The 6-Step Formula for a Financially Healthy Business with Avi Pinsky

You can't fix what you don't understand, especially when it comes to your business's financial health. Too many owners are running on gut instinct, crossing their fingers, and calling it a strategy. But your gut doesn't balance a cash flow statement and your hunch won't save you from a payroll crunch. And that's what we're talking about today on Experience Leadership.

Welcome to Experience Leadership, A podcast that challenges small business owners and entrepreneurs just like you to dare to be the exception. Join our host, customer experience expert Marc Haine, as he uncovers relevant and timely content to help you script and direct your business and teams to create jaw-dropping experiences your customers and staff deserve. Here is the host of Experience Leadership, author of Lights! Camera! Action!, customer experience expert Marc Haine.

Welcome to this episode of Experience Leadership. I am your host, Customer and Employee Experience Strategist Marc Haine. And I'm so glad that you are here with us today because today, we are going to be diving into one of the most overlooked and costly blind spots in any business. And that is understanding what your numbers are really telling you. My guest, the Business Finance Doctor, Avi Pinsky, is here to help us diagnose the financial health of your business so you can stop guessing, start growing, and finally build a business that funds your life, not drains it. I do have one simple request though. If there's somebody in your circle who could benefit from the insights that we're sharing with you today, please do them a favor and pass along a link to this episode. That way, they will grow and conquer their ills as well. You know, if you're like most business owners, your relationship with your numbers might sound something like this. Avoidance, confusion, flat-out denial. You know that they're important but they feel complicated, overwhelming, and a little too accountant-y. Here's the thing though. Those numbers are your business vital signs. And if you're not tracking them, you might be missing the warning signs of a bigger problem ahead. And that brings us to our Question of the Day. So when was the last time that you truly understood what your numbers were telling you and used that insight to make competent decisions for your business? And meeting with your accountant and just nodding along to whatever the accountant is saying Doesn't count. I'd love to know what your thoughts are, and I'd love to invite you to this conversation. So please feel free to drop your comments in the comment box. I'd love to know what the pressure you're under feels like and what you're doing about it as well. As I mentioned, my guest today is known as the Business Finance Doctor, and for good reason. After more than a decade as a public accountant, Avi Penske, CPA, MBT, realized that small business owners don't just need tax help, They need financial healthcare. Through his company, Penske Consulting, Avi performs business wellness checks to diagnose what's really going on behind all your spreadsheets. He helps owners understand their key metrics, identifying hidden issues and creating clear actionable treatment plans for growth, profitability, and consistent positive cash flow. So, he is on a mission to help business owners turn their numbers into tools for freedom and prosperity. Isn't that a unique thought? And not only for themselves but for their families and their teams as well. Abbie, welcome to the show. It's so great to have you.

Thanks for having me.

So Abbie, you've seen hundreds of businesses from the inside. What do you think is the number one mistake owners and managers are making when it comes to understanding their numbers?

The biggest mistake I'll say is that they're not. They're not understanding them. Kind of like you said, they take it as a once-a-year thing that they transfer their books from their bookkeeper to their tax accountant. The tax accountant fills out their tax return, they sign off on it, and they're done. That's about all they're using their numbers for. When really, as you said, there's a wealth of data there. There's a wealth of information that they can use to make better decisions based on data instead of going on a hunch, on a whim, by the seat of their pants. There's ways to make decisions that are smarter, that are actually based on realistic information and data and insights that you should be able to have in your business if you could only understand it.

Yeah.

Well, you know, and sometimes, like, I've run into business operators and they say, well, you know, I buy my widget for X amount and I sell it for X amount. I make a profit, so I know I'm doing fine. How misguided is that line of thinking?

There's so many other things that go into a business. You know, you're talking about your gross profit margin.

Okay.

That's Nice metric to look at. What about your payroll? What about your marketing expense? Is your marketing even working? Are your people even being productive for the amount that you're paying them? It's not just a matter of knowing what your numbers are, but what are they telling you? Are your marketing efforts really bringing a return, an ROI, a return on that investment? Are your customers paying you in a timely manner? How long, how many accounts receivables do you have outstanding and how long are they outstanding for? All of that is Money that should be in your pocket, but your clients are holding onto it. And that's money that you in theory are profiting, but in actuality, that's not hitting your bank account, right? How many people out there have a profitable business, right? It's profitable. Profit's all in theory. Revenue is all in theory. When I go to my bank, is it still profitable, right? Do I still feel the same way when I look at the accountant statements and I see the revenue and I see the profit numbers? I might be feeling very good about it, But do I feel the same way when I go to my bank statements? If not, why not? What's the difference there? There's so much more that goes into a business than just the gross profit. And as the business owner, you have to understand it. You have to understand what are those numbers telling you.

In your notes, you wrote down that most businesses don't die from lack of sales. They die from a lack of cash. Can you unpack that a little bit?

