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The Path to Profit: Insights from a Virtual CFO. w/ Manny Skevofilax
•Craig Moen & Shye Gilad | Business Owners | Entrepreneurship | Small Business
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Unlock the secrets of profitable business growth with insights from Manny Skevofilax, celebrated business consultant and author of "Ultimate Profit Management." Discover why bootstrapping is making a triumphant return and how focusing on profitability, rather than chasing venture capital, can lead to sustainable success. Manny sheds light on the common misconception that external funding is the only path to growth, sharing examples of businesses thriving through calculated, gradual expansion. Additionally, we explore the influence of technological disruptions, like artificial intelligence, on profitability and the importance of staying adaptable in ever-evolving markets.
Navigate the complexities of financial growth with expert strategies tailored for business owners. Learn how to forecast your financial needs accurately, set realistic growth targets, and avoid the potential pitfalls of aggressive expansion. Through the lens of a virtual CFO, gain valuable insights into the importance of regular financial reviews and how comparative analysis can be your guiding light in understanding market corrections. Whether you're a small business owner or an executive steering a company through the challenges of scaling, our discussion provides the tools and knowledge you need to ensure profitability while investing in talent and infrastructure for continued growth.
Business Owners Radio is a podcast that brings you insights, inspiration, and actionable advice from successful entrepreneurs and business experts. Hosted by Shye Gilad and Craig Moen, our show aims to help you grow your business and achieve your goals. Join us every week for new episodes packed with valuable tips and resources.
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And now Taking Care of Business, your hosts Craig Moen and Shai Gillod.
Speaker 2:
Welcome to Business Owners Radio Episode 248. Joining Shai and I in the studio today is Manny Skivo-Felax, business consultant and author of the new book Ultimate Profit Management Maximizing Profitability as you Grow your Business. Manny has helped countless business owners find a more effective way to grow their businesses without causing it to become unprofitable.
Speaker 3:
Good morning, manny. Welcome to Business Owners Radio. Hey, thanks for having me. Well, we're certainly excited to talk with you today. Happy to get a copy of this book. Ultimate Profit Management Maximizing Profitability as you Grow your Business. Wow, that is definitely a very important topic for all of us business owners. Tell us what inspired you to write this book. Great question.
Speaker 4:
I felt like there was a lot of emphasis placed on being funded or having outside investors over the last like 17 years, and the old bootstrapping method seemed to just not get mentioned as much anymore. And I work with a lot of small businesses. That that's how they do it. They grow slowly and steadily and make a sustainable business, and I wanted to give hope to other business owners that this concept, as old as it is, is still alive and well. So that was really the big inspiration.
Speaker 3:
Yeah, it's interesting. We work a lot with startups, especially in an academic environment where we have student startups and I agree, I think a lot of the dialogue and a lot of not so much education, but maybe what's in the zeitgeist around entrepreneurship seems to be focused on fundraising. Everybody's excited about venture capital and what round and how much money they raised. I'm like, well, that's great, but it turns out that very small percentages of businesses actually grow using that kind of capital. Using that kind of capital. You're missing out on such a large sector of entrepreneurship where people are running very profitable enterprises that they have built slowly, methodically and created really great value and a really good lifestyle for themselves along the way.
Speaker 4:
Yeah, that's really well said, Shai.
Speaker 3:
It also helps people are able to hold on to more equity in their business as they start to think about their long-term goals and look towards exit. They can remain in the driver's seat a little bit, which is really a big deal, and I know that you have a background in banking and, as you said, you've seen a lot of business owners go through this process. What are some of the pitfalls? The book is really around managing profit as you try to grow, and we know that growing businesses are just tremendous consumers of cash. So how do you like to think about this balance?
Speaker 4:
You know, based on what my teachers and mentors have taught me over the course of my career, the first thing was make sure that you can make money doing what you like doing. There have been many historical examples of businesses that sound good and cool and everything, but they don't make money. And if you don't make money then there is no future in that business. Therefore, we have to put profit as kind of like the first thing. That is really going to be the marker of whether or not this business is going to be successful.
