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How to Build Long-Term Sustainable Success

Transcript 

Crista (host):

Welcome to the Lean Out Your Business podcast, a show dedicated to helping entrepreneurs accelerate business growth AND simplify success. I'm your host, Crista Grasso, and I've been working with businesses for more than two decades to help them lean out and optimize what's working while eliminating anything that's not adding value. So if you are ready to get more time back in your day, more profit in your business, and to do business differently, growing and scaling on your terms, let's dive in to today's episode.

 

Crista (host):

Hello hello everyone, and welcome to another episode of the Lean Out Your Business podcast. Today, I'm really excited to be chatting with Kathy Svetina. She is the founder of NewCastle Finance, which is a company that offers fractional CFO services. She really works with women-owned small businesses. For nearly 14 years, she has done senior level financial planning and analysis for Fortune 500 companies, and she saw firsthand how those big companies use financial information to drive their companies forward. She started her business, which is NewCastle Finance, because she wanted to offer the same powerful financial insight to women-owned businesses. Now she really helps businesses as the financial puzzle solver, I love that, to get clear on their numbers and their financial strategy so that they can feel confident that they're making really good decisions that will result in a thriving business. So Kathy, welcome. I'm so excited that you are here today.

 

Kathy (guest):

Hi, Crista. Thank you so much for having me. I'm super excited to talk to you.

 

Crista (host):

So we've got to dive into this because there's so much that we could talk about when it comes to finances and financial strategy for entrepreneurs. But one of the first things I wanted to start with is when you're helping entrepreneurs develop that financial strategy, one of the things I love is that you're passionate about them building long-term sustainable success. So as you're developing a financial strategy, that's going to help them with that long-term success. What are some of the things that are really essential? And how does that change as a business scales? First, I bet there's a set of things that are really needed at six figures, but then probably something different at seven and eight.

 

Kathy (guest):

Yeah, and that's a good point. So I focus on the healthy and sustainable business. That is always the goal for my clients, even though you might be saving money by doing something in the short-term. But the question is, how is that going to affect you in the long-term? A year, two years from now in the business. So really making sure that when you're making decisions in your business, you're not just looking at short-term, what is going to bring you the most money and you're going to have the best profit numbers at that point, but how is that really going to affect you in the long-term? So if you're cutting some costs, don't just cut costs for the sake of cutting costs. Really think through, how is it going to affect you?

 

Kathy (guest):

The foundational piece for all of that is having good data. Even though you're just starting out and you might be pushing like $100,000, $200,000 in your business, whatever it is, as fast as you can, I would say, go and get a bookkeeper, an accountant. Have someone that's going to help you put all that financial information that you're getting about your business. Your business is going to... There's going to be invoices, there's going to be customers, they're going to be paying you. Have someone else do that for you. Because when you get that information that you know it's going to be accurate in your accounting system, whatever accounting system you're using, and you know that it's going to be up to date. Because if you're waiting three, four, five months, by the time that you have time to actually update your accounting system, that information is not going to be helpful to you to make decisions because it's going to be inconsistent. It's going to be missing. There's going to be all these gaps in the data. And you're not going to be able to use that to actually operate efficiently and smartly about your business.

 

Kathy (guest):

So it's really important that before you do any type of planning, any type of analysis about your business, that you have that foundation, actually have the right data in your systems.

 

Crista (host):

I think that's so critical. And I love that you talk about it in the terms of decision making. Because I think so often, it can be really easy for an entrepreneur to get tied to a big idea and get really enamored by what they want to do, and never really consider the financial aspects of that decision. So critical.

 

Kathy (guest):

Yeah. And as your business grows, you're going to be needing a lot more looking into that particular data. What does the data actually tell you? What are some of the trends that you're seeing in your business? And the piece that's really important that a lot of the businesses that I work with... And you'd be surprised. Even when they're in the multimillion dollar sphere, they do not have the planning in place. When it comes to planning, what I mean is, have the budgets in place. And actually looking at the budgets, comparing them. What is really happening in your business on a monthly basis? So if you set a budget, look at it monthly. How are you on or off the budget?

 

Kathy (guest):

The other piece is when you have the budget set up, don't just file it away and have it on your desk or somewhere collecting dust on your computer. Revise it. Look at it. What has happened in your business? Have you signed on a new client? Are you seeing your customers, for example, starting to pay you very slowly for whatever's happening? You're going to have to be looking at that and making decisions about how you're spending your cash, how you're spending your resources, and putting a new plan together. So that's when the forecasting comes into place, the planning for that.