So like I just said, I can open up a million-dollar business tomorrow, But if I have to spend $5 million to do it, so I'm not profitable. Sales is only one metric. What do I have to do in order to get that sale, in order to get to that level of sales? That's a much broader story. So I might go sell, sell, sell, sell, sell. And if that's the only way I want to build my business, I might be getting more and more and more in debt, more and more and more in the red, more and more. Yeah, I could lose more and more money if I'm not selling properly. So what am I selling? Am I selling something at a profitable rate? That's also only one side of the story. There's also your cash flow. Am I collecting on my sales, right? Am I having to pay my vendors well before I'm collecting from my customers? That's going to create a huge timing problem where maybe I need a huge cash infusion to cover that gap of time. And if I'm just chasing more sales and I'm not paying attention to the other factors in the business, I could be slowly killing myself, right? So it's not, you can't have a myopic view of your business of just sales, sales, sales, sales, sales.

Yeah. It's interesting because I've met business owners who are like, oh yeah, I know I have really good customers and all this. And then they look at cost of sales, which was the product that they were selling. But I started arguing with them that the cost of sale is actually, what does it cost you time-wise, labor-wise in order to maintain that customer? Because we found as we dug into it that he had his biggest customer was such a big drain on his team and the people, like so many resources were thrown into supporting this one customer. And it's like, do you actually realize that as much as he's throwing all this money at you, that it's actually costing you more to deal with him than anybody else? How does one measure that?

That's one of the reasons why I left accounting work. You got your manager, your director, your partner all on top of you in a public accounting firm. And they say, oh, well, this is such a big customer. We have to do everything we can to please them. That's a big drain on the staff, right? If the staff have to then bend over backwards, stay late 4 or 5 times a week, constantly redo their work, you're going to lose a lot of your good staff. And that's a huge strain on your business. So again, whatever he's going to bring in, you also have to weigh what's he costing you? What's the headache that he's costing you?

Yeah. There's lots of talk these days about scaling. Like, a lot of people are talking. In fact, I just did one episode about scaling and trying to alleviate the stress to scaling. But how can growing— you know, it's funny, I've seen this so many times, even with franchises. Like, back in the '80s and stuff, growing up in Montreal, we had all these franchises that were just like launching, and they would open up all these multi-units. And then within like 5 or 6 years, all of a sudden they start all closing down. That How is it that when you're growing, and you're growing your revenue, and you're scaling up, how can that actually make your business less healthy?

It's a matter again, of looking at all of the metrics, not just your revenue. And when you are thinking about scaling, you have to take those into account when you're making your decisions. How big do you want to get? And how fast do you want to get there? Yeah, I was looking at a cash flow projection with somebody, they wanted to scale, they were in a medical field of sorts, and they wanted to constantly bring in new clients, new therapists, new doctors, and they wanted to bring them in at a certain rate where they were never, ever, ever going to be cash flow positive. So it's a matter of playing out the scenario, seeing, well, if I bring in X amount of clients, Y amount of new service providers, what does that do to my cash flow on a monthly basis? And do I have that cushion to be able to cover for the timing issues that in that field it happens to be? There's a big timing issue with insurance collections, right? If I bill my insurance company today, I might not see that money for 3, 4 months. So if I'm scaling and keep scaling, scaling, scaling, do I have enough cash on hand to cover that 3, 4-month window? Or do I have to say at some point, wait a minute, let's Pause on the scaling. Let's take it to a certain height and say, let's wait for cash to catch up, and then we'll have that cash on hand to scale even further. But you have to look at where am I trying to get to and what's the best path to get there in a realistic way? Because this model that this person was showing me, it was completely unrealistic. He was never, ever, ever going to be cash flow positive if he kept scaling the way he wanted it. That's really the only thing I can tell you is you're scaling too fast. You need to slow down, wait for your cash to catch up, and then you can continue from there. But if you're not looking at your numbers, you're not looking at the metrics, you'll never notice what's coming down the pipe if you continue the way you're going. So you need to do a little bit of an analysis, get somebody on your team that can help you with that. Because let's face it, most business owners, we're not number people. Accountants are number people. CFOs are number people. A plumber who just decided to go out on his own and start his own plumbing company, or a contractor who decided, I could do this for myself, and goes out and starts his own business, he's not a number guy, right? He can read a tape measure, he can read an architectural plan, but he can't read a financial statement. So how are you making informed decisions if you don't have somebody on your team who's helping you? So you need somebody who can play out that what-if scenario and see, well, is this a smart way to do it? Or am I going to end up shooting myself in the foot by trying to grow too fast? And I might not have the capital to actually support it.

It's really interesting. As you were saying that, I was flashing back to when I was working with a trucking company. It was a husband and wife team and they had one truck. And, you know, the whole thing with is that you're making money as long as the truck is on the road. If it's not on the road, you're— they really wanted like the husband was really into like, he loves new things and he, He gets a real kick out of buying and he wanted to buy a new truck and then he wanted to hire. And it's like, but you know, when you look, actually looked at the numbers and you looked at how tight the cash flow was in order to make the commitments on the existing truck, I knew that if you buy this truck, yes, short-term, it looks like you're gonna make a ton of money by hiring a driver and so on. But what happens when one of those trucks break down?

Exactly.

