The Small Business Safari

Profit Over Revenue: How 4 Corners CFO Turns Chaos into Clarity | Danielle Hendon

• Chris Lalomia, Alan Wyatt, Danielle Hendon • Season 4 • Episode 214

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🎧 The Small Business Safari – Episode Title
Profit Over Revenue: How 4 Corners CFO Turns Chaos into Clarity

Hook:
We dig into profit over revenue, how service businesses should structure their books, and why capacity-based budgeting beats guesses.

Summary:
Danielle Hendon, founder of 4 Corners CFO, shows how niching, clean reconciliations, and cash flow forecasts turn anxiety into action. From culture vs. process tension to bottom-up budgeting, Danielle reframes accounting from a headache into a strategic growth tool. Learn why people costs belong in COGS, how capacity-based metrics expose underutilization, and what separates a weak bookkeeper from a real CFO partner.

💡 GOLD NUGGETS (Key Moments)
• Culture vs. process tension reframed around scalable profit
• Revenue obsession challenged by profit-first thinking
• People costs placed in COGS for real gross margin
• Capacity-based revenue and utilization metrics
• Bottom-up budgeting tied to activities, not accounts
• Expense buckets as required, perks, and investments
• Pricing flat fees to capture efficiency gains
• Segregation of duties and clean reconciliations
• How to spot a weak bookkeeper fast
• Niching into law firms and selling with specifics
• Cash flow forecasting that includes taxes and timing

🔗 Guest Links
• Website: 4cornerscfo.com

 • Special Page: 4cornerscfo.com/smallbusinesssafari

https://www.linkedin.com/in/danielle-hendon/



🌍 Follow The Small Business Safari
• Instagram | @smallbusinesssafaripodcast

• LinkedIn | https://www.linkedin.com/in/chrislalomia/

• Website | https://chrislalomia.com




SPEAKER_05:

I think we culture eats process for lunch every day. Got it. But you gotta have good processes if you want to scale. But Danielle hit on it.

SPEAKER_04:

Sometimes Well, could you be more successful with good culture and bad process than good process, bad culture? I'll let Danielle answer and see if she's right, Danielle.

SPEAKER_05:

I'm gonna go, I'm gonna go in the I'm gonna go in the sound booth.

SPEAKER_03:

I'm I'm gonna say no, actually, because you can have the most amazing people and the most amazing culture, and you're only gonna you're gonna hit a cap.

SPEAKER_05:

Did you just flip me off? No, I said bring me back in. I don't know what she said. I took my headphones off. So all right. She agreed with you. Ah, Danielle.

SPEAKER_03:

But I also don't want you turning over employees like left and right, because that's not good either.

SPEAKER_05:

No, actually, come on, you know I take a lot of pride in that. My body counts for it. You're like Schwartz and business. You know, it's quick though. Uh I have to say it's terminator quick. Like if you come in and you don't make because I'm again, we're in people's houses. If you don't fit our culture uh and you can't follow our process, you opt out or we opt you out pretty quickly. You're the Navy SEALs of uh remodeling.

SPEAKER_02:

I was gonna say, are you the John Wick?

SPEAKER_04:

John Wick. Don't don't feed his ego, Danielle. Look at the look on your face. I know. You know what sucks? It's the best thing anybody ever said to four years of this podcast.

SPEAKER_05:

I'm so excited. I am taking that to my sales meeting. Boys, you're gonna have to wear a wig. John Wick. Big wig. Big wig. Yeah. Thank you. I'm gonna wear a dark suit, put my sunglasses on, and go, anybody seen John Wick? Did you sell something last week? Looks like bullet in your head. Bye-bye. Oh, look at you.

SPEAKER_01:

And I'm just gonna keep dancing around in the But if we just said we're not doing that.

SPEAKER_05:

Oh, we're not shooting everybody? No, no, no.

SPEAKER_04:

Shoot! Yeah.

SPEAKER_05:

Shoot again. No. Welcome to the Small Business Safari, where I help guide you to avoid those traps, pitfalls, and dangers that lurk when navigating the wild world of small business ownership. I'll share those gold nuggets of information and invite guests to help accelerate your extent to that mountaintop of success. It's a jungle out there, and I want to help you traverse through the levels of owning your own business that can get you bogged down and distract you from hitting your own personal and professional goals. So strap in Adventure Team and let's take a ride through the safari that get you too. Alan, that sound you hear in the background is no noise today. Yeah. But we're still remodeling the basement. Here we are, everybody.

SPEAKER_04:

And you have guests coming.

SPEAKER_05:

And I have guests coming. And once again. Once again, I'm gonna change the name of the trusted toolbox to just give me three more days contracting.

SPEAKER_04:

Manana. Just give me three more days. Manana contracting contracting.

SPEAKER_05:

So uh so this is where uh everybody says the uh what did they say, the cobbler's uh son such as the shoemakers, kids have no shoes, right? So this is one where I said um my project or customer project. I'm like, go customer project, go, customer project. And then they came back and said, okay, we do this for uh this amount of money, and I'm like, no, find another number. I'm the boss. L jefe. We found the right number, and they're starting, and we're gonna finish. But yes, well, of course they're gonna finish, but when? Uh we're we're actually on track. Uh, so we're recording this. Define track. Uh well is it's sort of a moving target. Just give me three more days. Name of my contracting company. Uh Danielle, feel three free to steal that one. But before we get to Danielle and our guest today, we had a special gift given. Yeah. Super cool. Can't it's way way up there. But we got our own small business safari podcast, bourbon glasses, from Marika Ponton. Isn't she the best? She is uh she is rocking.

SPEAKER_04:

Danielle, you got you got you gotta be the best now.

SPEAKER_05:

But uh so you can't uh you can't see it because they're bourbon color. Uh I guess I probably should have told her we drink a lot of bourbon.

SPEAKER_04:

Um so they're bourbon color, but you don't see the letters, and then the more you drink, then the letters reveal themselves.

SPEAKER_05:

That is cool. She is super cool. She was a great uh coach. She is um profit. Uh she's the profit coach. Um, Marika Ponton. She was a great guest, a lot of fun. Somebody I met years ago uh when she got into her own small business leaving the big four consultancy, made the leap and asked me if she thought I thought it was a good idea, and I told her exactly what I thought.

