What Are DATA Principles for Realistic Projections with Jeffrey Kates

Welcome to the B2B Growth Blueprint podcast, where we talk with entrepreneurs, founders, and leaders at B2B services, tech, and SaaS companies to learn the systems and processes they've used to create success for their business. We'll also learn from marketing and sales experts to provide insights to help you grow your business. I'm your host, Mark Osborne, and the podcast is brought to you by Modern Revenue strategies and their 10x ROI B2B growth guarantee. Schedule a free diagnostic call to learn the fastest path to double your B2B revenues in just 90 days. Hello and welcome to another episode of the B2B Growth Blueprint podcast. I'm your host, Mark Osborne. Today I'm very excited to welcome my guest, Jeffrey Cates. Jeffrey is someone who shows up when companies absolutely cannot afford to get it wrong. He's a partner at The Founders Group and one of the most respected workout, turnaround, and M&A advisors in the market. He also leads JAIC Consulting, where he spent more than 2 decades helping companies stabilize, rebuild, and regain momentum in their most critical moments. He brings a rare blend of CFO-level financial expertise, operational rigor, and boardroom-ready insight. His background includes advising Fortune 500s like Barclays Capital, AT&T, Toys R Us, as well as serving as CFO inside both healthcare and pharmaceutical environments. He's known for stepping into complex situations, aligning stakeholders quickly, and creating immediate measurable value. He holds an MBA with distinction from Hofstra University, is a certified exit planning advisor, and is an active member of the Turnaround Management Association, the Exit Planning Institute, and Financial Executives Networking Group. Put simply, when companies need clarity, discipline, and a steady hand to guide them through transition or transformation, Jeffrey is the person they call. So, Jeffrey, welcome to the show.

Thank you for that very nice and warm introduction. You make me sound fabulous.

Well, it's all true.

It is a pleasure to be here. So, thank you for having me.

So, obviously, you've done a lot of things through your career and, you know, had a lot of successes along the way. And we've got some interesting topics to talk about today. But before we jump in on some of those topics, why don't you give our audience a little bit of a sort of picture of the history of what your career looked like and how it brought you to where you are today?

Fabulous. Thank you so much. Yes. So originally, I am from Montreal, Canada, born and raised. And I spent my first 35 years up there. I am an E&Y, an Ernst Young background. Started in accounting.

Okay.

Moved to a smaller firm. And it was there that a gentleman came into the group and was doing workouts and turnarounds. And I decided very quickly that's what I wanted to be doing. I didn't want to be looking back at the company's financials. I felt like it was a commodity and I wasn't really giving any value to anybody. But when he came in, I'm like, that's what I want to do. And so, I went up to him at an office Christmas party. Met with him. Within a month, I was working for him doing workouts and turnarounds in Montreal. And then moved down to the States in 2003 when I met my wife, my now wife, on the computer. And I have been running businesses and doing all sorts of high-level CFO forensic turnaround value acceleration work in a variety of industries and a variety of companies for the last 20 years here in the States, 22 years here in the States. Wow.

So, you said something in there that I think is really worth kind of digging into, and that's this idea of, you know, you have the opportunity to add a lot more value to businesses by focusing on forward-looking rather than backwards-looking. And I know a lot of folks when they think about, you know, sort of their financials, it's about, well, let's get our historical books Let's see how we did historically. But you have a very different sort of perspective on that. And a lot of the value that you bring to companies is around that difference between backwards-looking books to forwards-looking projections. Tell us a little more about that and how business owners, entrepreneurs should be thinking about their financials from those 2 different lenses.

So, I absolutely agree with that concept, of course. I want to say one thing. You know that people always say, you can't know where you're going till you know where you're from.

Okay.

So, I don't want to belittle the concept of having good, accurate historical financials. And Marc, you'd be surprised at how many companies we see that you think it's common nature for businesses to have a good handle on their financials. And I'm shocked at the percentage of companies that we run into that don't even have their financials up to date or there are issues with them.

Right.

So, I do want to caveat by saying that it's still really important. But if you want to be next level as a business owner or a management team, you need to be looking at the future and what that looks like financially and operationally. So, that's where good solid financial projections based on your operations are so critical to running the business. And giving business owners peace of mind that they're going in the right direction and that they're making good strategic and tactical decisions without having to wonder what the numbers look like. And just by looking at their bank account, right? A lot of business owners go, oh, I have an extra $150,000 in the account this month, or an extra half a million, or an extra million. So, I'm doing fine. And that's all they do. And it's a little mind-blowing sometimes.

Well, and likewise, you know, I work with some folks in, you know, really capital-intensive businesses. They look at their bank account and they're like, we had a $1,000,000 default last month. We're in the red by $1,000,000. How can that be? Like, my financials definitely aren't telling me the right picture.