 

Kathy (guest):

The third piece of that is the strategic planning, which is the long-term goals of your business. Where are you going to be three, five years from now, 10 years from now? And essentially, what is the ultimate goal of your business? Do you want to sell it? Do you want to grow it into a multimillion dollar business? Do you want to even have an IPO, initial public offering? These are all the things that you should be looking at your business. It might seem, well, these are so long-term, but that's really a shining beacon that you're moving towards. And you have a clear focus and a clear goal that you're going towards, and you're not just chasing shiny objects around.

 

Crista (host):

You are so speaking my language there. I am all about strategic planning. I think that financial aspect of it, again, is absolutely critical, right? That's what we're in business for. We need to make a profit in our business in order to have the impact we want and do what we want and grow and scale in the way that we want. And so let's talk about profit and revenue and cash, and the differences and nuances that entrepreneurs really should be thinking about and aware of and how they would leverage each.

 

Kathy (guest):

There's a difference between sales, revenue, profit, and cash. And I like to equate that in a butterfly transformation of your sale. So the butterfly goes through these stages when it evolves, right? So does your customer's orders. So when you first sign someone and you get a customer, that is your sales. You got revenue. Let's say that someone signed up for your course at $5,000, so that is what you made in revenue. That is your sale. However, for you to be seeing that number in your bank account, there are certain things that need to happen. So you have to invoice them and then they have to pay you.

 

Kathy (guest):

And on top of that, you're not going to be seeing that $5,000 in your account at the end of the line because you're going to have all the expenses associated with your business. So when you think about if you have employees in your business, if you have any ads that you have to pay, any marketing materials, and then, of course, taxes that you have to pay out, that's already taking a chunk out of that $5,000. So when it comes to your profit, taking those expenses in account, you might end up with $2,000. So that's the difference between a revenue and a profit.

 

Kathy (guest):

And then on the other hand, it takes time for you to actually get that cash. So if you have an offer like this, usually big offers like this, people will not pay you immediately. There could be a payment option that they're going to pay you in two installments. So the problem with that is that they might pay you 30 days after they signed up and then 30 days after, or 60 days after or whatever your structure is. You're not going to be seeing that cash right immediately. So thinking about not only what my profit is, but when I'm actually going to see that cash in my bank account, because that is going to really affect a cashflow. And you're going to be paying your employees immediately and putting stuff aside for taxes, but the cash is not going to be there right that second.

 

Kathy (guest):

So having really taken that into account when you're planning, that is huge. So it could be as simple as just a spreadsheet, or you can be more advanced and plan it in certain tools that you can use. It's all what really works for you and for your business.

 

Crista (host):

I think understanding that distinction is so important and often overlooked. Because one of the things I want to dive into with you, and this, to me, is one of the most misleading things that I see, especially in the coaching industry, but in most industries, is people talking about their launches and talking about the success of their launches. I've been behind the scenes in groups with a lot of those people that publicly are being promoted. And they're out there saying, "I had a six figure launch the first time I tried this new system." And they're out there, and it's true. They did have a six figure launch in revenue. But when you really listen to them behind the scenes, they're struggling and they're saying, "I'm not sure how to pay my employees." They've got negative cashflow in the beginning, and in some cases, they're never actually going to generate a profit. They paid so much in ads and so much in resources and help that they ended up with a six figure launch and a multi six figure price tag associated with that launch.

 

Crista (host):

And so let's talk about, as you are launching and you're thinking about that, how do you not make that mistake and set yourself up for success?

 

Kathy (guest):

And you're right. Five figure, six figure launches, you see that all the time in online world. But what does that really mean? Is it five figures in revenue? Is it five figures in cash? Is a five figures in profit? So those are distinctive things. And people, when they say five figure, six figure launch, usually what they mean is just sales. So really have that distinction of, okay, you're getting $20,000, but how much is all the expenses associated with it? The thing is when you're in business, you're going to have business expenses. Keep that in mind.