Speaker 3:
Yeah, I think I love it when people speak in sort of these fundamental truths, right? So creating value is great, but can you also receive that value in return? And without profit? You're just not going to be around for that long. Regardless of where your funding comes from. Right, eventually it's going to go away. So what kind of measures do you think about when you're talking about healthy, profitable businesses? Are there benchmarks or rules of thumb that you're looking for when you're analyzing business models?
Speaker 4:
You know, generally speaking, shai, it depends on the business. I will definitely try to understand, first and foremost, what the SIC or NAICS code is, to give just some kind of light in terms of where we're supposed to be looking, where a reasonable benchmark is and you know, these things are not perfect, but they're a guide, they're a way that it can give us some guidance. So, for example, if your company is a service-based business doing between one and five million you know our country is really good at statistics, we've got statistics for everything. They provide all those different metrics. You know they provide P&L metrics, they provide balance sheet metrics, they provide return metrics. So you can get a reasonable idea if your business's profits, based on its revenue size, it's kind of in line with its peer group.
Speaker 3:
Yeah, so it sounds like benchmarking, or trying to understand who you're up against and really understanding the market. You're getting yourself into right, like I like how you started by saying, first of all, you got to make sure that it's something you actually like and that you can be profitable there, but also the market is just so important, right. All the best intentions and even an opportunity for near-term profit can be dwarfed by megatrends that tend to disrupt marketplaces entirely, and it certainly feels like we're in an era where we see more and more dynamic markets, more and more international markets and more disruption by technology.
Speaker 4:
Yes, definitely. The interesting thing is we had a disruptor already called the internet in our lifetime and it looks like this new one called artificial intelligence is the next one.
Speaker 2:
So it'll be really interesting to see how AI affects profitability and see if it helps productivity and like we're in the phase of growth and it's growing organically, but we have this feeling like, in order to get the economies of scale and production and so forth, that we really want to accelerate that growth. What are some of the warning signs that you would like to make our listeners aware of that? Looking at that growth and how much growth, and what's a sustainable growth and what's realistic, that's a great question.
Speaker 4:
So in my opinion, based on my experience, there's two ways to take a look at this, because I like to do things very simply. The first would be to understand really simply how much cash you know. Do a back of the cocktail napkin calculation, how much cash you think it's going to take you to grow the next 10%. If you're doing a million, what's it going to cost to do the next hundred or 200 or 300,000? That's a simple one. The other one that's a little more complicated is you can either use a projection model or get somebody that knows how to do one of these financial projection models and put in your growth assumptions. Let's just say you're trying to grow the top line by 20% and it will actually calculate a number for you that says at this threshold of capitalization you're going to have borrowing need.
Speaker 4:
So there's two ways there to assist the business owner. Generally speaking, I like to advise of course, not all business owners see it the same way I like to advise to go slow, to set a reasonable target, to try not to go crazy, because I think we've seen things that are a little crazy, like 10, 20, 50% annual growth. They try to just make it reasonable. Engage how it's impacting your cash.
Speaker 2:
You've consulted with a lot of companies and a lot of business owners and in the market space today or in recent times, what are some examples of some of the tragedies that you've seen? As far as examples of how not to go about this, oh gosh.
Speaker 4:
I've had my own tragedies, you know, in investments. You know I said, gosh, that looked good on paper. We had the right people there. How could that possibly not work? So you just never know. What I like to say to my clients is like, look, I think this is a pretty aggressive plan, but there's people out there that are smarter than us and had more money and they didn't make it. All right, what is the differentiator here? What is going to help you to make it if others didn't make it?
Speaker 2:
Yeah, I see a couple happening in real time right now in a marketplace of electric vehicles and they want to be cool kid having an electrical vehicle in their vehicle offerings or they're a startup for just electric vehicle, and the speed in which they need to get to market is driving some of their costs and burn rate of cash at phenomenal rates. These would be unheard of decades ago, but today it's such a speed environment it looks like tragedy is happening and we know that there's going to be some fallout and huge volumes of capital just being thrown away. For a small business owner there's that intrigue of going after big opportunities and having capability but just really overextending. So you've mentioned some great things. As far as things to watch for and when should they be looking at, it's time to do a course correction. What are your thoughts?