SPEAKER_04:

Which it's kind of funny that you say that. I have a funny story. Yeah. Um, you know my tennis partner.

SPEAKER_05:

I do know your tennis partner.

SPEAKER_04:

Yeah, he he's a he's a blunt instrument, and we were on our way to our match last night. Six love, six three, by the way. And uh our podcast came up, and he goes, Yeah, I've listened to a couple of your episodes. Do what? It's not for me. Oh, I love him. That's right on brand with this dude, man. That is so right on brand. No, if that's me, I just don't even mention it. Or I go, how's your podcast going? Or, you know, tell me a funny story about your podcast.

SPEAKER_05:

No, it's not for me. You know why? Because this is for people who want to excel in small business. These are for people who want to ride up the mountain, see what success looks like, and not languish away in corporate America hidden behind their cubicle.

SPEAKER_04:

But I do like all my friends that that actually tell the truth, say what they're thinking.

SPEAKER_05:

Yeah, well, you know, when he listens to this one, suck it, buddy. Uh, you stay in your little cube, you get your little 401k, you get your little health care. Uh maybe you get a watch. You know what? You don't even get a watch. You might not even get a five-year pin. Uh yeah. Take that. So let's get on it. Let's start racking it, man. Let's go make it happen. Let's go make some work happen. Venture team. Or not. Because you know, it's not for me. It's not for that. It's so on brand for that dude. That's so classic. That's the title of this one. Not for me. Uh do you want to make money? Not for me. Hey, do you want to run your own business? Not for me. Do you want to take care of your own world? Not for me. Do you want to make sure you got good books? Not for me. But today, we're gonna do it. Yeah. Let's get into it. Daniel Hendon is here from Four Corner CFO to talk to us about make sure you got good books. If you want to get to the top, I got a feeling you got to have good books. And like to take that analogy, you gotta have a good backpack. You gotta have it with the right stuff in it. And if you can't take stock in what's in there, you probably got some problems.

SPEAKER_03:

If it's too heavy, you're probably not going very far either.

SPEAKER_05:

Oh, Sensei already. She is good. Wow. Danielle, thanks for joining the show. So today we're gonna talk about what you do a little bit, but let's let's just let's go right into this. So, what is the stupidest thing we'd all do as entrepreneurs trying to scale our small businesses?

SPEAKER_03:

Focus on revenue instead of profit.

SPEAKER_05:

It's a little too heavy. That's a little too heavy in the pack. You know what I'm saying?

SPEAKER_04:

I was hoping she was gonna say focus too much on process rather than uh culture.

unknown:

Ooh. Huh.

SPEAKER_04:

I saw I saw you had a LinkedIn post that was kind of like I talk a lot about that. Because Chris and I kind of have a little differing opinion, but of course he's wildly more successful than me. So maybe you should just be all anal, all process all the time. Thank you. No fun police. What that's right. And FP. All right.

SPEAKER_03:

I'd be curious in that environment what the turnover ratio looks like.

SPEAKER_04:

Well, it depends on who's doing the turnover.

SPEAKER_05:

So as the world, as the trusted toolbox turns, we are not in a question, Daniel. I think we culture eats process for lunch every day. Got it. But you gotta have good processes if you want to scale. But Danielle hit on it.

SPEAKER_04:

Sometimes Well, could you be more successful with good culture and bad process than good process, bad culture?

SPEAKER_05:

I'll let Danielle answer and see if she's right, Daniel. I'm gonna go, I'm gonna go in the sound booth.

SPEAKER_03:

I'm I'm gonna say no, actually, because you can have the most amazing people and the most amazing culture, and you're only gonna you're gonna hit a cap.

SPEAKER_05:

Did you just flip me off? No, I said bring me back in. I don't know what she said. I took my headphones off. So all right. She agreed with you. Ah, Danielle.

SPEAKER_03:

But I also don't want you turning over employees like left and right, because that's not good either.

SPEAKER_05:

No, actually, come on, you know I take a lot of pride in that. My body count was really good. You're like Schwartz and business. You know, it's quick though. Uh I have to say it's terminator quick. Like if you come in and you don't make because I'm again, we're in people's houses. If you don't fit our culture uh and you can't follow our process, you opt out or we opt you out pretty quickly. You're the Navy SEALs of uh remodeling.

SPEAKER_02:

I was gonna say, are you the John Wick?

SPEAKER_04:

John Wick. Don't don't feed his ego, Daniel. Look at the look on your face. I know. You know what sucks? I just had my four years of this podcast.

SPEAKER_05:

I'm so excited. I am taking that to my sales meeting. Boys, you're gonna have to wear a John Wick. I have to wear the big wig. Yeah, a big wig. Yeah. Thank you. I'm gonna wear a dark suit, put my sunglasses on, and go, anybody seen John Wick? Did you sell something last week? Looks like bullet in your head. Bye-bye. Oh, look at you. And I'm just gonna keep dancing around in the floor.

SPEAKER_01:

But what did we just say we're not doing that? Oh, we're not shooting everybody?

SPEAKER_05:

No, no, you're fine.

SPEAKER_04:

Shoot. Yeah, that's right. Shoot again.

SPEAKER_05:

No. So Danielle.

SPEAKER_03:

Don't want the turnover.

SPEAKER_05:

Let's go back. Because uh, here's where I I've told people, you know, cash is king, but you gotta have those sales, right? You gotta have that revenue, you want to get to that bottom line. Um, so when you say we're too focused on revenue, what do you see us doing?

SPEAKER_03:

So you're absolutely right, cash is king. Revenue is important, but if you are growing for the sake of growth, more money, more problems. If you're not actually growing your profit and putting more money back in your pocket, what are you doing it for?

SPEAKER_05:

You know, that's a great point. More money, more problems. We've talked to a number of people on the podcast. I was just talking with a guy who was on our podcast uh years ago, um, because we've we've remained fen friends, and I've been asking him, as he was able to niche his business down and remodeling, he was actually able to grow his profits. So I said, as I'm going as I'm going through that, doing this uh similar exercise at the trusted toolbox, what I'm worried about is that I relied on that gross profit dollar size, but when you really looked at the net, the net wasn't being fed by the right part of the business. It was the net was being fed by the left part of the business, as it was.

SPEAKER_04:

But you like dropping the top line number. I do. Yeah. I'll do it. You know what? I mean, there's the conventional wisdom uh uh of if you're uh if you're not growing, you're shrinking. Or if you're not growing, you're dying.