So I got into a little bit of a tiff with him. And at some point he decided he would go off to an accountant Hire an accountant to help him make the decision. He left me, you know, and they went ahead and they financed a brand new truck. And within 6 months, they had to close their business. And it's like, it was so sensitive. And it's like, did you— so we have these delusions, I guess, because what you're really talking about is really having a finance person, having somebody who understands the number as a coach, not just—

Yeah.

somebody to sign off on the year-end numbers, but somebody to come in as a coach. Are there specific behaviors or habits that keep owners really blind to what's going on?

I don't want to say it's an unwillingness to learn, but I feel like it's a little bit of a stubbornness of, you know, I've been doing this for my, you know, for the last 20, 30 years. I know this business inside and out. And yeah, you might know the operations of the business, and that's what got you off the ground and made you really successful at the beginning when it was, you know, Maybe you and a buddy in your one truck, maybe that was really successful because all you had to do was run the business. But excuse me, you want to expand, you want to get 3, 4, 5, however many, 10 more trucks on the road and really scale this out, get an office and a secretary and a whole staff. You're changing your role. You cannot stick to your old ways of just being an operator. You have to switch to being a business owner. And Nobody's training you for that. So you need to be able to humble yourself to a degree and ask the questions that you need to ask. Get a coach, get somebody who's on your finance team, your bookkeeper, your accountant, your tax guy. They could do it. They have the skills to do it. Unfortunately, that's not in their business, in their job description, and it's not in their purview. Their job is to report about what happened in the past. That's essentially what a bookkeeper and a tax guy do. That's what they do.

Yeah.

They're looking at what happened and they're making sure your business stays compliant with regulations in what they're reporting. Very nice. Your job is to look towards the future to figure out how can I be more prosperous, right? I don't care what happened any more than I care what's in my rearview mirror when I'm driving, right? Yeah. It's good to get that information to figure out how can I proceed forward. If I want to see, is it safe to change lanes? So I'm not going to turn my head all the way around. I'm going to look in my rearview mirror. It's a lot more efficient that way, but that's only because I'm using that information from what's behind me in order to determine how I'm moving forward. So you can do the same thing with your books and your accounting. You need to use that information to gain data on what do I do going forward that's different? Maybe it's what's the same, right? What should I not change? What should I change? That's not That's not the accountant's purview. That's not the bookkeeper's purview, but you as a business owner, that's your purview, what you need to have. So that might require either having a good talk with your accountant and explaining to them what you need from them and not taking no for an answer, right? Or it might be getting somebody else on your team, getting a coach in there, getting some sort of a CFO of sorts that can help you figure out, well, based on what happened, what do I have to do differently going forward?

Mm-hmm.

Again, it takes a little bit of a humbling and saying, maybe I don't know everything. Yeah, maybe the last 10 years really did work when our business was kind of small, but I want to scale up. Now my kid is out of diapers. I'm going to have to start thinking about a college fund and maybe I need a bigger house. I need to get something else out of my business that I can't do when it's just me and my friend and a truck. I need to expand. I need to figure out how to do this bigger and better. And you don't have the skills for that just because you are really good as a, as a guy on the crew. Right. So getting another person on your team to help you is crucial to figure out what are the things that you don't know and how can you do things better than what you've been doing up until now.

I love that. So Abby, what I'd love to do is I'd love you to walk us through your 6-step process to help businesses regain their health. And we'll get to that right after this.

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Welcome back. I'm speaking with the Business Finance Doctor, Avi Pinsky. Avi, I think that you need to come on these calls with a lab coat. Maybe you can have a stethoscope, but instead of like the little reader thing on the stethoscope, maybe it's like a calculator, like something that kind of fits that brand.

Yeah, well, I bet people ask me if I'm actually a doctor and I'm not.

You're not. But Avi, so from a snapshot point of view, like somebody looking at their business, and we know that there's lots of delusions in business because we are all in our little bubble, but what does a healthy business actually look like in financial terms?

For sure.

So a healthy business is one where you don't have pain points, right? Just like, why do you go to the doctor? Because something's not— something doesn't feel right. Something's not working right. My elbow hurts. My, you know, I can't, I can't walk as well. I'm losing my balance. There's something wrong with you. That's when you go to a doctor. Same thing with your business. If something is wrong with the business, you need somebody to come and diagnose it and figure out what's the treatment plan. Take a certain amount of medicines, get a certain amount of exercise, change your diet, whatever it is, you need a way to move forward. So what does it mean if a business is not working properly? Well, why did you open your business? The goal of any business, at least any business that I've come across to date, is to make money. Even a nonprofit, if it doesn't make money, it's going to close its doors and then it's not going to be able to do the good work that it's trying to do. So any business needs some sort of profit, some sort of cash flow to come in to sustain the business. And any entrepreneur, they open their business again, anyone that I'm familiar with, they open the business to be able to support their family. And if you're not able to get that cash flow from the business into your own pocket, you're not able to sustain your family. So then why are you killing yourself working, you know, 60, 70, 80-hour, maybe even 100-hour weeks if it's not even doing what you want it to do anyway? You know, you're working harder than anybody else in your business and you're getting— you're coming home with nothing.

It's interesting that you say that because I have, uh, my mechanic, he opened up a mechanic shop because he loves working on cars, right? And so he opened up his mechanic shop because it just felt better for him to do it on his own. He didn't have his own A boss yelling and screaming at him and stuff.

