[This transcript has been automatically generated by a digital software and will therefore  contain errors and typos. Please kindly take note of this and only rely on the digital transcript for reference.]

00:00

Hey guys, welcome back to the tattoo business show. This is Ted, your friend and host speaking now I just really wanted to take some time to thank every single one of you who have been tuning in hearing your feedback and the stories of how the show has been impacting you and your businesses have been really gratifying for me as well. With that, I will promise to continue producing quality content as long as I can and to bring you the best actionable advice I can. So for today’s episode, we’re talking about the importance of financial insights for your business.

 

So the question really is how well do you know your company when you’re trying to grow your company and make it more profitable? Are you looking at the financial data or are you religious going by your gut view? So to share with us more on this topic I brought in my friend Rob to Brucker, who is the founder of insight matters. Insight matters is a financial consulting firm that helps provides his clients with financial insights that the CEO would receive in a large company, as Rob puts it, his providing 80% of the value of a CFO for 20% of the price.

 

Now with years of experience advising clients in Beijing, China and around the world. Rob knows the importance of financial insights when it comes to growing a business. And he uses this expertise to help his clients analyze their financial data to help them make better decisions for their own businesses. On today’s show, Rob shares about the importance of always focusing on your cash flow, the importance of tracking your financial performance.

 

And the reason why you should always negotiate for shorter credit terms of your customers. So guys, if you ever receive any value from the show, they don’t deserve to get your support. The best way you can do this is to subscribe to the show, leave a review on Apple podcasts and to share the show with somebody who will find it useful as well. And if you’d like to stay up to date with the latest episodes, tools and resources, then make sure you log on to Ted teo.com. That’s t Ed teo.com. And now let’s dive right in.

 

Hey, Rob, thank you for joining us today. It’s so nice to have you here.

 

01:48

Thank you for having me. It’s a pleasure to be here.

 

01:51

Yes, The pleasure is mine. So Rob, let’s start with a very simple icebreaker so we can get to know you a bit better. Can you share with us? Who is Rob to brockagh when he isn’t working?

 

02:01

That’s not an easy question. That’s a hard one

 

02:03

is not but it’s my favorite.

 

02:06

I’m a bit of a workaholic. But I tried to balance the time between working building the business. My son who is now nine, tomorrow, exactly nine months old. Wow. And trying to get some exercise in.

 

02:19

Congratulations. Thank you. So you’re a new father.

 

02:22

Yes.

 

02:23

Wow. So what’s your son’s name?

 

02:25

Alexander.

 

02:25

Oh, it’s a beautiful name. So Rob, share with us your story. I know you were previously from the Netherlands, and you spent about seven years in China, could you connect the dots of us and share verse how you started, insights matters thereafter.

 

02:37

So after I finished university, I was working in like the talent program of one of the Dutch banks, ANZ bank, and I really liked that talent program, I was not a big fan of the work itself, I found it quite boring. But as part of the program, they sent me on a project abroad, and a bit a bit of luck, I happen to get a project in China. So they sent me to China with the idea that I would spend six months there, work on a project and then head back to Amsterdam. But in those six months, I just was absolutely captured by the energy and the drive in Beijing and the entrepreneurship that I didn’t really want to go back to the Netherlands.

 

03:24

So what was the difference in the energy in China and Amsterdam that you really noticed? Could you explain this to us? What was it like in the

 

03:31

Netherlands, if in Amsterdam, if the bank would gain 1% market share and would increase 5% in profits? It was company wide celebration. And in China, in in in Beijing, I was working in a Chinese bank that IMG is a shareholder in. We grew 20% and we were behind the markets. Wow. It’s a huge designs, the whole speed of development and dynamic was completely different. I found it very

 

04:00

addictive. Yeah. Especially when you’re young and you’re early in your career.

 

04:02

Exactly. I figured I should do what every sane person would do. I’m young, I didn’t have a house didn’t have a wife, no kids, etc. So I quit the job and started the business in Beijing with a partner. Ran that for about seven years. And then realized that I really wanted to go back to finance. Like that’s where my background is. That’s where my passion is. So I started working as a finance consultants, and working with smaller companies, startups, mainly foreign owned startups in China, and gradually expanded that into a more online business client base.

 

 And how from there to solving inside matters was a really simple step because almost everybody I will be working with came with the question like can you help us because we’re running out of money. We don’t know how to grow. We want to raise investments and we don’t know how and every time my first question Was show me two books, show me where you are. Show me your your management reports. What are we working with? Nobody had that in order, nobody.

 

So I figured that that is a there’s a big need to offer those kinds of foundational services to digital businesses because it’s foundational.

 

05:24

Well, it sounds like you’re really connected the dots, you know, really nicely. So your clients organically came up to you and asked for the very services they needed from you, which led you to start insight matters. So Rob, in your own words, I understand that you started insight matters, with the goal to provide your clients with access to the same financial insights as corporate CEOs to make better decisions for their businesses.

 

 So walk us through the types of financial information that you provide your clients, and how do you go about doing this with them.

 

05:54

So first, start with our mission, because indeed, any business owner who only relies on their gut feeling to make big decisions, it’s dangerous,

 

06:04

you can trust your gut, you need to know concretely what’s going on in your company, right?

 

06:09

Often the gut feeling is right, but often is not enough to build your business on. So we do the whole financial spectrum, we start with accounting for those that need it’s our focus, and our strength is on reporting.

 

So taking the information from the accountants, and translating that into management information. And with management information, I mean, a visual dashboards that is very clear for every owner to understand how is their business doing? Where which products or services are profitable? Where are they growing? Where are they investing too much?

 

Where are they investing too little. So making that all insightful and visual. And on top, we are starting to work with budgeting and cash flow forecasting, to offer that as a standalone service that people can actually see. This is where I am now. But next month, when I gain another client, what does that mean for my cash flow? Or if I lose the clients? What does that mean?

