The 3 Key Metrics For Your Lifestyle Business With Stephanie Skryzowski

Diane: [00:00:00] hey everyone. So I am thrilled today to get to nerd out on all things, numbers, and metrics, which I love with my fellow accountant and Stephanie Skryzowsk. She runs the Entrepreneur's CFO corner, which is a membership geared at empowering entrepreneurs to master their numbers. So get your pencils ready. We're definitely going to take some notes. Hey Stephanie, welcome to the show. Stephanie: [00:00:20] Hey, thanks for having me. Diane: [00:00:22] I'm excited to talk to you about all the number of things but before we start, I'd love you to tell the listeners a little about you and your lifestyle business Stephanie: [00:00:30] sure. So I run a business called 100 degrees consulting and we help purpose-driven leaders of small businesses and nonprofits to really manage their numbers and make smart decisions so they can grow their business and really love their life. And so we provide done for you CFO and bookkeeping services for organizations around the globe. And then we also have, like you just mentioned, the Entrepreneur CFO Corner was, which is a membership, which teaches entrepreneurs our framework to help you really understand and use your numbers to make smart decisions. Like I said, to grow your business and to really, have a lifestyle that you love. Diane: [00:01:08] I think it's an interesting one for people who haven't been in corporate, maybe we should touch on a little bit about what a CFO does because I do think people think that you're kind of that mean person with the expense accounts, spreadsheet, or telling them they can't spend their money. So how does the CFO help a CEO? Stephanie: [00:01:26] Oh, I love that so much. Yes. So a CFO, first of all, as a chief financial officer, so we're like the highest numbers person in any type of organization. And so what we do you're right. a lot of people think that we're the ones that are gonna come in and tell you to cut your budget and scrimp and save and, stop buying your lattes. That is not what we do at all. We are enablers. We help you look at your numbers and find a way to make things happen. So if you want to grow this particular revenue stream and you're kind of stuck on like, okay, how do we do this? We're going to look at the numbers and show you the path to help you do that. It's not just, looking back, looking at history, looking at your P&L from last month or last year, it's a really looking forward into the future and, and helping you make decisions based on what's going to happen. So I like to think of us as enablers. Diane: [00:02:19] Yeah. And that was pretty much my job in corporate. essentially for one of the trading desks. And I spent an awful lot of time on planning and figuring out what was going to happen if we did this if we did that option. So I think it's a really important role, that maybe not a lot of entrepreneurs have encountered. but how did that business come about because you have two small children, did the business start when you were on maternity leave? Stephanie: [00:02:46] Yeah, so rewind to my career before I started the business. I actually worked in the nonprofit world traveling the world from Afghanistan to Nepal, to Haiti, to all over Africa and everywhere in between working for nonprofits as a CFO. and I absolutely loved it. loved my job, but when it came to her for my husband and I to want to start a family, it was not really conducive to doing that. so I ended up leaving that job. I took a very. Steady sort of plain vanilla job in my hometown, and was just completely unfulfilled. there, we had actually a lot of struggle with infertility and so I was at that job, like longer than I thought it was going to be. And I decided, you know what, this is kind of the worst. Like I don't want to be here regardless of whether I had children or not. So. I'm gonna start this business. I think there's a model where nonprofits and entrepreneurs really need this sort of fractional, like CFO, like a part-time CFO. And so I ended up starting the business and then did end up getting pregnant. So we're running the business, working the boring job at the same time. And then when I was about six months pregnant, I left the boring job and just went all-in on my business. Diane: [00:03:58] Wow. that's quite an undertaking, six months pregnant and a new business all in one go. Stephanie: [00:04:04] I know, you know, I didn't really think about it at the time. I was just like, Oh, this is great. Now I don't have to like, have a maternity leave. I'll just, have this little side business, I'll be able to hang out and spend time with my daughter as much as I want. So I just kind of looked on it for the freedom side of things and didn't really think at all about like, Wow. This is actually like maybe a little bit risky, but it all worked out. Diane: [00:04:27] And so what did it start as, did it start more as like a one to one, like fractional CFO relationship? Stephanie: [00:04:34] Yes. So I was like, okay, what skills can I provide? I can do, I can be a CFO. I can be a CFO to maybe three or four different companies or organizations, on a very part-time basis. I can run their financials. I can kind of take a look at their accounts. I can help them, create a cash flow forecast. And so I actually just started reaching out cold emails, to organizations that I thought would be a good fit. I started with nonprofits. On the nonprofit side of things, their tax returns here in the US are