Financial Flux in the Land of Dollars & Cents - w/ Kristian Marquez | Ep. 114

In this podcast episode, David and Gary speak with the President and CEO of FinStrat Management Inc., Kristian Marquez.

Links:

https://www.linkedin.com/in/kristianmarquez/

https://finstratmgmt.com/

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David Baxter has been designing, building, and advising startups and businesses for over ten years. His passion, knowledge, and brutal honesty have helped dozens of companies get their start.

In Biz/Dev, David and award-winning Creative Director Gary Voigt talk about current events and how they affect the world of startups, entrepreneurship, software development, and culture.

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Transcript

David: 0:00

How has the world changed in seven years for finance and accounting? Everyone, welcome to the biz dev Podcast, the podcast about developing your business on David Baxter, your host, and I'm joined per usual by Gary Voight. How's it going, Gary?

Gary: 0:16

It's going well, how you doing?

David: 0:18

Your office is getting put together behind you. Is that Austin Powers behind you? Yes,

Gary: 0:23

there is an Austin Powers and and Dr. Evil and Kylo Ren and the weight from the office. There's a bunch, maybe, maybe we'll do a bookshelf tour one of these episodes, but all coming together slowly. So that sounds riveted to finish

David: 0:41

the look on your face as prizes, especially with this new whatever you're growing here is I know it's good radio to talk about Gary's facial hair, but it looks like it's attacking your face. So as well done, well done, you glued it and I appreciate that. Thank you. More importantly, we are joined by Kristian Marquez, who is the CEO and are you founder you are? Are you not the founder? No, we're not the founder. You are the founder. Okay, so that does not say that on my thing here. So good to know. Good to know you are it says President CEO and CFO but not founder. So that matters that matters more broadly, you're in charge of fin strap Management, Inc. So I'm gonna ask you the 30,000 Well, first, hello. Nice to have you. I'm really bad at doing that.

Kristian: 1:26

Now. Oh, good. Thank you for having me on.

David: 1:30

Oh, sure. God, glad to have you. Okay, so give me the 1000 3000 30,000 Whichever height you'd like, of what Finn Stratus.

Kristian: 1:39

So fish shrimp management is accounting and finance for early stage companies and investors. More specifically, we provide fractional CFO led end to end accounting and finance services for other founders, predominantly b2b SaaS, venture backed companies, as well as Angel and venture capital firms. And so the way I describe it is, we're a bit unique in terms of our value proposition, we operate at the intersection of shared interests between founders, and investors. And to date, I've not yet come across another firm like ours who is doing that. Nice.

David: 2:20

Okay, so tell me a little bit more about that unique thing. So you're because you work with investors and founders, you have a unique view lens? Have you wanna say that into that world? And so that's very cohesive, very useful, very helpful. How does that help people?

Kristian: 2:40

It's helpful to so if we start with founders, and our value proposition, I can distill it into two things. Thing One is what I describe as fix it once the other is assisting monetize their business, I

David: 2:53

have a question that I think you're uniquely capable of answering. So when a company is running on a runway, and for those who don't know what I'm talking about, a runway means you have someone else's money. And you're spending it for a period of time until you're out of said persons money, investors, angels, however, you want to calculate that that money, but you are spending other people's money to get your idea off the ground. Hence, the term runway. When someone is on in that phase of their company, is accounting very different, because there's no money coming in, right? You just have a big balloon that you're slowly leaking air out of until you crash.