SPEAKER_03:

So we're there is, but I also think, and I may go against the grain here. I think there are a lot of businesses that are in this as and they're legitimate businesses, and they're in it as a lifestyle. When you hit a certain point and you're happy with it, you can stay steady state and be happy. You don't want to be going backwards. You have to be paying attention, you have to be changing and pivoting and maintaining the business, but you don't necessarily always have to keep growing revenue. You have to keep growing your pipeline, you have to keep growing your connections, you have to keep maintaining your business and feeding it, which to some might feel like growth. But you can absolutely, we've got one of my favorite law firms has been with us for gosh, almost five years now. And she just when she first came to me, she was like, I just don't want to go backwards. I want to make sure that whatever we do, I can maintain what I have and I don't want to go backwards. And she is perfectly happy doing so.

SPEAKER_04:

So are you an example of uh, you know, doing what practicing what you preach because you've niched super tight into you know, CFO for law firms, which I'm like, I I've never heard of such a thing. And is that as a result of you were a CFO for everybody and you kind of found the sweet spot? Talk about that.

SPEAKER_03:

So when I started the business, everybody tells you riches are in the niches and nobody wants to listen. And I was one of them. I was like, no, I can like why not? Professional service-based business. And literally, I would have told you that this time last year. I would have said professional service-based business. But to the point you were talking about earlier, I realized 80% of our book was law firms. And I could talk about the ins and outs and all the different things that come with law firms and write those processes efficiently with all kinds of automation because I know it versus somebody coming to me with a marketing agency. And I'm like, I don't know what systems they're using, I don't know what software they're in, I don't know what the average rate of pay is for their people. It just completely changes your ability to find efficiencies in your operations. And so many law firms, so many businesses in general, if you haven't looked at your numbers and you're still charging hourly, are losing out on getting all that sweat equity you've put into those processes through efficiencies on flat fees. What I mean by that is if I know exactly how to do a law firm and now we can get it done in, I don't know, three hours, that's way underestimating. But if we could get it done in three hours instead of 10 when we started, that seven hours gain in profit is because we've put in the sweat equity getting there. It's not free.

SPEAKER_04:

And my guess is it's a lot easier to sell your services when you're focused on one thing and you've done it over and over again. So you've got your next prospect attorney. How has your pitch changed in the last 12 months?

SPEAKER_03:

It is quite literally focused on what I know exactly they're going through. I mean, we went from I'll tell you my current pitch right now, I realized is we've always sold comfort and clarity because when you don't know your numbers, you're in chaos, anxiety, overwhelm. But comfort and clarity are not painful enough to make people pull the trigger. So we are actually in the process of building out a quiz for law firms, but the new pitch itself is if you show me your numbers, I can tell you exactly what you're leaving on the table right now. And then we can go work on it.

SPEAKER_04:

That that would work with you. That would by the way. That's really powerful. So I'm gonna start taking my clothes off.

SPEAKER_03:

Sorry, Danielle, but like, wait, I don't know about that. I know. Seriously I didn't know it was that kind of show.

SPEAKER_05:

Whoa, hey, we're going to a new genre explicit. We are explicit. We're going to a new, we're going to do a whole new genre. That's right. Yes. All right. We were true crime. We were true crime. Uh, we've been true crime a couple times. Now I guess we're going to go into the sex industry. Okay. Um, and this is not good sexy by the career. Now, really kind of niche. All right. That's one word. I'll think of it a couple of words.

SPEAKER_03:

Way to bring it full circle.

SPEAKER_05:

All right, let's go back. So you said you you changed your pitch. Uh uh, you changed uh that as you made that switch to the niches. Again, I've heard the same thing, Danielle. Yeah when I first started 17 years ago, I would do anything to anybody at any time. I really would. And you you have to learn where your specialty is. So you've learned it, but it's still hard to go, okay, I'm gonna turn away that marketing agency on number one, and I'm gonna turn away that professional service firm on number two. How did you gain that discipline to move to it?

SPEAKER_03:

I'm gonna be entirely honest. And everybody I've talked to that says the riches are in the niches doesn't necessarily turn away the other stuff.

SPEAKER_04:

Because I'm assuming, and then based on what I saw in your LinkedIn posts, I mean, if somebody comes to you and they want to do business with you, I can't help myself.

SPEAKER_03:

If they're a passionate business owner, I'm like, all right, let's go.

SPEAKER_04:

But you're just not focusing on them as far as your target market, your avatar.

SPEAKER_03:

Yes. I'm not focusing on them. And I'm also not we're very focused on the law firm space in the sense of who we network and spend time with from a referral relationship and in our marketing efforts. It streamlines the marketing, but it doesn't mean if I mean, I'll tell you, one of our clients that's still on my books is uh a group of guys out of California that sell merchandise or they make the merchandise for bands that go on tour all over the U.S. Ex-Music Major in me is like, how do I say no?

SPEAKER_05:

No, you can't say no to that. So you you hit on the exact fallacy that I I love telling everybody. A lot of people give you that lip service that niches bring the riches, but in practice, if you got in their books and saw what they were really doing, they didn't all the way niche down.

SPEAKER_03:

But I will tell you there are riches in the niches from an efficiency perspective. So, I mean, take your business, for example. If you niched down to a specific type of that construction area that you love to do, and I it has to be what you love. I always tell people, my purple hair is my litmus test because attorneys are two types, and if they get on the call and they can handle the purple hair, we can do business. If they can't, then I got referral partners.

SPEAKER_05:

But that might be a little difficult. Call us purple in your head, my friend. You should go for the purple purple tips. You should go for the purple stash. Maybe a purple purple purp the purple van dyke, as it were.

SPEAKER_03:

But if you think about it as a process person, if you were focusing in one specific thing, those processes are gonna kick butt and you're gonna be really freaking fast.

SPEAKER_04:

This is this is the first time in four years, though, that we've actually kind of uncovered this little secret, which I think is great because we do talk about niches a lot. And the fact is your niche is your focus, but if you've got low-hanging fruit coming to you, you don't turn it down.

SPEAKER_03:

You don't as long as you've got space.

SPEAKER_04:

Yeah.

