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Adam is the founder of The CFO Project that's made up of "Chief Financial Officers" who works directly with small business owners and shows them how to make their business profitable.
Welcome to the podcast Adam. Hey, I'm glad to be here. Thanks for having me. Yeah, not a problem. I'm super excited to talk to you because you're a numbers guy and he got that too many numbers guys on the podcast and so it's a little. We are switching gears a little bit here, but the bottom line is numbers is where it’s at and that’s what businesses really need to be focused on. On a day-to-day basis the focus should be improving that bottom line and you’ve come up with a clear path for businesses to achieve profitability. You have developed four key steps that we’re going to be talking about today in the podcast.
Yeah. So, I mean the reason why I'm doing what I'm doing today, which is helping small business owners and improve the profit of their business is because I started my very first e-commerce store when I graduated from college, this is back in 2005.
I was an accounting major. I thought hey, I'll become an accountant. I became an accountant quickly realized that that was not the profession for me. I understood numbers and I got it. I just didn't like sitting behind a desk recording what happened for a business. I wanted to actually work in the business and sort of get my hands dirty and.
So I was bored to tears. So I started an e-commerce business. This was back in 2005 and the things actually started off pretty great. I mean within I mean it was a struggle of course, but within two years I was doing about a half a million dollars in sales, and it was great. So I left my day job.
And then things started to go downhill very fast, you know sales were growing that's the thing sales were growing but profitability was not in fact, it was shrinking the more sales grew the more my profit shrank, which is not a good thing and I remember, you know about a month before Christmas and of course, I sold a you know in retail.
All of us that have retail businesses Christmas the fourth quarter is such a very important time and I remember sitting at my desk about a month before just scared to death because things were going so wrong, but I don't know why. That was so overwhelmed at it. It seemed like I had all these balls up in the air and I felt like they were all going to drop and of course my luck.
They were all going to drop two weeks before Christmas and and I would go out of business. All my customers would hate me and but the thing that frustrated me was that I was an. I should have known what was wrong with the business, but I didn't because I was so unfocused. I simply was just not focused on the most important things that mattered so I got to work figuring out.
What were the most important things that mattered. In the business because I didn't want to fail so it took me several years to get there, but I figured out the most important things that need to happen. And you know, I got it a song out. I'm a lot of others very smart people in the Commerce world people that were not the even Ecommerce world that were business people and I figured out what needed to happen.
And so that's what I do today. As I founded this business called the CFO project. We give business owners e-commerce business owners a CFO to lead them through this four step process for having a more profitable business. That's what we do. Okay, that's awesome. And it's really good to hear that you come from.
You know, I guess you could say you're kind of a veteran in the game as far as e-commerce is concerned because like you said you ran an e-commerce business and you know, you were making a couple million dollars in that and that's not an effort that is easy to achieve really, you know, that's not something that you can just wake up one day said, okay.
I'm going to sell. Selling shoes online and you don't that, you know, six months later or a year later. You don't just immediately start making millions of dollars. It's just not that easy. So obviously you were doing the right thing and that you knew what you had to do. Now one thing I wanted to ask you and I think I may already know the answer to this question, but we always hear that so many businesses fail, you know out of all of these businesses that start up everyday small businesses.
There's such a thing. More percentage of these businesses that actually see their fifth birthday is the main reason because they didn't. Follow these particular steps, these four key things. Is that really what it is that kind of what you uncovered it all boils down to focusing on the most important things the most important things that matter and you know, according to the small business administration half of all small businesses fail within the first five years.
They never see that's the statistic you were just reciting never see their fifth birthday half hour. Does crazy and it's because of you things but it all boils down to the fact that those business owners did not focus on the most important things in order to have a profitable business because the end of the day any business in listening business owner listening to this knows that you have to have cash flow.
Well, this sounds obvious, but when you put it in practically speaking, what does that even mean? Like cash flow be a profitable business. I mean, what does that even mean? What at the end of the day? You have to have you simply just have to have enough cash to continue keeping the business alive, but also growing the business that's pretty much it.
So if that's the end goal to have generate enough cash to keep the lights on and to grow the business then how do you get there? Well, The question the million dollar question that business owners struggle with they're not focusing on the answer to that question. They're not focusing on the things that matter every single month and had the reason is is because most and this is a my my opinion from working with a ton of business owners and just my own personal experience is that business owners get into business because they have a love of what they sell.