 

Or if I hire a super senior operations manager, what does that mean for the business?

 

07:18

So Rob, if I understand correctly, in your core business, you take the financial information, you repackage it into a very visually easily understandable product for your clients who are not financially trained like you, you remove the jargon, and you actually give them something actionable in the report, where you can say, very specifically, what has already happened in the company, and how can you make it better?

 

07:38

Yeah, well, the report is mainly focused on this is what has happened. For example, this product category, the revenue was growing. But since the last one or two months, it’s evening out. So pointing out these things, and finding the root cause for that, and advising the clients on, what can they do about that?

 

So we have the reports, we have the dashboards, and we have a walkthrough video, where one of our analysts, records a video basically, to walk through the whole report and basically connect the dots give the whole story, rather than just

 

08:16

zero, if I understand correctly, this is actually a customized solution. Right?

 

08:19

Exactly, exactly. So not just like, oh, here are 10 charts with two sentences, but give the story like how do they connect, we see these these metrics go up, we see this one go down, that kind of suggests that this is where your problem is

 

08:34

my understand. Now, Rob, before we actually speak a little bit more about the insights that you can actually provide to your clients. Let’s take a step back. Let’s talk about what happens when they don’t actually have such financial information. What kind of bet financial decisions have you seen your clients make before they actually started engaging you? What was the path that you were on?

 

08:53

We have seen clients go out of almost go out of business. So one example is a client is an agency in the travel industry. And before I started working with us, one of the founders took a leave of absence for a few months. When he came back, the bank account was empty. A quarter of the clients had left a quarter of staff had left. And the whole business was just on a very, very steep downward trajectory. And the rest of the team was just not managing the financials. There were massive amounts of revenue that we’re not paid yet.

 

So in the books in the revenue, it looked quite okay. But clients didn’t pay and nobody was asking them to pay. Nobody was chasing them. staff was paid too late. There was just I wouldn’t say anarchy, but it was just a complete battlefield basically,

 

09:51

where employees can be happy when you’re not getting paid. So there was a huge issue of receivables I understand. The services have been performed by their own customers. But it seems like no one was really in charge of collecting the fees. So even though I guess the profitable in a sense, there was no cash flow. Exactly. Okay, Rob, so after they engaged you What happened? How do you help them,

 

10:11

the first thing we did in their specific case was the exact approach always differs a little bit. In their case, it was really very strict cash management’s. So any receivable needs to be chased. And one of the admin ladies was in charge of that. Just she tried to train her to become a pit bull, and chase any outstanding that you have to be relentless.

 

On the other hand, we instructed the management team to cut any expense that they could cut, to make sure that the cash outflow to cash bleeding would stop, they had to let go of about what to say 10 to 15% of the team at that point, to make sure that they were at least on a cash flow level breakeven, when that will stabilize. That’s the point where we, we help the founders to start planning for recovery. So the first thing you do is if somebody is wounded, you stop the bleeding. And then you start looking at how can you recover?

 

And what is the rehabilitation process. So for decades, that was coming up with a growth plan. Until COVID, hit, of course, coming up with the growth plan, like where does the growth need to come from which clients are actually the right clients? And which are the profitable clients? How, what is the cost, actually, for each of the products? That’s where we guided them in the process.

 

11:38

My understand, okay, guys, so as Rob has explained, you really need to rely on your financial data when you’re looking at what’s going wrong or right with your business. So in the story that Rob just shared, you really have to look at your credit terms, and how much money are you really collecting from your clients. So even though you may be profitable on paper, but we’re not collecting your piece from your clients, you have no money in your bank account.

 

And if your customers don’t actually pay up, you may actually have to write these as bad debts off in the future. These are the kinds of insights that a deeper understanding of your financial data will show you. And with that kind of information, you can implement the right actions to counteract them. So back to you, Rob, apart from cash flow issues, what are the financial insights? Can you draw out from a client’s financial data to help them improve their business?

 

12:19

There’s a lot of things although I got to say that in 90% of the cases, cash flow management is priority number one. Almost every entrepreneur looks at revenue, almost everybody looks at profit. And cash flow is really, really undervalued. The things we always look at is indeed revenue, profit, cash flow. We look at, if it’s a service business, we look at receivables, billable rates, net base of sales outstanding. And if it’s a product business, we really look at inventory levels, inventory, turnover rates, working capital, the gross margin for product category.

 

12:56

Yep, so guys, one thing that Rob just shared, of course, is that depending on business, the financial data that you’re looking at would definitely differ. So to put it simply, if you’re in the business of consulting, then you probably have little to no data in terms of inventory. But if you’re in the product business, then a lot of the time they should spend will be really looking at inventory, how fast you have to replace it, the cost of acquiring the goods in order to determine your gross margin in the end of the day.

 

So since we’re actually talking about inventory issues in a product business, right now, let’s talk a little bit about product returns that companies be faced after they have sold their products to their customers. Now, this would really affect their profitability at the end of the day, how should they look at their financial data in order to account for this,

 

13:36

so you’re talking about a product business in this case, so I would look at the revenue. And revenue in this case means gross revenue, but also look at net revenue, and gross revenue minus any return refund reshipment, etc. That is your net revenue. And the difference between those two is one of the things you want to keep a really tight eye on. Because if that difference is too big, you probably have either a communication problem or a quality problem.

 

But something has gone wrong on that part then. And the other thing for health wise is gross margin. So your net revenue, minus your cost of goods holes, that is the other one I would look at in that case. And again, if you have a higher return rates, your gross margin is going to be lower. So that is the second reason why you want to have your returns, I’m gonna set as low as possible,

 

14:34

and it’s true audit financial data, then you can really understand what is going wrong with your business. So if the customers are having a high return rate, then go and investigate as to why this is happening. So pay close attention to your financial data guys. Now, Rob, I know that most of your clients fall under the brackets of SMEs, startups and agencies.

