Donny Mashiach - Founder & CEO at Warrior Group

Welcome to another CEO Wisdom pod. We have Donnie Macias with us today. Donnie's a founder and CEO at Warrior Group. He's a fractional CFO, uh, he's an FP&A, finance, and CFO thought leader. If you want to follow him up on LinkedIn, um, and yeah, you're in the Chicago area, right, Donnie? Welcome to the pod. Tell us a bit more about yourself and what you're up to.

Thanks, Charles. Yes, Based in Chicago, born and raised there. And previously I was in investment banking on Wall Street, had a good time doing that, working on billion-dollar deals and all the fun stuff there. And then a few years back said, why can't I bring the cheat codes of large industry and large business down to the growing businesses? And now we work with founders and entrepreneurs specifically in the fashion and apparel space in the fractional CFO arena. So we're doing everything from finances and bookkeeping and strategy, to help companies scale through the power of finance.

And you started out in the hot dog business?

Yes, we started in the hot dog business in Wrigley Field. I got married when I was 19. Dad said, you got to figure out how to take care of your family. And so he had a connection to Wrigley Field and the Chicago Cubs, and the next thing I knew, he said, well, you're going to be running the hot dog business at Wrigley Field. So did that for a few years, learned everything about inventory and cost and running a business. And obviously it was just a hot dog stand, but it really set me up for a love of entrepreneurship as I kind of transitioned out of that into banking. And then I was able to start seeing like, oh, all the things I didn't know about the finance pieces of it and how to forecast inventory and how to think about expenses and things like that. So gave me my first love of entrepreneurship. But yeah, we went from hot dogs to billion-dollar deals pretty quickly and then back down to growing businesses too.

Right. And why quit your comfortable finance job?

Well, I love Wall Street. I learned so much from it, right? To me, it was the best education that I could get in a very short period of time. And I think a lot of people don't realize that, that investment banking, as much as it's finance and deals, it's like it teaches you the levers of business. From sales and marketing and ops and what you're able to actually maneuver there. And I don't know, after I saw these large deals, I missed working with founders. A lot of investment banking is private equity money on top of private equity money. And therefore, at a certain point, I said, I miss working with founders. I miss being able to help people from the ground up in operations and not just on the deals. And I thought I could bring something to them. So yeah, I took a big risk. I left a very comfortable path, I think, to many millions of dollars. And I'm doing something that's very fun and, and very meaningful, right?

And you target, uh, the fashion industry. Is that your only niche right now? And why did you choose that niche specifically?

Yeah, so fashion and apparel businesses, they're the ones that we're going after now. And honestly, we happened to just come across it when we were starting early on, start a business, and you kind of take everybody that comes in and then we kind of had one fashion and apparel business, we had a jewelry business, and then we just got referred again and again until it kind of became our niche. And I don't— I think that what became interesting to us is that there's so many pain points of finance in the fashion and apparel space. For example, seasonality, right? Seasonal demand. People only buy during certain months. That's a finance pain point. That you can cash flow and seasonality and things like that. Inventory is a big pain point in figuring out how much you should order, because if you order too much, you have stuff on the shelf. Order too little, there's not enough. And so there's, there's just— and there's also different margins. There's e-com, wholesale, retail, like different payments of suppliers. And I think it just becomes a very big finance, uh, headache if you don't have the right person in the right seat in fashion and apparel, for sure. And that's why we focus on that.

Interesting. Uh, and what size are these companies most of the time? Give me an idea of revenue, how much, uh, headcounts, what problems they're facing, for example, with tariffs nowadays.

Yeah, so the size of these companies usually were in the $5 to $50 million range. So they've become a business, they've established themselves, right? They're well into their 7 figures, but maybe they're not at the point where they're $100 million business looking to exit. They're kind of on their way in that inflection point. And having somebody who has seen these companies scale, which is what a fractional CFO is, it's the strategic partner to the CEO that's building out the roadmap and holding the team accountable to that, is extremely valuable. And I mean, we've seen everything in recent months with people having to put their orders maybe months in advance, years, even a year in advance. And you have to be able to take that cash flow put it aside, forecast what you're going to do in the future. And so forecasting and analyzing the numbers becomes way more important because you're essentially out cash for months and months and months because of all those recent events.

And can they get financing instead of saving that cash?