Kristian: 3:31

So the answer so a couple things. One, it's important to identify stage. And when I just heard you describe as God bless you, what I just heard you describe is identifying product market fit. So you're just getting started. And if you're identifying product market fit, there's a potential that you don't have reoccurring revenue, ie revenue sporadic. And so it's important to highlight that because for any company that has reoccurring revenue 100% Without question accounting is crucial. Because the only way that you're going to be able to calculate a very important metric metric monthly reoccurring revenue, is because you're appropriately accruing. That revenue. And so just a quick example, if someone sells a 12 month subscription, or if six months subscription, anything greater than a month. If you go the traditional QuickBooks route of just creating that invoice for multiple months, QuickBooks is going to put all revenue in that one month that the invoice is dated. But that's not right. It needs to be spread out for the months of service. And so that's oversimplifying, but that's effectively what accrual accounting is, is taking that portion of revenue greater than a month and putting it on the balance sheet, and then peeling it off when it's supposed to be when it's being incurred. And so in the absence of that, you see what looks like a cardiogram, your revenue is a reflection of when you're actually Sending invoices out the door. Not when you're actually you're incurring the revenue. And so to a founder, but definitely for an investor. That's important. It's important because it's a it's a metric that many people in the venture capital space who are investing in reoccurring subscription type businesses, assess. But back to your question, if they're still trying to get product market fit, ie throwing spaghetti against the wall to see how their what their business is going to generate consistent revenue, I can make a case that accounting is less important. But the only reason that I would pause is because your earlier your comment about well, what does your runway look like? And so even if you're selling deals sporadically, you have to ask the question, is it just good enough that I go to my bank account and see what my balance is to make a decision of whether or not I have enough runway? In my experience? The answer is, you can be done. But I don't like that answer. I don't like that answer, especially if your your capital planning or capital spending is going to change. If you're making new hires, if they're just variables that are not currently reflected in what your bank balances, to help you determine whether or not you're going to maintain that that same rate of decrease.

David: 6:26

You're using very technical, big terms, which I mean, you know, the state of the art kind of stuff for you. The question I have is, do most of the founders have a clue what you're saying? Are you also a teacher to explain this stuff. I mean, I guess most of your people will probably have money from somebody already, they're not just getting started. They're not living off of, you know, aunts and uncles. So

Kristian: 6:51

we find that we're a good fit when a company has about a million dollars in annual reoccurring revenue. That said, we have a handful of clients that are pre revenue. In those instances, the pre revenue businesses, they've hired us because they already have VCs on there, or as investors. And those VCs have an expectation that their financials are going to not only be prepared accurately, but they want them to have access to a fractional chief financial officer who can assist guide strategy. And so to answer your earlier question about, you know, how do we assist a founder connect the dots. I mean, a lot of times, it's just visuals, dashboards, models, we use specific tools to manage cash flow for on a short term basis. And not only will we pull that up and share screen on a weekly call, but you have a fractional CFO who can who can explain what they're looking at. And so, in that regard, if you think if you come back to what I was sharing earlier, assisting a founder monetize their business, everything I just described, are steps along the way to get there.

David: 8:09

It's just, it's, I'm thinking in my account, I'm not a finance guy by any stretch of the imagination. I only it's funny, my business group talks about how I'm the example when it comes to cash, because I work cash only. And that it's, and they make it sound like it's such something grand, but it's really I have no other way of measuring success. For me. It's just Do we have enough cash in the bank to make payroll? Sweet? I'm good. Right? That's, that's it. I don't have anything fancier than that. But as a founder, I all the stuff you're saying. I mean, conceptually, I know what you're saying. But if you asked me to explain my own business, in those terms, deer caught in the headlights, I have no idea what you just said, in a practical way. So

Kristian: 8:54

I can let me I'm gonna provide an example that I that I think will resonate with us in your audience. So everyone is familiar with return on investment. And simplest term would be if you spend $1, you want to make back at least let's make up a number $3. In return, five is even better. Maybe I can argue actually Why $100 Maybe is too high, more than that in a moment. But in simplest terms, it's basically saying alright, I'm going to spend money on something in the expectation that I'm going to make more money back. Alright, so in that example, the the numerator or the money back would be your revenue. However your company generates revenue is is the numerator in the formula. And the money that you give to somebody the dollar is going to be your sales and marketing expense. And so if I was your fractional CFO or anybody's fractional CFO One of the questions I would want to answer is, if any given month, let's say you made $100. And I look at your sales and marketing spent seminar or simplify it, and you spent a total of $10. Well, that's a 10 to one ROI. That's great. Like, what were the things that you did to spend that expense on? And should we do more of it? Because once we understand what's driving your revenue, and how much you're spending, in order to gain that revenue, you can start making a whole host of decisions. A very valuable decision would be let's say you have an entire host of affiliates that you work with, and you want to start giving them commissions or a percentage of any new business that they bring to you. Well, if you know that 10 to one, now, you know what your guardrails are, of how much you can give to them and continue to be profitable. On that revenue. We answer questions like that for our clients on a regular basis.