 

So since we’ve talked a little bit about the product businesses just now and the issues that they can face, let’s talk a little bit about the other side of the spectrum. Why do agencies, maybe consulting agencies based in terms of financial issues that is actually rather common from your experience. There’s two big

 

15:06

problems that we see in almost almost every case, lack of cash flow management. So nobody really is actively in charge or actively monitoring, the operational cashflow. Everybody’s focused on revenue and profits. The second one is profitability per service, especially in the agency space. People look at exactly how much revenue do we realize for each of the service lines. But allocating the right cost to delivering that service and seeing which of the service lines or which of the client groups are actually profitable or most profitable.

 

That is a really undervalued part as well. So it often happens that clients think service a is by far the most profitable one, because that’s where they make the most revenue. But once you dig a bit deeper in the numbers, it shows that actually, the profitability of that service may not be that high, because the team is too expensive or not efficient, or they’re over servicing. And actually, service line B, or C is where they make the money.

 

16:14

So here’s a key takeaway, guys don’t just focus on revenue, focus on the other issues, such as your profitability, just because you’re generating a lot of revenue from a specific service line doesn’t mean that it’s the service line that should be allocating all your resources on if another service line actually generates less revenue by is higher in terms of the profits they generate. And he maybe you want to take a closer look at that as well.

 

Now Rob, getting such financial data can really be a game changer for an agency, right? It really gets an agency the ability to realize how they can maximize their resources going forward. So if I understand correctly, you are actually going to provide in the report, service line, a service line B service, I see how each service line is really performing. And then they can decide how they want to approach it,

 

16:55

what we what we focus on is giving them that insights, and then handing them the options. So it could be investing in option B and C. But it could also be that for whatever strategic reason, service is a is the most important. But then they want to either optimize that delivery or increase their prices. But make that more profitable. Yes.

 

17:19

Now, Rob, here’s a trickier question on the quality of the financial insights that you’re able to provide to your clients would definitely be dependent on the kind of data they provide to you. But I assume that most small businesses, agencies, startups, they may not actually do a good job collecting and keeping these records. What happens is as a case, what happens when a client approaches you, and they don’t have their records in order.

 

17:41

To be honest, I’m not an accountant. And I don’t even like accounting. But because in the reporting business, it is such a foundational inputs. And apparently, a lot of bookkeepers and accountants don’t really know what they’re doing. That’s why we started offering that ourselves as well. So it’s not our core area. But for us, it’s a necessity that is done well. So if we will start working with somebody who doesn’t have the books in order, we can take it on or we can help them screen a another partner if they insist on having a local partner.

 

But we can’t do anything on the reporting sites. And we’re not taking on clients if their books are not an order. Because it’s basically like a financial hierarchy of needs, what we call it a bit like Maslow’s hierarchy of needs. But then for financial services, everything in the bottom, the bottom trench is record keeping bookkeeping. If that is not in order, anything on top of that is unreliable at best

 

18:48

guys, this Rob just shared, it’s actually super important, no matter how big or small your business is to keep good records. Now, not only is it super important, because it gives you the ability to see how your business is doing is so necessary. So when it comes to tax season is a lot easier for you to file your taxes with your relevant tax authorities. Now, Rob, let’s circle back to the issue of cash flow and credit terms. So entrepreneurs, like you said may not realize that cash flow is so important, they really focus on revenue and profit.

 

And once they’re out of cash, they may not actually be able to pay their own employees and suppliers, even if they are profitable. Now I know you previously voice very strongly that on a previous on another interview, that businesses should try their best to get their own customers to pay them as early as they can. Because longer credit terms is the equivalent of them subsidizing the cost of maybe a loan for their own customers. Could you share a little bit more about this.

 

19:40

So if you are running an agency and you are working with let’s say a big company like Disney or Coca Cola, and you work a month, your whole team works for them. You pay your team and at the end of the month you send that invoice and then basically your Coca Cola takes 30 60 or even longer days to pay, that means that you are paying your shot the team, the month that you did the service for them. And then another two months after that, before your customer actually pays you. So effectively, you’re lending them money for 90 days, you are

 

20:18

the one providing this. If you work

 

20:20

with a small company, that could be a legitimate choice, and especially in the product business is quite common. And there there are things you can argue why that’s, that’s fair. But especially in a service business, I don’t think that it makes a lot of sense that you subsidize your customers. So we wherever possible, we always hammer on get paid upfront, or if they if your customer doesn’t want to pay upfront, get a deposits, I one time deposit that you hold so that you don’t have the risk of them not painted. Because in a product business,

 

 if they don’t pay, you can get the product back, theoretically, theoretically, at least in a service business, that’s never going to work, you’re not going to take the logo back or take the website back. So once you have delivered, you have all the risk. So you’re financing your customers, and you have

 

21:14

the risk by taking deposit, you at least have a certain portion of the funds in your bank account already. And it gives you additional lifeline. And you know, you’re not chasing for the full 100% and hoping that your own customers are going to pay you based on their own credit terms because they can really miss their own credit terms as well. And you may have to be chasing them for payments to be made. Correct,

 

21:37

correct. And if you have 100 customers as an agency, then if one or two are paying late, it’s annoying, but manageable. But if you’re a small agency with let’s say, five or 10 people, and you have two really big customers and one of them pays late, it can immediately ruin your cash flow and it can immediately and danger, the financial health of your of your business, I

 

22:02

think there’s something to be said about the bargaining power of the parties. So the bigger declined. And let’s say that you’re a small firm, and you had the chance to learn a really large MNC, large MNC is tend to have longer credit terms, whether it’s 30 days, 60 days, or even 90 days, as you pointed out earlier on, what advice do you have for an entrepreneur who’s actually maybe running a smaller company and he managed to land a larger MNC?