Yeah. So there's a few different strategies. It actually reminds me of a call I had maybe a week or so ago. So there is something in financing for any type of brand really, but it's called factoring or PO financing. And essentially you can get a bank to give you financing once the invoice is issued from a client. Let's just say you sell to a big company like a Target or Neiman Marcus or whatever else. And instead of waiting for 6 months to get paid by them once you deliver the goods, you're actually able to take the invoice that they issue you, go to a bank, and the bank will assess the credit of that large company and they will finance that accordingly, which is a strategy we've implemented many times. And it Why it's so important to fashion businesses is because it flips the working capital cycle, the cash timing cycle, because instead of it being that you have to put out a bunch of money for months and months and months, you're able to take an invoice, collect that money upfront, and have that money for months and months, which means you're able to scale as opposed to running out of cash to get the next inventory cycle.

Can you speak about the tariffs as well, the effect that it had on these businesses?

Yeah, so tariffs has been— tariffs have been a really big one because essentially what it does is it forces everyone else to either compress their margins, lay off people, right, or have to raise their prices and see how that affects their customers. So what I've seen, that the strategy that people have implemented, at least by us, is that they'll do new lines as opposed to just increasing prices of things that they had before is it forced them to be innovative, create new lines for things that they could charge more on even though it costs the same on their suppliers to eat up that margin. And so that obviously had— it also caused people to have to shift their supply chains. So a lot more people came back to American supply chain for that. Some other people had to like shift from, let's say, China to somewhere else. So it completely disrupted, A, our clients as well as the M&A market for people who were trying to sell their businesses. A lot of investors got scared from that too.

Do you feel the fractional CFO space is, uh, I mean, it's competitive right now? Seems like everyone is, uh, offering that service. Um, yeah, how do you view that? Because my, in my opinion, I think like products should be built out of that because fractional CFO is too broad, right? Like need one to do one precise thing for one precise person. What's your view on that?

There is a lot of people that call themselves fractional CFOs. I will, I definitely agree on that. There are, I don't believe so many people who are good at being fractional CFOs, right? Because I think it's an attractive industry for somebody who's been an accountant or been a CFO at a W-2 at a large industry or whatever else to then come and say, hey, I'm going to be a CFO of 5 businesses at once. That takes a lot and that takes a lot to do well. I think that for us, what we've tried to target is the specific pain points in the industry that we're trying to solve and the service that we offer is very direct. So things like budgets and models and cash flow forecasts that are updated on a weekly or monthly basis. But I think the more important part is not just the data, but, and what the deliverable is, but the person who the CFO is, if they've been someone, if they are someone that has seen other businesses scale and there's someone who can say, based on the numbers that I'm seeing and based on my experience, here's what you should do, that's invaluable. So I think there's two parts of the CFO lens. I think people get caught up with the first one, which is like financial modeling and budgets and numbers and things like that. That is helpful and you need to have that correct. But the more important part is having somebody who's a partner to the CEO and uses the data to then strategize on how to go to the future and that's what we offer.

And do you offer packages or is it hourly? How does that work?

Yeah, so we offer packages. The reason why we don't do hourly is because nobody wants to feel like they're getting charged to speak to their partner. It would incentivize people not to talk to us, right, on a per-hour basis or whatever else. And so we originally did that. We found that it didn't let us be as effective as we wanted to. So we do monthly retainers based on the scope of work and how much value we can create for our clients.

Have you thought of taking rev share or equity in some of your clients eventually, the best of them?

So it's very interesting. I tell all of my clients, never take equity from anybody. That's my hot take. Unless you're gonna go IPO like, you know, Elon Musk and Tesla and SpaceX or whatever. And the reason is, is because people are usually coming for equity, uh, for some type of infusion of capital, of money. And there's so many other sources to get that. Let's say there's debt, there's lines of credit, there's PO factoring, invoicing, things like that. And even when that stuff's not available, there's usually a way to structure equity of profit sharing and other things that you're not actually giving up a piece of your company. Because otherwise you're in a position where at a vulnerable spot you give up an oversized piece of your business that you can never earn back. And forever after you're giving that up. So I don't take equity in the businesses that, that I work with, um, just because I just think that I advise them against that. So that's my hot take.

How do you get your clients nowadays? What does go-to-market look like?

So up until recently, go-to-market was all referral, word of mouth. The past 6 months, I have consumed more paid ads content than just about— I don't say just about anyone, but a lot of people. And so we've been running paid ads on Meta, and I mean, most of our clients are on Instagram, right? The fashion founders, that's really where they are. And so we've been fortunate to have good traction coming in on the paid ad side because ultimately I was thinking is to scale this business to 8 figures and then 9 eventually, you can't just rely on referrals or affiliates, right? You really need a I put in X dollars, I get this amount out. And so that's been a journey coming from a finance guy into a marketing guy or maybe a marketing and sales guy. I've definitely had a lot of Alex Hormozi and Brunson and Gary Vee and all those people that have helped me influence and like reading a lot of books, but it's been a fascinating journey. It's one thing to put 5% revenue goes into marketing into a model, a financial model. It's another thing to live it and see how it converts.

