The Secret CFO Playbook for Explosive Business Growth with John Hannum, Founder & CEO (#429)

429 John Hannum
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Jeffrey Feldberg: [00:00:00] John Hanom is the founder and CEO of PPS Solutions PC, a firm that provides fractional CFO services and full service accounting and financing to growth businesses. With more than 25 years in corporate finance and as a CFO of companies with phenomenal growth trajectories, John now focuses on bringing the financial firepower commonly employed by large successful companies to the smaller, growing businesses that need it the most. 

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The idea shared forever changed the trajectory of [00:01:00] the business and best of all, the experience was fun. And we'll round things out with Stacey. 

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Deep Wealth Nation welcome to another episode of the Deep Wealth Podcast. And I have a question for you. When it comes to your company, are you doing all that you should? Are you dotting your I's crossing your T's when it comes to your financials, your projections, or if you're like me in my early days, are you flying by the seat of your pants that most entrepreneurs, the answer is usually flying by the seat of our pants.

But what if I told you you could have access to world-class quality CFOs at a fraction of the budget of what you would normally spend and put your company ahead, higher profits, more insights, and easier growth, and when it comes time for your capital raise or for your exit, it's a heck of a lot easier with less mistakes and [00:03:00] less stress.

So all that said, that's what we're talking about today. John, welcome to the Deep Wealth Podcast, an absolute pleasure to have you with us. And every guest has a story. So John, I'm very curious about your story. What's the story behind the story? What got you from where you were to where you are today?

John Hannum: That's a very interesting story and I wish it was my choice to have made that switch. It was rather interesting. my background is corporate CFO, get to ring the bell a couple of times taking companies public, making bigger companies even bigger and, acquiring lots of companies.

So building somethings into the hundreds millions, and billions of dollars. Just out of work for kind of the first time since I was eight, my parents were entrepreneurs as well. So I had uh, you know, forced child labor in the accounting office. was out of work for a few weeks at the beginning of the pandemic, and it seemed like a good time to take a break anyway.

When a friend asked me to consult with a company that was a small 13 million operation. listened to what they had to say and realized and horrified that they made a lot of decisions that, A larger company would not have allowed based on their [00:04:00] finances, so immediately I kind of shifted into this focus of kind of bringing finance to smaller companies.

And I didn't really know how to do that at the time, learned the words fractional CFO and the industry that's burgeoning now out of that. But that was my mission was to just switch from using. My power of numbers to grow big companies bigger to really helping people that matter, people that are you know, could, live or die basically on the, value of their business.

Jeffrey Feldberg: Interesting. And we're going to delve into that. But before we get going, John, let me ask you this, and you can say, Jeffrey, on base or off base, I know here at Deep Wealth, we hear these stories of how most entrepreneurs, they just show up, go to an investment banker, okay, I'm ready, take me to market. And now they're in market.

And John, they may approach someone like you and begin to do the reports. At Deep Wealth, we say, you've already lost before you've begun. If you're already in market and you're trying to do all these reports and everything else, It is a perfect storm for mistakes and failure. Where are you on that big picture wise?

John Hannum: Well, for [00:05:00] startups in particular there's two types of startups in my mind, the bootstrapper that's pulling a thousand dollars out of savings to Throw at a business opportunity and really has to do everything themselves and just, has to learn quick books and do it until they actually get big enough to, to do something that may require some official reporting.

And then there's a capitalized startup, and you probably owe people some money and there's some You know, when they come after you, they come with a subpoena rather than, pitchforks. So, having your, everything together is really important. Losing your, life savings is important as well, but having something all of that reporting and everything that, has to be done with a startup is super key to have somebody that knows that I like the back of their hand.

There are people, I don't necessarily have that skill of a startup because it is a very specific type of capital raise. I spent most of my career in private equity, so understand that level capital raise. But having somebody that matches the experience to help you with that is super key.

I

Jeffrey Feldberg: And with that, so with what you're doing right now for fractional CFO services, and we'll talk what that's all about in just a moment, but back in the [00:06:00] day when you're doing private equity and you're doing your various ventures. Let me ask you this. It's one of my favorite questions in this kind of scenario.