 

Can they actually level the difference between the bargaining powers between the two of them? Yes,

 

22:28

because if you are running a digital marketing agency, and you’re competing with 500, other agencies, you have no bargaining power to work towards those agencies. On the other hand, we’ve seen some of our clients who are super small agencies as well, again, five to 10 people work with agencies and get 100% paid upfront. And that’s simply because they offer a service and they have a positioning that allows them to say, Look, guys, you want to work with us, these are our terms,

 

take it or leave it. And it sounds a bit arrogant to tell that to let’s say a Disney or Coca Cola. But if you have a super strong position in that specific area, you can. So the only advice for me it would be make sure you stand out so that even those MCs are almost competing to work with you, rather than you bidding with 100 agencies to work with them.

 

23:29

So guys, of course, it’s not that easy to actually negotiate with a larger company. I mean, if you’re a small business, and you actually managed to land a large client up so over the moon that you may not actually want to over negotiate and to potentially lose them. So of course, walk that fine, line yourself and make a judgment call.

 

See how you can actually approach this the best way that you can, I guess my key takeaway for this issue is that if you’re really very cash tight, and try your best not to actually set any clients with a long credit term, because this could actually potentially put you in a lot of financial difficulty, even though you’re providing them the service because until they pay you you’re actually quite vulnerable.

 

Now Rob, I noticed your website provides a service called the financial gameplan. Could you share with us what this is all about?

 

24:11

Yes. So whenever we start working with somebody, the first question is, what are you trying to achieve? Because that question drives everything. If you want to build a Tesla size, unicorn massive company, or when you want to make it a four hour workweek kind of lifestyle business has a big impact in what metrics you should be managing what metrics you should be tracking and paying attention to. So what we do with a game plan is we start with the question, What’s your goal? What are you trying to optimize for? then translate that into the metrics. And again, those are super tailored because every company is different.

 

Every goal is different. And then we translate that into how does your accounting process need to look like so that you can have, so you actually get the right information. And you can measure those metrics. So we make the connection between your personal goal. And what does your accountant need to do, so that you get the right information. So you can manage your company the right way.

 

25:25

But this is not like a snapshot view of the financial status of the company, I would say, is it probably more of a report to help them understand what has happened? And how they can actually act on it to improve profitability down the road?

 

25:38

That it’s not? It’s not like a snapshot view of like, how healthy is it now it’s really focused on what are the levers that you should pay attention to. Because again, if you want to build an Uber or a Tesla, you want to focus on revenue, so then we would break down into, okay, you really want to have revenue centric metrics, because that this size if you are successful or not, but if you want to make it a cash flow business, and spend your year in Thailand on the beach,

 

we would break it down much more in profitability, and cash flow oriented, its metrics and revenue, all of a sudden, is a lot less relevant. So the snapshot is really on. How should information flow? And what information should you be paying attention to?

 

26:27

I see. Okay, Rob. So walk me through this. So after the client has gotten the financial gameplan from you, what do you actually provide for them after that, in terms of a longer term service? Do you have anything like that,

 

26:38

after the game plan, we give them an implementation plan. And they can implement it themselves, they can work with any accountant, they once they can work with any financial consultant they want, or they can do it internally. Of course, we would like to work with them. Because once we understand the business, we have an idea on how to organize, we’d like to help them get there.

 

If they want to move ahead with us after the game plan, we build a dashboard for them, we set up the reporting structure, we make sure that there are accountants makes the changes that we discussed, or that we take over the accounting. And as of the next month, we start delivering the reports to guide them into the right direction.

 

27:19

Okay, I understand. Now, Rob, if the listeners only remember one thing from today’s conversation, Oh, do you like it to be

 

27:26

revenue is vanity. Profit is sanity. But cash flow is reality, that if there’s one thing to remember, that’s the one. In the end of the day, cash flow is the only thing that matters.

 

27:39

Wow, that’s a very interesting way to put it. Because without cash, you’re dead. Without cash

 

27:43

or debt, you can be super profitable. If you can’t pay your team. If you can’t pay your suppliers, you’re still bankrupt, no matter how profitable your p&l may look like. So at the end of the day, cash flow is what pays the bills. It’s what pays your team, it’s what pays your own salary.

 

27:59

Now, Rob, how can listeners getting contacted view if they need your help,

 

28:02

the best way would be to go to connect rob.com. There is a bit of my background info and a link to schedule a call with me. Or alternatively, go to LinkedIn. And if you’re interested in the game plan, go to finance insight matters.com slash tatio.

 

28:23

Now, Rob, thank you so much for joining us today and sharing your wisdom. It’s been great having you here.

 

28:28

It was a pleasure to be here. Now guys, thank

 

28:29

you so much for joining Robert do today’s episode. And I hope you’ve learned a little bit about the importance of understanding your financial data and the financial insights behind them. Now, as Rob said, your revenue is only a vanity metric. No matter how much your revenue is the focus really is on your profitability and your cash flow, you can actually be running a company that’s generating over $1 million in revenue, but still be lost making.

 

So as Rob said, revenue is vanity. Profit is sanity. And cash flow is reality. No apart from credit terms and asking for deposits. There are tons of issues in cash flow management that I’m sure out there. If you’re really keen on learning more, please do spend some time googling about this and educating yourself because it’s super important just to paint a little picture. If your client is asking you to get in 90 days worth of credit terms. That means after you’ve performed your work, you have to wait three four months before we can expect them to pay you.

 

So within this three months, you’re actually going to be paying your suppliers and your employees by the money from the project they’ve completed for the client has nicely entered your bank account yet. I hope those tips were helpful if you ever need to get in contact with me and you’d like to discuss anything about your business or entrepreneurship then drop me an email at Hello at TED to calm now guys to stay up to date with all the latest episodes, tools and resources that make sure to log on to Ted to.com that’s tto.com and even better yet, sign up for our newsletter and you’ll hear from me directly.

 

And as before, if you’ve received any value from the show, then I’d love to get your support. The best way you can show this is just this scribed to the show, leave a review on Apple podcasts and to share the show with somebody who will find it useful as well. That’s all for me today. I’ll see you next time.