And what's your average package sold, and is it monthly?

Yeah, so everything is, everything is monthly with us. I'd say like we have two packages. One's a $7,500 a month and the other one's like a $19.5K a month. So it depends on the business size and what they need, but essentially that's, that's usually when our two packages come into something around those.

And do you find that designers have that type of budget?

Yeah, yeah, there are so many. Yeah, I mean, the, the $5 million, $10 million, $15 million ones, like, there are some incredible, incredible fashion apparel businesses. And the interesting thing is that for them, usually it ends up being like they make a multiple of their investment. I'll give you an example. Like, we had a jewelry business that even just from one conversation with them, we discovered some trends based on their numbers and their inventory numbers, and we discovered $1 million of obsolete inventory just hiding in the books, right? Hiding in like— and they didn't even know about it. And so they were able to sell that and then put that money back into the business. But that's just like one example of a business that gets to $15, $20, $30 million. At that point, like, it ends up being a money maker for them to have somebody so designated on the finances and increasing their profit margins and helping them make decisions on their cash flow and revenue.

And what are their margins? Usually it's pretty thin, right? Like 10%. It's like, what are their profits margins?

Um, actually, I, I've seen, I've seen fashion apparel businesses with 35-40% margins. I've seen jewelry businesses very similar. And then I've seen about like businesses with negative margins. I am not like, uh, obviously like construction and real estate in certain industries, like they have their averages. Another hot take of mine, I don't care about industry averages. I've done a lot of industry averages when I like put companies up on Wall Street and we'd say, hey, this is the industry average. When someone comes to me and they say like, hey, every industry average is this, can we be this? Like, well, it doesn't really matter what the industry average is because you should still try to increase your profit margin to the absolute maximum. And if you want to use it as some type of barometer of, oh, here's where we are, but like never measure yourself against that as success because then you just get complacent of either we're doing great or we're not. Either way, you should be going for better.

Yeah, yeah, you need to be an outlier, need to go all in in business, as else it's just not, uh, interesting. Um, your ads, how much clients do they get you per month? How successful is it? And how much do you invest in Facebook ads and Insta?

Yeah, so we started— this is, this has been the struggle, right? You start and you're waiting for the money to convert. I've probably invested, I've invested well over 6 figures in the past 6 months or so. And that includes everything from the learning of it into the actual ads of it. And just now, right, just now we're starting to see people booking calls, people converting, right? So I'd say our return on investment is not very high.

It's negative.

It's negative, very much so.

But negative 90K.

Yeah, at least. But, but I will say that the, the engine that like you pay to pay, you pay to play, I mean, right? So it's like you, you have to spend this amount of money to test the creatives to figure out how it's going to work. And I think the people who quit and say like Meta ads don't work, I mean, listen, the reach is guaranteed, right? That's the entire thing. The reach of Meta is guaranteed. They will get you in front of the people. That's what the algorithm is meant to do. It's the creative or the offer or the company that then it's on them, right? It's almost like when someone says, hey, like, I can't lose weight, right? I just, I just can't. It's like, well, I'm sure that everybody has their own circumstances, but is it— are you going to be the outlier in the world that just can't, or is it going to be something where you may just have to do things a little bit differently? And that's kind of how I viewed it in my head. As you continue to painfully spend money on ads that don't convert, eventually it's the cost of it, of— and then you figure out something that works and you keep moving.

I agree with that 100%. So I'm guessing marketing advertising is like the core of your cost, right? You also have a team, or is that the team pretty lean? Uh, is the team costing you a lot too, or—

We have, yeah, we have a big team. We have 30 people on the team. So we have 15 CFOs, and underneath our CFOs we have 15 analysts, bookkeepers, everybody who's fulfilling all of that. And Yeah, so we definitely have a pretty expensive payroll with all of that and the ads are an expense that fuels everything to keep things moving. But we've gotten a really good client base which has been able to support us. And the good thing is that I think our retention rate's somewhere around 90, 95%. So our clients stay with us for a long time.

And you have a roster of what, 30 clients right now?

Yeah, more than that. Some of them are, yeah, running on monthly, quarterly, and whatever else. So yeah.

Okay, interesting. Hmm. Yeah, so, okay, 30 clients, yeah, to fuel a team of 30, 6 figures in ad spend. That's, uh, that's pretty intriguing. Do you have like upsells to your existing clients?

Yes, we actually got—

we have a few different guys that studied Bronson.

