EntreLeadership - Knowing Your Numbers is More Important Than Ever Before

Episode Date: April 4, 2020

Tune in to hear Daniel Tardy and Mark Floyd respond to some business owners' fears around Coronavirus.   Get access to the EntreLeadership Weekly Report Tool, FREE, for you and your team for 3 months: Text TEAMHEALTH to 33444 or visit entreleadership.com/weekly-report   Follow us on social media to stay plugged in to everything we’re doing to help the small business owner win: LinkedIn Instagram Facebook Twitter YouTube Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, this is Alex. I think we all know that times are a little bit wild and crazy right now. And I think one of the things that makes it so crazy is that everything is changing so fast. But here's the deal. The last thing you want to do as a leader is keep your eyes glued to CNN and Fox News. I just don't think that's good for your sanity. So we wanted to make sure that we were providing you with the most up-to-date information with regard to how we are handling this whole situation at Ramsey Solutions, but also how we see small business owners around the country winning and leading in this time. So every day, we're committed to bring you action-oriented, practical, positive content that can help you move your business forward. So here's today's bonus episode with Daniel Tarty and our CFO here at Ramsey Solutions, Mark Floyd. Hey, guys, Daniel Tarty with Entree Leadership and Ramsey Solutions, and I'm joined today by our CFO, Mark Floyd. Mark, thanks for jumping in here with us today. You're looking, Ben. You're happy to be here.

Well, the last couple weeks have been interesting. As fellow board members, you and I have joined Dave and our operating board on a lot of unscheduled conversations about how Ramsey Solutions is responding to everything going on on the marketplace right now with the disruption around the coronavirus thing. So I'm curious for you, what was the first moment for you that it kind of I went from like, ah, this isn't going to be a big deal. It's just, and then all of a sudden, like, oh, this is a thing. Like, we're actually going to have to respond a little bit differently. It was on the Sunday, so was that like the 12th maybe? I got an email from Dave and said,

hey, let's huddle up in the morning and talk about X and kind of things that you start planning. And I thought, that's been percolating in my head for a day or so. All the conference tournaments getting canceled for March Madness. I was really looking forward to March Madness. So I was more focused on what it was affecting me kind of fun. As a consumer, right? Fund-wise, consumer-wise. And then that weekend, it was kind of like, well, that stuff is gone. Oh, this has gotten really drastic. And that Monday morning I woke up with a sense of, this is heavy. I mean, it, so it was almost overnight. It was a 24-hour period where I went from, oh, this is affecting me negatively to, oh, this is heavy and this is real stuff. And we better get our collective crap

together. Yeah. I think we all kind of felt it that Monday. Like this is a new gear that we've got to jump into to respond appropriately. Well, as you know, so many of our small business owners understand the importance of knowing their numbers and accounting practices so that the numbers tell them the story of how their business is performing. And, you know, that really is the language of business. So paying attention to our numbers, oftentimes it's kind of a monthly cycle or maybe week to week. I imagine it looks a little different when all that goes out the window and all the sudden we're responding in real time. From your vantage point, what are some of the general principles of what business owners should be paying attention to now in the numbers that's

maybe different than just kind of your typical monthly cycle, if you will? We've seen it happen with us, right? And some of our new daily reporting that we're doing, We probably were a little lax in some of those areas and didn't do it at a corporate level, did it at individual business unit level. So all of a sudden, we're concerned each day with what lead volumes might be doing or sales and do a daily revenue tracker.

It used to be, hey, things were kind of business as usual, and unless there was something weird happening during the middle of the month with one particular business unit, we just waited to the end of the month to kind of tally things up. I kind of knew what was going on. I kind of had a feel of where we'd be, but didn't worry about communicating it

because it was business as usual. Now, every morning, I get a report and we're sending it out to the board, adding any kind of color to it to say, here's what you're seeing in the numbers today. And so we've gone from, I'll say, really close to monthly from an overall company standpoint

to heavy-duty daily kind of stuff. And so I don't know why you would do anything different as a small business owner and actually you might even be a if you're doing something that you could actually watch something, you know, twice a day or whatever. I would, I would just escalate that just to stay on top of your numbers as best you can. And typically that's going to be, so what are your cash balances, you know, what kind of sales volume if I'm doing sales? Hopefully you're doing some sales.