[This transcript has been automatically generated by a digital software and will therefore  contain errors and typos. Please kindly take note of this and only rely on the digital transcript for reference.]

00:00

Hey guys, welcome back to the tattoo business show. This is Ted, your friend and host speaking now I just really wanted to take some time to thank every single one of you who have been tuning in hearing your feedback and the stories of how the show has been impacting you and your businesses have been really gratifying for me as well. With that, I will promise to continue producing quality content as long as I can and to bring you the best actionable advice I can. So for today’s episode, we’re talking about the importance of financial insights for your business.

 

So the question really is how well do you know your company when you’re trying to grow your company and make it more profitable? Are you looking at the financial data or are you religious going by your gut view? So to share with us more on this topic I brought in my friend Rob to Brucker, who is the founder of insight matters. Insight matters is a financial consulting firm that helps provides his clients with financial insights that the CEO would receive in a large company, as Rob puts it, his providing 80% of the value of a CFO for 20% of the price.

 

Now with years of experience advising clients in Beijing, China and around the world. Rob knows the importance of financial insights when it comes to growing a business. And he uses this expertise to help his clients analyze their financial data to help them make better decisions for their own businesses. On today’s show, Rob shares about the importance of always focusing on your cash flow, the importance of tracking your financial performance.

 

And the reason why you should always negotiate for shorter credit terms of your customers. So guys, if you ever receive any value from the show, they don’t deserve to get your support. The best way you can do this is to subscribe to the show, leave a review on Apple podcasts and to share the show with somebody who will find it useful as well. And if you’d like to stay up to date with the latest episodes, tools and resources, then make sure you log on to Ted teo.com. That’s t Ed teo.com. And now let’s dive right in.

 

Hey, Rob, thank you for joining us today. It’s so nice to have you here.

 

01:48

Thank you for having me. It’s a pleasure to be here.

 

01:51

Yes, The pleasure is mine. So Rob, let’s start with a very simple icebreaker so we can get to know you a bit better. Can you share with us? Who is Rob to brockagh when he isn’t working?

 

02:01

That’s not an easy question. That’s a hard one

 

02:03

is not but it’s my favorite.

 

02:06

I’m a bit of a workaholic. But I tried to balance the time between working building the business. My son who is now nine, tomorrow, exactly nine months old. Wow. And trying to get some exercise in.

 

02:19

Congratulations. Thank you. So you’re a new father.

 

02:22

Yes.

 

02:23

Wow. So what’s your son’s name?

 

02:25

Alexander.

 

02:25

Oh, it’s a beautiful name. So Rob, share with us your story. I know you were previously from the Netherlands, and you spent about seven years in China, could you connect the dots of us and share verse how you started, insights matters thereafter.

 

02:37

So after I finished university, I was working in like the talent program of one of the Dutch banks, ANZ bank, and I really liked that talent program, I was not a big fan of the work itself, I found it quite boring. But as part of the program, they sent me on a project abroad, and a bit a bit of luck, I happen to get a project in China. So they sent me to China with the idea that I would spend six months there, work on a project and then head back to Amsterdam. But in those six months, I just was absolutely captured by the energy and the drive in Beijing and the entrepreneurship that I didn’t really want to go back to the Netherlands.

 

03:24

So what was the difference in the energy in China and Amsterdam that you really noticed? Could you explain this to us? What was it like in the

 

03:31

Netherlands, if in Amsterdam, if the bank would gain 1% market share and would increase 5% in profits? It was company wide celebration. And in China, in in in Beijing, I was working in a Chinese bank that IMG is a shareholder in. We grew 20% and we were behind the markets. Wow. It’s a huge designs, the whole speed of development and dynamic was completely different. I found it very

 

04:00

addictive. Yeah. Especially when you’re young and you’re early in your career.

 

04:02

Exactly. I figured I should do what every sane person would do. I’m young, I didn’t have a house didn’t have a wife, no kids, etc. So I quit the job and started the business in Beijing with a partner. Ran that for about seven years. And then realized that I really wanted to go back to finance. Like that’s where my background is. That’s where my passion is. So I started working as a finance consultants, and working with smaller companies, startups, mainly foreign owned startups in China, and gradually expanded that into a more online business client base.

 

 And how from there to solving inside matters was a really simple step because almost everybody I will be working with came with the question like can you help us because we’re running out of money. We don’t know how to grow. We want to raise investments and we don’t know how and every time my first question Was show me two books, show me where you are. Show me your your management reports. What are we working with? Nobody had that in order, nobody.

 

So I figured that that is a there’s a big need to offer those kinds of foundational services to digital businesses because it’s foundational.

 

05:24

Well, it sounds like you’re really connected the dots, you know, really nicely. So your clients organically came up to you and asked for the very services they needed from you, which led you to start insight matters. So Rob, in your own words, I understand that you started insight matters, with the goal to provide your clients with access to the same financial insights as corporate CEOs to make better decisions for their businesses.

 

 So walk us through the types of financial information that you provide your clients, and how do you go about doing this with them.

 

05:54

So first, start with our mission, because indeed, any business owner who only relies on their gut feeling to make big decisions, it’s dangerous,

 

06:04

you can trust your gut, you need to know concretely what’s going on in your company, right?

 

06:09

Often the gut feeling is right, but often is not enough to build your business on. So we do the whole financial spectrum, we start with accounting for those that need it’s our focus, and our strength is on reporting.

 

So taking the information from the accountants, and translating that into management information. And with management information, I mean, a visual dashboards that is very clear for every owner to understand how is their business doing? Where which products or services are profitable? Where are they growing? Where are they investing too much?

 

Where are they investing too little. So making that all insightful and visual. And on top, we are starting to work with budgeting and cash flow forecasting, to offer that as a standalone service that people can actually see. This is where I am now. But next month, when I gain another client, what does that mean for my cash flow? Or if I lose the clients? What does that mean?

