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everybody, Chris Bintliff back with you at create the next from Pro CFO partners. And I'm here today with Stacey fry. And Stacey, I'm excited to talk to you about something that is obviously special to me, which is small business, and some of the interesting financial functions, maybe some of the interesting insights that you can share around improving some of the ways that financial functions can operate inside of a small business, especially to help us grow with a small team of people around us maybe all kind of thinking about things in new or different or better ways more streamlined, or more focused ways. And I'm wondering for you just kind of starting off, what are some common issues or misconceptions or distortions that you see, again, and again, from business leaders or financial leaders inside of small businesses.

So lots of times, in us in the small businesses, even in large businesses, the employee set back and they think that that the owner, the CEO sitting in the ivory tower, and he's driving a yacht, and everything's going perfect, and you know, sometimes the owner is sitting there, and maybe he's not sleeping at night, because things aren't so rosy, and he's worried about whether or not the payrolls gonna get covered the neck, I mean, cash flows and payroll, and whether or not everything's going to be there, when the time comes to make, make it all works. And maybe the owners not sleeping and the employees think it's all rosy. And it's just kind of crazy when when the perceptions are different.

So is this the responsibility of of executives or leadership to be a little more open and a little more transparent about what's going on? Or is there a cultural misstep where employees are thinking that they should have more information or access to information that they don't have? Or how do we start to address that issue?

And when, I mean, in some companies, that doesn't work, I mean, not necessarily a misconception. But but there's times when, if the employee if, if the company is more transparent with the employees as to what's going on in the business, it allows them to all end up in the same place and start to function together as a group. I

think that there's a, an idea that opening the books up a little bit or being a little more transparent. I see a lot of startups and a lot of young companies really opening that up, and just being as broad and wide open as possible with that, and being real, obvious dashboards, everybody can access. But I see some older companies that feel like no, no, that's, that's nobody's business, but the executive teams, that's nobody's business, but you know, these four people or whatever, what do you think about that? Is that, is there even a generational component to this? Or is this an outdated notion? Or is the advantage to the younger companies who are opening this, you know, wide open? Or do they put themselves at some kind of risk there as well?

In the startup, I mean, some of the younger company, I mean, some companies do get really excited about sharing, and they've got dashboards all over the place. And when they have dashboards in there, sharing the numbers and telling people where they are, if they if they've set the goals and employees know what the goals are, and they have something exciting to be working towards. It gets everybody on the same place and kind of gets them running in the same direction. If employees have no idea which direction the owners the groups want them to run, then, you know, they're not not necessarily building the momentum to drive the company success.

I completely see that. And I've seen that in my own experience where maybe the lack of transparency means a morale issue starts to come and play because well, why did that it appears nobody's getting raises again. But we made more money than ever, without being sensible about profitability. Or why did that person or why did that team? Or why are we investing in this thing when we clearly have needs over there? And that can create that can be created? I think, a lot of tension that isn't intentional, but it comes from just a lack of transparency. So what's your coaching on that? Should? Should we start to be a little bit more? I guess it's obviously going to be situational. But should we start to empower our employees more to be part of that process? So as you say, we can start to move in the same direction.

So I go back in my time, I was at a company where we started playing, playing the game started sharing the financial information with our employees, we started teaching them how to understand the business aspects of the company. When the company was making money, we're the worst When somebody thinks maybe a dollars worth of sales comes in the door, and they think $1 99 cents of it goes in the owners pocket, but really, half of it had to go to payroll and another 20% went to rent an office. And by the time they get down to it, you know, you have five cents on the dollar. And that's what's left for the owner to have to reward him for his, you know, all everything he's done within the company, his investment in time. And that's not always enough money to set the company up or an employee an employer to want to basically run a business.

So that's interesting, and can really shed some light on the realities that executives face when you were in that situation, what was the impetus? What made you start to say, look, let's start to share a little bit more of this with the employees and how this works. Was it a slow process? Walk me through that a little bit.

So I was in a company, and we had several years of really working your tails off and not really making any money on the bottom line. And I was exposed to this concept of open good management when I was sitting in a session, continuing education session. And I went back and we shared, shared the concept with the leadership team and gave them the book from jack stack the great game of business and show them the that there's other ways to do things. And we really went and we started to share very slowly start to share numbers with employees, but we gave them targets and said, you know, if the company makes this amount of money, then every, then we're going to have this bonus pool, and we're going to share it across the board so that everybody gets a chance to win. So the company wasn't out anything. If we didn't make more money. There was no bonus but but of the excess that got added by by having everybody financially literate and understanding what's going on in the business. We shared a portion of that with the, with the employees. And what it really got people doing was running around going, oh my goodness, we're using too much toilet paper and what where's the supply manager? Crazy. I mean, everybody in the company from from the janitor to the service technicians and everybody understood what was going on and where we were on a daily, weekly, monthly basis. Not they didn't understand debt and equity and the whole balance sheet. But we did begin to teach that and that over the years as we went on, we helped them understand why why if the inventory nut was in excess of what it should be what why, you know, there wasn't cash in the company to pay out bonuses. And if we didn't collect our receivables fast enough, you know, we need to cash so so we got into all sides of the business as we moved along in time and the understanding of the cat cash impact as well as the financial side of sales and expenses. Not enough say sales exceeding the expenses.

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that is really interesting. And it almost sounds like there was a a momentum shift in in kind of team teamwork, camaraderie like suddenly we all knew the same things, and we were taking action towards the same thing. So was incentivising a strategic choice for you and you said, let's start to open the books. And one way that we'll do this is by helping everyone know that if we can do these things, there's a bonus pool at the end for us to tap into was that kind of a an on purpose way to introduce this idea.