David: 11:03

So if you I guess we're I have my own limited knowledge of running businesses. We have few clients, right yours, those numbers that you're talking about that I can do a 10 to one, because I have 100 clients or 1000 clients and adding new ones, you know, I might add 10 a day. And so I can easily calculate because I'm, you know, I'm a Software as a Service, this, you know, Facebook being a cheesy example. But they have, you know, 100,000 chances every day for someone to sign up. But in my case, I might get five new clients a year. And so those numbers get really weird at what is what worked? I don't know, I don't know what brought that guy through the door. But I mean, I can go ask him because he's just a dude. But, you know, it's it's a different thing. I don't have as many at bats as and maybe that's just the nature of my business? Well, of course, it's the nature of my business versus a software service where I have 1000s and hundreds of 1000s of users. What does that change those calculations at all? Or is do these only apply? Does that tend to one or five? One? I mean, I'm lucky enough, I'm getting I give $1? And I get$1.20? Back? Right? That's the world of services. As opposed to Facebook, where I give $1 and I get $1,000, back or Google?

Kristian: 12:18

So great, great question. So I would say that first answer is yes, the formula changes. So in addition to doing month, a month, I would do a trailing six and I would do in trailing 12 month, which is what we generally do for early stage companies, because the law of small numbers, you're gonna get a lot of variability if your sample size is too small. And so one of the ways we control with that is trend analysis, show me how I'm doing over time. But it also comes back to what you were saying earlier is that if we're going to record revenue on any company's books, we want to we're not going to lump everything together. On the contrary, we're gonna have one line of business for your professional services, one line of business for Facebook, one line of business for affiliates. And then on the expense side, we're going to make best efforts to separate that expense, and allocate it to the appropriate line of revenue, so that we can answer those questions. Now, sometimes it's not that clean, it's harder. Sure, if this, this doesn't have to be exact, per se, you know, there's a degree of hand-grenades in this. In fact, that's where I see a lot of founders need counseling. You know, one of my biggest pieces of advice I can give any founder, if you had to choose how you spend your time, more than anything else, it should be on top of the funnel and closing deals all day long. And it should be led by founders until which time your sales and marketing machine or your sales and marketing function is a machine that there is a degree of consistency of seeing the same or more count of leads at the top of the funnel month in month out and closing deals. And what I see happen a lot of times is founders will continue to spend more money on features and functions. But they may be great features or functions, but they don't matter if you if you run out of cash,

David: 14:12

man. So we we have not had this conversation. So we build custom software for startups a lot of times, and one of the things that I hear a lot is, well, I need to add these features. They don't have and these are generally pre revenue. So the reason that have to in that quiz question is doing a lot of heavy lifting. Right? Who's telling you this? Unless it's you know, and this is could be another $50,000 over the development for these new features that you quote, have to have, but no one knows what the ROI on that will be. And so oftentimes, I tell them we shoot ourselves in the foot because we're telling don't build that even though we're you're killing our VA our revenue because of that, but I want to think long term. You don't know if the works. So get it out the door. And then let's see what people say, because founders have in their mind that I need all of this stuff. And it's not raising, it's not raising, it's like painting your house, it's a lot of money. Unless you just really love the color. You're never getting that money back, you know, say, Don't build that feature just because you really like, you want to do this cool quote engine, where every time I come in and give you a new fancy quote from some famous person every day to inspire you, man, oh, there's

Kristian: 15:30

so much we can unpack there. So in no particular order, when all you have is a hammer, everything looks like a nail. And so most of us, myself included, I mean, I'm accounting and finance, I'm not sales and marketing, everything I know, in sales and marketing, I've had to either learn by trial and error or just find other people. Today, I'll tell you, I'm you know, I'm a gigantic fan of is Alex Hermoza.