public information. So I could go check out their tax returns to see how big they were. I could then. Pop over to their website. See if they've already had a CFO. So I did like some major recognizance before I did, I even sent them an email and was like, Hey, super passionate about what you're doing. I feel like I can help here's how. Do you want to talk? And to my surprise, I got four, for clients from that first round of cold email. Diane: [00:05:28] I think that's such a valuable lesson in direct outreach. that wasn't even what we were going to talk about today, but that was just like a mini master class in what it actually looks like when it's done well, because people, these days are so afraid of that outreach model, but actually, if it's done well, look at that, it started your whole business. Stephanie: [00:05:46] It works. It works. I think the key yeah. Is to be. Is to be personal, be a human being don't use like the LinkedIn bots that are going to send the same spammy message to all 800 of their contacts. It was like, I was literally typing a new email in my Gmail for every single person. And I think that sort of personalization is just a touch that people just don't see anymore. Diane: [00:06:09] Definitely. And so how did you migrate from one to one with non-profits being a partial fractional CFO to suddenly being in the entrepreneurial space? Stephanie: [00:06:20] I started with nonprofits, but then as an entrepreneur myself, I started putting myself in the Facebook groups and listening to the podcast with other entrepreneurs. And, you know, because I wanted to learn how to run a business for myself. So I was in those other groups to learn for me. And what I found very quickly was that entrepreneurs, small businesses, they needed the exact same support that I was giving to the nonprofits. Literally the only difference. Is like the tax structure. I mean, we all have the same challenges with revenue, with expenses, with cashflow. And so I was like, I think I can do this for them too. and so it started as one-to-one, as well as just, working with a couple of small businesses and then, really that grew. So, right now our model is like we've got actually about half nonprofits and have small businesses as our one-on-one clients right now. Diane: [00:07:08] And so what do you see for those entrepreneurs when they first come to you? what does that look like? Because a lot of entrepreneurs haven't really necessarily been at a level in corporate, they haven't got to that point where they've encountered that kind of CFO relationship. So what do you initially see when you're looking at their numbers with them? Stephanie: [00:07:26] Yeah. So I feel like the biggest, these challenges that they're coming to me with are, maybe they're keeping track of their numbers, but they've got a P and L a profit and loss statement at the end of every month. And they have no idea what it means. Is this good or is this bad? Maybe they think it looks good, but the cash in the bank is telling them a different story. Like why don't these numbers align? Why does it look like I had a really good revenue year but I have nothing in the bank? Or really not feeling confident in any of the decisions that they make for their business. And so they're stuck. They just, they stop because they've hit a wall where they can't work anymore to grow. or they can't sort of shrink the amount of time. If they're working on their business, they need to hire somebody, but they have no idea. can I afford it? Is this the right move? so then they're just like stuck in this place. Diane: [00:08:15] If somebody was sitting there in that space right now, and they don't have you in their back pocket yet. what would be the first thing that you would tell them to do. Stephanie: [00:08:25] Yes. So the first thing I would tell them to do is create a forecast. And so what I mean by that is basically have a column for every single month. Looking forward, we're looking into the future now, have a column for every single month. And fill in what you're anticipating for your revenue every single month and your expenses every single month, looking forward, maybe for the rest of this year and all of next year. So I would say anywhere from 12 to 18 months, let's try and fill this out. A lot of people get stuck here because they're like, well, I don't know what's going to happen in six months. We don't. We have no, I mean, I think that you know, the year of 2020 is a testament that we have no idea what's going to happen in six months, but your best guess. So fill all of that out for your revenue, all of that out for your expenses. And this gives you like new clarity, a new vision into your future that you probably didn't see before. So if you think now, Oh yeah, we're, we're cruising along just fine. You know, I've got a little bit of money in the bank, but then when you map it all out, you realize, Oh, my profit margin is like 5%. Like something needs to change on this gives you greater visibility into the future to help you make whatever decisions that you need to make. So that is always like, step one, create this sort of roadmap. We call it a profit plan. it's essentially a budget. I just don't like using the word budget. Cause people get all freaked out. It's about having to, you know, cut their lattes. Diane: [00:09:45] Yeah. And I think sometimes it's almost like if you're stuck on that revenue number, I find when I'm talking to people about what's going to happen in like June 2021 and they can't