Hello and welcome. I'm Samantha Hartley, host of the Profitable Joyful Consulting podcast. This is season, season three we're talking to consultants and consulting. And today, I have a very special guest, my client and friend, Patty Lawrence.

Patty Lawrence, CMA of Turbo Execs works with results oriented business owners to reveal the story behind the numbers with financial tools that skyrocket productivity and remove barriers to growth and profitability. Her clients typically increase the bottom line by at least 15% and feel in control of their finances and results. In her free time, Patty enjoys playing competitive tennis. Patty, welcome.

Thanks so much it's an honor to be here, Samantha. So I love to ask my guests, so just tell me a story of someone you've worked with like why did they come to you? What did you do for them? And what were things like once you were done? Yeah I’m glad you asked because I had a client that came to me a while back and was hemorrhaging cash. So Angela was in one industry in the manufacturing sector and was in the industry and made an acquisition in a different industry. So trying to integrate those two things was a bit problematic because what happened was she took on extra overhead and then that individual that she acquired the business from came with the business, which is usually the case when there's an acquisition, you want to keep that person because they have that area of expertise. So you want to tap that and make sure that that business has some continuation and some growth opportunities. But what happened was that the individual got lazy and there wasn't much accountability to that, you know, to the new owner in the new ownership of that business. And what happened is that person just turned into pure overhead, so there was no additional sales that came from it. There was, as a matter of fact, sales dropped as a result of it because that person was so lazy that they didn't even do maintenance type sales, maintenance type work. So it was the acquisition with the outlay of the money first. The second thing was the continued outlay of the salary for that individual was just such a drag on the business. So what happened over time was they started hemorrhaging cash because not only were those things happening on the cash side, but from just the attention standpoint and focus standpoint of the owner who acquired the business, they were like, I need to fix this, I need to fix this but now I'm not paying attention to my core business. So that distraction was two fold and it was double trouble right?

So the other business started suffering, too. So it was just this huge drag on things, so what we did was we said, all right, how can we put together a plan to stop this? So we looked long and hard and there are proven methods to help turn certain things around. Some of them are, you know, look at your costs, look where's your cash going? Take a look at those hard and fast look at those. And some of those are really difficult decisions, right? So I'm going to throw them all out there and have you make the choice right? I mean, have the owners make the choice because I can't do it all, I can’t do it for them, they need to do it. So we talked through it, she picked up the ones that kind of OSA appealed to her that she thought she could do. And within 12 months, that sucker was turned around. So much so that they not only increased sales by 20% year over year, but they increased the bottom line by 38%. So what you would expect was a 20 percent increase in sales would be a 20% increase in the bottom line right? No, there was additional cost savings and expense reductions that they kind of, you know, belt tightening kind of sucked up. And they did it, they did all the hard work. But you got to be willing to do that because it's not for the weak, not for the weak but they reaped huge rewards, so Angela had her best year ever, and she was able to kind of use that to keep building. Now, the moral of the story is when you do an acquisition like that, make sure that you can integrate it and that you're going to be adding to not only your sales, but your bottom line. She ended up closing, shutting down that one, even with the investment that she did, that she put into it, It was not going to pay her back, it was not just going to be a continued drag. So, you know, after six months, we decided the best, you know, the best route to take would be to shut it down and preserve the core of your business so that you could move forward. So that's one example of how I work with my clients and how they come to me and a lot of it is by referral.

So, Patty, so I know you work with businesses, they're in like 2 to 12 million dollar range but I feel like a lot of what I hear you talk about is relevant to small businesses, so my businesses are usually my clients and I think a lot of the businesses who are listeners are more in the $150 to $2000000 range. So kind of a little smaller than you work with but I think in terms of financial literacy and fluency, they tend to have a lot of the same problems. So can you go over the main financial issues, you see that we should be aware of as business owners?