Not necessarily because they're experts in business. So for example, somebody that loves leathercraft who came up with these who loves working with their hands and came up with these cool methods for creating wallets as an example in keychains out of leather and no post that person has a love for leathercraft and they want to sell their product on an e-commerce store.
It was a. But they're going to naturally spend most of their time focusing on the operations focusing on the product of their business. And of course, you have to have a good product. You have to provide something of quality and you have to provide some of the people want but at the end of the day the business is still a business in the business has to have cash flow and has to make a profit and business owners are a lot of times.
They're just not equipped. And or they're just too busy to figure out what those are what are the most important things needed to make a profit that is so true. And I think you really nailed it. The main thing is a lot of these business owners are just are too busy, you know, they're in the weeds.
So to speak over their business the managing the day-to-day operations making sure. The products are getting out to the people or the services are getting out to their customers and there's going through all that, you know, I don't have to list everything with all of the business owners out there that are listening know that you know, there's a million things that you have to do.
So it's really easy to get kind of distracted and really not and lose focus or lose sight into the true main thing that you need to be focused on which is increasing the profit. I think one of the things also that you mentioned earlier when you talked about. The business that you were in where we were continually making more and more sales selling more and more products, but you still weren't profitable and I can definitely see how that could be the case for, you know, not on your business would be the other businesses that I've seen this happen to and a lot of businesses don't realize this you can do as much marketing that you possibly can, you know on this podcast we've interviewed.
Hundreds of people and have provided some very insightful marketing strategies. And so you can do all of these tactics to drive business into your business or drive customers into your business, but that's not necessarily going to translate to profitability because of course you have to think about with all of these customers coming in that is going to increase overhead.
Things that you have to do and if you don't manage your numbers correctly and some of the key things that you know, you talk about you can easily not be profitable. So it's that I can definitely see ya that being the case with a lot of businesses. So in your experience with the businesses that you've dealt with really, what's the first thing that you look for when you kind of get in there and your cfo's sit down with them.
What do they look for? The very first thing we do when we work with any business is we've got to understand where the business is currently and everybody knows you got to know your numbers, but you have to not just know your numbers. You have to know what your numbers are telling you you have to be able to spot Trends.
You have to just look at your gift to take your rose colored glasses off and look at where your business really is heading one of the red flags. What are your the the weaknesses in the business and then the other hand what are the opportunities that you have? What are the strengths of the businesses that you could capitalize on all of that is you have to know your numbers but you also have to know what your numbers are telling you so that's the very first thing that's actually the first step in our four step process is we do a deep dive and really understand we do a no we call it a financial audit on the business, but you have to understand where your business is at now for the and where it's been for the past at least 24 months and be able to spot friends.
You have to take a very object of. At your business and that's hard for business owners, especially that because they're so close to the business business owners and I'm guilty of this tend to ignore certain red flags because they don't really want to deal with it. Right right, you know what I mean like that one year that I'm my worst year in business was the when I knew I had a problem.
It was a month before Christmas and I was working on things that I enjoyed more. And I failed to work on the things that needed to really improve the business and you're not the only one that I know is something that a lot of business owners do it's easy. It's kind of comfortable to kind of go through doing things that you know, like you said you like to do or that you're easy or things that you can kind of just do almost on autopilot because you're so used to doing it but.
A lot of times that is not right thing to be doing specifically at a certain times in the business. And by the way, you have to know your numbers. That's what I mentioned in Step 1 and a lot of business owners think that they have a bookkeeper and account up. So they're all good. Here's the problem though a bookkeeper and accountants job is to record what happened in the past correctly?
That's what they do. They're not designed. They're not getting paid to honestly. They're not getting paid to help you strategize and interpret your numbers and help you figure out what they mean what your numbers are telling you to help you grow your business. That's the job of a CFO. That's why big businesses have CFOs to do that.
The CFO has a team of people that. Produce the reports. I would be the bookkeeper accountant. They'll produce these financials for you. But the CFO interprets those numbers and helps the leadership understand what they need to focus on to grow the business because those 50 those business owner the half of all businesses that failed I guarantee you most of them had that failed had a bookkeeper an accountant.
So you have to be able to have you don't just need to know your numbers. You know what they're telling you. Right? Right. Definitely that makes a lot of sense. Now, you know, once you guys do this initial Deep dive what's like a high-level view of the next steps? What are the next things that you guys?