And then, and accounts receivable, I'd be really concerned about that because just like us and just like every other business. out there, what's one of the first things that they think they can do? It is, well, let's slow down maybe our payables. Payables. Well, what's on the other side of that is your receivables? So I would keep a close eye on that and maybe be that squeaky will. So as you- Proactively reach out to your vendors and say, hey, this is where we're going to...

Yeah, so I'm doing both sides. We're slow down our payables and then reach out to your receivables and say, hey, we expect you to still, I mean, you're kind of playing both sides of that. Yes, call major vendors and say, hey, I'm with you. going to make it through this, but here's what we're going to need to do that. And if it's, if it was usual 30-day terms, can we move it out to 60? I would be proactive, because if they don't know, then they may be assuming the worst. So I'd be proactive on that end. And of course, on your end, if you're the receiving, on the receiving end, on the accounts receivable side,

if the customer is always paid, you know, every 30 days or whatever it is, I would be watching on that 30th day to see if they've paid or not. And if not, pick up the phone and just say, hey, you know, So what's happening? How can I help? How can we? Would you incentivize that at all? Offer a 5% discount to go ahead and pay or give them some kind of... There's no reason. I mean, today, I need as much cash in the door, just like I would sell inventory cheaper than what I would sell it before. Because what is most important is, you know, CFO's number one job is don't run out of cash.

And so as a small business owner, you probably have too important job. Don't run out of cash and keep it coming in the door. I would be proactive in reaching out to, if you see if there's any issue, then could you negotiate favorable terms to you from a receiving side, just like you might try to negotiate favorable terms on the payable side. Yeah, that is really good advice. Mark, talk to that business owner who maybe right now spending a lot of time on the numbers, and it takes some time. You've got to pull reports, you've got to plug things in, you've got to check in with the team and update a model.

feels like everything's on fire with keeping, you mentioned keeping sales going and running the business. And it almost could be one of those things you go, hey, screw the accounting. I'll get to that later. But you were talking about the benefit of going through the exercise. After you sat down and your team kind of put pin to paper and started crunching numbers, there really was a confidence that came what maybe before felt like some fear and some ambiguity. Talk about the value of doing that exercise and why you can't really put that to the back burner of right now. Yeah, I just personally speaking, I can say the Monday that we just spoke about by midday that afternoon, you know, in that afternoon, I was, I was not in a good place.

I mean, just kind of, it was like, okay, this is heavy, this is deep stuff, and we got to make sure that, you know, we do everything that we can to make sure that we make it through however long this mess might be. We started working on a, what I'll call a sensitivity analysis where we do. just plugged in all of our numbers and said, what, you know, ran all the what if scenarios and ran it out for several months. Clearly, you'd think it might escalate. If things got bad in April, might they get worse in May? And you keep kind of escalating those what if scenarios. But ran all that out and went out three or four months and went, oh, okay, I feel better. So

knowledge, I mean, again, it's not total knowledge because I can't predict what the future is. but running through those various scenarios, once we did that, I felt better, walked into Dave's office and walked him through it. He felt better. I mean, so I think just the more knowledge that you have or the more scenarios that you can run, you'll feel better about it. But boy, don't put it to the back. I know I'm always a CFO on Entry Leadership Podcast saying,

you've got to know your numbers, you've got to know your numbers. Man, how more important right now is that? So just, man, be on top of it. I recently heard somebody say that all models are wrong, but many of them are useful. Right. So there's still a guess, but the confidence that it gives you and your ability to kind of navigate forward with a plan versus making it up as you go is really what you're saying. And we really don't know. I mean, anything we're modeling right now, I can, it's March 31st, so I can predict what March is going to be pretty well.

And I feel okay about April, but beyond that, I'm not sure. And so what I'm going to do, I'm going to take kind of a worst-case scenario. I know most small business owners don't want to do that negative thinking because, you know, you feel like you might get a little bit of a tailspin there, but you kind of have to go some worst-case scenarios so that you can plan it out and go, okay, so what do I do next? If this happens, what happens after that? What moves do I make next? So you have to do some worst-case scenario in this day and time.

Talk about the value of maybe some phases, some stop losses, if you will. Like right now, we're tightening our belt a little bit, but we're not cutting team members. and we're not cutting critical expenses, you know, there would be a scenario where we might need to cut into meat a little bit more, but right now we're cutting, let's call it fat. So fat, then meat, then bone, if you will. How does a business owner kind of determine what are the expenses I can cut today and survive and bounce back in a couple of months and then what would face two look like? And how do I know which expenses to kind of put into which bucket?