 

Kathy (guest):

And the other piece is that a lot of people even forget, you are going to have clients that you're going to bring them into your business, but now you have to serve them. And if you don't know the capacity of the business that you're currently serving and how much is your threshold, you can get in a lot of trouble with that. Because now you brought in 20 new customers, but you get into the point when you figure out that you cannot serve them well yourself and your current employees. You're going to have to hire someone else. So that $20,000 that you brought in, it's going to be eaten away by another employee that you have to bring in to support those people. So really think about is, that $20,000 that I'm planning to make, how much of that will I have to spend to actually support it and supported well?

 

Kathy (guest):

And another piece is, too, if you have someone paying installments, there also could be a point where their credit card declines, and now you're going to have to go and chase that credit card payment down. So trying to figure out what are some of the systems and processes that you can have in place to, A, prevent that, and B, if that does unfortunately happen, how can you get those transactions into your business automatically? Or if you have to offer someone a refund or whatever happens, that you build that into your plan as well. So that you know out of $20,000 that you made, maybe 1% or 2% of that, you know you're going to have to put back. So that's going to become another cost or your business that you have to take a look at. How is it going to affect your launch?

 

Crista (host):

I think those are really great things to consider. And I love the way that you looked at that very holistically end to end, not just the launch itself, but then actually fulfilling on whatever commitments you made to your customers during that launch. Because if your launch is successful, you now have customers in your business more than you had before the launch. So I think that's really important that you are thinking of that. And I really like that you hit on the systems, because that's what's ultimately going to help you simplify everything.

 

Kathy (guest):

Yeah. And the other piece, if you look at the business, you essentially have three stages of the business. It's pre-launch, whatever your business was like pre-launch. Then it's the launch planning, everything that happens during the launch. And then how is your business going to look like post-launch? All the new customers that you brought in. So those are the three phases that you should be really looking at when you're doing all this planning.

 

Crista (host):

Absolutely. So everyone, get your notebooks out. You have pre-launch, you have launch, you have post-launch. And you need a strategic plan in systems and need to know your finances. I love it. All right. So now let's talk about KPIs. Because I think that as people are thinking of launches, as people are thinking of just growing their business, when you think about that online entrepreneur, people in the coaching consulting space, what are some of the KPIs that they should really be thinking about and how should they be leveraging those?

 

Kathy (guest):

So the KPIs are the key performance indicators. I just had someone recently, they really explained it in a very succinct way, and I love it and I'm going to repeat it here. So with the KPIs is essentially, if you were on a remote island and you had to figure out what is happening in your business, and you call in the office, and what are the three to five things that you need to know, completely to know, to figure out what is happening in your business? So those are the three to five things that you should be tracking. So no matter what happens, if you look at those things, you know exactly what's happening in your business and what direction is going. Whether it's going well, whether it's going not so good, or something that you've expected. So don't think about these are the 20 things that I need to track. Just focus on the three to five things that are super important to you.

 

Kathy (guest):

And also, figure out why do they matter to you? Not just taking the KPIs out of whatever you find on Google, but truly what is really happening in your business? And when you're in the launch mode, what's happening in your business now might be different what's going to happen in post-launch. So what's really important to you during the launch mode might not be that important to you post-launch. Think about the KPIs when planning that. And they should be dynamic and they should be really relevant to you. So besides the most obvious one, which are the sales and the cash in the business, one of the things to really think about, these are some ideas, how many people are you connecting with when you're planning your launch? How good are those interactions? Are they saying yes or are they saying no?

 

Kathy (guest):

The other piece of it, too, is that KPI does not have to be financial. Doesn't have to be a dollar sign assigned to it. It could just be a quality check as well. How well are your employees interacting with the customers? And then the other piece, for example, how many people are signing up for the courses? If you have a monthly renewal, how long are people renewing? How long are they staying? Are they renewing their engagements with you? What is your customer satisfaction? Those are all the KPIs that you can be taking a look when you're in your business and when you're doing these courses and these launches.

 

Crista (host):

I think those are great examples. And I'll share my top three that I use all the time is, and you touched on all of these, but one is number of power partner calls. So a lot of my business comes through referrals. I love referring other amazing business owners and they frequently refer me. So I look for really high quality, what I call power partners, and I do certain numbers of calls each week with them. And that really helps me grow my business. I can see a really direct relationship between those calls and the growth of my business.