David: 15:54

How funny. We were just talking about him, Gary, Alex is

Kristian: 15:57

sharp. He knows his stuff. My opinion he's put on,

David: 16:01

and he's put on some nice a shave and put on some clothes. That's Other than that,

Gary: 16:05

Oh, is that the book that you were talking about? Yeah,

David: 16:07

we just bought I just bought his book. So I mean, it's kind of apropos anyway, it's

Kristian: 16:12

way you know, I'll just use this example. Obviously, lots of great books out there. But 100 million dollar offers 100 million dollar leads, very small investment for a phenomenal education in how to convey value, how to fill the top of the funnel. So big endorsement, at least from me. But you know, that that's, that's a new set of skills and requires overcoming inertia. And when you're an early stage, when you're a founder, and you have a lot to do, trying to like, tell the founder, I know you love your product. But you got to you got to put your feature your desire to roll out more features and functions aside and get dollars in the door. And the way you're going to do that is not only closing people, but the second item I've learned, because you have to ask for the sale. Because one of the things I've also learned is, for better or for worse, people will generally pay you lip service. And as I tell my daughters, watch what the boys do, not what they say. What does that mean? That means? Well, you can tell me all day long you like what I've got, but are you willing to give me money?

David: 17:24

Yeah, I've said when I do mentoring and stuff like that, it's like charge $1 Find something that makes them pull the credit card out of the wallet. Because that means so a 10,000 if it's $1 it's, it doesn't matter. It's the transactional relationship that has to be built. If I'm willing to give you $1 That doesn't just mean the money it means I'm you're trustworthy enough for me to trust you that I'm gonna give you my credit card that you're not going to run away and just start charging and gambling away my money. Right? It's a relationship that I've given if you know, you're my daughter who's 15 loves sheen. And what's the other one carry? Do you know the other one starts with a T 10? Mo? No.

Gary: 18:05

Are you asking me because I have daughters? Are you trying to yes say something? No, no, I'm not trying to no idea what you're even talking about. What is she really a makeup brand? No

David: 18:14

sheen and I think it's Timo. It doesn't matter. They are Chinese manufacturers. They're like Korean fast fashion. I mean, you're buying a shirt for like six bucks. chambered of TV movie. That's the one. She loves those. And I'm like, Girl, I'm not giving them my credit card period. Like, no, you can she has her a little debit card that we gave her. You want to put that there. It's only got a certain amount of money on it. You want to put that in there? Fine. But I am not giving them access to mine because I don't trust anything coming out of their multimillion dollar brand. I just know. And but that $1 just says so much. It's not Oh, because oh yeah, man. How many times Gary? Have we heard? If I just build this thing? I have three investors ready to go? Oh, yeah. And

Gary: 19:06

it happens almost every startup that we've worked with as a similar scenario, where they're on the verge, just like they do this, this and this. And then throwing this

Kristian: 19:21

in another way, you know, getting cash in exchange is validation that you're on the right track. And my experience has been, you know, two you can see some consistency. Your time is better spent selling and marketing than it is continuing to home or product. Presuming that you have an MVP that you can get out you can at least get out there. You're gonna be sell something

Christie: 19:46

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David: 20:13

I want to change gears again, because I have a question I've been sent in the back of my mind. So you've been doing this for a little over seven years, according to my cheats in front of me. How has the world changed in seven years for finance, and accounting? And all I mean, you've lived now through you know, the pandemic, crypto, now AI land, high interest rates, you've lived through low interest rates. How is it different now as opposed to even two years ago?