He—

that's what he wanted to do. But then he started getting successful because he cared about working on cars that now he had to hire another mechanic. And then he needed, oh, I need somebody to do billing. And so now they needed— he needed a front office person to come in and do the reservations, do the billing.

Exactly.

And the last time I dealt with him, I went in to pay my bill and he's behind the counter doing the credit card processing and the invoicing and all this.

Why don't you have help?

He goes, I used to have help. He says, I used to have a receptionist to do all this stuff. I used, but then I never got to do what I needed, I love to do, which is work on cars.

Yeah.

And, and he says, you know, I was so busy managing my business that I didn't get to work on cars. And I said, but now you're sitting behind the desk. You're not working on cars now. And so what he actually did, he actually kind of downsized. So I went up to him and I said, why don't you hire your own boss? And he goes, what? I said, hire a business manager, hire a fractional manager, somebody to come in to help you do, run your, let them run the business. You meet with them once a week. You get to work on the cars.

What?

And he, that was something that they, he never considered. And now you're talking about this idea of, you know, hiring a fractional CFO, somebody, a finance person to come in that you get to meet with once a week or once every couple of weeks. To walk you through kind of where you're at. To me, it makes perfect sense. Why do you think there's such a hesitation for people to do that?

I think people just don't know. I think people don't realize what's available out there. Going back to that mechanic, it ties into what we said earlier, right? That a lot of people start out small and then they have to get bigger and then they have to take on a new role as a business owner. It's a role that they don't know how to have. It's a role that they are not familiar with, but they think they want to attack the business the same way they've been doing up until now. Now, one solution is figure out how to be a business owner instead of how to be a mechanic.

Right.

Another solution is perfectly legitimate. You can own the business, be a stockholder in the business essentially, and delegate out the running of the business. And then you can be an operator. That's fine. That's a perfectly legitimate way to do it. But If you maybe, you know, a lot of business owners open a business because they don't want to have a boss telling them what to do. So then, yeah, you're going to have to figure out how to run the business as a business owner yourself.

Yeah.

It's a perfectly legitimate way to say, I'm going to hire my own boss and I'll be underneath someone from an operations point of view, and he'll tell me what to work on when and how to whatever. Fine. But I'm his actual— I'm the owner. So in theory, I am in charge. There are complications there.

Sure there is.

I could see a lot of power struggles coming up from it, but it's certainly a legitimate way if you say, look, what I love is working on cars. And there's plenty of people who maybe they have a hobby and their hobby could become profitable, but they want to continue to do it. And if you now make them into a business owner, well, now I lost my hobby. So it's certainly, there's complications either way, right? You either have to learn a new skill, or you have to learn how to humble yourself. And even though you are technically the one in charge, you still have to learn how to take direction from someone else.

Yeah.

So yeah, they're both legitimate ways.

So it starts exactly what you said. You have to have that humility, right? First, you have to have that humility and know that you don't know it all. And then you're bringing somebody on board specifically to help you so that you can do what you want to do. And will there be challenges and butting heads? Absolutely. But that's another skill you need to learn.

Yes, for sure.

So this idea of having, you know, being able to diagnose one's business health and get us healthier as businesses, can you walk us through your 6-step process?