do anything, they can still tell me their costs. They might not be able to tell me their revenue. So I'll just start with costs because then suddenly that focuses your brain on well, okay, wait, if I'm going to have all of those costs. What am I thinking about doing revenue-wise that maybe, it's almost like we're more, much better at thinking about the bad stuff than we all are thinking of the good stuff. Stephanie: [00:10:16] Yeah. I love working backwards sometimes too, because a lot of times we set these arbitrary revenue goals, right? if you're surfing around the internet in this sort of online entrepreneur space, You're going to see all the time. Let's hit six figures. Okay. Let's hit seven figures and those are completely arbitrary. but if you kind of work backwards and figure out, okay, what does it cost to run my business? And then back into that revenue number, that's going to give you something that's way more meaningful than just saying, okay. I want to hit six figures. I want to hit seven figures. So figuring out what does it cost to run your business? What do you want to take home for yourself and then figuring out, okay, well, this is how much money I need to make then. And I think also those Oh, make seven-figures, make eight-figures. Ooh. I did a launch and made like six figures in three hours or whatever it is. And that's so top line Diane: [00:11:02] we've all heard, like the stories of, Hey, did you see so, and so is on Facebook and they're doing this and I know in the background like their Facebook ads cost more than that. And I think also in the lifestyle business space, we're looking for the biggest bang for your buck. We're looking to what do I need for my lifestyle? How do I create that? So what metrics within that kind of P and L or that forecast, do you get people to focus on. Stephanie: [00:11:26] Yeah. So I definitely like looking at our profit margin. but not in a vacuum. I get the question all the time. What's a good profit margin. Well, it depends on what kind of business you have right there. There's no one right answer to what's a good profit margin. absolutely depends on your business. But what I do say is let's look at where your profit margin is going over time. So if we're looking at, the last six to 12 months and we're watching our profit margin go down and down and down, Something's happening, right? That's something that we need to look at and assess. Is it revenues decrease in our expenses going up because we're, scaling our expenses beyond what we really need to be looking at that, over time I think is really important. And the other thing, that I really like is, looking at the P and L compared to a prior period. I think a lot of times we're looking at our financial reports in a vacuum. And so just looking at, for example, June 2020, compared to nothing, we have no idea, is that good? Is the revenue number? Good. Is it bad? Is our profit margin good or bad? We need to have some point of comparison. and so I'm always looking at variance percentages. So looking at. Your profit and loss for last month compared to the month prior or compared to the same month last year. I think that comparison piece is really important to look at. Diane: [00:12:42] I get asked that as well. what's a good ratio for this. And I'm like, you'll have to tell me a little bit about your business I have one friend who is very like super techie and has made it her mission to run a zero software costs business. So she spends time like investing in lifetime deals to replace every piece of software that she's paying for which as a service-based entrepreneur. That's like your biggest cost usually. So if she was waving her profit margin at me, We'd probably have two very different responses to each other. and I think what you're saying is so true, it's like not in a vacuum, but also only comparing with yourself, are you doing better than you were previously? Not, are you doing better than your neighbor? Like, stay in your own lane? Stephanie: [00:13:26] Yeah, exactly. And I think the other thing too is, I'm sure you've heard of profit first, the sort of book and methodology by Mike Michalowicz, and a lot of our clients. Abide by the sort of general concepts around Profit First. I'm not like a by the book person. And, but I think that the concept of taking, your top-line revenue for the month and then locating it into different buckets. So basically taking, a portion of it for taxes, a portion of it for, your expenses, a portion of it for paying yourself, and a portion of it for your profit I think is really important. And that's something that we talk about with our clients as well, and figuring out what percentages goes to each of those buckets is right for you. that is definitely a sort of personal choice. And again, that's where some of our clients stray away from the framework that is in the book, but I think it's an important concept to make sure that we're not just dumping all of our revenue, everything that we're bringing in into expenses. We need to have money to pay ourselves. That's why we have a lifestyle business to compensate ourselves. And I think it's very easy to get carried away in terms of what you're spending on the business. in terms of, you're following along with all of the gurus on Instagram and all of the digital marketing people, like it's very easy to invest in this and that masterminds and this strategy and all the things. And then before, you know it, you have no money left and like it's not a lifestyle business