And I'm going to preface it by saying, John, you'd be perfectly right to say, Jeffrey, that's a very general question. It depends on the company, the business, what's going on in the economy, and all of that, and I'd agree with you. But generally speaking, are there patterns? Is it the 80 20 principle where it's like, 20 percent of these same actions are generating 80 percent of these same, some people call them problems, I call them opportunities.

Were there general trends that you're seeing of just mistakes that we're making as entrepreneurs?

John Hannum: don't see a constant set of mistakes. I think the biggest mistake is just not looking at your numbers, right? Thinking that you know your business because you're operating it every day but not actually looking at something that tells you how your business is operating. Most businesses I see that have things like cash crunches, which are super problematic.

If they had looked at the forecast and looked at the idea of what their business was doing, they would have seen that coming. So I think, that's just the biggest missed opportunity. What you look at [00:07:00] is different by business. What your fractional CFO can help you kind of understand about the numbers is different by business.

But just looking at it and not assuming that you know what's going on the key for me.

Jeffrey Feldberg: And so from that, I suppose we can flip it on the head, if you don't do this, you should be doing that. Either back in the day of private equity or the companies that you're now helping them achieve their goals, getting from here to there, the companies that are hitting it out of the park, what would be some strategies or best practices that really across the board, across different companies, they're doing some of these same things?

John Hannum: So, most of the companies I see capitalizing on opportunities are just organized enough to do so. Right? The whole idea behind being in private equity space, for example, is that you operate by their playbook, you're kind of ingrained in their management, they help you to understand and run the business, and they also provide capital and liquidity for the opportunities that come along.

Either, maybe buying another company in your industry, that type of thing. If you're messy or, you know, not. [00:08:00] doing what you should on a daily basis, that opportunity comes along, you might not be able to unlock that liquidity and get that opportunity, so, the more organized your company is and the more it's operating in all of its cylinders, I think the more opportunity comes your way.

Jeffrey Feldberg: Sure. And so let me ask you this. For someone in Deep Wealth Nation, they're hearing us talk and they're hearing fractional CFO. Okay, I've heard the word fractional before, but CFO, how exactly does that work? Or they may be thinking, they're buying into the myth, okay, CFO starts with the C level suite, probably something I can't afford.

So let's assume nothing. John, with what you're doing, first of all, what is a fractional CFO and why can most businesses actually have the budgets to bring one on board?

John Hannum: So first we have to get to what a CFO is, right? Chief Financial Officer. It's a person that brings the finance strategy to the table. So they're a person that if you had a bigger company and you had a boardroom, they would sit at the board table they would be involved with the CEO and [00:09:00] CRO and any of the other COOs and all the other Cs in running the business.

So. Smaller businesses think of finance maybe as their CPA. Somebody do their taxes, ask a few questions, bookkeeping, et cetera. And that's a super important part of the finances because clean books are the basis for good information, which is what finance does, it's really not what a CFO does.

So, in a larger company, a CFO is the finance department and runs that at a strategic level. We try and focus on is dividing that CFO, an actual CFO with CFO experience into small pieces and giving a little piece to each of the businesses that they support. It allows that CFO to still make a CFO level salary which, is important.

And it allows those businesses to benefit from that strategic level Financial Acumen the CFO brings. So, Fractional CFO is really, it could be simple as part time, it could be as simple as a subscription, which is how my firm operates but it's really important that they're bringing [00:10:00] the financial acumen, not just You Kind of doing accounting or not CFO work.

Jeffrey Feldberg: And that brings up another question when most people hear CFO, if they haven't been in the upper echelons of a larger business. They ask the question, and I'll ask it to you, well, John, okay, I have an accountant, I have a bookkeeper, why would I need a CFO? What's going on there?

John Hannum: The CFO is totally different. So the CFO is going to take those books that your bookkeeper is hopefully keeping in a very neat and organized way, and it's going to help you interpret those numbers and what the trends mean, etc. Bookkeeping is usually a backwards looking activity. You're only reporting on the last month and you're getting, Hopefully very quickly after the month.

So you can actually use that information for making decisions, but you're doing it from the previous month. A CFO is going to help you look forward and say, what is the market doing now? How are we going to build a budget or a plan? Cashflow forecast is a pretty important part of that. What are we going to do tomorrow?