Speaker 4:
Oh, I think that that should be done on a daily basis. For example, what I found in my experience, craig, is that business owners some of them don't look at their financial information until like a month or two later. So let's just say it's the end of May and they're not really looking at a financial until 45 days from now. So I think it should be an ongoing exercise and I think that is the single most valuable exercise that a business owner can do is to just sit down once a month for an hour and just take a look at that financial and try to make sure you can catch a negative trend before it really takes root.
Speaker 3:
Man, I know you have a lot of expertise in this area and for some business owners, financial review can be a little daunting, right? They know they need to be looking at their numbers, but they're often not sure exactly what they should be analyzing to identify those trends. What recommendations do you have, you know? Is there a process that you follow, as an experienced CFO, when you're looking at this kind of financial review?
Speaker 4:
Yeah sure, great question, shai. The technical term is comparative analysis this is what bankers are taught where you compare the financial results from two different periods. I like to do things really nice and simple, so the first thing I'm going to do is let's take a look at how last month went, for example, versus that same month a year ago. Then we're going to look at the first five months of the year this year versus five months last year and then use percentages. Percentages are very valuable, a very simple, underrated tool, but it tells you a story and it helps you to really understand things. Look at all the percentage changes.
Speaker 4:
For example, your revenue went up during this period, but your payroll went up faster than the rate of growth in your sales, which led you to have a smaller gross profit margin. That's not a trend that you want to see continue, so let's ask ourselves why that happened. Is it temporary? So that would be the first piece, the P&L analysis, same thing with the balance sheet, comparing the strength of that balance sheet over a period of time, and the third piece would be the remainder of the statement of cash flows, receivables and payables. And you're right, closing a sale is exhilarating. Conducting this financial review is boring like watching paint dry, but it's the consistency of doing this thing every month that really leads to long-term success for business owners, in my experience, Manny, when you're looking at the analysis of the financials, what other elements are affecting financials today, from the standpoint, of course, direction of the business?
Speaker 2:
Many times small businesses look at other peers in their business and they may see some real activity going on that was going to require some major investments to, in their view, keep up. What are your recommendations as far as keeping that sanity level?
Speaker 4:
It starts with trying to make a reasonable slash, manageable goal. We've gone through this long period of time since 2007, where we haven't had a correction, and I have chief executives that I'm working with now that are in their late 30s. They've never been through a correction, so they don't understand. It's a foreign concept to them. So you know, in my opinion, based on what my teachers and Because if you put an enormous amount of pressure on yourself and your team, as we've seen, that's not going to end very well. And the team is, the most important part of the equation is having people that are happy to be there and that are all rowing in the same direction and moving the company towards the common goal.
Speaker 3:
So, manny, we know that you do a lot of work providing your expertise as a virtual CFO, or rather like a fractional CFO for small business owners. Tell us a little bit about the type of client you help. What is that inflection point where they're reaching for help, like what happens where people start to realize, hey, I might be in a little over my head here.
Speaker 4:
Yeah, great question, shai. Generally, the business owner starts not having enough time to dedicate to the financial piece the way they used to because they've gotten too busy. That's kind of the first sign. The second sign is they're not understanding some of the correspondence or things like that, that they're getting in the business. And then the third thing is they might be taking on a larger project. Right, because in order to get that larger growth, you certainly need to take on larger projects. And you got to double check and make sure that, before you take on a larger project, that it's going to meet your financial metrics, because those are some of the ones, to answer Craig's question from earlier, taking on that big project and not having costed it correctly could lead to real problems. I had a client one time, craig, because the story just came to me that they won the largest contract in their history and they costed it at a loss. And they had no idea exactly what happened, because they were busy, they were working three shifts, right, none of the machinery was stopping, they were going like gangbusters in there and their account was overdrawn. So painful, yeah. So those are a handful of things, and so I guide business owners on maximizing profits and overcoming growth challenges. So it's very different for each client.