Absolutely, and some of these translate across, it doesn't matter how big or small you are, it's those things that are the universal in the financial management arena. So, you know, I'm looking at what, you know, what kind of things should I know as a business owner? And let's call it the basics, right? Yeah, I would say cash position is one. Cash is king or queen. So the cash position is really, really important. And so we're looking at not only the cash position that you have, the cash reserves on hand and the cash runway that you have. So the runway is kind of let's talk velocity, so velocity of spend, how much do you have on hand that you know, how much you have on hand and how far will it take you? How long will it last you? So do you have one month, two months, three months of expenses, say you had no sales in Covid right? So a shut down if you had to fund those expenses, fixed expenses, variable expenses, whatever those commitments are. How long could your cash last? Ok, so that's one thing to just keep in mind.

The second is called profitability. Profitability is huge, it's not the same as cash right? Cash is different from profit. But really, your overall business is your overall business profitable. And then let's take it down another level. Are your customers profitable? So is each customer as profitable as the other, right? Or do you do some kind of deal of the day right? Do you have that going on, that affects your profitability at the customer level? The other thing is profitability at either the product or service level, depending on if you sell a tangible product or if you're delivering services. So do you know what that profitability is? Because knowing that enables you to make other decisions on your next sale, how you approach that client you know if you have a renewal coming up with that client, there's a lot of decisions that can impact in a positive way if you know that information. Another thing is budgets are benchmarks, budgets are great but if you don't have the time and energy to put a budget in place versus last year is awesome. So look at your numbers versus last year and that will help you understand and gauge how this year is going and where you might be to make some tweaks in order to make yourself a little more profitable.

I also like to look at being alone equals being at risk ok. Surround yourself with a great team of advisers like you are to me. Where do you have blind spots that other people can help you with and see in your business so that you can adjust? You can make those adjustments and go forward with confidence and you can grow and prosper. I'd say another one is building team. So when to hire, when to fire and when I say building team, I'm not only limiting it to employees, so bringing on an employee, but bringing on maybe it's a contractor. Maybe it's a part time person, maybe it's a full time person. But knowing from a business standpoint, what do you need? And when do you need it? And then looking at do I have the cash flow to be able to make that happen? Another one is to say building team is when to hire, when to fire, that's in there. But you want to make sure that it's not exclusively applied to just employees. And just maybe the last thing is honestly, don't be your lowest paid employee. There are ways to figure out what you can afford to pay yourself and what level of sales that will support that kind of not only a lifestyle but that expenditure, right? That cash outlay without bankrupting your business, from a cash standpoint. So you don't want to pull everything out of the business because then you don't have any fuel left for growth. But conversely, you don't want to give it all away to everybody else because you're making significant contributions to your business and you need to be paid for that, so don't shortchange yourself.

So, I think a typical situation among my clients is that there's one or two principals, sometimes three, but a couple of principals and then they usually have one or two employees in addition to themselves, and then contractors probably do the rest of the work. So when you say cash position, how much cash should we keep in the bank as opposed to not just pulling absolutely everything out. If we know like, I know what my budget is and I need to have X amount in there for my budget. How much extra on top of the budget should be in there?

Yeah, well, you know pre-COVID, COVID kind of changed everything, didn't it now? But pre COVID, I would have been in the 3ish months you know as a caution. Three months of your expenses looking at that and you know, that's for funding. You know, if you have rent payments, if you have your advertising, some of those things that are what's called fixed expenses that you don't have many adjusting levers for. But I will say that, once COVID hits and seeing the duration that this has been having, the impact this has been having for so long, my starting point is more in the six month range now. So to have six months of cash on hand for you to be able to, once an event happens to be able to react to it. And what I call adjust your levers, so be able to go out there and, you know, kind of pull back on spending, pull back wherever you can, because wherever it makes sense, because some things you want to position yourself in terms of marketing. If you need to be seen during that period, I would say and there's going to be a return on that investment, you darn well should be investing in that. But I'd say four other things that are variable expenses and that you can kind of pull back on. I'd say pull back on those and then see what kind of help the landscape looks and how, you know, things are progressing or not progressing and then make other decisions as you go along. But keep a close eye on those expenditures. So it sounds like three to six months, three if we're feeling kind of safe and then six if it's, if things aren't maybe going so well. Correct. How does a service business, you know I came out of the Coca- Cola company so I understand what the cost of that was. There's like a product and you can make all of the individual ingredients and the pieces and then the machinery and then the people in the building and build that all in. I don't understand how to do that for a service business. How would you help us start? And like, should I go to my CPA for that? Or should I hire someone like you for a special project to figure out our costs?