Yeah. So the very next step in step two in our four step process is we set goals. For profit so we say all right, as of 12 miles from today's date, where do we want to be profit-wise and that will be our Target. We call it the the profit Target. So that will be our Target for profit to come up with that Target.
Will Digger out where do we want to be sales-wise and we'll do this for every. Product or if your storage is large enough, every category will sales goals for every category or every product will set gross average order amounts. And then total order amount will set goals for those things that will give us sales goals, then we'll set gross margin goals for each of those same categories or.
And then we'll set expense goals for the whole store like overhead expenses. And then that will give us our net profit goal. And once we set that gold that is our Focus. That's why we call it a Target that is our focus a lot of businesses. They'll call it like a. They'll set a budget and then forget it because budget is such a constricting term that is we'd like to think of it as a goal because it is a goal.
We you know, if you set an aggressive enough goal that is reason that it's realistic and attainable that's motivating if you know that in a year from now, you can have a twenty percent or 10 percent higher profit. He did last year that's motivating that translates into real cash that goes into your pocket that you can.
Do what you want with you can reinvest back in your business. You can keep it you can give everybody a bonus. It doesn't matter. It's just you're creating more cash, which is helping you not go out of business. That's really good because it's really so important to have these goals. I know it's something in the fact that you kind of see what you're striving for rather than shooting in the dark because I know businesses tend to.
They know they need to make more money. They know needed to make more sales. They're constantly running. They're constantly trying to achieve a goal but it's like an almost an unstated goal, but there's something in the power of actually noting that and dictating all of that to the appropriate people within the organization at these are our goals.
This is what we're trying to meet for this particular quarter this particular month. This is what we need to be and these are the things that we're going to do to make that happen. And so yeah, I think that's really so important and I know with businesses, of course, there's a lot to it, but I think the main thing and I know what you probably do.
I know a lot of what you guys are probably doing is really just kind of coaching businesses to really kind of stay on track and it here to these things which I know it's kind of a whole thing as to what you're doing is to make sure that they follow through with this. Yeah, that's actually steps three and four.
I mean the step 3 is keeping track of how well the business is doing compared to its goal and we call it the scoreboard. So we literally create a scoreboard of how the business is doing and. And that's the other thing we don't like to speak like an accountant or Finance person because most business owners don't want to listen to that.
Right and we speak like a normal person even though we're Financial people. We know what it's like, I mean to be the business owner we want to make and we want to make sure you hit those targets. So we're going to do whatever we can to help you. So we created this thing called a scoreboard and will give you this one page report that she will clearly show you.
School bullying right and what's going wrong and then step four is every single month will give you a list of no more than five. So usually about 330325 of the most important next steps that need to happen. Within the next 30 days and we'll do that every single mop and that way you're focusing on only two things that matter.
So as long as you do these three to five things then you can spend the rest of your time doing what you enjoy doing frankly things that you you should be doing to help you from being burnt out, but at least you know that you're there when you're working on these three to five most important things you're working on your business instead of in your business, you're ensuring that your business is going.
Into is growing and as an on track to hit those goals that's very critical. And so true that it's really interesting what you said. It's not that these business owners have to put aside really what they're passionate about which is providing a product or service or doing a specific aspect of a visits That's essential to it the heart of the business.
Then I have to put that aside but what they have to do is more kind of adjust their priorities and focus on those key things that you mentioned and have some more accountability. I know that's really the key thing there. Now as far as these steps are concerned. Is there a like a general in your experiences or a general time frame?
As to when a business will reach profitability. Let's say at the beginning of you meeting with them and working with them. How long does it typically take a business to reach profitability when they go through these steps? That's a great question. It really just depends on the business and depends on how bad the business is and we've seen that it takes about a good six months to really to see a lot of progress but most businesses that start working with us will see progress within 30 to 60 days because we're naturally going to start.
With the most important thing. So there's sort of the lower hanging fruit of the things that we can immediately give you some cash influx some some things that will improve the profit almost immediately and then every single month we'll keep working on those things so that you're growing in your profit growing profit and cash flow.
Would you know, one of my favorite quotes is it doesn't matter how much you make. It matters how much you keep and making is the sales part keeping his The Profit part that is so true. I really comes down to it. Yeah, how much are you keeping a sisterly how much you're pulling in now? I'm a huge fan of these business shows that.
Kind of go into the details in the minutiae is of businesses that have been around for you know, varying the amount of time at the specifically the show The Profit which is on CNBC eyeliner, right? I think you had mentioned that we spoke earlier. That's your big fan of it. And for those listeners that are familiar with it.