SPEAKER_05:

You got space and you got well and the process to handle it, because I think you're right. Because once you have your model down and you know your own uh efficiencies, is that when you step out, it's not as efficient. That means you've got to do a little bit extra work, and sometimes that's where we lose our profit margin, is when we have to do a little extra work, kind of kicking out there and getting around it.

SPEAKER_04:

So are you uh are you focusing on the Houston area where you're from, or are you we are nationwide.

SPEAKER_03:

I actually had a client in Canada until recently. We love Canada.

SPEAKER_04:

She was a mixed and a duh.

SPEAKER_03:

Hey, they've got some some some good bourbon.

SPEAKER_04:

I think it is because I have a bad sore throat.

SPEAKER_05:

It's true.

SPEAKER_03:

Uh exchange rates weren't so friendly for us, so we're we're pausing for the moment.

SPEAKER_05:

Oh right. All right. So let's go back to the uh lawyers and how you handle them. So you say you can look at these books. So in our world, uh uh well, any world, right? You have uh revenue and you have cost of goods sold, leaves you with your gross profit, and then you have the overhead and expenses. Tell us what do you see are uh how do people organize their books to be able to see some of these trends and the some of the things you do to help them?

SPEAKER_03:

For anybody, professional or trade that is in what I will call the service-based business, meaning your people make you money, your people need to be in your cost of goods sold. And if they're not, you are losing a huge part of the story. And it's a big part of how we calculate exactly how much money's left on the table.

SPEAKER_04:

Unpack that a little bit more. Yeah, get it.

SPEAKER_03:

So if you've got, let's say, a team of five and you do a lot of flat fee work as most people with people do, because that's where the efficiencies are, those people, those five people, should be working whatever their hours are. I'm gonna assume 30 to 40, though I will be honest, most of my team is part-time and I love it. But let's assume they work 30 hours a week that they are doing client-related work, not driving, not what I they're on client-related work. And on average, if you were going to bill them out hourly, it should be$200 an hour. You take those five people times that 30 hours a week and that$200 an hour. And if your revenue's not coming in there, you're missing something.

SPEAKER_05:

Got it. You can't cover the other, yeah, you can't, you don't have the right utilization. So you also help develop metrics for them to to kind of get their own scorecards put together. She's shaking her head. This is a podcast. Yes.

SPEAKER_03:

Yes, yes, we do. I don't want to interrupt you all the time.

SPEAKER_05:

No, I uh I go on the radio quite a bit, and our radio guest host always does that. This is radio, we can't see you.

SPEAKER_03:

I am I am definitely a fan of ratios and utilization, and operations means just as much as the numbers. And for our law firms, especially, we usually try to get access to those operations practice management tools because they help us tell the story of your numbers. And my goal is to always make the numbers a story that makes sense to the business owners. And if it doesn't make sense to you, and we're talking accounting terminology or over your head, you can't use it. If it's not useful, it doesn't make a difference.

SPEAKER_05:

Do you find that these guys have these law firms, guys, law firms have uh similar software packages? Or does you recogni you oh really? So what's the name of the one that you see the most? Cleo. Cleo, got it. Yep. I had an aunt Cleo once. That's all I got.

SPEAKER_04:

That's all I could say. Was she a good cook?

SPEAKER_05:

She uh she was a good cook.

SPEAKER_03:

She sounds like she'd be a good cook.

SPEAKER_05:

Yeah, of course. Yeah, a lot of a lot of my a lot of my I I I was in the kitchen with them all. So yes, they were all great. What a gift you got growing up. Cleo. Yep. That's amazing. She was cool. Yep, she let me in now. She let me in the kitchen all the time. All right, so that back to Cleo, the financial system and look.

SPEAKER_04:

So you you get distracted pretty easily, Danielle. What? Huh? What? Where? Okay.

SPEAKER_03:

That's what makes life fun.

SPEAKER_04:

That's right. So do you do you uh what services do you provide? Are you are you doing fractional CFO or you know?

SPEAKER_03:

Yeah, so we are fractional CFO. That means different people, different things to different people.

SPEAKER_04:

So it means one thing to me. So what does that mean to you? What are the different things?

SPEAKER_03:

I'm curious what it means to you.

SPEAKER_04:

Yeah, do do tell.

SPEAKER_03:

Well, I'll explain all the other pieces, but I want to know what it means to you now.

SPEAKER_04:

So there's there's a company that gets to a certain size where they need more than bookkeeping, they need a CFO, and yet they don't think they can afford one, so they can get a fractional one, so they get a part-time CFO who then ultimately pays for themselves because they're so freaking smart, and they then all of a sudden they become the full-time CFO.

SPEAKER_05:

That's that's how I view it. That's a good start. Okay, Danielle, continue. Thanks for the condescension.

SPEAKER_04:

So you know, I'm not afraid to throw it out there.

SPEAKER_05:

Not for me. You know.

SPEAKER_03:

Hey, you you hit the the cliff notes. See, you got the cliff notes out of it. A little deeper down. Oh a little deeper down, you're gonna have you're gonna have your startup CFOs, your funding, your private equity, the the people that are gonna help you talk to a bank, whether it's a startup situation or a cash crunch. There are CFOs that are very well versed in how to get you more money. And we are not one of those. Then you have the CFOs that will come in and I'll be honest, they're gonna be like, oh, I need to look at your books and let's figure out what the problems are. And they're gonna be very project-oriented in how to quote unquote fix your business. That's not what we are either. We fall in a group of CFOs that do controller and operational style CFO work. So it's taking that next step from your bookkeeping and building out a budget, understanding your revenue streams, understanding your expenses, focusing on the budget to actuals because that's where the story starts to happen. And that's where you can make current changes in your business that aren't hidden away in ratios that then need further explanation. We can do those budget to actuals, then we take that and we turn it into a cash flow forecast that looks like your budget. So it actually makes sense to you, but it includes all the timing and the loans and the profit distributions and the savings for taxes, because please, by the love of God, save for your taxes and don't leave it until April.

SPEAKER_05:

Uh make a note of that, Chris. Well, I don't want to tell on myself, but uh April is just an extension day for Chris.

SPEAKER_03:

For very, for very many people it is.

SPEAKER_05:

But if you aren't saying, give me three more days. Give me three days instruction. Give me three more days, Uncle Sam.

SPEAKER_03:

That's that's never what he doesn't listen very well.