 

Or if I hire a super senior operations manager, what does that mean for the business?

 

07:18

So Rob, if I understand correctly, in your core business, you take the financial information, you repackage it into a very visually easily understandable product for your clients who are not financially trained like you, you remove the jargon, and you actually give them something actionable in the report, where you can say, very specifically, what has already happened in the company, and how can you make it better?

 

07:38

Yeah, well, the report is mainly focused on this is what has happened. For example, this product category, the revenue was growing. But since the last one or two months, it’s evening out. So pointing out these things, and finding the root cause for that, and advising the clients on, what can they do about that?

 

So we have the reports, we have the dashboards, and we have a walkthrough video, where one of our analysts, records a video basically, to walk through the whole report and basically connect the dots give the whole story, rather than just

 

08:16

zero, if I understand correctly, this is actually a customized solution. Right?

 

08:19

Exactly, exactly. So not just like, oh, here are 10 charts with two sentences, but give the story like how do they connect, we see these these metrics go up, we see this one go down, that kind of suggests that this is where your problem is

 

08:34

my understand. Now, Rob, before we actually speak a little bit more about the insights that you can actually provide to your clients. Let’s take a step back. Let’s talk about what happens when they don’t actually have such financial information. What kind of bet financial decisions have you seen your clients make before they actually started engaging you? What was the path that you were on?

 

08:53

We have seen clients go out of almost go out of business. So one example is a client is an agency in the travel industry. And before I started working with us, one of the founders took a leave of absence for a few months. When he came back, the bank account was empty. A quarter of the clients had left a quarter of staff had left. And the whole business was just on a very, very steep downward trajectory. And the rest of the team was just not managing the financials. There were massive amounts of revenue that we’re not paid yet.

 

So in the books in the revenue, it looked quite okay. But clients didn’t pay and nobody was asking them to pay. Nobody was chasing them. staff was paid too late. There was just I wouldn’t say anarchy, but it was just a complete battlefield basically,

 

09:51

where employees can be happy when you’re not getting paid. So there was a huge issue of receivables I understand. The services have been performed by their own customers. But it seems like no one was really in charge of collecting the fees. So even though I guess the profitable in a sense, there was no cash flow. Exactly. Okay, Rob, so after they engaged you What happened? How do you help them,

 

10:11

the first thing we did in their specific case was the exact approach always differs a little bit. In their case, it was really very strict cash management’s. So any receivable needs to be chased. And one of the admin ladies was in charge of that. Just she tried to train her to become a pit bull, and chase any outstanding that you have to be relentless.

 

On the other hand, we instructed the management team to cut any expense that they could cut, to make sure that the cash outflow to cash bleeding would stop, they had to let go of about what to say 10 to 15% of the team at that point, to make sure that they were at least on a cash flow level breakeven, when that will stabilize. That’s the point where we, we help the founders to start planning for recovery. So the first thing you do is if somebody is wounded, you stop the bleeding. And then you start looking at how can you recover?

 

And what is the rehabilitation process. So for decades, that was coming up with a growth plan. Until COVID, hit, of course, coming up with the growth plan, like where does the growth need to come from which clients are actually the right clients? And which are the profitable clients? How, what is the cost, actually, for each of the products? That’s where we guided them in the process.

 

11:38

My understand, okay, guys, so as Rob has explained, you really need to rely on your financial data when you’re looking at what’s going wrong or right with your business. So in the story that Rob just shared, you really have to look at your credit terms, and how much money are you really collecting from your clients. So even though you may be profitable on paper, but we’re not collecting your piece from your clients, you have no money in your bank account.

 

And if your customers don’t actually pay up, you may actually have to write these as bad debts off in the future. These are the kinds of insights that a deeper understanding of your financial data will show you. And with that kind of information, you can implement the right actions to counteract them. So back to you, Rob, apart from cash flow issues, what are the financial insights? Can you draw out from a client’s financial data to help them improve their business?

 

12:19

There’s a lot of things although I got to say that in 90% of the cases, cash flow management is priority number one. Almost every entrepreneur looks at revenue, almost everybody looks at profit. And cash flow is really, really undervalued. The things we always look at is indeed revenue, profit, cash flow. We look at, if it’s a service business, we look at receivables, billable rates, net base of sales outstanding. And if it’s a product business, we really look at inventory levels, inventory, turnover rates, working capital, the gross margin for product category.

 

12:56

Yep, so guys, one thing that Rob just shared, of course, is that depending on business, the financial data that you’re looking at would definitely differ. So to put it simply, if you’re in the business of consulting, then you probably have little to no data in terms of inventory. But if you’re in the product business, then a lot of the time they should spend will be really looking at inventory, how fast you have to replace it, the cost of acquiring the goods in order to determine your gross margin in the end of the day.

 

So since we’re actually talking about inventory issues in a product business, right now, let’s talk a little bit about product returns that companies be faced after they have sold their products to their customers. Now, this would really affect their profitability at the end of the day, how should they look at their financial data in order to account for this,

 

13:36

so you’re talking about a product business in this case, so I would look at the revenue. And revenue in this case means gross revenue, but also look at net revenue, and gross revenue minus any return refund reshipment, etc. That is your net revenue. And the difference between those two is one of the things you want to keep a really tight eye on. Because if that difference is too big, you probably have either a communication problem or a quality problem.

 

But something has gone wrong on that part then. And the other thing for health wise is gross margin. So your net revenue, minus your cost of goods holes, that is the other one I would look at in that case. And again, if you have a higher return rates, your gross margin is going to be lower. So that is the second reason why you want to have your returns, I’m gonna set as low as possible,

 

14:34

and it’s true audit financial data, then you can really understand what is going wrong with your business. So if the customers are having a high return rate, then go and investigate as to why this is happening. So pay close attention to your financial data guys. Now, Rob, I know that most of your clients fall under the brackets of SMEs, startups and agencies.