anymore. Diane: [00:14:50] Yeah. And I think also we, I see it in a different way when people get excited when they have that profit and they get excited suddenly like it's real to them. So now suddenly it's all about scale. And then what often happens is actually the profit decreases. So as people are scaling. They're so focused on that revenue number. They're not actually monitoring anything else that's going on. And then they're like, Oh, my business is 10X. And my profit is halved. What on earth has happened? So I think it's really good for controlling that piece. but I get really frustrated when people are like, oh, I made this much profit and I reinvested all of it. I'm like, then you made no profit. Stephanie: [00:15:28] Exactly Diane: [00:15:30] That's not how profit works. Stephanie: [00:15:32] Exactly profit is the money you get to take home. And I think that's important too, to remember for people as well. Yeah. Diane: [00:15:39] any other KPIs you'd like people to focus on that or maybe not PNL or. That's something else in the P and L. Stephanie: [00:15:46] Yeah. So, cash on hand is really, really important. this is where, this is probably one of the top things that entrepreneurs are like, I have no idea why I don't have enough money in my bank account. Like where, where did it all go? I have no idea. so one metric that we always look at is, months of cash on hand, which is basically if you did not bring in another dollar starting today, how long could your business operate at your current level of expenses? without going into the red basically. A sort of benchmark that we're working towards with all of our clients is to make sure that we've got three to six months of expenses in the bank, so that if something happens, a global pandemic, you can still pay your bills. You can still pay yourself, you can pay your team. If you have one or subcontractors, whatever you've got. as you're waiting for revenue to rebuild again. So months of cash on hand is like my favorite metric. I think it's really, really important. And often. We don't know what our average monthly expenses are because we're not paying attention to our P and L we're just, sort of spending. And so we don't know what this, we don't know how many months of cash on hand we have. but this is, I think one of the most important things, cause at the end of the day like you can't do anything. If you have no cash, Diane: [00:16:59] And so do you get them to put that as like a separate line on the P and L so they don't accidentally take that as profit? Or do you get them to put it in a separate bank account? A la profit first? How do they manage that? Yeah, so most of our clients and myself included for our business. I put it in a separate bank account. It doesn't have to be, you know, an account in a separate bank where like you can't touch it. It's just an, a savings account attached to my, my business checking account. But that way I can really see, I can watch that particular account grow. I'm almost never taking money out of that account. So we're watching it grow. but yeah, I like having it in a separate bank account. That way it doesn't get mixed in with all the money coming in and going out. Yeah, I think it's super easy to be like, Hey, I've got this number on a spreadsheet and yeah, when you go into your bank and you're like, woo, look how flush I am. I'm going to buy a new like Apple Mac book because it looks pretty or whatever. any other metrics that we've got, like your profit margin versus yourself and previous, we've got your months of cash on hand and we're aiming for three to six months of that. Anything else? That would be a key target for people. Stephanie: [00:18:04] Yeah. I really like I'm looking at your revenue diversity. And so figuring out how much of your revenue is coming from which source. So we have some clients who have an online course and it is entirely driven by Facebook ads. And so their entire model is hinging on Facebook? So if Facebook. went down tomorrow. They have no more business. They would have to start coming up with some organic traffic to be able to generate revenue. So that is not a very diverse, revenue, or revenue model. My business, for example, we work with one on one clients. So we have, 30 one on one clients. If one of them leaves us, my business is not going under because we have lots of different revenue streams. we have other businesses who have. evergreen funnels that are going through Facebook, but they also have, a mastermind and they also have, their like organic traffic, organic leads, and they also have one on one coaching. So looking at how diverse your revenue is. And so how do we, how are we make sure we're keeping track of that? Well, making sure that if you're using some sort of bookkeeping system, right. That you are tracking each of those revenue sources separately. and sometimes that can get a little bit complicated if you're, if you're getting all of your revenue in through Stripe, you're going to have to do a little bit of, manual backend work to separate it out in your accounting system. But that piece is really, really important. and it also helps you figure out. Okay. What is my ROI, which of these revenue streams is most profitable because a lot of times, for example, running a mastermind and having, three in-person retreats that can sound super glamorous and the top line number might be really big. But when you factor in all of the expenses that come along with that, that activity might actually not