And how are we going to, what challenges are coming down the pike? So the CFO starts there and analysts could probably do that and, [00:11:00] help you do that and you wouldn't necessarily need a CFO, but. In preparing that budget and executing that budget with your CFO, you're actually going to think strategically about what your goals and priorities are.

That person's going to hold you to account for those goals. How are you doing with those goals? Who are we tracking on the budget for this or that? And really it's, helping the entrepreneur to think about the financial acumen of the company. like when we're presented with a a situation.

Maybe a difficulty or an opportunity, whatever it is, the CFO can look back in their experience having experienced something similar to this and say, have you thought about this? Have you thought about that? These are the options and here's what I think those options might mean to our budget.

Let's go make a model out of that, understand what it's going to look like, and now we can more reasonably forecast what that's going to look like in your financials. Oh, if it forecasts a negative. Cash balance, for example, we're going to need to go out and get liquidity. Your CFO also helps you do those types of things, work with the banks to make [00:12:00] sure that you're, going to stay liquid have the capital that you need, works with treasury to make sure everything's optimized, maybe even works with your insurance to understand risk and organize your financial profile there.

There's really a lot that the CFO does, and it has very little to do with bookkeeping and accounting. Certainly the basis, but yeah. So, if you're having your CFO do bookkeeping, missing out.

Jeffrey Feldberg: And for so many people in the nation, they haven't raised capital, and John, they haven't had an exit yet. Hearing you talk about this, I'm sure they're saying, okay, you know what, it sounds nice, not so much for me. Let's shift gears now, and we are preparing for a liquidity event. Maybe it's an exit, maybe it's a capital raise, nudge nudge, wink wink, a shameless plug.

They're going through the 988 Deep Wealth Mastery Program and Step 6 Advisory Team. We're talking about all these things How do you find the right advisor and questions to ask and all those kinds of things. So when we're in, and I'll use the two fancy words, liquidity event, when we're in liquidity event mode, raising capital, going public, selling part or all of the [00:13:00] business, talk to us about the difference of a CFO at that point, particularly with your PE background versus a bookkeeper or an accountant, because there are stark differences, but I'd love to hear it straight from you.

John Hannum: As a very stark difference, I would certainly not trust somebody that only had bookkeeping experience to do some of the complicated tasks. Your firm is in a position to help with all of that selection of people, etc., but there's a lot of good people. Going out and getting money requires great plan and it's got to look slick because the people that you're trying to get the money from are going to judge that plan and the person that's giving them that plan, so they have to have confidence you and business in order to do that, so Good books, again, being the basis of that, we have to present clean financial information.

It has to be clear and have a vision. It has to be believable. It has to have a good story. It has to have sex and sizzle. And then they'll give you money. If you have your bookkeeper tossing a financial report out and say, can you give me money that Usually doesn't work. So you want somebody with that skill and somebody that's raised capital [00:14:00] before.

I think raising capital in the venture, capital circuit is totally different than private equity to me. But it's the same idea. You have to have a story. You have to have really clean clear vision of what you've done so far and what you want to do in the future. And I'm sure you can get somebody to give you money.

There's plenty of it out there.

Jeffrey Feldberg: And let's focus now on the exit side, John. Really agree. I'm checking all the boxes with what you're saying. And I want to take you out of your CFO role for just a moment. Let's go back to the private equity days. On this podcast, I've had valuators who have said, Jeffrey, 90%, 80%, somewhere in between there, the value of the business, the enterprise value, it's coming from the narrative.

And I look at the financials after that, obviously you have to be able to back all that up and get that going. And then if I look to step three, future buyer, when we've had buyers on, hey Jeffrey, what really gets us excited is a terrific narrative. Yes, the financials have to be in order. We have to like the projections and everything else, but it's an entire package.

If you just came to us, here are the financials [00:15:00] and that's it. Well, as good as the financials might be, you want to get us excited. You want to get us of a bright, beautiful, hopeful tomorrow of all these nice things that are going to be coming there. Can you share with Deep Wealth Nation, when you're in private equity, wearing that hat, what had you walk away from the table and say, thank you, but no, thank you, generally speaking?

John Hannum: So if I can keep my CFO hat on for the explanation, I will. Cause it's my favorite hat. you know, Everything is, a finance exercise and Everything impacts finance, so when you talk about evaluation, when you talk about, either acquiring or not acquiring a successful deal or an unsuccessful deal, you could buy a crappy company with a lower multiple because it's a good opportunity.

