enough for us to work with and it didn’t make sense or just had one small problem. I’ve had people call me and they’re like, “We absolutely have to hire you.” On the sales call, I’m like, “No. If you fix this one thing and here’s how you fix it, you’re going to be fine and you don’t need us.” I love doing those things.
One of the things I teach people is you’d be the first to walk away if it’s not a win-win sale. That’s living in truth.
We live in a lot of truth around here. Give us a call. If nothing else, I’m fun to chat too.
Brooke, I appreciate you being here. I know this is such an important topic to all businesses of all sizes, especially if they don’t have a financial officer in place today, or even if they have one and they’re thinking, “Maybe we could widen the profitability by hiring and going fractional.” Give her a call, folks. Thank you for being here. This has been a wonderful interview and I appreciate you being here.
Thanks for having me. It’s been fun.
That was a great episode. We were talking with Brooke Lively from Cathedral Capital. Go get that Cash Flow Forecast from her at CathCap.com/ceocashflow. Run the numbers and see what you come up with. It never ceases to amaze me that a lot of businesses, whether they’re growing or they’re stuck or they’re declining, when I look at the flow of what’s going on and their conversion cycle as Brooke called it. I call it the overall customer journey. When we measure metrics and we look through all of these things, it’s amazing what you can optimize and how much untapped revenue and profit is sitting there for a company.
When you do this not only on the sales side but on the financial side, you also find that the same thing happens. You can optimize things, find cashflow you never thought you had, and find cash reserves or opportunities to take cash and reinvest it wisely into other parts of the business to grow it. Download the Cash Flow Forecast. If you want, need, or desire to talk to somebody about having a fractional chief financial officer at your company, give Brooke a call. They’ll be happy to give you an honest and truthful assessment of whether or not it’s right for you. As always, if you enjoyed this podcast, please go up and give it a five-star review. If you have topics that you’d like me to cover in this podcast because I’m here for you, then let me know what the topics are. Please comment and send me an email at Doug@BusinessSuccessFactors.com or at least give me a call at (603) 595-0303. Make it a great day into your success.
- LinkedIn – Brooke (Boo) Lively
- From Panic to Profit
About Brooke Lively
Brooke Lively is the CEO and Founder of Cathedral Capital, a team of CFO’s and Profitability Strategists who help entrepreneurs turn their businesses into profitable companies. After earning her MBA in Investments and Corporate Finance, Brooke built a 7- figure company in under 2 years. As a Chartered Financial Analyst (CFA), she and her team work with Hall of Famers, INC 5000 businesses, CEOs, and Small Business Owners.
With expertise in growth management, creative problem solving, and profitability strategy, Brooke has been the named ‘Top 25 Women to Watch,’ 2016 – 2020 Diversity Journal ‘Women Worth Watching’, and ‘Fort Worth’s 2016 CFO’s of the Year’. She is a highly regarded international speaker and the author of several books. Brooke has been featured in international media including CNBC, Forbes, US News and World Report, Fort Worth Business Press, Authority Magazine, and on podcasts such as Mission Matters, The American Bar Association Modern Law Library, and The Entrepreneur Way.