Yeah, I think that's a great question because a lot of people don't know exactly what, we'll call it job costing, right? So say you have a project or a job we'll call it a job right? You have a project with the client, you want to know exactly how much the cost to deliver those services is against how much your revenue or your sales level is, because that's your gross profit and that's what pays for salaries and Dan, Dan, Dan right? And the rest of your overheads. So what I like to encourage people to do is to understand how much time is invested against a certain project and quantify that through your QuickBooks or through your zero accounts or whatever that is. And then do an analysis or run a report on a monthly basis just to see where that is. And you should be right, if you're in that service industry you should, you know in the consulting business or an agency, you would want to be in that 50+% gross profit range. So because that 50+%, that's got to pay for other expenditures. So if you're advertising, you're marketing you know, your funnel, you know, whatever funnels that you have that you have to maintain whatever those look like. They still have to be paid for, you have to be able to afford that not only that, but what are you paying for, for your people to see the cost to deliver the services? Is it up in a call up margin? It's in cost of goods, ok, so that's the delivering the services. But the other expenditure say for advertising, the things that are more holistic to your business, that are expenditures that are getting you seen, you know, if you're writing a book, the costs to publish things that the things of those nature, of that nature and the overhead expenses like rent and things like that, if you have that. Those are which, by the way, COVID has caused everybody to kind of rethink that, so I think there are a lot of rents that are kind of going away as far as cost of space, which is not a bad thing unless you're in commercial real estate, that's a tough place to be right about now but did I answer your question?

Yes, so my take away from that was actually the 50%? I think what a lot of consultants are looking for is like, just tell me that number. And I've heard, like, team costs should never exceed like 35%. So I don't know if that's the case, but I think just some really simple numbers like, you know, you should make 50% of what you're charging is really helpful. You know, after expenses are paid, so is 35% reasonable for team cost or 50% really more what you're looking for us as a business to be able to clear?

So from a team cost standpoint, I would look in the range of anywhere from 20, let's see 20 to 30 ish percent. And it depends if you have other expenses associated with that. So if there are hard expenses, so if you're paying for some kind of technology to help you deliver your services, you have to have some kind of infrastructure that's specific for that, you know, that particular client. If you have those other costs, those have to be taken into account as well. And those would obviously be above and beyond that 20 to I'd call it the 20 - 30%. So and you're the pricing guru so, you know, you would know from a price standpoint. You know what is the market bearing? And what's your value proposition? All of those wonderful things that you've taught me over the years as far as price may allow you to take that 50% and be more like 60 or 70 %, depending on that composition and depending on, you know, the value of the services that you're delivering.

Awesome, I think that's really helpful because if we can just get some benchmarks around these numbers, then, you know, at least for me, it's helpful. You know, I've had clients who came to me and they when I said, what was your number from last year? They don't know that number until the tax person gives it to them. So they're not really tracking that on a monthly basis or even more frequently. And you know what kind of waiting for their accountant to pull that quick book, what numbers should we be looking at as business owners and how frequently on what kind of a basis?

So, yeah, that's a great question. I think as a business owner, you have to be very concerned about two and three in particular. First of all, it's your cash, cash is king ok, so cash is at the top of the list. The second thing is when you're pulling down reports, you want to look at what your sales are right. What's your top line revenue looking like, especially in comparison to last year? Now we can do budgets because those are targets and those are, you know, growth mindset. You know, hey, I want to put a big honking goal out there for myself for next year. And maybe you're thinking in your head it's maybe 1 to 2 clients, people like me and my team. We take those kinds of thoughts and turn them into numbers. So we'll take that number, you know. Oh, I need one to two clients per quarter right? Or I need to get 10 per quarter. Well, what we'll do is we'll turn that into a number, we'll turn that into a dollar value and we'll turn that into a budget or a forecast, something that you can have as a benchmark. So we talked about cash, we talked about revenue. Revenue’s good but even more important is gross profit, so gross profit we talked about is after the expenses to deliver those revenues, deliver on those revenues, what does it cost to deliver against those revenues?