So the first thing, what is a healthy business? As we said, it's one that's producing cash flow. So it has to grow, right? So that it's not constantly just stagnant. It has to be profitable because if it's not profitable, then, you know, you're probably not going to be able to get any cash out of it. But ultimately, it has to be producing that cash flow that you need to pay your bills, support your family, support your lifestyle. So the way that I like to look at it is a very simple 6-step process, which anybody can do on their own, provided you have the time and the wherewithal to do it. It's not complicated. This is a very logical, easy progression of steps. So step 1, you have to set a target. Set a goal for your year. I like to look at what happened in the previous year, maybe the year before that even, as a way to determine, well, what's a realistic target? What's a realistic goal? I set goals and targets for anywhere between 10 and 15 different financial levers or drivers depending on the business, how complicated the business is. So there may be up to 15 of them, maybe as few as 5, depending on what your business is. Things like how many leads are coming in? How good are you at converting them? What's your marketing expense, your payroll expense, overhead, right? All the various levers that you can have in a business. So that's number one, set your targets at the beginning of the year for all 15 of these drivers or whichever ones apply to your business. Step 2, track them on a monthly basis, at least monthly, right? If you're a really small business, maybe you can get away with quarterly, but I like to go with monthly. If you're a really big business, it might have to be weekly. If you're a huge company, Google, Apple, those businesses, they're probably doing it daily. So track the numbers and see what am I actually doing in these 15 areas of my business? What are my actual numbers from January 1st until January 31st, February 28th, the end of each month? How far have I gotten so far? That's step 2. Step 3, try to project out based on what I know about my business and the trends of the seasonality of my business. What can I expect for the remaining 10 months of the year, 6 months of the year, whatever's left in the year? You take step 2, you take step 3, you add them together, you've got your whole picture for where do you expect your whole 2025 or 2026, whatever year to look like. Step 4 is you want to compare that against the targets that you set out in step 1. So if in June I see that I've got 50 leads from January through the end of June, and I set a goal of 150 leads for that time, and my business is not seasonal, it's pretty consistent month after month after month, I know I'm only a third of the way to my goal, even though I'm halfway through my year. That's a red flag. It might not be horrible. It might not be a bad thing. But on its own, it's something to pay attention to and say, maybe we need to look at this a little bit more. Again, do that for all 15 items or 5 items, whatever, however many are applicable to your business. Step 5 is figuring out which of those levers, if I were to improve it, can have the biggest impact on the business. So play out the scenario, right? If I was able to get to 150 leads, would that be good? Maybe my conversion rate is really bad. So maybe it's just a matter of getting some sales training and then I have to improve my sales conversion rate. And that would be a bigger impact than getting more leads because I can get more and more leads, but if I'm really bad at converting them, so what? I can get another 100 leads and I'm not going to convert any of them. It's not going to help me. So determine which of the levers, if it were to improve, would have the biggest overall impact. On a monthly basis, narrow it down to one, maybe two. If you have some really simple, easy things that you can do to change these levers, maybe you can get a third one in there. But really try to limit your focus for the next month as you're doing this exercise to 1 or maybe 2 of these levers that you want to try to focus on. That's step 5, is narrowing down your focus. Step number 6 is put a very detailed list of the steps that you're going to have to do in order to accomplish the objective of improving those levers. So if you determine that you need to get more leads, that's your objective for July. What exactly are you going to do during July to get those leads? And put a very detailed list, give yourself a timeframe in which each step, each task has to get done, delegate it to various people who can take care of each step, right? When you break a big— if you were just to tell your secretary, get me 100 more leads this month, that's going to be a very daunting task for her. But if I break it down into 5 or 6 different steps of what it takes for me to get a lead, Yeah, maybe I can give my secretary one or two of them. Maybe my VP of marketing can take a couple of the steps. Maybe I could take some things off of my own head and it doesn't have to all be on top of me and I don't have to be doing everything myself. So break it into very simple, easy-to-do steps that can be easily delegated with a timeframe. Give each one a due date. If you don't give it a due date, it's going to get pushed back to the bottom of the line, to the back of the line. It's never, ever going to get done. So that's the 6 steps. Set targets, track your actuals, forecast the remainder of the year, compare that whole year to the targets that you set, determine which levers you want to attack this month, and then list out exactly what steps you're going to do this month to accomplish those objectives.

I love that. Hey, quick check-in. How can people get in touch with you? This is resonating with them and they'd like to pick your brain. How can they get in touch with you?

Yeah, so you can go to my website, Penske Consulting, penskeconsulting.com, and there's a link there where you can book a time to talk to me for a complimentary half-hour session. You can follow me on LinkedIn, usually pretty active in the DMs. So send me a connection request, send me a message. I usually get— I try to get back to people within 24 hours, assuming there's no crisis going on or anything. But yeah, those are the 2 best places.

And so maybe just give me a quick little synopsis of how do you serve your clients right now?

Exactly like I just said, that 6-step process. We go into a little bit more depth in each of the steps, but that's essentially it, right? I do a lot of that analysis myself. Steps 2, 3, 4, and 5, I'm doing myself. Step 1, I'm doing with the client at the beginning of any engagement, the beginning of any new year. We're setting out targets. Where do we want 2026 to be? How was 2025? What was good about it? What was bad about it? Realistically, where do we think 2026 is going to go? And then on a month-to-month basis, I do steps 2, 3, 4, 5. I meet with them, we go through step 6, we list out what exactly they're going to do in order to accomplish the objectives that I've determined are the most fitting objectives, things that we actually can do something about, because that's an important part of step number 5. Not every lever can you actually affect, and which ones will have the biggest impact if we can affect them, if we can do something about it. So I meet with my clients, Put down that list of steps that are going to be done in step number 6, that to-do list delegated out to their team so that it's not all sitting on their own shoulders, and then check in throughout the month and see if they have anything that's come up, any issues that are going on that are preventing them from potentially taking care of that to-do list.

So you are that finance coach that we've been talking about?

Exactly. Exactly. I went back and forth between, do I want to be the business finance coach or the business finance doctor? I like the idea of a doctor a lot better.

Sure. So having said that, because With doctors, people tend to go when stuff is chronic, right? And so I, I like the idea that before things get chronic, to be able to reach out to an expert like yourself to be able to help them. But having said that, a lot of what you've talked about, you know, things like lead generation and stuff, you know, a lot of small businesses don't have departments. When I used to run— I used to run 3 restaurants in Montreal, and I just did the best I could. It wasn't until I moved to Alberta and I went and worked at a casino, all of a sudden I had a a director of finance, I had a marketing manager, I had an HR manager. And it's like, holy moly, if I had these resources when I had my restaurants, this would have been amazing. I didn't even know that I needed it when I was an entrepreneur.

Exactly. That's, that's because you don't have that analysis done regularly to see, well, where's the business lagging?

Sure.

Right. If you don't realize that you could get 200 leads, but you're only getting 50, If you didn't actually measure that, like we started out the episode, if you're not measuring it, if you're not looking at it, how can you know to improve it? How do you know if your marketing is really bringing in the return that you expect it to if you're not actually analyzing where are your leads coming from?