 

So since we’ve talked a little bit about the product businesses just now and the issues that they can face, let’s talk a little bit about the other side of the spectrum. Why do agencies, maybe consulting agencies based in terms of financial issues that is actually rather common from your experience. There’s two big

 

15:06

problems that we see in almost almost every case, lack of cash flow management. So nobody really is actively in charge or actively monitoring, the operational cashflow. Everybody’s focused on revenue and profits. The second one is profitability per service, especially in the agency space. People look at exactly how much revenue do we realize for each of the service lines. But allocating the right cost to delivering that service and seeing which of the service lines or which of the client groups are actually profitable or most profitable.

 

That is a really undervalued part as well. So it often happens that clients think service a is by far the most profitable one, because that’s where they make the most revenue. But once you dig a bit deeper in the numbers, it shows that actually, the profitability of that service may not be that high, because the team is too expensive or not efficient, or they’re over servicing. And actually, service line B, or C is where they make the money.

 

16:14

So here’s a key takeaway, guys don’t just focus on revenue, focus on the other issues, such as your profitability, just because you’re generating a lot of revenue from a specific service line doesn’t mean that it’s the service line that should be allocating all your resources on if another service line actually generates less revenue by is higher in terms of the profits they generate. And he maybe you want to take a closer look at that as well.

 

Now Rob, getting such financial data can really be a game changer for an agency, right? It really gets an agency the ability to realize how they can maximize their resources going forward. So if I understand correctly, you are actually going to provide in the report, service line, a service line B service, I see how each service line is really performing. And then they can decide how they want to approach it,

 

16:55

what we what we focus on is giving them that insights, and then handing them the options. So it could be investing in option B and C. But it could also be that for whatever strategic reason, service is a is the most important. But then they want to either optimize that delivery or increase their prices. But make that more profitable. Yes.

 

17:19

Now, Rob, here’s a trickier question on the quality of the financial insights that you’re able to provide to your clients would definitely be dependent on the kind of data they provide to you. But I assume that most small businesses, agencies, startups, they may not actually do a good job collecting and keeping these records. What happens is as a case, what happens when a client approaches you, and they don’t have their records in order.

 

17:41

To be honest, I’m not an accountant. And I don’t even like accounting. But because in the reporting business, it is such a foundational inputs. And apparently, a lot of bookkeepers and accountants don’t really know what they’re doing. That’s why we started offering that ourselves as well. So it’s not our core area. But for us, it’s a necessity that is done well. So if we will start working with somebody who doesn’t have the books in order, we can take it on or we can help them screen a another partner if they insist on having a local partner.

 

But we can’t do anything on the reporting sites. And we’re not taking on clients if their books are not an order. Because it’s basically like a financial hierarchy of needs, what we call it a bit like Maslow’s hierarchy of needs. But then for financial services, everything in the bottom, the bottom trench is record keeping bookkeeping. If that is not in order, anything on top of that is unreliable at best

 

18:48

guys, this Rob just shared, it’s actually super important, no matter how big or small your business is to keep good records. Now, not only is it super important, because it gives you the ability to see how your business is doing is so necessary. So when it comes to tax season is a lot easier for you to file your taxes with your relevant tax authorities. Now, Rob, let’s circle back to the issue of cash flow and credit terms. So entrepreneurs, like you said may not realize that cash flow is so important, they really focus on revenue and profit.

 

And once they’re out of cash, they may not actually be able to pay their own employees and suppliers, even if they are profitable. Now I know you previously voice very strongly that on a previous on another interview, that businesses should try their best to get their own customers to pay them as early as they can. Because longer credit terms is the equivalent of them subsidizing the cost of maybe a loan for their own customers. Could you share a little bit more about this.

 

19:40

So if you are running an agency and you are working with let’s say a big company like Disney or Coca Cola, and you work a month, your whole team works for them. You pay your team and at the end of the month you send that invoice and then basically your Coca Cola takes 30 60 or even longer days to pay, that means that you are paying your shot the team, the month that you did the service for them. And then another two months after that, before your customer actually pays you. So effectively, you’re lending them money for 90 days, you are

 

20:18

the one providing this. If you work

 

20:20

with a small company, that could be a legitimate choice, and especially in the product business is quite common. And there there are things you can argue why that’s, that’s fair. But especially in a service business, I don’t think that it makes a lot of sense that you subsidize your customers. So we wherever possible, we always hammer on get paid upfront, or if they if your customer doesn’t want to pay upfront, get a deposits, I one time deposit that you hold so that you don’t have the risk of them not painted. Because in a product business,

 

 if they don’t pay, you can get the product back, theoretically, theoretically, at least in a service business, that’s never going to work, you’re not going to take the logo back or take the website back. So once you have delivered, you have all the risk. So you’re financing your customers, and you have

 

21:14

the risk by taking deposit, you at least have a certain portion of the funds in your bank account already. And it gives you additional lifeline. And you know, you’re not chasing for the full 100% and hoping that your own customers are going to pay you based on their own credit terms because they can really miss their own credit terms as well. And you may have to be chasing them for payments to be made. Correct,

 

21:37

correct. And if you have 100 customers as an agency, then if one or two are paying late, it’s annoying, but manageable. But if you’re a small agency with let’s say, five or 10 people, and you have two really big customers and one of them pays late, it can immediately ruin your cash flow and it can immediately and danger, the financial health of your of your business, I

 

22:02

think there’s something to be said about the bargaining power of the parties. So the bigger declined. And let’s say that you’re a small firm, and you had the chance to learn a really large MNC, large MNC is tend to have longer credit terms, whether it’s 30 days, 60 days, or even 90 days, as you pointed out earlier on, what advice do you have for an entrepreneur who’s actually maybe running a smaller company and he managed to land a larger MNC?