Do we need to wait for our CPA to get that number? Or can I just look at my bank statement and say if you know, in September I put in 50,000. And like, the deductions from expenses were 22,000. And so my gross profit is whatever that comes up to be, what, 28?

I suggest you don't wait, don't wait for those numbers to come up. Hopefully you've got somebody that can either help you with that bookkeeping or you're running them through rather than just running them through a checking account that you're actually using the most simplistic version of QuickBooks because it's really inexpensive. But it gives you a lot of insight and a lot of reporting horsepower that you can tap into and find out, geez, what did what happened this month? What do I spend money on? What went out the door and what came in the door? And how do those measure up? And what's the net effect of all of that? What's the net impact to me on the bottom line of all of that?

And so what does that mean the net effect? So if I look at, I earned 50 and then I spent 28 or whatever I said. And then that means 22 and that means that there were 28, so what do I learn from that information? What you learn is how much further ahead you are this month than maybe last year right? Or maybe the prior month, so if your business is going like this, maybe a really good comparison is versus the prior month. So if you've got, you know, three more clients this month than you had last month, are you spending the same amount of money as you did last month to deliver those sales? Deliver that revenue? Or did you have to increase, you know, the team that you have to be able to service that? So some of that is, let's call it leverage. Some of it's leverage because you can grow sales with the same team. That's more profit, if you're growing sales but you have to add much more before those sales hit. That's an investment and you've got to keep your eye on that very closely, because too many months of that shrinks your margin and it shrinks your bank account. So we can't have that, unless there's going to be a big payoff. And, you know, for a fact, right, that there's going to be a pay off two months down the road, then you can kind of hold on to that but if it's not and it just keeps kind of spiraling down, then that's no bueno.

Got it, I love that idea of what I'm learning from you, as we can compare, a lot of this is about comparison to see how we're doing versus last year, how we're doing versus the previous month, and kind of like what those trends are and that there's information for us in those trends. So I really you know, I've heard you talk kind of like the story behind the numbers, but now I'm really seeing what the story is. The story is, are we learning and doing better? Are we getting more profitable? Can we get more sales without adding more expenses and things like that? So that's super helpful.

Yeah, great. When I have consultants, one of the things I'm wanting is for those listening to hear what you do so they might bring you into their clients. If there's a need for something like this, which I know, the more I hear about it, every time I hear about it, I think this is amazing information. The second thing is I think it's important for people to hear it kind of like your expertise is relevant to us, even though you're working with larger clients so I love what you've been teaching us. And then the third thing is like, tell us about you as a consulting business. So I'm really interested, you talked about getting referrals and getting clients through referrals. So how else do your clients come to you?

Yeah, so our clients come to us but the number one way is through referrals. The second way is, oh, gosh, marketing, because they see me. So one thing it's a funny story. The marketing is, you know, I've had quite a journey, so I'll just share with you and your and your listeners a little bit of my specific marketing journey. So as a CFO, it's kind of a foreign territory for anybody and, you know, financial management function to go out there and do marketing and do it well. And I don't know, we were introduced way back when, it's been about at least six years ago that we've been working together at various levels. And that marketing journey began because marketing is not my Joy & Genius Zone at all. I'll be the first to admit that. So and and I'm I'm a lot more receptive to it now than I used to be and you can vouch for that. So it's been that six year journey with you but the last two years. Well, COVID kind of was a turning point for me and it was an inspirational time for me because I felt like there was a lot of confusion out there and a lot of void and a lot of I don't know where I'm going. I don't know what to do and maybe some bad decision making when COVID hit it oh my gosh what I'm going to do and people just literally freaking out. So about their finances and about their company and what I am going to do, how am I going to have it? I have nobody to help me with this. And so I know you've been after me for at least two years to do some video and occupy myself with the help of the universe, telling me, Patty, they need to hear from you, the universe is telling me that people need to hear from a calming voice about their business finances and it's going be ok. So I started doing videos just on my iPhone and posting them on LinkedIn and I was also being asked at the time because people were seeing those to come in to panel discussions and things like that because, you know, we're all in shutdown. We're all looking at our tubes right? We're all looking at our screens and looking for more information. We're starved for what we should do? What should we do next? What can we do right? What's within our power to be able to do for our business and for our people, and for our communities right. So that we're as strong or as strong as we can be on the other side of this.