SPEAKER_05:

Not a good listener, not a good listener, Uncle Sam. Thank you. Um, you know, I love door number three that you talked about, and uh I I like the way you explained it because um wasn't it a great setup question? It was a great setup question, and it was great. Your high-level just hey, fill in the buckets about what you should be asking. So that's gonna be the next question. When somebody looks, because I've had I actually part of a mastermind CEO group, a lot of these guys know this, and you'll hear that. Hey, I'm looking for a bookkeeper, I'm looking for a fractional CFO, but they don't nobody really know what they're asking for. So, what questions should we be asking you, or what should we ask people before we ask for people to help?

SPEAKER_03:

If you want to look at the future, you want to talk to a CFO. If you want to look at the past, you're gonna be talking about if you want to organize your books and look into the past, that's usually gonna be a tax person and a bookkeeper. Really good tax people are gonna get into strategy and look into the future with you, but they're not gonna get into business strategy, they're gonna get into tax strategy. I will say one of the best pieces of advice I got when I started my business, because like everybody, I put like everything in the kitchen sink we could do up there and had a business coach tell me they don't know what they want, you need to tell them what they need. So I no longer wait for people to be like, this is what I need, because they know exactly what you need, and we use our six-part framework. I don't care who you are, what you do, how you do it, it fits.

SPEAKER_04:

Huh. She's like accounting Yoda for lawyers. I know. Okay, but we take other people. You missed that part. You do wish you were a lawyer. You're kind of jealous. I can't. Hey, can you talk a little bit about budgeting? I've been through so many budget processes, and it's just it just feels like a wild ass guess. I mean, you're just, you know, okay.

SPEAKER_03:

You haven't been doing it with the right people.

SPEAKER_04:

You know, we're gonna go for 10% this year. We're gonna go for 15%, you know, and then you backfill it and blah, blah, blah, and you, you know, committee it, and then and then somebody just decides what it's gonna be. And hey, there's your budget, you gotta hit it.

SPEAKER_03:

So what so yeah. That is the easy way out of budgeting, I will be honest. And my team probably hates me that we don't take the easy way out sometimes, but a lot of as you grow and scale, a lot of budgets will start to become very trend based. It's how much are we doing on a regular monthly basis? And let's grow by 10%. You lose the story in that with our clients, and I'll be honest, we're working with anything from half a million to 15 million. We do what I call bottom-up budgeting. We don't budget by account, we budget by activity within that account so that then I can look at your books and compare exactly between your budget and your actual actuals and know what the difference is and why. And then we get to start to tell the story. Because the goal of a budget isn't to hit the budget. And when you start doing these trends and these 10%, it becomes this. I just need to hit the budget. And that's why people backfill and move things around. The goal of a budget isn't to hit the budget, it's to understand why you don't hit the budget. So you can either repeat the good things or fix the not so good things. When you don't hit your budget, you get to either make a change to your budget, which means we're changing our expectations, or you get to make a change in your business and get back on budget.

SPEAKER_05:

All right, back to budgeting. Neverly. I don't want to go back to my own.

SPEAKER_04:

No, no, I because I it's so frustrating to me because that you sit there and you go through all the gyrations, and ultimately the CF the CEO just kind of knows what number they got to report to the investors or whatever. Yeah. So let's just frickin' give me that number, and then we gotta figure out how to get there. But you've you've got we go backwards. A more granular way that I honestly have never been a part of. So I would kind of hope that you can unpack it for our listeners who are thinking about how do I plan for next year?

SPEAKER_03:

Yeah. So we talked about revenue from a capacity basis. That is quite literally how we budget. If we're not hitting capacity, I want to know it right away and we're gonna talk about it. So we budget by your people for revenue.

SPEAKER_06:

Smart.

SPEAKER_03:

And then for your expense side, we go through all of those. And before we even budget, when we're going through our onboarding process, we put things in one of three categories. You have what I like to call your required costs. I don't know a business that runs without cell phone and internet at a minimum. Like you gotta have something. Then you have what I like to call the personal perks, the things your tax CPA or EA has recommended you run through the business. My favorite example, my kids are on payroll. They don't add an ounce of value to the business, but they do add value to my tax deductions. So they're there and it's defensible.

SPEAKER_04:

Chris is writing that one down.

SPEAKER_03:

But then everything else, and it's not required.

SPEAKER_05:

I was like, we're gonna come back to the follow me in son and daughter and wife. Uh yes contracting.

SPEAKER_03:

So the fun part about kids, and now I'm sidetracking, but the fun part about kids is they don't have to file taxes if you. Stay under a certain amount.

SPEAKER_05:

Bingo.

SPEAKER_04:

Except for it should be uh daughter and wife and lollamy and son. And lolami and son. Probably the name of your entity. Right.

SPEAKER_05:

Yeah. So no, they're all they're all part of the holding company. So let's get back to it. So kids.

SPEAKER_03:

Everything else.

SPEAKER_05:

Run the kids through the business. Yes. Run them like a wash.

SPEAKER_03:

Under eight. Under eighteen.

SPEAKER_05:

Oh.

SPEAKER_03:

That makes a difference. That's the little problem. They gotta report a little bit more of it when it's not. But if you do have kids that are under 18, it's quite literally tax-free.

SPEAKER_05:

I like it. And yes, I did it. There's a nugget. It is. It is a great nugget, guys. Are you drinking bourbon too, Daniel? She is.

SPEAKER_03:

I am not. I wish I was, but I have to go drive and pick up kids in a little bit.

SPEAKER_05:

Oh. Oh, so do we have kids under 18? I do.

SPEAKER_03:

So mine are both on my on my business.

SPEAKER_05:

I like that my little tax deductions. Come on. When you pick them up, come on, my little minion tax deductions. Get the car. I have been never so happy to see you. I just got up a podcast. You know what? How much saving me now? You know, you guys keep costing, costing.

SPEAKER_04:

I love you this much, actually. It's this much. It's this much.

SPEAKER_03:

Oh, they cost more than they save, I promise.

SPEAKER_05:

You're talking to one who's got three over here. Uh, that's Alan, and me who have got two, and I can't seem to get two of them off the uh payroll.

SPEAKER_03:

If anyone are on swim team, and it it adds up fast.