Yeah. And, you know, you've heard the term a lot, non-essential, whether it's been applied to, to a business that can stay open or not stay open. And so we kind of thrown away around that phrase, not essential expenses. But there are probably some even non-essential things that we are still doing today that in phase two, if we're in phase one today, that we likely would stop. But those words, it does feel like you start cutting into bone a little bit if, and I'll just use an example of if 401K matching were something that a small business owner

was doing, you might think first about pushing out payables and, trying to speed up receivables or whatever you might do. That's in the phase one. The next thing you might go is, hey, what are some steps that I could do that, that, yeah, team members are going to start to feel that. But again, that's kind of gravy. So it's not quite bone. Phase three is probably cutting into the bone a little bit. So you just, I don't know where that magic point is. We've talked about here at our company. Well, it probably varies by business. And definitely varies by business. But it kind of gets to, okay, when we take that next step, that means it escalates.

and the team is going to fill this a little bit more. But I think as long as you're communicating that to them, they're not going to worry about that too much. So we've chosen to be really transparent with the whole team. You know, it's not like we have a plan that's under lock and key, and we haven't announced anything. We've really told all of our team a lot of what we're thinking about. If we get to this point, we'd have to make these difficult decisions.

And there's attention in that. We don't want to scare the team. We don't want to alarm them. The value of being transparent and bringing your team into that discussion And how do you do that well? Honestly, that very first week when we sat in our staff meeting with all of our team, and Dave said a couple of the things that he said from a number, I never thought, I've been here 11 years now,

I never thought we would be at that point. And I thought, okay, this is amazing that we're being this transparent, because if you don't, if you leave people in the dark, they're going to make up the worst case scenario on their head. I'm sure that it was probably darker for some. Some, it was very sobering. It was very sobering. But I think what you immediately got out of that was you got people,

A, thankful that they were informed. They felt the heaviness of it. But then they were like, what can I do to help? We're all in this together. We had more of those comments coming through. So I would say you got to keep the team out of the dark and bring them into the light as bad as that light might be in this case right here and just say, hey, I need everybody to step up their game.

And I think we're seeing that in our company. And I think everybody else will too. You know, it's just the time when everybody just kind of yokes together. I love it. Well, Mark, you've talked to us about the value of more than ever paying attention to the numbers, running kind of a sensitivity analysis and really letting the numbers talk to you about how your business is doing right now. We've also talked about kind of a phased plan and then being transparent and communicating with your entire team. Before we jump off, any final words of encouragement to business owners out there who are navigating these turbulent waters?

I'm old, and I've never seen this. before. So I'm going to guess that most people haven't seen this either. So I don't have a lot of advice to go, here's what happened because most other things have been like the 08, 09. That felt like we stepped into that recession a little differently than this cliff that we just, we drove up on right now. So I don't have a whole lot of historical facts to fall back upon. But I mean, my biggest word of encouragement would be, hey, you've got to step in at like no time. other than you've ever seen before and you've got to figure out you got to dive into the numbers things that you maybe haven't cared about before you have to you have to care about oh so much more

deeply and and you maybe have to swallow a little bit of pride we didn't talk about it maybe you've got a rent situation where you go to your landlord be the first one to go to the landlord to say I want to be here five years from now still paying you rent what can I do now go to your bank if you if you happen to have debt you may have to swallow your pride and not may, I'm pretty sure you will. But out of that, can you, can something good come out of it in the long term? And then all I would say is the biggest thing is get past this and remember all the things that you learned as you're going through it. And whether it was, we could have done this leaner, I could have saved this money here or there, or here was a revenue opportunity that

I didn't jump on at some point in time because I didn't feel like I had time to and you're doing it now because it's the most important thing. So there are learnings to come out of this as well. Well, Mark, thank you so much, guys. I hope this has been encouraging to you. Just a reminder, as a business owner, you are a problem solver. And Mark has given you some tools on the accounting side and number side for sure to go solve those problems that we're all up against right now. And just remember that we believe you have what it takes. And together, we're going to get through this.

Keep fighting. Keep going. Keep leading your team. And let us know how we can help you guys. And together we'll come out on the other side stronger and better as a result of this entire. experience.