Gary: 20:47

Especially when it comes to investments? Investors? Yeah, so

Kristian: 20:51

I mean, fun, great subject ups that are happy to unpack and X actually goes back further than that, I was around for the.com boom in the late 90s. So as David

David: 21:04

Oh, I

Kristian: 21:06

remember sitting next to a guy who was making $400,000 a month and I'm thinking to myself, What is going on here? So phenomenal education, a little bit of backdrop. So or background, and I think it'd be helpful context. So next year, we're mark two decades as an investing professional. So I have a designation. It's called the CFA Chartered Financial Analysts. somewhat equivalent to an MBA, a whole host of disciplines, heavy emphasis on portfolio management, but includes accounting and finance, equities, bonds, derivatives, take your pick anything in the investing world, I've made the decision to marry that with wearing a fractional CFO hat. So when I started fin strat, back in June of 2017, I was serving as a fractional CFO and I and I use the experience that I had previously as a founder and a CFO to assist our clients, many of whom have, you know, cumulatively closed over $100 million in debt and equity financing and have sold their business. And so just context that said, what's what's changed a couple of things that three things in particular that that that come to mind, in no particular order, number one is just access for information. Obviously, everyone appreciates, maybe they don't appreciate the ready access, they have to information via the internet. Said another way, the cost to start a business has never been lower. And just a quick context, Henry Ford, everyone knows who started Ford Motor. He used to have a room next to his office with dozens of professionals, who was effectively his Google, he would want to know something and he won't, he would send someone over there and say, you know, find out for me how iron Koch is made. And his people would go and figure out how, you know, you get an answer, maybe a day or two or three later. You know, today, that's crazy. Today, you and I can just in a matter of seconds have, you know, a base knowledge of how that works. So that's number one. Number two, for better or for worse interest rates. Absolutely. Or to say how expensive or inexpensive money is has an influence on risk, which has an influence influence on what people invest in. Probably a larger conversation. But my sense is that we're near the end of debt, supercycle that started was I mean, many, many decades ago. So if you think about when you borrow money, you have to pay interest, the amount of interest you pay is going to depend on a whole host of factors. But I'll keep it simple for now and say that it's set by the Federal Reserve. And for a very long time rates have been near zero. And now they're not now they're at near 20 year high. And that has consequences. It has consequences in what people can afford, what banks will lend mortgages, what venture capital firms will lend to companies. And the concept of a debt supercycle is that everyone kind of says, well, the government will always print more money. And there's, there's some truth to that, but you have to ask the question, Well, does it ever come to an end? And the answer is it does come to an end or one does it come to an end remain very objective answer? Well, the objective answer is is that for all of The debt that the government publishes, it not only has to repay the principal, but the interest. And as interest rates get bigger, if you have more debt out there, you come a point where you don't have enough revenue to support your interest payments. Unless you just print money, in which case you have very bad inflation, because there's no commensurate productivity associated with those dollars. And again, I'll oversimplify this and just say what is the dollar dollars intended to represent productivity, which is why there used to be a gold standard, the only reason you couldn't print money as because there was blood, sweat and tears associated with pulling gold out of the ground. When Nixon completely got us off the gold standard back in the 70s. What prevents the Federal Reserve from issuing as much debt as they want? Really, it's just Congress in terms of spending. But they have a whole host of monetary levers at their disposal, that basically gives them free rein to print money, I'm oversimplifying, but from where I sit, this is coming to an end, it's coming to an end because we live in a world of cause and effect. And just for the sake of example, if tomorrow, the dollar cracked, nothing it's going to cause that's going to bring us to number three, but if the dollar cracked, the Fed would be forced to raise rates more. Well, if they raise rates more what's going to happen to just lending in general, it'll continue to contract, and you'll see a slowdown. Consequently, if bonds sold off, because Japan or China or the rest of the world says, You know what us I don't like your financial profile, I'm not buying any more of your debt. What would have to happen, the Fed would have to start raising rates even more, in order to attract buyers of that debt, because they have a whole host of expenses, Social Security, Medicare defense, a whole host of other industries. My sense is that we're coming towards the end of what has been 20 years of cheap money. That is the effect of getting the US off of the gold standard in the 70s. And that higher rates are here to stay. And we've not yet worked their way, the full consequence of getting all that debt has not made its way out of the system yet. And before they do, they're going to be a lot of asset classes that are going to take it on the chin. There'll be other mitigating factors commercial real estate's a great example. COVID has put everybody in the home. Commercial real estate sector has not been successful.