You're gonna pay a higher multiple if you believe in it and it's got some sex and sizzle and you're ready, yeah, it fits right with your business, it's perfect for you that's more of a strategic decision. is kind of math problem at its core.

There is a normal [00:16:00] multiplier in each industry and. There are companies that sell above and below that. The ones that do sell above that, A, are super clean. So they've got a great story and they are able to present it their history correctly. They're able to get through either quality of earnings, diligence whatever level of diligence is presented there.

They're able to whiz through that because they've got great people and great systems on the side to be able to give information. And because, they've crafted a beautiful sim or have some great story they've projected. Otherwise they're just going to get the standard multiple.

And I think that's where that goes. I don't know if you're looking for a non finance answer, but everything to me boils down to that range. How can you value the business better because it has a compelling story?

Jeffrey Feldberg: Absolutely. And let me ask you this. It's interesting, actually, as we're recording today, a short while earlier, I was speaking with an investor. And the investor was coming on and he was sharing very similar to you, what they're looking for, what [00:17:00] they're not looking for, but the currency in mergers and acquisitions, in an exit, in a liquidity event, it's not dollars and cents, it's trust.

I have to trust you and I'm sure you can share stories if I'm coming out and there's mistakes in my financials or in my projections, obvious mistakes that you're picking up that we weren't aware of. Well, there goes the trust. Now I'm going to be questioning everything that's coming out there. So when you're coming in as the fractional CFO and you're now helping me prepare for an exit.

What's going on behind the scenes of what you're doing that I'm being presented professionally, that what's said is true, and I get that trust, and I get that excitement, I get that hope. What's going on behind the scenes with you, the team, the numbers, a little bit of your secret sauce here, John. What are you doing?

John Hannum: so just to be clear, I don't think, at one point I did have a forecast that was exactly correct. There was literally we Shout out the financial statements and the EBITDA number was almost, it was within 4, 000 of what was [00:18:00] projected for the year. It was a hooray moment. It was awesome for me.

Every forecast that you prepare is going to be wrong unless you're Either guessing or you have ESPN and it's just a matter of having that assumption set behind that says here's what we expected and why we expected the numbers. And that assumption set is particularly important in acquisition and presenting your information because somebody else could change that assumption set come up with a better or worse number, but they have a reason to do so.

So building credibility would be putting out an assumption set that matches margin expectations or market expectations or explaining why you're under or over performing the market. For example, when in the um, subcontracting business, we were doing mostly single family and multi residential homes.

And, that's a pretty set industry with A lot of information that comes out, home prices, you know, home everything is going to go up three percent, and you say your sales are going to go up ten percent, [00:19:00] you either have to add a number of homes, or you have to have some way that you're gaming the market and so really being in tune with that and putting out numbers that make sense and that the analysts that are going to look at those numbers can say, okay, this person, these people know what they're doing is key.

I think that Probably answers your question, but that's the secret sauce is really understanding the industry. You bring somebody, the fractional CFO in from a different industry, they might not be able to understand that, or it might be a long learning curve to get to that knowledge of the industry.

And the assumption said that they should have, Oh, great. We're going to increase sales 20 percent because the owner said that we could if you already have a hundred percent of the market. And the market's not going to, go up 20%. You're not going to go up 20%.

Jeffrey Feldberg: I hear you on that. Okay. So we've gone granular and believe me, there is a method to my madness. I promise you with all these questions all over the place. Now let's really start with here. So imagine now, John, I've come to, Hey, I heard you on the Deep Wealth Podcast. We are having an exit. I have some time with the exit.

It's not tomorrow. It's not [00:20:00] next month. It might be three years from now. It might be five years from now. There's a little bit of time, but John, can you help me on the backend with your fractional CFO services, prepare for that. So big picture wise, what are you going to be doing? And roughly how long would that take until you and the team are comfortable?

Okay, Jeffrey, you know, here you go. We're comfortable with this. And now if you want to start bringing on the investment banker and other team members, you're really good to go because we've got your back. We have it covered.

John Hannum: So the answer to that is as early as you can bringing somebody in the fractional CFO space will help you not just run your company on a daily basis and have more income over the time that you own your company, but will help you with the exit. So to me, bringing somebody in, one.