So COVID kind of changed everything for me in that regard, and I responded, so what I would tell other people is that there's kind of three guiding tenets for me right now as it relates to my marketing and how things come to me is, first of all, lean into it right. It may not be comfortable for you, surely it was not comfortable for me, but leaned into it and trust the process. Samantha has a process and so I trusted that process. It took me a while to just, you know, do it but once you do it, it works. It's awesome and then the third thing is real. Be yourself, be authentic. You need to be you, nobody else can be you, you be you and the right people will show up, your people will show up, exactly.

Well, one thing that you really have modeled, Patty, is overcoming that kind of reluctance to doing video and I do love that you got such resonance from your peeps with that information. And, you know, there's nothing like getting a message, you know, getting up and looking at one of your messengers and somebody saying, hey, I thought this video called me. I think that's really a reaffirmation about what we should be doing. So, Patty, can you share, like, how things were in your business when we met and what things are like now? And what would you say are the things that have changed or evolved the most?

Yeah. So a couple of things. First of all, team; team has really been important to me. When we first started working together, it was just me, it was just me, you know, trying to stay in my joy and genius zone, which was kind of rough because I didn't have any help. So I was overwhelmed with all of the things that I was trying to do and deliver to my clients, as well as doing, you know, running the business right now, doing it in the business and working on the business. So it was not allowing me to really shine and so you really helped me to see that I was capable of pulling together a team to help with the delivery side of it so that I can my joy and genius can shine through even more so. So it seems counterintuitive, but it really does work, so lean into that. Back from a week away where you said your team was just, like, spectacular. Yeah, it's been awesome. So, yeah during that week away, you know, and we prepare for that but we have systems in place, that’s a big one right? So I'm talking about that in a minute but during that time away, I didn't get any emails from clients, I didn't get any emails from my team.

Now, that's not to say they don't like me or don't need me, right? But what it does say is we have the systems, I have great team members and honestly, thanks to you, I have great clients. My clients are awesome and I know, you know, we had unfortunately, we had a family and a death in the family last year. And during that time, it was a hurry up and oh, my gosh I got to go. And my clients were like, oh, my gosh, Patty, don't worry about it, this could wait. We know you're working, please go take care of that and your team. They've got everything covered and we're good, we're good and my team was like Patti you go do what you need to do we got this, what more can you ask for right?

Yes, yes well, especially since the contrast is like anybody who remembers having needy clients or, you know everybody's been there with the wrong, I've been there, yeah yeah what else?

And systems, so let's talk about systems. So I did mention it, but having those systems in place for client delivery for onboarding a client for whatever systems you have, whatever workflows in your business that you have, that you repeat over and over and over. We think we do something special for every single client, we might tweak things. But essentially, a lot of that stuff's the same, so let's systematize it, let's get systems in place that support not only our people, but our clients and ourselves, because otherwise we're running around crazy, trying to. Oh, oh, how did I do that? How did it do that last time? What did I do? No, you copy paste, here's the template. Copy paste and start over, right? It's awesome, I highly recommend it and that's going to the other thing is we help people grow, we help people scale and grow. That's one of the huge foundations that you need to have in your business to allow yourself on that kind of trajectory to scale and grow, you got to have the systems to back it up. Awesome and it makes you more profitable because you're not reinventing the wheel and all that stuff so we can finally consider it yes. You learn something from me, I learnt a lot from you. I totally, like always taking Patty's knowledge. Awesome, yes.

What about packages? Do you feel comfortable talking about that? Packages as far as we deliver outcomes. So one thing you know, we worked with early on is to get away from hourly, you know, bill hourly. Were you doing hourly in the beginning? I was doing hourly at the beginning. Right now, we've totally transitioned away, we are a fixed fee for outcomes, we're outcomes based at TurboExecs. So we will provide a scope of work for you for a fixed monthly fee. So whether you need, you know, simple, straightforward bookkeeping or CFO services or everything in between or you want it, you want to outsource your entire back office to us, we got you covered. There is nothing better than being able to make data driven decisions to help you grow your business with complete confidence right? You're not looking at junk. So in the beginning, you were doing the hourly and what would you say your average client or project size was?