David: 27:41

And yeah, I have a friend who he buys big buildings. He said, I just bought 100,000 square foot buildings like force four storeys, not a high rise or something. And he said it was built six years ago, something like that, for $300 a square foot. He says, I just stole it from this guy. And he didn't have a choice I wouldn't have is just the economy's like, I didn't do anything bad here. But I'm basically robbing him, I paid 100 square foot. And he's like, this is coming. And he's telling everybody don't buy. Don't don't build

Kristian: 28:13

right now. And so who was the bank? Who you know, who finance that building at $300 a square foot and what happened to their balance sheet? Do you think they're gonna get crushed? They got crushed. And so it's just this bigger? Understanding is everything that we do live in a world of cause and effect sometimes my sense is we forget that. But anyway, that was number two. Number three. The final one is here's why I'm not a perma bear, or people who consistently say the sky is falling. I'm Uber bullish on artificial intelligence. And I genuinely believe it's a tremendous tailwind for the for the overall wealth of the United States and developed nations who are going to start leveraging it. I say that because you know, one of the things that separates the USA from Italy, just for sake of example, is the fact that we put such an emphasis on technology, technology is just a synonym for productivity is created wealth more than any time in recorded history, as compared to a country like Italy, I love Italy, I've been there a bunch of loved all the Italians I've ever interacted with, but a significant portion of their GDP is based on tourism. Well, all the AI in the world can't get more people to visit your country than me, you may be able to siphon more people from France, or Greece, because you got better marketing, but there's a limit. And so we now need to ask ourselves, well, what is the productivity impact that artificial intelligence is going to have on a typical American worker? My own personal experience is significant. You know, there are things things I can do today that took me twice the amount of time multiply that by professionals in this country. And we're only a year in. We haven't seen anything.

David: 30:10

So you are not afraid of the digital overlords?

Kristian: 30:13

I'm not. No. I mean, I think it also depends on your timeframe. If we were to fast forward 100 years, based on some of the things that I've read, maybe I am. But in the foreseeable future, no.

David: 30:27

Because I, I met Gary and I talked about this meeting, my old company and I talked about this. It is so interesting, because there's so it's like, the fear is that it's getting so much better, so much quicker, that we're going to lose the leash. And there goes, and now we can never get that back. And who knows what, where the end of that is. And that's what, maybe I've seen too many Terminator movies. I don't know. But it's scary to me to a point. I mean, I love that there is a golden age between that point and Skynet, right? Where AI is just a helper. And we go through this radical change, where we are able to be so productive. We all have superpowers, for all intents purposes. Before before any of the bad stuff happens. I'm not sure I will be alive even if the bad stuff does happen. But it's it's scary to me because what we don't know is how fast it can actually move. Because the fact that I mean, if you look at chat GBT a year ago, they're your birthday was just a little while ago. What they started out when we first got it, we all made fun of it, because it lied all the time. To what it can do now are the easier ones are the image generators. If you look at the original image generators, Gary uses these things all the time. That's how we do all our work. He doesn't actually do any real work.