Yeah.

If I'm advertising in 3 or 4 or 5 different places, am I tracking which ones are bringing in leads? Am I tracking which ones are bringing leads that actually convert? Am I dealing with 100 leads every month, but I'm fumbling 98 of them? Do I really need a sales coach? Maybe I got off of these calls and I get off of my sales pitches and my sales calls and I feel really great. I thought I did an amazing job. Why do I have no clients? Well, maybe you need a sales coach to come in and help you. But if you're not tracking it, you're not measuring it, you're never going to know.

Yeah. It's so interesting. I work with emerging and aspiring and professional speakers. And one of the biggest diseases we have as professional speakers, we make the initial calls, we do the initial outreach, but we don't do follow-up. People are like, I just don't understand why I'm not getting anything. It's like, well, how many times did you follow up? What do you mean follow up? I sent them an email.

And it's like, you know, it's on their plate now. They should do it.

And I use the analogy, it's like if you go door to door, I learned this from a guy called the Sales Ninja. where he says, you can't go— if you have a pizzeria, you can't go door to door with people to people's houses with a menu saying, here's my menu for my brand new pizzeria. I'm ready to take your order.

Right?

And so being able to be aware kind of that, because I do think that we think we're doing the work that we need to do. And what you're basically saying is hire— having somebody to be able to talk you through and be able to test your assumptions, I think is really important as well.

Yes. Yeah, you need to know, is this really what I need to do or is this what I think I need to do?

Right.

And that takes analysis, that takes a little bit more insight. That's where the data can come in and make it so that you're not flying by the seat of your pants. You're not going based on instinct or a whim, but you're confident this is what I need to do in order to move my business forward. And if I'm going to be dealing with something else that maybe I want to do or I think is important, you might be just spinning your wheels.

Right.

So you need to really make sure that this is the actual thing that you need to do.

Yeah. And, you know, when you say it, it says, of course, that, that just sounds so obvious, right? But somehow, somehow we're getting into— and again, you know, the whole impetus for this show is because we're so busy working in our business, we're not working on our business. And this is a perfect episode that says we need— if we don't have time to work on our business, We need to find resources to help us create this as a top-of-mind objective so that we can move our businesses forward long-term and be successful.

Yeah, exactly. 100%. Yeah. Hit the nail on the head.

When we come back, I'd like to share, talk about some cautionaries and pitfalls. As people want to make a change, I'm always a little bit afraid that somebody will tune into an episode like this and then there's a band-aid. Like all of a sudden, we have a new policy of the month. And cautionaries and pitfalls, I think, are really important to talk about. And we'll get to those right after this.

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Welcome back! We are having a great discussion. I hope you're getting tons of value from it. As you could tell from our discussion today, Avi and I are deeply dedicated to supporting business leaders just like you. So, if you're in the midst of planning a leadership retreat, an industry conference, or you're looking for some amazing content, or you're just needing some expert guidance, we're just a message away. Feel free to reach out to have a quick little conversation about your unique challenges, or even to discuss how we can help collaborate with you to help you achieve your goals. Our contact information is in the show notes. It'd be silly just to ignore those contact information because you got resources. I almost feel like I want to break into a song. We talked a little bit about the bookkeeping and the accountant. A lot of the financial data that one has really is tracking what has happened. They are lagging metrics. You made, you know, the owner makes a decision. And they see the result and the outcome in the financials later on. Are there any metrics that really highlight, that become a leading metric that they should be using to help them influence decisions rather than just reporting on those outcomes? Is there something they should be looking at within the confines of their financials that says, you know what, this, we need to put a process in to make this a leading measure rather than a lagging measure?

Within the context of the financial reports, Nothing comes to mind.

Okay.

Because they're reporting on the past.

Yes.

Right. You need real-time information on things. You need to track your leads, right? You need to track where are they coming from? How many of them are converting? How many from each avenue are converting? What am I doing right in my sales calls and what am I doing wrong? Right. It could be that avenue A, B, and C, maybe you're bringing in a lot of leads and you're spending a lot of time on sales calls and they're just not converting. Whereas avenue C, D, E, and F, Maybe they're bringing in very few leads, but hey, they're all converting. If that happens to be the case, so maybe it's not your messaging. Maybe it's just avenues A, B, and C are just not worth your time and effort, right? So you have to definitely keep track of those types of metrics in real time. Those don't show up on your financial reports at all, right? How many leads you came out with, how many you converted, it's not there at all. In terms of the financial reports, they are not meant for running a business. They're meant for investors to see which businesses have done well historically. They're meant for accountants to fill out your tax returns. That's about it. They're not meant for you as the business owner to run your business. There's information there that you can glean from and get insight from, right? But in terms of using that to determine how am I doing in the moment, nothing really comes to mind as something that Sticks out as like, oh yeah, that's a good leading metric.

I'm almost thinking that, you know, going through key points within the financials. So for instance, like sales and being able to break out what contributes to the sales and then start getting really granular, like really going into like almost mind mapping mode. What goes into sales? Well, because somebody bought my service. How, why did they buy my service? Well, because we did a reach out. Well, how many people did we reach out to that make the sales? And then from there, how many people did we reach out that didn't make sales? And we start, we could actually start mind mapping. Same thing with why is my labor cost so high?