SPEAKER_05:

Man, that's a that's a loud sport. That you know what? And it's time consuming. Yeah. Oh my god. Hey, we're going to the swim meet. Where are we going? Oh, we're going to the swimming pool. Two hours away. It's so yeah. And you go there, you're like, hey, this ain't no swimming pool. Where's the palm trees? Oh, no, no, no. We're in an auditorium. I do blah blah. Yeah, I'm like, okay, for how long? Um, well, I'm not sure. Eight hours. I'm in heat one, six. Yeah. I'm in 29 and 512. You're like, do what? Your kid has like three minutes of swimming in eight hours.

SPEAKER_04:

Yep.

SPEAKER_05:

Yeah, they uh they grew up.

SPEAKER_03:

And they might even miss it.

unknown:

Yeah.

SPEAKER_03:

And then you're like, what did I come here for?

SPEAKER_05:

Yeah, because you're up there in the stands, go, where are they? Where's that? You know, I'm kind of glad my kids don't swim. Well, I mine did and then stopped. Uh, thank God. Uh and then but we got into tennis and yeah, that same thing. At least they they played a little bit more, but you're still there all day. All right. Well, God bless you for doing that. And don't let them forget, uh it's just a little bit different. Um, but you cost me a lot of money. All right.

SPEAKER_03:

So let's talk about it. Okay, so we got personal perks. Yep. We've got our required. Everything else that is in your expense side of your PL is an investment in your business. And we go line by line to the extent we can. I'm not looking up every single restaurant, but line by line, and we say, Hey, what is this giving you in time, money, or both? And if it's not, why are we spending it?

SPEAKER_05:

Do they do much advertising law firms? Oh, yeah. So you work with the ones that do a lot of advertising, yeah.

SPEAKER_03:

Some of them, yeah.

SPEAKER_05:

Okay.

SPEAKER_03:

That one takes a little bit more, it's not an immediate time money. Then it becomes, I want to know who's how are you managing it? What are the metrics? How do we know it's working?

SPEAKER_05:

Yeah, that's so hard, especially right now in the world of with the AI coming in. Um, you know, I just had a great analogy. I'm gonna share this to everybody. AI good because you set it up. You just said it was great. It is. It wasn't mine, it's not mine. It's not mine. It's somebody else's. Watch this. Better be great. AI is not new. We've had disruptors before when it comes to working with people in business and advertising. Go back, television, when it first came out, there were three stations. They had 70 million viewers, not 70%, not that 70 million viewers that were captive watching just three channels. So you had advertising there. And uh then the uh so we talked about how this is not a new thing, it's just something you have to get used to, and you have to understand TV wasn't going away, and neither is this. All right, so I thought that was a great nugget. I think that was an amazing look on your face. I'm gonna put that out. I'm gonna put that in the show notes.

SPEAKER_04:

I was having a conversation with Michael about uh AI, and I actually went even further back to a disruptor, which was back in the old days, artists were portraiture. It's like they did landscapes, they did you know people's faces, and then and then photography came along. Yeah. So then there's no need for portraiture. And that's what sprung Cubism and all the different kinds of art that were what we call modern art, because there was no point in making realistic renditions of the image that you were looking at.

SPEAKER_05:

You know what? I'm gonna give you that one. That is good, but still TV's better. All right. Uh not for me. Not for me. All right, all right. Back to Danielle. What else? Big bird.

SPEAKER_03:

Okay, so we talked about how to budget for your revenue, how to calculate it. Now you take those expenses and you want to figure out how often they hit. The ones that you don't get rid of, you're gonna figure out how often they hit. And the purpose of a bottom-up budget, unless you have a tool you're gonna want to do this in Excel, is you need to go through and figure out what is that cell phone monthly? What it like, what are out of all those expenses that we've decided we're keeping, when do they hit? How often do they hit? How much do they hit? And which account do they roll up to?

SPEAKER_05:

How often are they like half off? Like when they but when they when you start saying, let's look at your expenses, you're like, uh, my cell phone's like a hundred bucks a month. Okay, let's go look. Um, actually, you pay for all four, so that's four hundred dollars a month. Oh, yeah, right. Okay, write that down. Um, my internet, um, I think I'm on the uh lowest plan. Let's just put 80.

SPEAKER_03:

Um anything you put on your credit card, I guarantee you're half off.

SPEAKER_04:

It's so bad. It just runs and goes. Is if you were working with Chris, you would be going through the the Braves tickets, the Falcons tickets, the trips to Vegas, uh Kiwa.

SPEAKER_03:

Some of that might hit personal perks versus uh investments, but you know.

SPEAKER_04:

He would have to defend how that impacted his business. Was it worth it? What's the ROI on it?

SPEAKER_05:

I will argue that Bill Gates had a lifestyle business. His lifestyle was just very, very large. And I have a lifestyle business too. I just I don't have to hear you equate yourself to Bill Gates. Well, you know, actually just hit me because everybody says, Chris, you have a lifestyle business. I'm like, I do not. I mean, I got a process-based business that's working in two different cities. I'm like, don't give me this crap that I'm gonna lay.

SPEAKER_03:

But it supports your lifestyle, and I wish people would quit thinking lifestyle business was a bad thing.

SPEAKER_05:

It well, uh you're right, I was, and that's why I'm going, you know what? She is so on your side today. I'm so digging this too. You know what? You know what she's thinking right now, Alan? Not for me. Okay. I love that. That's good. All right, let's go back to Daniel. She's trying to give us more nuggets and we're running out of time. So yeah. So you get engaged, you keep moving, you're right, you're running through this, do you give them the budget, they start rolling. How long do these guys stay with you? Is one of the biggest questions I've got. So I get I on board with you as a law firm. How long will they usually stay?

SPEAKER_03:

Honestly, indefinitely. So it takes us about six months to go through that process. I know.

SPEAKER_04:

But it becomes you were trying to see if her turnover was as bad as yours. Oh, I knew it wasn't. I mean, I knew it was a layup.

SPEAKER_03:

I'm not gonna lie, I I just told you we we lost the client in Canada. Exchange rates got too high. But most likely it's it's usually it's indefinitely. It's um it becomes a little bit of a therapy session sometimes. I open most of our client meetings with uh what's giving you heartburn right now, because half of our clients don't even look at their reports. They just know that we've looked at their reports, and then we're gonna talk through whatever's giving them heartburn and figure out the answers. Guilty.