Three years before the exit, just for the exit, there's always going to be a cleanup activity. There's always going to be something that we do that has to be overcome. And therefore you're going to get ready for the event, but you have to start with this huge amount of effort.

To me, Part of the magic of running any [00:21:00] business, whether it's for one year or a hundred years, is budgeting and planning. So we start year one, we budget, we plan, we execute, we have a million dollars worth of sales. Year two, we're going to build a budget and a plan that's going to increase that by some level and we're going to strategically try and figure out the good things to do with the business.

And if we have failures in the business, we're going to minimize those and try and not do that stuff anymore. So every single year, looking at our business operations, growing what we know works, figuring out what doesn't work and taking the failures off the table for the next time, learning from our mistakes.

That activity is the magic of business. Can you do it for three years and make yourself more valuable? Yes. Can you do it for 20 years? And make yourself more valuable. It's just like your retirement or annuity. To me, looking at it every year, you're going to grow over that 20 year timeframe in a lot different way and a lot, better.

And your business might be worth, 20 times what it could have been. I think you've, you've been through that yourself. You could do it anytime, but [00:22:00] as soon as you get in there and do it, it's going to make your business better every single year so that when you're ready to sell, it just happens correctly.

One of the things that, you know, that I've experienced in my life is entrepreneurs that can't do acquisitions as well. So there's an acquisition that comes up, I want to acquire this company, but They're either messy enough that they can't get the loan, which is why we're called in, they can't get the loan to buy the company, or something else happens that they just couldn't do that because they weren't ready.

A well run company with a good CFO is going to be ready to take advantage of that, Maybe have some strategic funding idea of how that cash will come out. So when something comes up, that's a great fit for their business, they can actually acquire that company and maybe double, triple or quadruple the size of it during the middle, and then the next year, what do we do?

We look at that combined company. How do we make it better? Maybe you put things together more, cut costs, think about revenue increases, just do all the things every single year that make that combined company even better. And now you've gone [00:23:00] from, just 20X ing your, you know, your earnings and your valuation to 100X.

So, strategy is, an every year thing, not just the last three.

Jeffrey Feldberg: And John, if I'm hearing you correctly, it sounds as though part of the time that you're brought in is to pick up the pieces. Somebody went out there, It didn't work. Effectively, they failed. All that time, that effort, that money was for naught. And now, okay, John, make it right. So again, in this kind of situation, I know every company is different and situations have changed, but generally speaking, where would be some of the common errors that you're coming in, you're finding them, you're fixing them, and then they go back out, no guarantees, but if they're doing it right, they'll likely succeed.

John Hannum: Yeah. I wish it wasn't true that we get called in when there's a mess, but there's usually some event. Nobody just wakes up in the morning and says, today's the day I'm going to hire a CFO, whether it's fractional or not, we're expensive. Some of us are cantankerous and have bad attitudes.

Nobody just wakes up and says, I want to hire a CFO. I've never gotten a call that just said, I, I thought this [00:24:00] morning I should hire a CFO. There's always an event and I wish it weren't so, but it is. And those events usually are something that can be overcome.

Somebody told me I didn't have my books in order and I need to, in order to sell the company or get a loan or whatever it is that I want to do. In some cases it, we're brought in. To avoid bankruptcy, even, that's the worst case scenario space. Can we save the company? I've done some work both back in the private equity And the fractional work as well. That to me is the worst. Because it's not certain that you're actually going to recover. Okay. first section, you might not get a loan and you might not be able to acquire the company that you want, you'll probably survive and we can get your accounting and your finances, in order and help you survive.

To me, it. No matter where you're at in your growth strategy, a CFO can help, and we don't have to clean up a mess to start, but it usually happens that way.

Jeffrey Feldberg: Okay. And so from that perspective, I'm hearing CFO, fractional CFO, again, assuming nothing, this is all new to me, John, what's the [00:25:00] difference?

John Hannum: and fractional CFO are the same thing, they just do it for multiple people. CFO has experience within their industry, brings that experience to their company, and in this fractional space, we just operate for more than one company.

Jeffrey Feldberg: Okay, so really, it's as though you have one talented CFO, however, I'm not picking up the full cost, if I'm hearing you correctly, of that CFO. I'm going to have part of that CFO's time and there's going to be other businesses that are going to have part of that CFO's time, although you're really handling that.