Yeah. And how did that happen? And what do I do next? Right. So, you know, I am very big on working with business owners and CFOs to develop accurate projections as a tool. I just think it's critical. And now today, with AI coming in and with all that capabilities to build projections and do it accurately, I just think you're doing a disservice to your clients and your business owner clients if you're not helping them with having that good forward-looking financials.

And, and I— you said something in there also that sort of struck a chord, which is the idea of financials and projections that are actually tied to operations. And I know sometimes, you know, I work in the marketing and sales field, the leadership team will kind of go off and be like, well, what do we want to happen over the next year? And that's what their forward-looking projections look like, which is essentially, you know, an aspirational goal.

Yeah.

maybe of new accounts or revenues or whatever it might be. But you talk about tying it specifically to operations. Tell us what you mean by that.

So, you'd be surprised at how many sets of projections I've seen where CFOs or business owners say, well, we did $22 million last year and we're looking to grow this division by 5% and this one by 8%. And we're going to have a drop-off here. So, we're going to do $23 million. Right. And they don't really have an idea of where those numbers are coming from.

Yeah.

So, what I mean by detailed, accurate projections based on operations, I'm talking about really vetting the company to understand workflow, supply chain timing, margins, gross margins, and what those look like. And how do those play into what a projection is going to look like? You really have to understand the business. To know how to build a projection that's going to mimic those operations. And the more that you are able to figure that out, the more accurate the projections are going to be. So, and the other thing that happens is you become more just— you have that ability to react to changes. If you have accurate projections. And now you're looking at a month and going, wow, we're down by 10%. Let's figure out why we're down. Where are we down? This is what we thought was going to happen. Now, let's go look and see what actually happened. Why? What's going on? Is this a harbinger of things to come? Is it a customer issue? Is it a manufacturing issue? Like, what's going on that we were so off on our projections? Or by the other token, why are we so much better? And what are our opportunities here? So, when I say mimicking operations, it's really about understanding those assumptions that you're going to use to build the projections that tie to what's going on behind the scenes.

Yeah, and you hit on something there that I think is so crucial. So, when we're building marketing and sales systems, we always build in specific priorities and then sort of the engines that drive that. And then, those metrics that measure our progress. And look at those kind of weekly scorecards so that we've got an expectation of, well, we think it's going to generate this against this metric, whether 110, whatever it might be. And so, if it's high, well, great. Just as you say, what opportunity does that indicate? If it's low, uh-oh. Well, what is this telling us about what's actually happening in the marketplace? And so, oftentimes we see folks that they're just doing Well, here's how we did last month, and reporting that way too late to respond because not only did you not get a chance to respond in the month, but now you might be sort of getting further and further underwater because of some sort of snafu either in your system or process or just some changing market condition that you didn't plan for.

Yeah, absolutely. If I may, I'd love to give you like 2 examples of what I'm talking about. Yeah, please do. I think it'll help your listeners kind of comprehend what we're trying to get our hands around here. So, I've worked with 2 clients in the last year or so, specifically in terms of helping them build projections. So, we had a CFO come to us and say, or the business owner saying, we want to do a valuation. But they're asking for projections and we just don't know how to get them done. Can you help us? And so, it took like 2 months for us, for me to meet with the CFO to vet and figure out what was going on, to develop a set of assumptions and drivers that allowed us to develop the projections. So, this company was in the oil and gas space. And they did a lot of bidding for jobs.

Hmm.

But their bids were all over the place. They had small bids. They had medium bids. They had huge large bids. They had teams of people out in the field. They had 3 different lines of business. Well, for 2 months we vetted the process exactly how it worked, and we dug for data and we found data, and we were able to figure out their process and come up with proper assumptions as to what kind of bid, what kind of percentage these bids would convert at, at these different levels. So these smaller bids converted at like 86%.

Wow.

The larger ones converted at 22%. So if you were to use an average of 50%, you're getting different, totally different But by, you know, really digging into what the business was actually doing, we were able to build a set of projections based on these assumptions. And they're playing out, you know, we come within 2 or 3% of our projections, which is a nice thing to know.

Well, and I know you have a framework that you use to actually create, you know, good high-quality projections. Tell us a little bit about that.

Sure. So listen, with the advent of AI today, right, and all these programs, it's making it easier to develop projections like in the old— rather than the old days when we were using Excel and building. And we still do that because, you know, you can build a framework for a set of projections, but every company is different and it's the assumptions that make the projections. So, you know, you're going to run a projection for a manufacturing company is going to be different for a distribution company.

Right.