Oh, gosh, I don't know, it's probably around, I don't know, maybe 2500 to 3000, 2500 to 3500. Yeah, now where all your engagements tend to be. Oh my gosh. Yeah, we're starting at 3,000/month and all the way up to record now we had a scope increase for a client. We have a client at $11,000/month and we have a client at 10,000/month. I mean, they're happy and they're happy to expand the scope to us. They couldn't be happier, we've actually had clients that have seen what we bring and wanted an immediate scope expansion and they have made adjustments to their internal staffing to accommodate us. Wow, yeah, wow is right.

We bring the value, how does it feel? Awesome.

I mean, it's, you know, your transformation has been so extraordinary and really my favorite thing is that because you have the systems and the team you're in a position of, you know, potentially fairly unlimited growth. Like, you can take on more and more and more clients because you have the capacity to serve them. Whereas so many of my clients will come to me and they're like, they're stuck, they are like, I really want to grow but I don't have anywhere to put it. And you've really put in place all of the things that we need to have, you know, team tools, leverage strategic partnerships or, you know, all of those signature systems, all of those things that allow you to expand your business. So it's been super, super amazing. And, you know, I have to say also, so much of growth is really expanding a mindset and like who you are as a person, and I've really just seen such an amazing evolution during the time I've known you.

Thank you so much. I appreciate that. That's a huge one for me, because my most recent team member addition was somebody to replace me, not really replace, but added bandwidth for me so I can, you know, take I have a staff CFO now. Who knew, right? That's that ego that has to happen right? We talked about that a little earlier, but that was my big hurdle that was my last big hurdle and my mindset had to change around that, because in order to continue to provide the level of services and to people and to take on more clients and bigger projects, that was the only way that that was going to happen is I had to get out of my own way and get over it. So I'm not too proud to say that you know, it did take a little bit of time and we're all human. But yeah, I'm over it.

You're over it and you're like, you know, you're Patty 3.0. You know, that's like the version you held that is like two versions ago. Okay, so I know you have something really amazing that I want you to share with us. And the reason so a little bit background on the origin of this was I was working with a client who said and I was talking to her about the path to 2 million, which a lot of my clients want to be on. And she said, well, here's the deal is like, I don't know if I need 2 million. I want to bring home $500,000/year. So how much do I need to make to bring home $500,000 and I was like, good question and I know just who can answer it. So tell me what you've created and if somebody says I don't need 500, I want 200 and somebody says I want 750,000. Like you've created something that we can plug in our number, our desired take home salary or draw so what do you have and where can we go? Take it.

Love it, yeah when you brought that to me I'm like, well that's easy. So I am going to put together a tool for your folks and your listeners to use to basically solve for that. So let's get an answer to that question. And it's a tool that's available at https://turboexecs.com/salary-tool. So what it is, it's a great little Excel tool that you have to input a few numbers that you'll know from your business and input your desired salary. What do you want to make out of the business? And then it'll solve for what's the level of sales, what's the level of revenue that you have to bring in in order to support that. And sometimes it's just your big goal, right? This is my big goal, so what does that look like? And that's going to help you to frame that up for yourself and have that goal for next year.

So Patty, I just want to thank you so much for, first of all, for simplifying this, for holding the possibility that we could all understand this. We could make enough money to support our families and contribute to our communities and for modeling for us, a kind of evolution that a business owner makes when they go from kind of like this hourly, like this is how I thought I should do it to really being expansive and transforming their clients with outcomes. So I just want to thank you so much for everything you've shared with us today and how about LinkedIn? Is that a good place to connect with you?

LinkedIn is a perfect place to connect with me, so just look me up www.linkedin.com/in/pattylawrence/ Awesome. thank you again so much, Patty, I know with all that you've shared today that our audience will definitely be emphasizing the profitable part of being profitable, joyful consultants.