 

Crista (host):

The other is the number of sales calls or discovery calls booked, because that is my closest path to getting private clients in particular for my one day business intensives. And then for my courses and my programs and some of my group coaching programs, it's number of signups for whatever event I have, whether it's a live masterclass or a webinar or something of that nature. And I'll have launch specific KPIs as well. But those are my top three that have a really big impact on my financial results in my business, but they aren't necessarily financial KPIs.

 

Kathy (guest):

These are excellent KPIs, these definitely.

 

Crista (host):

So if people do not have KPIs in their business, because I know a lot of business owners don't today, do you have any tips for them on actually getting them created and starting to use them and track them with their teams or by themselves?

 

Kathy (guest):

Yeah. Like I said, it really is custom and depending on your business. What is important to you? So really taking the time and think about, what is my end goal? And how do I track the success on my path to this end goal? And how will I know that I'm successful? It's how do I know that I'm successful? And what do I need to track in order to know that I'm successful? So those are the good starting points to think about when you're putting the KPIs together.

 

Crista (host):

That's great. So I've got a question I want to ask you. I ask everybody this. And I can't wait to see how you answer it. So how in your business do you work smarter, not harder, and keep things lean?

 

Kathy (guest):

Oh my goodness. I am very much a systems and process person. So the way how I structure my business is I use a project management tool called ClickUp. You take that tool away from me, and I would not know how to run my business anymore. Everything is in there. It's ridiculous how much knowledge is in there. All my SOPs, the standard operating procedures. All my communications with the clients. It's everything that I need and all the processes that I have, because having things in your email or some other tools, or everything you have, it gets really confusing. So I actually started to have this central repository where if I need something, I know exactly where it is, how to do it, and how to get it. It keeps everything in place and I just absolutely love it. I'm able to really work leaner and smarter because of it.

 

Crista (host):

I love that. I am a big Monday fan, but it's a similar approach, similar tool. So that's great. So before we dive into where people can find you and learn more about you, is there anything else that you think would be really important for entrepreneurs to take away from this episode when they think about their finances and their business or developing a financial strategy?

 

Kathy (guest):

Yeah. The thing that I would really say is plan. Just take the time to not just work in your business, but on your business as well, and plan it. And you can do this DIY style. You can hire people for it. If you're going to go the DIY style, like I said, you have to have that foundation of financial data in your business. But once you have it, you can do a lot of the, like we talked about, the KPIs and all of the analysis.

 

Kathy (guest):

And there's tools out there that are going to help you. So there's two out there that I really recommend for people who are going to be doing the DIY. And again, this is not sponsored in any way. I just love them. I recommend them everywhere. The first one is called the Spotlight Reporting and the second one is called Fathom. So they're both the same. Some people prefer one, some people prefer the other. Fathom is a little bit more graphic, so it has more of a feel of a Fitbit almost when you see all the graphic representations, so people like that. And if you have those in place, you're really going to be seeing all the trends. And you can do all the planning yourself if you wanted to. It's very easy. And they integrate with whatever accounting software you have. If you have QuickBooks or Xero, those are the two popular ones, they're super easy to integrate for that. So I really recommend that if you're going to be doing the DIY style.

 

Crista (host):

So good and so helpful. So tell people how they can learn more about you, where can they find you, and what do you have coming up in your business that you want people to know about?

 

Kathy (guest):

So you can find me either on LinkedIn, I hang out there a lot under Kathy Svetina, or you can go on my website, newcastlefinance.us. And in terms of what I have in my business going on, it's doing a lot of podcasting events like this, and events and presentations. Make sure that people are getting the content that's going to help them in the business. Really, like I said, for me, it's very important that people know who to turn to if they need help like that. Fractional CFOs, there's many of us out there. If you need help like this, find someone that can really work with you that they can help you. And take care of your financial future so that your company is healthy and sustainable.

 

Crista (host):

I love it. Kathy, thank you so much. This was so great. So much good information. So everyone, you will find Kathy's info in the show notes below, so go check her out. And Kathy, we will talk again and have you back on soon.

 

Crista (host):

Thank you for joining me for another episode of the Lean Out Your Business podcast. I hope you got a lot of value and actionable insights from today's show, and would love if you'd take a moment to leave us a review. If you have any questions on today's episode or on how to lean out your business, join us over in our private Facebook community, where every week we do live training and Q&A. And I'd love to have you be part of the conversation. Head to leanoutmethod.com/group to join us. And before you go, be sure to subscribe to the show so you're the first to know when we release a new episode. We'll see you next week.