Speaker 4:
I think my most dramatic value is my ability to sit down with a business owner and their financial statement and quickly determine where a business could potentially become more efficient and improve its profits, and then explain that very simply to a business owner, say, hey, here's what your financial statement is saying. Here's where we can go. Look, here's what your financial statement saying, here's where we can go. Look, because I'm never going to know that business as good as that owner. Right, I can't run that business better than my client can. I'm just there as the guide and that financial statement is the instrument that gets that business owner to really be able to dig in and understand, to make sure that all the actions that they're taking are leading to profitability. Because you got to have profits in order to pay bonuses right, give raises, attract the talent that you want, make the investments in the infrastructure. I want to take some money at home. That sounds like a good idea. Well, all that is driven by profit In terms of revenue size, generally speaking, between $1 million to $50 million in revenue, and my business is all based on referral and I do not believe that I have any competition. I believe that there are thousands of competent financial professionals out there.
Speaker 4:
I liken us all to chefs. We're all going to make you lasagna. It's going to be real tasty, it's going to be satisfying. Now you, mr or Mrs Customer, you got to make your lasagna. It's going to be real tasty, it's going to be satisfying. Now you, mr, mrs customer, you got to make the decision. Who do you want to work with? You want to work with guy fieri. You want to work with, you know, rachel ray. You want to work with chef in your face, manny. What is your preference?
Speaker 3:
that makes a lot of sense and I think that sometimes, when you're dealing with something like this, where there really is a defined expertise around numbers and that's just not something that's not always intuitive for business owners, just the act of having a regular appointment where you're almost forced to sit down and deal with it and get someone there to reassure you, who can save you a lot of time, point out some maybe hard things that you don't always want to hear but, more importantly, help you develop strategies to get back on track, is really, really valuable.
Speaker 4:
You know you hit the nail right on the head, shai. My clients have told me that in certain cases I do get on their nerves, but it's the good kind of getting on their nerves.
Speaker 3:
You're doing it right.
Speaker 4:
Right. There's certain things that they need to hear, and some of this stuff is tough. You know I'm in here trying to tell you something. For example, my client's been running his business 25 years and I walk in the door he's like who are you? What do you want? I've been here through the ups and downs, I've taken all the risks. How can you help? You know who are you, you. So it's definitely a tough climb, but I work on an advisory basis, so I'm available all the time to talk to my clients, and then I do what you said, shai. I insist that there is a once a month timeout where we do a full blown financial review meeting, just the same way that a bank would look at your business or an outside investor. Now, that way, there's no surprises and we keep it brief.
Speaker 3:
Now to that end. I know that I'm sure our listeners are going to be interested in checking out your book on ultimate profit management and maybe some of them will want to contact you. But, as you said, you know there's a lot of folks that work in this space and a lot of people bring value. What should I, as a small business owner, be looking for? What should I, as a small business owner, be looking for in a financial advisor and you know, really a CFO, not so much a long-term financial advisor, like we think about retirement and those things, but more around, really a strategic financial advisor to help me maximize the value of my business assets.
Speaker 4:
Great question, shai. You know, in my opinion it would be no K-N-O-W, no like and trust. You know, find someone that you know you don't have to love them, but you at least got to like them because you're going to be spending some time together. And then find someone that you trust. Dig into your network. Like I said, my business grows from referrals. Dig in your network and talk to a few people and don't be afraid to change If you don't like the personality or if you don't like the quality of information you're getting. There's a lot of competent financial professionals out there.
Speaker 3:
Manny, thanks for joining us today. We really enjoyed the conversation. Sean Craig, thanks for having me. I enjoyed being here. Is there anything else you'd like to leave for our listeners?
Speaker 4:
Yes, the name of my book. It's my first book Ultimate Profit Management Maximizing Profitability as you Grow your Business. It is available on Amazon and, if you want to find additional information on me, I have a really nice blog that's searchable. If you have any topics that you want to get some information on, that would be portalcfocom dot com.
Speaker 2:
Our guest today has been Manny Skifo-Vilax, business consultant and author of the new book Ultimate Profit Management Maximizing Profitability as you Grow your Business. You can learn more about Manny, as well as find links to his content and book, on our website at businessownersradiocom.
Speaker 1:
Thank you for joining us on Business Owners Radio. We hope you enjoyed today's show. As always, you can read more about each episode, along with links and offers, in the show notes on our website, businessownersradiocom. We want to hear your feedback. Please leave comments on this show or suggestions for upcoming episodes. Tell your fellow business owners about the show and, of course, you would love the stars and comments on iTunes. Till next time, keep taking care of business.