Yeah, so we have, we have a few different upsells. We also have downsells. So we have 2 things that are very interesting. One is something called the Vault, and the Vault is basically like, aside from just Fractional CFO, which is strategic and get making sure finances in order, things like that, like our companies want to scale. And so we have industry leaders, like for example, in fashion and apparel, people have worked at the largest companies that go into the business for 90 days, find the biggest problems, and then solve them with you. Much more of a 90-day accelerator. And those are like programs that cost into like the, you know, like 5 and 6 figures, right, for things, for something like that. On the other side of it, for businesses that are just a million dollars and up, we have something called the Inner Circle, which is an executive coaching program, um, that's for million-dollar and up female businesses that actually my mom leads because she's an awesome female entrepreneur. And I know I have to be very confident to bring my mom into the business, and she leads that, and, and it's been incredible. We have, I think, 25 women in it right now, and that's more of like a Slack community of people with monthly live sessions. So we have the downsell and the upsell. We also obviously have, like, aside from Fractional CFO, we have the bookkeeping and other elements of back office with it. So anything that's finance and strategy, we're trying to have covered for the, for the people who want to grow.

And what's your goal 5, 10 years down the line? You mentioned 8 to 9 figures. It's, uh, to, I don't know, have an exit? You want to bring a company public? As a Wall Street guy, what's What's your goal?

I've been through too many Wall Street exits for that. Um, I'll say, I'll say it like this: my goal is to get the business to $100 million, and I'd love to do that within the next 5 or 6 years. It'll take a lot, but that's why we've invested so much in the business development engine here and the revenue engine. That all being said, I heard something that was fascinating, right? And I, I advise my clients this way too.

To—

if you're making a company to exit the business, the decisions that you're going to make now will take— probably mean more investment and less cash flow so that you invest more and have a likelier upside exit in the future. And something like— and then someone asked me the question, like, would you rather take a bunch of cash right now, take chips off the table right now, and make the decisions based on building your net worth as you go through the business, or leave it all in the business and gamble on the upside? And even though I'm like, I'm a banker by nature, right? So everything's like, yeah, you make your business, this is going to get your valuation multiple up and whatever else. I've adopted the mindset of the business is a vehicle for you to grow and for you to live. Take the chips off the table now, build your net worth. It'll give you the options instead of gambling it all in the business for an upside exit in the future.

I love it, dude. Um, is it like the Deloitte of fractional CFO or the JP Morgan of fractional CFO? Is that the vision or What is that?

Is that—

well, I mean, 100— yeah, 100 million, that scale. Yeah, you're becoming like a staple. You're becoming sort of a Big Four of like fractional CFO, right?

I'd love that. I never— I've never heard it said like that, but I'll take Big Four fractional CFO.

Yeah, and I'm saying that because there's no existing big player doing this, correct?

There's no existing big player that's doing fractional CFO that I know. I mean, there's big players in the fractional CFO space But the interesting thing about us is I call us more of like we're the platform that brings industry talent down to the growing businesses. And I think we can replicate that in like many distribution channels. Like our platform is not limited just to a small services business. So I think we can scale.

Well, generally speaking, I think very few business owners have real financial acumen, right? Like Wall Street is sort of closed doors. And I think it's pretty cool that you're bringing that. Yeah, you're democratizing that. What have you learned from guys like Hormozy, you study these guys a lot. Like, what have been like, uh, top lessons?

Hormozy's lesson to me was you have to do a volume of work that would make it unreasonable for you to fail. And I think that's like understanding what that means. Like, I started waking up at 3 o'clock in the morning, going to bed at 8:30 at night, um, as an example of that. Because I don't know, I'm one of those guys, chip on my shoulder, I can do it better and, you know, prove it to the world. And I think that one's been a big one. And I think another one is this, like, as you scale up in business, you break beliefs of what you thought was possible. And like, now I'm sitting across, like, you know, from $5, $10, $20, $50, $100 million founders, and you realize that they're just like you. They're just like you with people with an idea. And I think that there's this, like, you'll never get there. You put in the work, you'll get there. And I think beliefs being broken of spending $5, $10, $100,000 on ads belief broken, and it gets you to the next step. And I think you kind of keep having to break your own beliefs to get there. And if you stay in your box and there's always a reason to say no, you never will.

Love it, dude. Where can people find out more about you?

Yeah, so warriorgp.com is where you can find us, or on Instagram @donnymashiach. And we'd be happy to give— we give free CFO sessions, whether it's me or one of our CFOs talking, for people to understand their business a little bit better. It's totally free, it's our gift to them. Because ultimately we want to democratize finance, make the world a better place, and everyone does better when they understand their finances a little bit more.

There you go. So how is Donnie and