It was and we we followed a lot. We're I'm sitting in Springfield, Missouri, and the company SRC remanufacturing src is a big open book. They're kind of kind of led open book management clear back into the 80s. And we started kind of modeling our business and doing some of the kind of things that SRCS consultants did in the output management side. And part part of it is If people have to have something that makes them want to want to win, and just having some bit of a stake in the company's success, help give them the direction to drive. And

how many, you said over the years, you would expose us, you know, to this financial literacy and teaching about debt and about the balance sheet? How was it? Three years? Was it a five year was a two year deal? How long before you feel like it was everybody pretty much knew everything that was going on?

Me, we were on this track for 17 years, oh, I'm continually continually improving. I mean, we probably the last four or five years when we really started sharing some of the balance sheet stuff. But it got to the place where we were paying out some very substantial bonuses, and going well, like, I don't feel like our employees really know everything they need to know. And we actually did finally engage consultants to come in and really help us do that process better.

Do you feel like that changed the relationship between leadership and employees? Did they see did they look at each other differently? And what ways do you feel like that was maybe a healthier relationship?

It was one of the coolest things, that back in 2009, when we had the whole decline of the economy, we were in such a in such a place where we didn't notice it at first, because we had a lot of contracts and things going. But we were as we were sharing the monthly numbers with employees, we started seeing that our backlog was starting to decline. And some of those things and when it came to the place where we had to basically make some decisions, do we downsize a few people, we were in a place where we stopped our 401k contributions and did some different things just to keep the company, you know, successful. And everybody was in on board with that, because they had seen all the progression for like six years of seeing the numbers and starting to understand, and they could see that the company needed to do something. And we also made a commitment and said, if we if we get get to this place, and we have three continual months where we don't lose money, we're gonna reinstate the 401k contribution, and we'll go backwards. So So everybody was driving, and we were able actually to go in and do that, which was a very cool thing. And everybody trusted and understood and was on board. One of the things when we first did open, open the books to to the employees, we were able to, I mean, everybody understood, and we actually seen crazy things happen. And we've seen we had a rental business, we seen our delivery charge income Double, double that first year, because the guys, they were sitting at the counter saying, sure I'll eat your delivery charge wasn't gonna eat the delivery charge, because they might get four or five cents of that on in a bonus paycheck. And so it changed. We've doubled maintenance, contract income and some of the some really big nuts, and you could see some really big places where there was some great impact that you would have never dreamed.

And so it really revealed some not just opportunities, but existing inefficiencies or things that we take for granted. Easy to throw that away. But when you stop throwing away, you can see how valuable it is.

Right? Right. It just made people open their eyes and say, Hey, I don't need to really give away this delivery. It's not necessary.

And when I feel like I have some ownership or some stake in this, it's my money I'm giving away. It's not vacuous. You know, you know, a bit of misunderstanding, it's I don't know where it goes, but it's no big deal, it suddenly becomes a big deal. And you can really see in a chart and graph, you know, how big of a deal it is. That's fascinating.

Yeah, we've seen a big shift.

One of the things that I love about the whole idea is your approach to our partners, we have the FGC flywheel, which shows how everything is in relationship to everything else. And you're really articulating a practical application of that, you know, you can start employees, and everybody can start to see how this thing, as you pointed out, this thing, inventory affects this thing, which affects this thing, which affects that thing. And it gives everyone's kind of this micro level of control or practical application to managing those things so that they can better understand the macro level of these things. And I think that's really powerful when we can start to break apart what seems like a giant nut to crack and, and show the small things you can do toilet paper, the small things you can do that can make an impact, larger, you know, company wide.

So we actually did read as a leadership team in that company. We did read Jim Collins book, and I pulled the flywheel out because we want to help his favorite. Yeah, we actually did I mean, we were talking about, but we call it it's been in the hamster wheel and we you know, we were all working and trying to run the same direction and we did see success. over the many years in that company,

if you have any advice then for an executive was listening or financial leaders listening, what's a what's a good place to start? If I'm thinking about? Well, I've been experienced him as everybody thinks every time we make $1. I'm on vacation with it. And I'm up at night because I can hardly make payroll. Do we start with small steps? Do we start with thinking about incentivizing? And what makes that? What makes sense? Do we start with a call to pro CFO partners to see if we can start to work this out? What's one of the first things I can do to start to wrap my head around this?

It's always good to have somebody on board to help you understand it, as you know, somebody like pro CFO partners, just what is the business strategy? And what are you doing? It is great to start to give people some more information and just help them understand where you're going and what's going on in the company. minute, it is a big step to open the books, but it is something that you can start slowly, just and gather, you know, gather your head around it, our CEO at the time, when we decided we were going to do this, we had our whole leadership and we had one CEO that I'm 100% of the company. And you know, he was a little leery, but he was like, I'm to the place where I'll do anything to get to get things to turn around. And if you're in that place, this is you know, yeah, it's a it's a good option is to try something different. Well, once you start, you don't really get to go back.

No, that's, and it sounds transformative. It's not just about reports. And it's not just about content, as we like to say but really starts to give context to the entire organization. For the people who can make the most impact to that which are the employees, the people who are doing the things every day that make an impact and make a difference. Stacey fry, thank you so much for sharing some time and expertise with us today. I thought it was fascinating to really think about maybe starting to have to go against our nature a little bit for some of us as leaders to opening a bit of vulnerability up to say this is what's happening inside the company. And I think the positive impacts that can come of that for the right people in the right situations. really fascinating, really interesting. Thanks for thanks for talking with us today. Hope we'll come back soon.

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