Or a sales and marketing company. So building those assumptions becomes the most critical framework. But really, we tie everything from cost of goods sold and supplemental information that goes into support revenues and cost of sales so that we can get accurate gross margins. And then, we manage all the overheads and expenses and really get detailed. And then, we build the cash flow that goes with it because it's not Projections. A lot of people think that projections are just about profits and loss, right? But you need the cash flow piece of it as well to understand, are you going to need additional financing to support growth? Are you going to have enough money? What is your balance sheet going to look like in 6 months? And that's a big part of what we do with business owners and their teams every day.

And I know you tie it all together with like an acronym, like a DREAM projection.

Yeah, I call them dream projections. So, yes, thank you. So, the dream projection is an acronym for me. It's data integrity.

Yeah.

Right? So, understand that what the client is giving you as information is you can rely on it. So, you have to dig and you have to put in the work to understand historical information and their historical financials because ultimately, you want your projections to match the company's financial statements so that you're looking at one of the— you're not looking at 3 different sets of data.

Right.

You can compare actual results according to the financial statements against your projections. And sometimes, when we go through this, we have to re-engineer the company's chart of accounts because it's just not giving enough valuable information. So, that becomes part of our process as well. So, there's certainly data integrity for us. Then, the R is realistic.

Okay.

Right? Like, if a company, like I said, did $20 million last year and they come to you and they say, yeah, we're gonna do $32 million this year. Okay, prove it.

Right.

Just because you say it doesn't mean, is it realistic? So, everything has to be tied to reality. The E is ease of use. How easy is the model itself for users to get a handle on and make it easy? So, what I love doing is When I'm sitting with a CFO or business owner in a meeting and we're talking about the projections, and I actually have it up on the screen and they say something and I can just push one button and the entire projection updates. Oh, you mean this? And they either go, well, usually they go, wow. But after they go, wow, they go, wait, that's what I meant, yes, or no, I got that wrong. So let's talk about it. Let's Right. Flesh that out and let's understand what you truly mean so as to provide a little more accuracy. Um, the A is for the quality of the assumptions. So, I focused a lot of time on the assumptions. I think that's key to any successful set of projections to be used as a tool for business owners. But it's based on the quality of the assumptions. And the M is, do they mimic historical results? Right? So, so, you know, there are times when there are companies that are changing direction, changing strategy, changing course, and that's fine, right? But most companies live within a certain bandwidth just off the center, right? And they live within a standard deviation or 2 of what it is depending on some outliers. Or, you know, maybe we lost a customer, maybe we got a new customer, maybe there are price effects, tariffs, right, that came in. So, there are things that affect, you know, the financials and the numbers, but they really should mimic historical results to a certain extent. So, when you put all that together and you build them, then you know you have something that's pretty accurate. And it becomes a great tool.

I love that framework. And so oftentimes we see, you know, really analytical models that can be very powerful. But if you don't trust that data coming in, that data integrity, or you don't trust the model itself or the ease of use or the assumptions that are being used. And if it's not based in any sort of reality, it's not really that valuable, no matter how much horsepower you have behind the computational strength or even the size of the dataset. So that's such a great framework that you have there.

Thank you.

So One of the places where both you and I spend a fair amount of time is working with companies in a specific context. And that context is preparing for maybe a founder exit or some recapitalization, where really the enterprise value is, you know, one of the main drivers of success is increasing that enterprise value. And we both share the opinion that all businesses should be building enterprise value every day, not just top-line revenue.

Absolutely.

But tell us a little bit about how having strong projections impacts enterprise value.

Yeah. And if I may, I'm going to tie it also to valuation for a minute.

Okay.

Because I think that's key also is a lot of business owners when they start to consider— well, some business owners have transitions thrust upon them because it doesn't become a choice. And so, they don't get to control the the narrative and control the dialogue. But when a business owner is considering transition and they're controlling the process, one of the things they should know is, what's the value of my business today? What's the value? And valuation, without getting too technical, is a combination of understanding the historical information but also looking forward. And so, what do those forward statements look like? And a lot of valuation is dependent on discounted cash flows and projections that are built. So, we are a firm believer at our company about having projections to be used as part of evaluation today to understand, well, here's where we are. But here's where we're going. And here's where we'd like to be. And there may be a value gap in there and tax issues and all that. But we need projections to really understand. So, the other really important factor is in today's world, especially with private equity groups, so many of them now, and a lot of owners considering selling to either private equity or competitors, is people are smart out there. You know, I always, when I'm in these negotiations and in these rooms, I always think I'm the dumbest at the table. Because there's— people are just, they're really smart. And so, they understand And so, you can't pull the wool over their eyes, nor should you try.

Right.

But if you can present historical information and then you also get to present a set of projections with detailed assumptions that shows where you're going to be, it provides credibility. It shows a path to growth for the buyer so that that can help support the price that you're asking for or that they want to pay, right? And it's going to help in due diligence. It's just a great tool to have as part of your overall package as you prepare for due diligence as you're considering transitioning.