SPEAKER_05:

No, but once I got my books back straight, and I do I now I don't I don't have a fractional CFO. I have the bookkeeper looking in the past. We close up our books. Um, but you're right. I actually the meeting has gone. I mean, we're done in 25 minutes with that part.

SPEAKER_04:

Well, and that's the sign of the fact that you completely trust that person and you've got a good person in place. Now you still have to check on them to make sure that Danielle's not embezzling or whatever. She, I mean, she's got a swim team to support. I know.

SPEAKER_05:

She can't.

SPEAKER_03:

That's expensive. But that is also why the ex-auditor and me will never do bookkeeping or taxes. I think you need multiplies on your books every every month.

SPEAKER_05:

Oh, great point. Expand on that one real quick.

SPEAKER_03:

So, segregation of duties is what we technically call it. It means you want more than one set of people looking at everything. You want more than one set of people touching everything. The bookkeeper's job is to categorize it. I can't tell you how many times we come in and one of our first recommendations is to change bookkeepers. Wow.

SPEAKER_05:

Huh. I could say, well, actually, having been through a nightmare of uh having the wrong bookkeeper, I I completely understand. Um I think right now I'm in the groove where I am debating uh the whole fractional CFO, which is why part of the reason uh we're on. So Danielle could have a little therapy session with Chris.

SPEAKER_04:

By the way, Daniel, the purpose of this podcast.

SPEAKER_03:

Hey, we take other, you missed that part.

SPEAKER_04:

Is for Chris to get free advice. That's right.

SPEAKER_05:

Um, I like free advice.

SPEAKER_04:

So let's get access to incredible people. Let's go super granular because you think about who our listeners are. Yeah. And there's somebody driving down the road going, Well, how do I know if I have a good bookkeeper?

SPEAKER_05:

Oh, that's a great question. Oh, that is great.

SPEAKER_03:

I'll tell you how I know when you have a book, a good bookkeeper or not. Well, two ways. Because I'll also tell you we have a client that we onboarded recently, and as soon as they found out we were involved, because one of the first things we ask is for an intro to your bookkeeper, they started sending all these corrections over and things that needed to be, and that was like, ha ha, they know someone else is looking. Gotcha. So that's one way. You could fake it and say you hired a CFO and see if you start getting a bunch of emails. The other way, though, is if you are willing to get into your own QuickBooks or Zero or whatever accounting platform you're on, you want to look at your balance sheet. And inside your balance sheet, you should have something called reconciliations. And they should be getting done every single month and not just done, but inside, and I'm gonna talk bank reconciliations and date myself a little bit here. A bank reconciliation is kind of like tying out your checkbook back in the day. So when you open that bank reconciliation, the goal isn't that your books and your bank have the same number because they shouldn't actually, most of the time. There's gonna be timing differences, there's gonna be a check that got written and hasn't been cashed yet. There's gonna be things in there. Those reconciling items, those uncleared items, should all be fairly recent. If you've got stuff back to 2020, your bookkeeper hasn't been keeping clean books.

SPEAKER_05:

That is the gold nugget of gold nuggets to your granular question. You want to know, and most of us are probably on QuickBooks, let's face it, because QuickBooks is kind of like kind of like Google. Everybody seems to have that one if you're ubiquitous. Yeah. So just go, and all you have to do is go to reports, reconciliation, and see when it was last done and how far back some of those outstanding items are. And when you see six months worth of unreconciled items, yeah, you got a problem. Oh yeah. Is that what happened? Yeah, that's what happened. Yeah, I had no idea. That's a great question. Uh, and that's a great answer.

SPEAKER_04:

And that is I just got three great questions out of that one.

SPEAKER_05:

Uh so yeah, not for me. Three three zero. I I would say uh still your opening line, but not for me. That's your that's your 100%. Oh, just because I know this guy. I mean, we can go to the tape.

SPEAKER_03:

I'm gonna be kind of offended if that ends up being the title of this. I'm just saying.

SPEAKER_05:

Not for me. No, there's no way. No, no, let's let's. Well, how about this? Hey, you want a bad CFO? Not for me. Listen to this episode. Way to spin it. I'll give you almost the back.

SPEAKER_04:

But yeah, we can go to the tape. You said great question like three times.

SPEAKER_05:

I did. All right, Danielle, how can everybody get a hold of you? Because you have to. And if you aren't a lawyer, she'll still talk to you. And I think it's worth the conversation. And if you know somebody's a lawyer, you better send them. And how about this? If you're using that lawyer, definitely send her to Danielle. Oh god, that's a good idea.

SPEAKER_03:

Oh, that's a good one.

SPEAKER_05:

Yeah. So you're using a lawyer, send it to them. Send, send, send, send the lawyer. Hey, look, man, I want to make sure you're charging me right. I don't want you to be overcharged me, and I want to make sure your books are good. You need to talk to this chick. So talk to Danielle with the purple hair and get ready for it because she's gonna bring the heat. All right, Danielle, how can we get a hold of you?

SPEAKER_03:

Website's the best way. The number four, not the word, fourcornerscfo.com. And then you can find me on LinkedIn under my name. And we are going to have a page set up just for you guys that I need to double check what it is.

SPEAKER_04:

So say wait a minute, I'm not very smart. Say the website again.

SPEAKER_03:

So my website is the number fourcorners CFO.com. You'll find all kinds of information there. But just for this podcast and for you guys to drop into the show notes, we are gonna have fourcornerscfo.com slash small business safari. That'll have some freebies, that'll have some ways to get in touch, all the fun things. And I am going to tell her to put not for me somewhere in really big letters.

SPEAKER_05:

Oh, yeah. Hey, you went and get a hey, uh, do you want to make money not for me? Don't call me. Huh? You want to make money? You call me. That's it.

SPEAKER_03:

I love if money is not for you, don't worry about it.

SPEAKER_05:

Not for me. Not for me. I love that. We're gonna spin that. We're gonna spin that on the title. I think that actually gets more truth. Because let's face it. I mean, I mean, uh we just made this a very sexy topic. I mean, we actually got we got we went to the colour. You know what?

SPEAKER_04:

I didn't even have to take my clothes off today. Thank God. I know I know I quite I turned the fan on at night. That's why I walked away. It's quite cool now.

SPEAKER_05:

Thank God. All right, I'll get you back in the meat locker. All right, can we get to the final four questions? Let's get there. We've got to get there. Danielle, what is a book you'd recommend to the adventure team, our small business safari listeners?