Yes, for sure.

Right? Why is my labor cost so high? Why is my cost of goods high? That sort of thing.

Yeah. And but those metrics about sales, they're not in your financial reports. I've got 5 metrics that I use for getting to sales: leads, conversion rate, retention rate, purchase frequency, and purchase value. None of those. None of those. are in your income statement, right? None of them. All of them lead into your revenue. So you have to be tracking all of them on your own and figuring out, well, which one am I lacking on? Can we take a second to explain what those were just in case?

Please.

Leads. How many people are aware of your business that you're going to try to sell to? Conversion rate. How many of them that you try to sell to are actually buying? Retention rate. How many previous customers are coming back a second, third, fourth time? Purchase frequency. Are you charging people monthly? Are you doing a monthly service? Are you doing a weekly service? Are you doing a yearly service, right? How often are you charging your customers? And then purchase value, average purchase value. How much does somebody spend when they walk into your business, they walk into your store, right? If I've got a restaurant, it'd be nice to have the same customer every week. That'd be great. Have 52 sales, right? But if I've got an HVAC company, it's a little bit harder to assume that I'm going to be servicing someone every week. If I'm fixing your air conditioner every week, maybe I'm not doing such a good job of it, right? So every business has to figure out which one of those levers they can play with, right? Maybe if you are an ice cream parlor, maybe you can play with something, some sort of specials and giveaways in order to get people in your door a lot more frequently. Give them those punch cards and the 10th one is free. You might get repeat customers on a monthly basis, right? Some coffee shops have the same customer come in every single day, sometimes twice a day if you own a certain type of Starbucks type of coffee shop, right? So which of those metrics with your business can you play with that's going to help you up your revenue and up your sales game? But again, none of that is on your financial statement. None of that is shown anywhere in your financial statements.

It's really fascinating as we're talking about that, when in my book I talked about The lifetime value of a customer. But then we also talked about the value of a customer, not just necessarily lifetime. And so being able to understand exactly what it is you do, like the mechanic shop, you know, what, what kind of things can you do to bring people back on a frequent and make you the top-of-mind specialist that people want to deal with? You know, at the, at the moment now, I have to say, I very rarely go back to that mechanic as much as I like him as an individual. Because things take too long. And so the customer service is being affected. And so it becomes a challenge. But these are things that he might not be aware of. He might just be looking at it and go, I don't know why my business is slowing. I don't know why I don't get as many people anymore bringing in their cars. Right?

And that's gonna show up on the retention rate. Exactly. But he's not tracking his retention rate.

Exactly.

He's never gonna know that.

Exactly. And having said that, He's got the data, he's got all our emails, he's got all our telephone numbers, he's got all our addresses. He's perfectly able to work with somebody like even a fractional marketing manager to say, how can I take this data and make myself top of mind within my marketplace?

Takes the right CRM or something like that to track.

Yeah.

Which customers have come in frequently and which ones haven't been in for a while. Maybe they need an oil change, you know, something. There's gonna be some service that he can offer you. Where if he's going to do a good job, he'll come back. Every business can have repeat customers. Again, like I said, an HVAC business doesn't want to have a customer every single week, but they want to have them maybe once a season. Let me come and clean your filters or something. There's always some sort of upsell or some sort of maintenance that can be given, that can be offered to clients.

Yeah.

But if you're not tracking that retention rate, You'll never know it.

Yeah, it's, it's really fascinating. So now that people have this information that, you know, from our discussion today, Avi, somebody decides, oh, he's so right, I have to do something about it, and they want to jump on this bandwagon. Are there any cautionaries and pitfalls we should be aware of? Yes.

I mean, just repeating, don't assume more sales is going to be a healthier business. You can have more and more and more sales. It doesn't mean you're going to be profitable. And just because you're profitable doesn't mean you're going to have cash. So keep the goal in mind, right? Keep what's most important top of mind. Revenue is important. You need to bring in the money. Profit's important, more important than revenue, right? You need to make sure that you're making money, but most important is going to be your cash flow. And you can't just be relying on a profitable business. That's in theory, it's all accounting jargon. And it's things that can change based on certain classifications of things. You need your cash flow to be healthy, and if you're not getting a significant cash flow from your business, the business is not healthy. That's definitely cautionary tale number one.

Sorry, before we get too far, could we define what cash flow is compared to what people are perceiving cash flow to be? A lot of people look at profit and think that that's their cash flow, but that's not the case, is it?

Correct. Yeah, that's definitely not the case, right? Revenue and profit, these are accounting numbers, accounting jargon. Accounting jargon is all in theory. It's about timing. It's about classifications. It's not about real, what actually practically happens in the business, right? The bank account determines whether you're healthy or not. Your cash flow is the money that goes in and out of your bank account on a regular basis. And you need that number to be going up. You need that number to be going up at a steady clip so that you as the business owner can take the money out for your private needs.

Gotcha.