Yeah. So powerful. And what you've really described is this sort of, as you opened with, this difference between kind of B players and really A players. And I know most businesses really aspire to be best in class. For their category, for their industry, for their— at least for their niche. And you've described a lot of, you know, really great ways to approach that and some really good frameworks with your DREAM framework. But I think this is probably going to air about the beginning of the year. But at the beginning of any sort of cycle, folks oftentimes start to think about projecting towards the end of that cycle. So what are some ways that folks can, you know, whether they're starting the new year or a new quarter, start to bring in some of these sort of capabilities around projections to help elevate their operations. What are some things that they can do to get started on that?

So I'm going to start with— that's a great question, Mark. I'm going to start with the first thing you have to do. So if you're looking to 2026, let's say right now, right? So a lot of best-in-class companies already have their budgets done and their projections done 2026, um, and they're starting to lock them down. Now, I'm also a believer that once you have your initial set of projections, you don't change them because that moves the bar and it gives owners that false sense of security that, oh, we're meeting projections. Well, yeah, you're meeting them because you've adjusted them—

Recasting.

During the year. So of course you're meeting them.

That's right.

So I'm a firm believer in, in keeping the originals you know, as a base.

Yeah.

But the first thing that has to happen is I don't believe you can build a good set of projections without a good opening set of— like, if you need a balance sheet, your balance sheet has to be clean. And it's got to be— if you're looking at 2026, you're going to need a December 31st, 2025 balance sheet and opening numbers that are accurate. So, if you're a business owner and you know your financials, aren't in great shape, the projections are the second thing you have to do. The first thing you have to do is clean up the financials and get them done in a more timely manner and clean them up because your projections are only going to be as good as the historical data and the data you have. So, when you ask what would you be looking to do in the, let's say, in January of 2026, my answer is where are you with 2025 numbers? And if they're not straightened away, Focus there. But if you've done that, now you really got to dive in and put your team together from your different divisions in your organization and start to talk through, you know, what's what. Where are we looking at this year from a customer basis, from an infrastructure basis? Do we have capital improvements we need to make? Do we have a budget for that? Where are we with our supply chain vendors? How are margins? Are SKUs— are we relying— do we have 200 too many SKUs? Customer concentration issues. Do we have all our eggs in one basket? These are all things that when we talk about value creation and acceleration, these are things we look at anyway in the industry going forward. But if you're not using projections, it's a great time to start. If you are, make sure your historical data is strong and that your assumptions are good.

Wow, such great advice. Such great advice. So, Jeffrey, you're obviously an expert in a lot of really interesting areas that we could talk about all day, but I have to be mindful of your time. But before I let you go, you know, tell us a little bit, like, who do you work with and how do you help them? Who should reach out?

So, I actually have 2 companies. I am the owner of JIK Consulting. Uh, we do fractional CFO work, forensic work, mostly turnarounds.

Okay.

Um, and so companies that are struggling or in trouble have cash flow issues. That's really where all this— these projections stem from, because in the industry most lenders require 13-week cash flows. So we do projections of cash flows week by week to get them out of a mess. So, so that's really detailed, and, uh, been doing that for a lot of years. So, and so that's what we do in one company. And then in my other company, The Founders Group, I'm a partner and I manage the business initiatives for our group with regards to working with high net worth business owners. And then, you know, in the $30 million, the businesses are around the $30 million and up. And we help them create value. And we do that by starting to look at and do a discovery process of the assessing their personal and financial situation. We do a set of business assessments on the attractiveness and readiness of the business. We do evaluation, as I mentioned briefly. And from there, we figure out where, where's the business at, where's the owner at, and what needs to be done to start to create value and prepare them for the ultimate decision. And that may come in 3 months, a year, 5 years, but you're It's never too early to start getting ready to plan for your exit because it will come. And as we say, good exit planning is just good business planning. So, that's right.

That's right. So, for folks that are listening and would like to sort of engage with you, what's the best way to get in touch?

Yeah, the best way to find me is you can go to www.foundersgroup.biz and you can go into the Who We Are. And under the Partners, you'll find my bio and all of my contact information is there.

Fantastic. Well, Jeffrey, thank you so much for taking the time to join us today. I really enjoyed our conversation and learned a lot. I'm sure our audience did as well.

It was my pleasure. Thank you so much for having me, Mark. It's always a pleasure to see you and to talk to you. So thanks very much.

All right. See you again soon.

Take care.

Thank you for joining this episode of the B2B Growth Blueprint podcast. We hope you've gained insights to grow your business. If you enjoyed this discussion, please rate, comment, like on your favorite platform, and share to others who will find it useful. Do you know a CEO, founder, or leader at an early-stage B2B services, tech, or SaaS company who would like to be a guest and share their story? Send us a note. Let's schedule a conversation.