In this prudent episode, Tom Dillon, Founder of Frak Finance, shares strategies for data-driven financial decisions. If you struggle with cashflow mismatches, you won’t want to miss it.
You will discover:
– How to shift from gut-based to data-driven decisions
– How to use rolling forecasts to predict cashflow issues
– Why transparency with executives boosts team problem-solving
Episode Transcript
Scott Ritzheimer
Hello, hello and welcome. Welcome, once again to the start, scale and succeed. Podcast the only podcast that grows with you through all seven stages of your journey as a founder and if you have had enough success to lead your organization long enough and again successfully enough to hit milestones like your first million or your first 5 million or even 10 million or 50 million, you have probably discovered what I did through those different phases, and that is that organizations get bigger, not necessarily better. And with all that growth, especially when it comes quickly, comes problems, a lot of problems, and oftentimes financial problems. And I have found, in my experience, maybe other than people, problems, financial ones are the most frustrating, because they’re just there and they you know, you can try to get around them, but if you don’t solve them, they keep coming back and they keep coming back and they keep coming back. And so if your revenue, you’re listening today, and your revenue and your profit, or your revenue and your cash flow don’t seem to match, right? You’re bringing way too much money coming in to keep so little of it, then you’re you’re in the right place, because with us today is Tom Dillon. And Tom is a seasoned financial strategist and the driving force behind FRAC finance with years of experience as a fractional CFO. Tom specializes in helping small and medium sized businesses to unlock growth through data driven financial management, cash flow optimization and strategic investments. His mission is to demystify complex financial concepts, empowering entrepreneurs and executives to make confident, informed decisions that fuel long term success. His insights help entrepreneurs and executives get the cut through financial noise, focus on what drives profitability and make strategic decisions with clarity and confidence. And he’s here with us today. Tom I’ve had this question rolling around my mind the last couple of weeks, and I think you’re the perfect person to answer it, so I’m gonna say it this way. I don’t think that organizations have financial problems, at least at the core. I think that they have decision making problems that have financial consequences. And I would love to hear, do you agree with that, or how do you see it differently?
Tom Dillon
I do agree with that. And Hey, Scott, it’s a pleasure to be here. I really love what you do for the community and really helping founders move from that kind of visionary gut feel decision making into more of the kind of data driven decision making. And so to answer your question, yeah, I absolutely agree with you. It’s it’s really not having a good understanding around the impact of those decisions, they feel like a lot of founders move from that kind of gut feeling of this feels like we’re making the right decisions. And a lot of times early on in the phases and the journey of building a company, you have to operate in that vacuum of the void of no data, but then you start to get the data, and then you really want to utilize it. But we felt so good, and we’ve gotten thus far. Why would we change? So this visionary kind of transition into more of a, you know, a leader of executives, needs to transpire, and sometimes, and we see that at the detriment of these companies. And so, yeah, I 100% agree with you, and a lot of times those decisions revolve around, you know, maybe a bloated team that needs some trimming. That’s not happening. Maybe it’s that there’s not really a stop gap with regards to a budget. If we hit this level of profitability or cash flow, maybe we need to take a pause, revisit and really look and lean on our team leaders to reorganize. So those are just a couple of examples of things that popped into my head as soon as you asked the question of, you know, some of these decisions around, you know, the hiring, the margins, not product, those are all in swirling around my head as well. Yeah, yeah. It definitely leads to the detriment.
Scott Ritzheimer
Yeah. So the way that I like to kind of articulate this to folks is it’s kind of like flying, and when you first you get your pilot’s license, which I don’t have, I took one course and realized that’s a very bad idea for me. The checklist just crushed my soul, but it’s better crushing your soul on the ground than crushing all of you in the air. So I decided not to do that. But basically, when you first start, you’re authorized to fly by sight, right, visually. And so you look out the window and you see the roads and the lakes and everything, and you know where to go and and in many ways, that’s how we start businesses right? The intuition that we have doesn’t come out of nowhere. It doesn’t just like emanate from you. It’s how you’re processing all the information that you see and experience on a daily basis. But you get big enough to where you’re flying in the clouds, you’re flying high enough you can’t see that anymore, and it robs us of the data that our gut used to make those good decisions. Yes. So it’s a really big deal. Now, when we go to try and cross that bridge to okay, how do we make database decisions? There’s, there’s some, I found some pretty big problems from a financial perspective. And one of the things that I’ve seen really great CFOs do, and this includes fractional CFOs, is to come in and basically make that financial data accessible so that we can make better decisions and and so one of the you listed off a couple of these already, but I want to dig into it a little bit deeper. How do you see founders and their teams relate to data differently after you’ve worked with them and helped them give get access to that data, versus before?