Gary: 31:44

That's not

David: 31:47

we, but when there was a there's actually a website that does the same thing. I think it's something like, make me a party, an intergenerational multi racial party at a dog park is the prompt that they've been giving, like every month to watch these things change. And you look at the ones from a year ago. I mean, it's creepy zombie people, right? Their mouths are all weird. They have no fingers. Right? It's all their eyes are all like all over the and now. It's, there are parts of it that look amazing. The eyes are still kind of off. But it's amazing. The growth, and that's what scares me. Is that was one year. I mean, you give it a decade that we've I don't see how we hold that leash anymore. I really don't. So

Kristian: 32:34

the way I think about it is artificial intelligence is a tool, like any tool, it still needs a purpose. But just like when Ford introduced cars and replace horses, it just created a new industry. So if you wanted me to, you know, procrastinate right now I tell you can I imagine that we now have an entire industry that's focused on mining asteroids or exploring the solar system. And we're going to leverage AI to do a lot of the amazing computing that's going to take to solve so many of the problems that are away. Yeah. And people will be busy doing those things. Now, whether or not there's any AI that ever gets away from us. I mean, it's, it's conceivable, at least from what I've read on the subject, and I'm, and I'm not an expert. We're we're many decades away from solving some of the bigger problems that would enable something that looks like Skynet, or Terminator? Well,

Gary: 33:40

Kristen, with your experience so far, what would you say are the top three pieces of advice that you would give a new entrepreneur, a new business or a startup?

Kristian: 33:52

Let's see top three. Number one is going to be if you're going to start a business, understand that all businesses fail for the same reason is they run out of cash. And So said another way, if you're going to start a business, you have to answer the question, how can you start generating as much cash as soon as possible, or as quickly as possible. And one of the things that I've found is, it's easier to start with something that resembles a service than it is a product. Again, there are exceptions. But a service is going to require less upfront capital and start to give you the opportunity to learn. Number two, no one's going to care about your company as much as you do. And so I'm a very big proponent on people and ensuring that they're smart, effective, giving them and my case, all of the staff in my company has stock options. I think ownership is extremely valuable, valuable for a whole host of reasons. But at the end of the day, you need a chief hustle officer, someone who is going to roll up their sleeves and do what it takes to get done. If you have that means working on the weekends, giving up your free time. And so that that changes over time until you hit a critical mass. But in the beginning, we just know that you're going to it's going to be a require a significant time requirement. And then third is kind of going back to what we touched on before, in terms of focusing on sales. You know, in the beginning, you really have to turn this machine on, to get consistent in your ability to generate revenue. And once once you see a critical mass that you're, you're being consistent is when I would say you can start asking questions like Are where I want to take this company, you know, Am I satisfied with the status quo? Or do I want to start introducing other lines of business? Or, you know, do I want a sale, and that kind of dovetails into, you know, I can give you items for five and six. But if you ask me, if just for three as a starting point, that's where I would go. Awesome.

Gary: 36:07

Well thought out pieces of the first one for sure. A lot of people, they will start and they'll have the passion, they'll have the drive, but they sometimes just throw caution to the wind and think like, you know, as long as I work hard, the money will come and then doesn't always pan out that way for him.

David: 36:24

Yeah, I've always hated the advice of if you treat your people well, and you do a good job that your success will follow. That's not true. I mean, it can be true, and you want it to be true. But the simple fact of the matter is, you keep going until you run out of money. And if you don't figure it out, I don't care how I could treat my people wonderfully. But if I'm not taking care of my customers, or I'm not building a product that anyone cares about, the rest doesn't matter. I can love all I want, I can love NF T's more than anybody else. And it's still a crappy product. So well,

Kristian: 37:05

100% and that comes back with is someone willing to give you money? And because it's really just synonymous with art, what problem are you solving. And there's no debate if someone's willing to hand you cash, that you're solving a problem that's worth solving. I, you and I, if the three of us here came up with a whole list of things that we would like to see done better. I'm sure we could spend hours. But question is, is are these anything that any problems that people are willing to pay money for? And that's that's the litmus test. In my mind, once you find what

Gary: 37:40

many people to not just a couple. What exactly

Kristian: 37:44

and so what's your scale? Not everyone is gonna end up with a multibillion dollar business. But you could still come you can end up with $100 million business. You know, we helped. Yeah, I mean, it was just you answering the? Well, I'll leave this, it comes back to one of the big exercises we do is we always like to begin with the end in mind. What's your time horizon? And how much money would you like to make when this is all said and done after taxes? And once we know the answer to those questions, we can work backwards.