 

Can they actually level the difference between the bargaining powers between the two of them? Yes,

 

22:28

because if you are running a digital marketing agency, and you’re competing with 500, other agencies, you have no bargaining power to work towards those agencies. On the other hand, we’ve seen some of our clients who are super small agencies as well, again, five to 10 people work with agencies and get 100% paid upfront. And that’s simply because they offer a service and they have a positioning that allows them to say, Look, guys, you want to work with us, these are our terms,

 

take it or leave it. And it sounds a bit arrogant to tell that to let’s say a Disney or Coca Cola. But if you have a super strong position in that specific area, you can. So the only advice for me it would be make sure you stand out so that even those MCs are almost competing to work with you, rather than you bidding with 100 agencies to work with them.

 

23:29

So guys, of course, it’s not that easy to actually negotiate with a larger company. I mean, if you’re a small business, and you actually managed to land a large client up so over the moon that you may not actually want to over negotiate and to potentially lose them. So of course, walk that fine, line yourself and make a judgment call.

 

See how you can actually approach this the best way that you can, I guess my key takeaway for this issue is that if you’re really very cash tight, and try your best not to actually set any clients with a long credit term, because this could actually potentially put you in a lot of financial difficulty, even though you’re providing them the service because until they pay you you’re actually quite vulnerable.

 

Now Rob, I noticed your website provides a service called the financial gameplan. Could you share with us what this is all about?

 

24:11

Yes. So whenever we start working with somebody, the first question is, what are you trying to achieve? Because that question drives everything. If you want to build a Tesla size, unicorn massive company, or when you want to make it a four hour workweek kind of lifestyle business has a big impact in what metrics you should be managing what metrics you should be tracking and paying attention to. So what we do with a game plan is we start with the question, What’s your goal? What are you trying to optimize for? then translate that into the metrics. And again, those are super tailored because every company is different.

 

Every goal is different. And then we translate that into how does your accounting process need to look like so that you can have, so you actually get the right information. And you can measure those metrics. So we make the connection between your personal goal. And what does your accountant need to do, so that you get the right information. So you can manage your company the right way.

 

25:25

But this is not like a snapshot view of the financial status of the company, I would say, is it probably more of a report to help them understand what has happened? And how they can actually act on it to improve profitability down the road?

 

25:38

That it’s not? It’s not like a snapshot view of like, how healthy is it now it’s really focused on what are the levers that you should pay attention to. Because again, if you want to build an Uber or a Tesla, you want to focus on revenue, so then we would break down into, okay, you really want to have revenue centric metrics, because that this size if you are successful or not, but if you want to make it a cash flow business, and spend your year in Thailand on the beach,

 

we would break it down much more in profitability, and cash flow oriented, its metrics and revenue, all of a sudden, is a lot less relevant. So the snapshot is really on. How should information flow? And what information should you be paying attention to?

 

26:27

I see. Okay, Rob. So walk me through this. So after the client has gotten the financial gameplan from you, what do you actually provide for them after that, in terms of a longer term service? Do you have anything like that,

 

26:38

after the game plan, we give them an implementation plan. And they can implement it themselves, they can work with any accountant, they once they can work with any financial consultant they want, or they can do it internally. Of course, we would like to work with them. Because once we understand the business, we have an idea on how to organize, we’d like to help them get there.

 

If they want to move ahead with us after the game plan, we build a dashboard for them, we set up the reporting structure, we make sure that there are accountants makes the changes that we discussed, or that we take over the accounting. And as of the next month, we start delivering the reports to guide them into the right direction.

 

27:19

Okay, I understand. Now, Rob, if the listeners only remember one thing from today’s conversation, Oh, do you like it to be

 

27:26

revenue is vanity. Profit is sanity. But cash flow is reality, that if there’s one thing to remember, that’s the one. In the end of the day, cash flow is the only thing that matters.

 

27:39

Wow, that’s a very interesting way to put it. Because without cash, you’re dead. Without cash

 

27:43

or debt, you can be super profitable. If you can’t pay your team. If you can’t pay your suppliers, you’re still bankrupt, no matter how profitable your p&l may look like. So at the end of the day, cash flow is what pays the bills. It’s what pays your team, it’s what pays your own salary.

 

27:59

Now, Rob, how can listeners getting contacted view if they need your help,

 

28:02

the best way would be to go to connect rob.com. There is a bit of my background info and a link to schedule a call with me. Or alternatively, go to LinkedIn. And if you’re interested in the game plan, go to finance insight matters.com slash tatio.

 

28:23

Now, Rob, thank you so much for joining us today and sharing your wisdom. It’s been great having you here.

 

28:28

It was a pleasure to be here. Now guys, thank

 

28:29

you so much for joining Robert do today’s episode. And I hope you’ve learned a little bit about the importance of understanding your financial data and the financial insights behind them. Now, as Rob said, your revenue is only a vanity metric. No matter how much your revenue is the focus really is on your profitability and your cash flow, you can actually be running a company that’s generating over $1 million in revenue, but still be lost making.

 

So as Rob said, revenue is vanity. Profit is sanity. And cash flow is reality. No apart from credit terms and asking for deposits. There are tons of issues in cash flow management that I’m sure out there. If you’re really keen on learning more, please do spend some time googling about this and educating yourself because it’s super important just to paint a little picture. If your client is asking you to get in 90 days worth of credit terms. That means after you’ve performed your work, you have to wait three four months before we can expect them to pay you.

 

So within this three months, you’re actually going to be paying your suppliers and your employees by the money from the project they’ve completed for the client has nicely entered your bank account yet. I hope those tips were helpful if you ever need to get in contact with me and you’d like to discuss anything about your business or entrepreneurship then drop me an email at Hello at TED to calm now guys to stay up to date with all the latest episodes, tools and resources that make sure to log on to Ted to.com that’s tto.com and even better yet, sign up for our newsletter and you’ll hear from me directly.

 

And as before, if you’ve received any value from the show, then I’d love to get your support. The best way you can show this is just this scribed to the show, leave a review on Apple podcasts and to share the show with somebody who will find it useful as well. That’s all for me today. I’ll see you next time.