Tom Dillon
That’s really good question. So let me tell a story first and then provide an insight. If that’s okay. Love it. Okay. Um, so we, we came in a few years back, but it’s just such a perfect story for for this question. We came in, and we were brought in to help this company that was a little distressed. They were starting to have some cash flow issues. They were looking at getting some lines of credit, term loans, etc. And we ain’t paused and asked the question, Why? Why do you need to take on this debt? We’ve seen it ruin so many companies. Are you leveraging it for growth? Are you leveraging it for survival? Very good distinction. If any of you, founders or business owners that are out there need to ask yourself, that’s the question to ask before you do so. And so when we asked that question, we started to realize that when we met with the other executives on the team, they all had different answers and different problems, and they clearly weren’t talking to each other, and they all had solutions to their current problem. And so I think to your point in pulling in that analogy of flying by site, flying by data, the instruments that you have at hand that you have to rely on. What is the feedback that you’re getting from all these technical tools as you fly in these clouds? Well, the founders and or business owners, they need to leverage their team, the department heads, the executives on their team. Those are the instruments on the plane that are telling you how to navigate through these clouds that you can’t see and use your normal gut feel and that sight of the senses that has led that led you this far, and so when we went in there it was, it was this kind of the void that, you know, the vacuum of a lack of data that people were trying to make decisions in, and then it was connecting them. And so all we did was say, Hey guys, you you guys are a phenomenal team. We’ve met with all of you. We think you’re you guys are all exceptional. But there’s a communication breakdown here. And it’s not that it wasn’t being communicated because it was they had their leadership meetings, but they all wanted to say their piece, and they all wanted to make right. They didn’t want to listen to the overall underlining issues and solve the, you know, the actual, you know, fundamental problems, where sales and marketing were saying, hey, we need more qualified leads and marketing saying, or sales saying we need more leads and marketing saying we need more qualified leads and etc, etc. You know, you know the story of how that goes on, and then Ops is saying we need to hire more people for this growth. And so the problem was, was connecting all those kind of stories, but it really just revolved around two things. One was having a rolling forecast where we can update and see it in real time around. Here is my issue. How does it affect the future? Most importantly, cash number number two was, it was the it was the audio learners, or versus virtual visual visual learners. Perfect example, most of the team, they needed to see the dashboard. They needed to see the KPIs in which one they were being benchmarked against, but also their team was being benchmarked against so that they could understand not just, Hey, here’s performance and how we get might be paid, because without all of its tied to comp, a lot of it should just be tied to management. The team wins, you know, and if this person wins, we all win. And so once we were able to make the implement those two things, which was the leadership conversations, led to actual implementation of fork rolling forecasts that allowed us to understand what problems lied ahead, and then collaborating as a team of how to solve them, utilizing those actual KPIs, the key performance indicators, the things that move the needle in every department head in which they’re kind of benchmark hands that was transformative and. That’s what we did, and what we were able to leverage into to your exact question. You know, you have these problems. There’s bad decision making. But how do you implement, how do you get people to listen effectively? And so there’s a lot of different, you know, it’s the ego management personality, the different learning types in terms of, you know, maybe someone has linguistic intelligence, another person has a processing so different brains, right? And then basically being able to pull all together and say, All right, here are the tools we’re going to use to help you. So that was really powerful for that.
Scott Ritzheimer
It’s so good, and it highlights what I think is a really important change, and that is that we have to move to this being a team sport, right? Understanding and implementing financial data in an organization of this size and complexity is a team sport, and that creates a couple of different challenges. And one is, is actually pretty practical, but a lot of founders, early on play their financial data pretty close to their chest, right? It it it has a lot to do with their personal income and profits. You know, can be very taboo in some organizational cultures. How do you know what information to share with the team and what if anything, to withhold?