David: 38:15

It's so funny you say that because a lot of people say if you ask someone that if I ask a 10 year old kid, how much money do you want, at the end of all this in a year from now? If you had to do X, Y and Z? How much money would you want? And they would say $1,000? Because that's all they can understand. But you asked my son almost 18 How much money do you want? I want 18 bazillion dollars, okay? That's because you don't understand. It's the opposite side because you're 18. But it's if you have a company, I've used this example a lot. If you've never taken money, and you have a lifestyle business, and it's making a million dollars in revenue, you as a person are making a very nice life, you have a wonderful life, that you're making a very nice salary, and you're doing well. You took a million dollars, and you made that million dollars, you're still on ramen, you're still because everyone's mad at you same revenue, but it's just a different perspective. And I'm not saying what's right or wrong, but you need to know what you're going. And not everyone has the ability, or the desire to run a billion dollar company. That's a whole different beast. That's right.

Kristian: 39:20

And so fun activities, a couple fun activities, if you ever want to do with your son is having go to the Forbes list of billionaires and have him cycle through the first 100 and ask him what he sees in terms of patterns, because there are patterns in there. And so, you know, set it another way for starting a hotdog stand. You're not going to make a billion, but the people who are on that list and start a hotdog stand. And so and that's just a fun exercise. But I agree with you the other big thing I would leave with you and this kind of comes back to the CFO what we were talking about when I was using the example of ROI understanding a set of financials Extremely valuable balance sheet finance, p&l and cash flow statement. If we were to unpack the balance sheet, its assets, liabilities and equity, more specifically, assets equal liabilities plus equity. And if you think about an asset, like everyone on this call presumably has a home, you think about liabilities, your mortgage, that portion that the bank either asked you to pay put down when you bought it. And or that you've accumulated over time making your payments as your equity. That identical concept exists with a business. For example, why does apple with all of their cash issue bonds in the open market, they sell bonds to investors. And they do it because they know that the amount of money they can make, after they pay back interest to the people who buy their bonds is greater, they can generate additional yield. So it's this concept of leverage is really important. So like you were pointing out that if you have a million dollar business, and you bought a million, that's kind of one to one, that's not phenomenal leverage. But if you power a million and create a $10 million dollar business now, I guess and so just a great example, you triggered you know, when I think about wearing a fractional CFO hat and having conversations, those are the types of things that we assist, you know, highlight and unpack.

Gary: 41:25

Christian, if anybody wants to connect with you or learn more about fin strat, how can they get in touch with your

Kristian: 41:31

website is fin strat mgmt.com. And if you Google consultation, for any of your listeners who have a venture backed company, they'd like to get a little bit of call time with one of our CFOs as a courtesy, your listeners happy to extend that

Gary: 41:51

was awesome. Yeah, we'll put these links in the show notes too. So everybody will get access to them. Well,

David: 41:57

thank you so much, Christian, for joining us. It's been a lot of fun.

Kristian: 42:00

Likewise, you know, I've been on a lot of podcasts, and I genuinely enjoy how you guys have made this fun and enjoyable.

David: 42:09

Awesome. I'll take it here that Gary, and screwed up this time. While

Gary: 42:14

I was on mute most the time because my dog was barking in the background. Because we're professionals, no joke.

David: 42:21

We are very professional. Already out. We're gonna end this one. Thank you guys so much. Willie will talk to you next week.

Gary: 42:26

So yes.

Christie: 42:27

Hi, I'm Christy pronto, Content Marketing Director here at Big pixel. Thank you for listening to this episode of the biz dev podcast. We'd love to hear from you. Shoot us an email. Hello at Doug big pixel.net the biz dev podcast is produced and presented by big pixel. See you next week. Until then follow us on Instagram, Twitter, Facebook threads, YouTube and LinkedIn