There's a gentleman a very successful entrepreneur named Marcus Lemonis who goes and he invests in businesses. What he'll do is provide an initial infusion of cash in exchange for equity and he also goes in and does various other role plays other roles in the business or his team actually plays other roles where they'll assist them with various things.
And one of the things that I've seen on a lot of the episodes at the beginning is, you know, there's a lot of businesses where. A lot of these businesses, maybe some mom-and-pop spots small businesses where seems like they have a really solid product or they're providing some great services, but yet they just have a track record of years and years of not being profitable.
A lot of these businesses have a lot of debt that they're dealing with. And it's not that they don't have a good product or service but it's just they have this long history of just really not making a profit. What I really wanted to know in your opinion is when you're dealing with businesses like that where you know, they haven't been profitable for just years and years.
They maybe have a lot of debt is it? Is it too late to fix a company like this there? Is it ever too late for a company to reach profitability honestly, if they're still in business, it's not too late. If the business owner has passion and if the business owner cares that much and they believe that much then we're going to do everything we can to help them and if the business is not out of business yet.
Then there's a reason why I mean so we're going to do as much as we could but we can't be passionate more than the. This honor business we can't push the business owner. The business owner has to it if they care that much the week will care. We truly care about the success of our clients. Now in some cases it may be too late, but we've never experienced that.
Yeah, I guess like you said as long as they're still in business that if the lights are still on their still providing a product or service to some set of customers There's Hope. Yeah, I guess there's still a little bit of light at the end of that tunnel, even though it may be getting dimmer and dimmer as long as they're like you said this the doors are still open.
There's there's definitely things that can be done. In the clients that I've dealt with that had a very similar situation, it's usually because I didn't have a the reason why they hadn't gone out of business yet is because there is a demand for what they sell and there they have sales. They're just not making enough money on those sales.
So like I had a client that we started working with a couple years ago that they didn't have a sales problem. They were doing about 1.4 million in sales. We quickly realize that one of their problems was one of their kind of categories had very very poor margins. We got to work on fixing those margins.
We either increase the price or worked with the supplier on getting the cost down, but we were able to improve their profit their net profit by a quarter of a million dollars without increasing sales. And so that's the thing. It is doesn't matter how much you make literally matters how much. Keep they were better off with the of course with making a 250 thousand dollar profit than they were making a loss with the same sales.
That's really interesting because like you say you never did increase their sales. But yeah, you just did some tweaks and allow them to make more off of those sales that they were already getting. Yeah. So that's very powerful. Well Adam you definitely of open my eyes on a quite a lot of things and I know a lot of our listeners as well, and it's a great refresher here to talk about.
Some accounting fundamentals and and profitability which is something that every business owner needs to be focusing on for sure. So I know you're four steps there to success are definitely going to be great for the businesses that take advantage of that. But yeah what I'd like to leave our listeners with is my final question that I always ask and just kind of Switching gears here to my final fun fact question and that's what's one thing.
One fun fact that our audience would be surprised to know about you that I was a DJ for my college radio station. That was the 80s lunchtime rewind DJ. It was a lot of fun. Okay? Okay. That's awesome. RW e GL I had tens and tens of listeners. I'm sure you had more than that. That's awesome. Yeah, I know.
It's pretty cool job. I could imagine I'm regardless of how many listeners you had. I know you had a ball doing. Yeah. Yeah. I thought it was fun. Yeah, definitely. All right. Well, that sounds awesome Adam. Well, we definitely appreciate you being on the e-commerce marketing podcast and joining us today and finally of course if any of our listeners.
I would like to get a hold of you and pick your brain more than we've already done. So what's the best way for them to get in contact with you? So the best way is to go to my website the CFO project.com and then you can literally book a call with me at the top right of the website. So just schedule a call but also.
I have a sort of a workshop that I'll give you for free called the CFO project.com video. The workshop is why your e-commerce business might not be as profitable as it should be and the five changes required to boost profits this quarter. So check that out the CFO project.com video. Okay, great.
Well, we appreciate that Adam. I'm glad to share that with our listeners and I know I definitely encourage everyone to take advantage of that. For short and definitely. Thank you again for joining us today on the e-commerce marketing podcast. How a man thanks for having me. I appreciate it. Thank you for listening to the e-commerce marketing podcast.
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Founder of The CFO Project