How To Increase Your Bottom Line By 15% By Finding Money Hiding In Your Business w/ Patty Lawrence
Patty Lawrence is a fractional CFO known for her ability to find money that may be hiding in plain sight in your business.
Her clients typically increase their bottom line by at least 15% and feel more in control of their finances and results.
In this blog post, young entrepreneurs will learn more about:
- The metrics that matter for your business
- Ways to grow your business WITHOUT adding more sales
- How you can see the “story behind the numbers” and grow your business without being bogged down by numbers and bookkeeping
Meet the “Money Finder”
Patty is in the business of revealing the “story behind the numbers” to her clients. With the right financial tools and systems, she can improve productivity in businesses and remove barriers to growth and productivity.
As a fractional CFO, Patty works with business owners, 7-figure entrepreneurs and those well beyond that mark to focus on internal financial management.
In other words, she makes it manageable for business owners to understand the numbers in a digestible way.
What a Fractional CFO Can Teach You
It’s a common theme that entrepreneurs love creating things. They love launching new products. They’re focused on getting their ideas out into the world.
But to grow at sustainable levels, you have to understand your finances.
Patty says, “Fractional CFOs look at what can be done better in your business.”
They answer questions like:
- Where’s the low-hanging fruit?
- What’s the highest and best use of money?
- Are you getting the best return for that money?
- Is there any wasteful spending that’s not adding to the bottom line?
“We’re looking for returns on investment in your business,” she says.
People like Patty engineer systems and workflows to help streamline things. And this means looking for areas where you may be spending too much.
Learn to Be on the Outside Looking In
A great analogy Patty uses is that you can’t read a label from inside a bottle. The best place to read the label is on the outside.
In the same vein, entrepreneurs need to take a step back and run their business from the outside looking in.
But, to have that perspective is challenging from any owner’s standpoint.
And you have to hire somebody to perform that advisory role, specifically someone with a lot of business experience in different industries.
A lot of that expert knowledge can be translated back into your business.
Some concepts are universal and others are industry-specific. But they can be tweaked so that they can benefit businesses in the long run.
“We can plug into any organization anywhere to give them the kind of visibility into their numbers and make them tweak it so they can get more value out of it,” Patty says.
How to Increase Revenue Without Sales
A common misconception among entrepreneurs is the belief that you need to add more sales for the business to grow.
But there are ways to grow besides the obvious.
So, how can you increase revenue without increasing sales?
Don’t throw volume at bad margin
Bad margin refers to low or unprofitable lines of business.
This could be a product or line of service that really doesn’t return any profit. It could be something like rent, salaries, or infrastructure.
If you don’t know your numbers and they turn out to be bad, and you continue to sell more of that product or service, you will run into negative cash flow.
Customer profitability is key
Customer profitability is essential. You need to understand which customers are actually yielding the most profits, focus on them and adjust your model accordingly.
Identify different lines of business
If you have a couple of different lines of business or a few different products that you sell, you want to know what is most profitable.
And the answer may even surprise you.
You have to look at the complete picture when it comes to the assignment of cost to a particular revenue stream to get the most accurate representation of your most profitable lines of business.
The Metrics That Matter
So, we’ve covered ways to grow your business without actually adding more sales and revenue.
But in entrepreneurship, what are the most important financial lessons we should be learning?
Cash is king
How do you measure cash?
Of course, you can look at your bank account, but cash and profit are not the same thing.
When you look at cash, look at what is called a “cash runway.”
This is looking at your cash balance at any point in time and expressing how many months it will cover your overhead.
Ideally, your cash balance should cover at least six months of overhead, which is a good baseline to work with.
Instead of looking at the dollar amount in your bank account, look at how much it actually means for your business in terms of runway.
Your income statements are a benchmark
You should view your income statements as a benchmark.
This makes it more digestible and enables business owners to draw conclusions from it easily.
You don’t want to just look at raw numbers, as you will likely have no idea if it’s good or bad.
Sometimes, it’s the percentage of sales that matters more than the dollar amount.
Having a benchmark to work with will help you understand what you historically spend compared to your current profit.
So, develop those over time, and they will serve you well.
Patty says, “I see so many people bragging about seven or eight figures in their businesses. Of course, that’s great to have that kind of cash because it’s all about the top-line sales revenue. But it’s not about how much you have; it’s about what you get to keep.”
How to Build a Financial Team for your Business
Getting a next-level professional is wise as you cross into that one- or two-million-dollar zone and get into the real crux of your business.
1. Hire a bookkeeper
Your first hire should always be a bookkeeper because your job is to run your business. Therefore, you need to free up your time to focus on your genius zone. And typically, as a young entrepreneur, that’s not accounting.
Finding a good bookkeeper is as easy as a Google search. Just make sure to hire someone who understands accounting and will take you the furthest as you grow and scale your business.
2. Hire a CFO (Chief Financial Officer) instead of a CPA (Certified Personal Accountant)
A CPA is not usually the best person to help you build your in-house financial team as they are typically compliance-based and not really focused on the operations of your business. A CFO will have a good understanding of finances from an operational point-of-view.
3. Bring on a next-level professional
The next level would be hiring a stat accounting manager or controller if your business is growing exponentially and you need to start thinking about strategy and investments.
They need to make sure that everything is running on a day-to-day basis and focus on the way forward.
Three Things to Remember
Ultimately, there are different sets of skills that you need to take your business to the next level.
And with every new level, you need new levels of visibility and new levels of clarity. With that comes new people.
Whether it’s relevant to you and your business right now or not, it’s always good to understand that the right people are highly valuable in moving your business forward.
According to Patty, the three key things to remember are:
- Partner with people with unique abilities and trust their process.
- Lean into the process, lean into who you are and lean into all the good things you have to give to people.
- Be authentic.
For entrepreneurs, this takes the weight off of you, and it allows you to free up your brain capacity to do what you do best.
To link up with Patty Lawrence and learn more about her special offer for readers, visit turboexecs.com.