And to support the growth of the business as well. If you want a business to grow, a lot of times you need the capital on hand in order to do that. So those are, I say, the 2 primary needs for cash in the business is to grow the business and to support your lifestyle, to support your family. But cash flow versus profit is your accounting financial reporting versus your bank reporting. The accountant, very nice, good information. You need to know it for the IRS. Okay. Yeah. Blah, blah, blah. Boring. Not fun. Not interesting. Doesn't matter to you. Bank statement, very important. Very interesting. Very important to you as a person and as a business owner. So that's the real cash flow is the bank statement essentially.

Gotcha. Okay. We were going on to second cautionary. I'm sorry to To divert you.

Second pitfall.

Yes.

Second pitfall, don't wait for perfection. A lot of people think that they need their books to be 100% ticked and tied and numbers to be absolutely perfect. Absolutely not. The 6-step process that I outlined earlier, it's all about spotting trends. You don't need your numbers to be perfect. You need your numbers to be directionally accurate. What does that mean? That I can see the trends. I can see I'm making more sales during this time of the year. I've got I've had more payroll this year than last year. My marketing went up and down and fluctuated like this. I just need to know roughly how have things gone. Based on that, I can make decisions on, well, where do I want them to go instead? Where do I want to be different than the past? So I just needed it to be accurate enough that I have an accurate picture of what happened and why it happened. Based on that, I can then determine, well, what do I want to be different? So that's definitely cautionary tale number 2, pitfall number 2. You don't need perfect books to start. You just need to understand what happened and why it happened.

While they're in this chronic phase of, oh my God, I'm up to here and I don't know why I'm up to here, this is a perfect time. You don't have to be out of that to try to start figuring out now what is ailing you, right, Mr. Finance Doctor?

Exactly. Yeah. Your doctor, they're going to tell you a bunch of numbers. They're going to tell you what's your blood count, your blood pressure, your this, your red blood cells, your white blood cells, your vitamin. Am I in a healthy range? Am I not in a healthy range?

Yes.

Have I improved? Have I not improved?

Yes.

You don't need to know exactly what your red blood cell count is. That doesn't matter. That's nice for the doctor. I look at my blood tests and I look, am I in a healthy range or not? That's all I care about.

And if I'm not, what do I need to do to fix it?

Yeah, definitely. 100%.

Perfect. Avi, this has been such a great conversation. Hey, do you have any last thoughts about what we've been talking about today?

Yeah. I mean, if people want to start doing this on their own, I've got a very easy, easy-to-understand Excel that you can download from my website. I call it my Prosperity Playbook. You can go into my website, put in a couple pieces of information, a couple personal details, and it'll email you a link to download this very, very basic, simple Excel. which anybody can use to figure out what their targets are for their business, where their goals should be. There's a scoreboard there where you can keep track of, well, how am I doing? Am I actually going to meet my goals or not? And help you complete basically all 6 steps, figuring out what your targets are, where am I falling short, and what do I have to do in order to get things back on track?

And this is the perfect time of year to start thinking about that, isn't it? Yeah.

Yes, 100%. Now is the time where, you know, we're right at the end of the year. You want to look at what happened in 2025 and figure out Well, where do I want 2026 to be? Am I good with where 2025 was? Are there certain things I want to change? Now is the perfect, perfect time to start thinking about that.

Love it. Hey, Avi, could you remind everybody one more time how they can get ahold of you?

Yeah, you can go on my website, pinskeconsulting.com. That's got all my information there. You can email me at avi@pinskeconsulting.com, or you can connect with me on LinkedIn and DM me there.

Love it. Hey, Avi, I want to thank you so much for sharing your passion, your expertise with us today. It's been absolutely a brilliant conversation. I really appreciate the fact that you were able to make it so that people who don't know anything about finance could understand what the heck you're talking about. I appreciate you.

Yeah, really appreciate being on your show. And I love teaching people. I love giving over knowledge and helping people understand things that up until now were jargon, was nothing that they could really make any sense out of. So I hope I shared some insights that people can make use of.

Thank you very much. Loved having you on the show. I appreciate you. Why don't you let me know if this was of value to you? As always, my offer stands. If you would like 30 minutes of my time to help brainstorm your business with you and your team, feel free to book yourself on my online calendar. The link is in the show notes. It's the one that's marked meetwith.marchaine.com. And if anything about this show resonated with you and you think you need some help, feel free to reach out to Avi as well. I know that our Our value system is to be of service to you. And while you're at it, why don't you go ahead, leave a comment or review about this episode? I'd love to get your feedback. Was this of value to you? Did you get anything out of it? And of course, if you haven't done so yet, please make sure that you're subscribed to this podcast. You'll get notifications each and every week when I bring you fresh new experts like Avi to help you move your business forward so we can concentrate on working on our business, not just working in our business. Thank you for joining me today. My name is Marc Haine. I hope you stay safe, stay healthy, and I hope you dare to be the exception. Bye for now.

Thank you for joining us this week on Experience Leadership. Make sure you visit MarcHaine.com for a full directory of available episodes. While you're at it, if you found today's content valuable, please share it and tell your friends about the show. As Marc says, knowledge is power, but only if you share it. Be sure to tune in each week for the newest episode. Please stay safe, stay healthy, and I'll see you next time. Thank you, Marc. In the end, dare to be the exception.