be that profitable. And it's a huge time drain. Should you really be doing it? So. Yeah, looking at revenue diversity, tracking it appropriately in your accounting system, or even in Excel, wherever you're tracking your numbers so that you really also understand the profitability of each of those revenue streams. I think that is super important to look at. Diane: [00:20:09] Yeah. I love that for two reasons. One I often see a lot of service providers who are stuck with a heavy reliance on one client? Like one client is 50% of their time and their revenue, and especially if that relationship starts to deteriorate, it's not just the client leaving you. It's if you want to fire that client. They've kind of got you hostage. and the other reason I love it is I get a lot of people coming to me, wanting to do, I'm going to do like a 27 buck membership. And when you start to work out, like how many people that would actually take for you to make enough money just to cover your costs, this like passive income dream, I think is really kind of blown out of the water. When you start to look at things at a product level, which we don't see a lot of in the entrepreneur space, most people just know, top line. Stephanie: [00:20:57] Yeah. Yeah, exactly. When you start factoring in the cost of all of the software to maintain it and how much time you're actually spending. I think we all know at this point, passive like there is no passive, truly passive income stream, so yeah, that's a great point. Diane: [00:21:11] this has been so good. I love those metrics to grab for people. and I know you definitely have a freebie for the forecasts that people can grab. anything else from you that they should also grab? Stephanie: [00:21:21] Yes. Yes. the, 100 reviews, consulting.com/profit. You're going to find our profit playbook there. And that basically helps you map out your revenue expenses into the future, as well as your cash flow and what you can do with this. It's really fun. You can kind of. Play around with, okay. Say I did this say, I added a subcontractor to my team in September. What would that do to my bank balance at the end of the year, it's all tied together. So you can sort of play around with it and run through different scenarios and see what would my business look like if I were to add this revenue stream, how much cash would I have in the bank at the end of the year? So I think that tool is probably the most valuable thing to really help you see into the future of your business. Diane: [00:22:04] I know people listening are probably thinking well, this all sounds great, but it sounds super complicated. So I love that you have a tool that they can just go and plug in some numbers and Hey Presto if they're not like a spreadsheets, color-coding nerd like certain people on this podcast episode. Meaning me So I've loved all of this. I'm actually like mentally taking notes and going to go play with the tool myself. but to finish up, I always ask two questions to my guests. So the first one is what is your number one lifestyle boundary for your business? You know, that thing that you just will not sacrifice in your life. Stephanie: [00:22:39] Sleep I never or sacrificed sleep. I never pull an all-nighter. I'm always in bed by 10, 10 30. I will never, you'll never find me working, in the evenings late at night. I will not sacrifice sleep. Diane: [00:22:54] Oh, that's such a good one. I'm with you on like team grandma do you not message me after 9:00 PM? I think it's not happening. I'll talk to you in the morning. Stephanie: [00:23:03] Yeah. I'm a morning person. My brain shuts down at night, so yeah, I'll never, never catch me pulling it all later. Diane: [00:23:09] No, it's an interesting one for me to manage with the U S. Because often people are only kind of getting up at like my lunchtime ish sort of thing. So I definitely it's one that I keep a really close eye on as well. And finally, what is the worst piece of cookie-cutter advice you ever got as a lifestyle entrepreneur? Stephanie: [00:23:26] Yeah, that the only way to scale is by, having an online course with Facebook ads. I have a service business and we do have a digital sort of component to it, but, you can absolutely scale a service business and still maintain your lifestyle. and so doing that through, Facebook ads and evergreen funnels, it's not the only way. I love that that is an argument slash discussion that I have all the time. I think it is just about bending your business model to work with what works in your lifestyle and not being afraid to just go, you know what, I'm not going to do that thing that everybody else is doing. And. Being able to put the blinders on. thank you so much for sharing all of this juicy inside information with us today. If people want to connect with you and carry on the conversation, where's a good place to find you. I spend a lot of time over on Instagram, so that is always a good place. My, my name there is Stephanie dot S. K R Y. So it's just like the first four letters of my last name. and then on our website, actually, we can just through a website rebrand. So I would love it if anybody checks out our website, 100 degrees consulting.com, you can find lots of information about who we are and what we do, and how we serve our clients over there. Diane: [00:24:38] Thank you so much. I always love having a really good nerd out session with you. I so appreciate you and thank you for telling everybody what to watch for. Stephanie: [00:24:47] Thanks for having me.