Tom Dillon
Wow, great question. Surprisingly, I haven’t been asked this before on, you know, publicly, in a podcast, internally, we have these conversations. So it really boils down to what and then when. And I think in every team could be different in terms of the when, but I think the what should be, you know, pretty, pretty commonplace, synonymous across the board, around for us, it’s performance. Here’s the thing, high level, I’m just going to say everything transparency wins, but with exceptions, and we’ll go into that right now. So when it comes down to performance, it’s sharing it all. It’s being transparent, just like the forecast and the in the KPIs, the dashboards, all of that. Here’s the one that’s kind of taboo to some people, cash burn or your runway, yeah, share it with your executive team, right? You’re not going to be sharing this with you know, middle, lower level employees who that might scare and they think, oh my gosh, this is frightening. I don’t have the ability to, you know, bet on these people in a secure way. I just signed a lease that’s expensive, and I thought I was signing up for a huge opportunity here and now, it sounds unstable, but for the executive teams, if you don’t have someone that can help you navigate and problem solve during your your your cash burn, time periods where things are getting tight, maybe there’s seasonality where you do need a line of credit, and you need to figure that out of how to get past that until you grow to a size, or maybe you’ll never be at the at the size, but you have to manage it. You want to share all that, those different perspectives and how you can navigate it, are instrumental. I’ve seen such creative solutions come out of the most unlikely areas within your operators. And so for that, you share, you know, your cash position, your performance, and then for us, the when. So it’s the what, and then it’s the when and when for us again, it’s that rolling forecast. This is monthly your leadership meetings. It’s shared, best shared ahead of time, but shared and then executed upon in terms of what are the solutions if there’s problems or congratulating and you know, given the the proud kind of cheers for the people who have really been crushing it. And so that opportunity of the when now the what not to share these would be, I mean, executives, a lot of them have access to HR, not all of them. But, you know, salaries, any kind of sensitive HR stuff, big hypothetical scenarios of like, oh my god, if we lose our biggest client, we’re done for not necessary. It’s obvious. But like, we don’t need to sit here and play scenario analysis and scare people. And then there’s the one thing about like, if you’re going to be having those conversations with your board or an investor, yeah, keep those private. If you’re raising capital, you know the investors need to know what their downside risk is. Your team, your employees. Don’t. You know the success and failure rates of startups. It’s you know, if someone’s signing up and they don’t understand the inherent risks associated with startups. I mean, shame on them, but like in terms of managing people, egos and productivity of people, yeah, you know, you don’t want to play out those scenarios that’s going to end up having your top talent head for the hills.
Scott Ritzheimer
Yeah. I agree on all this front. And so I think one of the things that that could be missed with a casual listen is how important it is to shift from what we do with financial reporting typically, which is what happened, to what you keep saying, and rightfully so, is actually using it to forecast what will happen, because you can’t make any decisions to change what has happened. You can only make decisions as a management team about what will happen. And so getting in that habit and building the skill like it doesn’t come automatically. And this is where someone like a CFO or fractional CFO is really helpful. Like, just because you want to have a rolling cash forecast doesn’t mean that you know how to do that. And so making sure that that is done well and it’s reliable to the extent that that’s possible, is a really, really important skill to develop as a team. I couldn’t agree more on all fronts there Tom this conversation could go for a very long time, but I want to get to one question I’m dying to hear your answer to before we let folks know how they can get in touch with you and find out more directly. But that question is this, what would you say is the biggest secret that you wish wasn’t a secret at all. What’s that one thing you wish everybody watching or listening today knew?
Tom Dillon
That you don’t need to be a financial expert to run a great company, but you do need to stop pretending like it doesn’t matter. Think that’s the biggest secret that I could possibly share with people to have it resonate and and hopefully take action because of it.
Scott Ritzheimer
Yeah, so true. So true. So tell us just quickly. What do you folks do there at frack finance? And where can we find out more?
Tom Dillon
Yeah, so we’re a corporate finance advisory firm boutique, and so we really help companies that are in their journey of either buying, growing or selling a business, and ultimately in that growth phase it is. You kind of think of it as outsourced finance and accounting type work, and we really help companies grow and and that’s really our focus, both on organic and inorganic growth. And so growth through acquisition, buying, buying companies as well. And so you can find us best, to find me on LinkedIn, and then also you can also reach us on our website at frakfinance.com, which is F, R, A, K, finance.com
Scott Ritzheimer
Fantastic, Tom, thanks so much for being on the show. It was a real privilege and honor having you here today, and for those of you watching and listening, you know your time and attention mean the world to us. I hope you got as much out of this episode as I know I did, and I cannot wait to see you next time. Take care.
Contact Tom Dillon
Tom Dillon, CFA, is a seasoned financial strategist and the driving force behind Frank Finance. With years of experience as a fractional CFO, Tom specializes in helping SMBs unlock growth through data-driven financial management, cash flow optimization, and strategic investments. His mission is to demystify complex financial concepts, empowering entrepreneurs and executives to make confident, informed decisions that fuel long-term success. His insights help entrepreneurs and executives cut through financial noise, focus on what drives profitability, and make strategic decisions with clarity and confidence.
Want to learn more about Tom Dillon’s work at Frak Finance? Check out his website at https://www.frakfinance.com/