SPEAKER_03:

If you are not ready to look into a CFO, but you do feel like there's something going on in the numbers and you want to be more profit-oriented. I'm a huge fan of Profit First by Mike McAllowitz. Uh, really, really, really good book just to get you mentally oriented and looking at your bank account and setting things up in a way that puts you first because so many business owners put everybody and everything else first.

SPEAKER_04:

That's the best explanation for why they recommended a book we've had in four years.

SPEAKER_05:

That is a great explanation. Uh, and have read the book uh and haven't adopted one thing of it.

SPEAKER_03:

It's a little tedious, but it is.

SPEAKER_05:

I actually but I would tell you what, I go two guys, two companies that have actually um have implemented the profit first. There's a lot of checking accounts you gotta reconcile. And my bookkeeper does charge me by account, so I said, Well, we're just gonna do all in one.

SPEAKER_03:

So, Chris, that's why you need the fractional CFO, because we just take all of that and we do it in a cash flow forecast instead.

SPEAKER_04:

Oh I'm calling. Don't worry. Chris, you always think you're smarter than everybody, but once in a while I do get you gotta give it to them. I do.

SPEAKER_05:

I I actually put on my head. I think I got concussed. Um, because we're full of there's no doubt you got concussed. Oh, yeah. Oh, there's no doubt. I mean, it's so funny back in the day. I was like, stars, bright lights, handshaking. That was just next play. All right, let's keep going. All right, next question. Whoa boy. And speaking of concussion, I just lost my next question. But I have what's the favorite feature of your home?

SPEAKER_03:

The fact that my office is completely separate from the whole other side of the house. My kids have theirs set, like all the rooms and everything else are over there, and my office gets to stay nice and quiet.

SPEAKER_05:

Love that. I think actually we I think we haven't done the heat map on uh the questions of the of the uh favorite home. I would say for a lot of people it's been their office. Isn't that wild? I think so. Yeah. I mean, some some of them have the view.

SPEAKER_04:

Yeah, a lot of time there, you may as well make it awesome, right? Yeah, I love that. How close are you to the uh golf?

SPEAKER_03:

Oh, I could probably ride a bike.

SPEAKER_05:

That's pretty sweet. All right, so proximity is also big. All right. One of the things we haven't talked a lot about, but because you gotta have good books, but Al and I are kind of customer service freaks. We're kind of crazy about it. What's a customer service pet peeve of yours when you are the customer and you're out there and looking for service?

SPEAKER_03:

So I'm gonna spin it a little bit in a way that fits with what I do in business. My pet peeve is when people are completely inauthentic. The I the millions of LinkedIns and everything else that people get that are just not authentic. Like there people reach out and they're like, Hey, can you do my taxes? And I'm like, I don't do I don't help people with taxes. I don't need to I don't need help helping people with taxes. It's not even my business.

SPEAKER_05:

No, I was thinking the other way around on LinkedIn. I was thinking douchefactor on LinkedIn. Hey, I can take your website to the next level. I don't know who you are. And have you looked at my website? No, clearly not. Hey, um, you you want your podcast to get more listeners? Um, have you found out how many listeners we have? I mean, so um you all do. Well, but people will intro it people I've had on it.

SPEAKER_03:

They will intro it in a way that they're like they might be a customer. They're like, hey, can you do my taxes? I help other people do blah blah blah blah. Other tax firms do. I'm like, no, I don't even touch taxes, but you didn't look.

SPEAKER_05:

Oh, so in Houston, do you see bless my uh bless your heart? Can you see it on there or no?

SPEAKER_03:

We do say bless your heart.

SPEAKER_05:

That's right. Yeah, that's Southeast. Oh, Bless Your Heart for that stupid LinkedIn message you just sent me. You have to, I have to agree to that's becoming really noisy. All right. So, you ready?

SPEAKER_04:

I want to know if Danielle's ready. She was she was not thinking correctly. This is I was not. No, I mean everything else she said has been flawless.

SPEAKER_05:

I don't want to hear about those contractors screwing up because I'm only just give me three more days contracting.

SPEAKER_04:

Yeah, we want to know how Danielle hurt herself. Yeah.

SPEAKER_03:

Oh, and I'm gonna go finance on this one. So I'm like a total Excel nerd. My personal budget sits in Excel and I keep up with it fairly frequently. But um when you get a formula wrong, it can make things really bad. And I had a formula wrong and completely like I think we were three or four grand off on like my tax calculation for like where because I also keep up with what do we think taxes are gonna be with the business. And I was like, now we gotta go find four grand for that payment.

SPEAKER_05:

I didn't know, but we and we bleeped it. No, that's awesome. You know what? That is a great TI line. Oh great answer. Because I have I have that same problem. You're like, Can you imagine how bad she would feel? I know that you mean you mean it doesn't matter.

SPEAKER_03:

Oh, the cobblers kids have no shoes. I'm the worst at my books and taxes.

SPEAKER_05:

Oh great confession. Daniel has the best. Daniel Handon has done it, she's kept it authentic, she's kept it real. She is the one that you need to talk about when it talks about fractional CFO. If you didn't learn something today, man, that's on you guys. You just got another great lesson on how we can all run our businesses better. Keep it up, keep watching. Hey, if you didn't stay on this uh this that long, this long, this long, whatever. What are you talking to them if they weren't there? Hey, if you're not here, get on. If you're still here, what are you doing here? No, go out there and make money, make it happen. YouTube, go out there and check us out because these things are online. You can see the mess that is, the plastic behind me. But once again, this podcast, if you didn't get something out of you, maybe it ain't for you. No, no, yeah.

SPEAKER_04:

Huh?

SPEAKER_05:

Not for me. Not for me. Let's go. It is for you.

SPEAKER_04:

Dumbass that I get anything out of this one. Because this was awesome. Yeah, you just she brought the heat. So many gold nuggets. Right. Epic.

SPEAKER_05:

Yep. Hey, Alan, yeah. Let's go swimming. We got to get out of here. Danielle ended. Thank you so much. Enjoyed it. Cheers, everybody. Thank you for listening to this episode of the Small Business Safari. Remember, your positive attitude will help you achieve that higher altitude you're looking for in the wild world of small business ownership. And until next time, make it a great day.

Head Shot

Chris Lalomia

Host
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Alan Wyatt

Co-host