That's not so much my concern. All I know is I'm getting so many hours, perhaps per week or per month, and that's all I need to focus on. Is that correct?

John Hannum: It is. I'll give you a story of how I found fractional CFOs, and my first idea of a fractional CFO, which was not. It wasn't called that at the time. We acquired a company that had a one day a week CFO. And I thought, well, that's really interesting. The guy came in on Tuesday as he was semi retired.

So I think he had other two clients, but then he did a five day weekend and he did one day in the office. And that [00:26:00] day that he was in the office, he spent part of it walking around, making, catching up from the week before and doing all that. Then he would look over the books and do the things with the CEO, but he was a one day a week CFO and they paid him for one day a week.

On the days as we were working on this acquisition, on the days that he was not there, We could not get to anything. So, you know, there were, four other weekdays. And of course, you know, private equity are working weekends as well. So, six other days a week that we couldn't reach Ron. And that was frustrating.

It worked out because we just organized it so that we bombarded him on the day that he was there, but. Ultimately, that was my first experience with a fractional CFO. The way that my firm works is on a subscription basis. So it's a little bit different than that. The CFOs don't necessarily go into their companies every day or on a specific day.

What we do is integrate the workload so that we make sure all the deliverables are out at whatever day they're due and that the entrepreneurs and the companies they represent feel supported. Through whatever communication channel that [00:27:00] is, and that is specifically emails texts or phone calls. Prefer obviously that, we don't spend all day in meetings or all day on the phone. So, a hundred phone calls a day is, not appropriate for a fractional CFO, but. If you're making a decision on a certain day and you're doing something on a certain day, you have a super important meeting on a certain day, we put that on the calendar and your CFO can attend any day.

And that's the magic of that. Hopefully we don't have, many clients competing over the same exact times. We can organize ourselves correctly and we now support those businesses in the same way that, that Ron did as a one day a week person. But in a much more robust way so that we can allocate the right resources in the right time.

Jeffrey Feldberg: And so, John, with your subscription, as you're calling it, is it always going to be the same person, or if I need more hours, perhaps, in a period of time, it may be other people on the team? How are you working that?

John Hannum: So we do a couple of different things. The CFO is always the same person. I think there's a relationship that happens with your CFO. You work with that person and you develop a rapport. [00:28:00] I think to be successful an entrepreneur has to know, like, CFO, which are three very different things. Knowing gets to liking and trusting, but not necessarily all three.

So. Working with your CFO, we wouldn't want to just toss somebody else in there to do that work. Automatically, but there are times when projects happen and we can allocate other resources, maybe a fractional analyst or some other resources that you can help with that project.

And that's something we do on a regular basis. But your CFO is your CFO. If you don't like your CFO, then we talk about that and we replace them. But that really doesn't happen because it's a relationship that's pretty valuable. And we'll know From both sides, whether that relationship is working.

If you don't pick up your phone and call your CFO when you need to, if you don't like that person, you're not going to talk to them and therefore you're not going to get the support that you need and you're not going to be a client for long. So, we monitor those relationships and make sure that everybody's really working together on the relationship.

Jeffrey Feldberg: And you mentioned something [00:29:00] interesting just now, which perhaps you're going to be able to check that box. So in addition to the CFO, as a company, particularly if I'm going through a liquidity event and I'm in that preparation phase, it's not just going to be a CFO that's going to be required. There may be some other areas outside of the CFO's expertise, or it just doesn't make sense economically for a CFO to really be doing that.

So with your service, John, How would you cover that? Is that also different team members that you have that you bring to the table? Or are you bringing in other people from other companies? How are you handling that?

John Hannum: We do a couple of other services in addition to the CFO. I call it a full service accounting and finance. So I do have some analysts and some accountants that do physical accounting and bookkeeping, that type of thing, or analysts that prepare KPIs or those types of things. We use several different reporting systems and, we might put together a package that would make sense for a particular business in addition to having their CFO.

So they could have a subscription for that. Or we could have a project work as well. We're not a [00:30:00] huge firm. We don't, don't have a ton of analysts, but we can find resources and make sure that entrepreneurs are supported through whatever finance issues they need.

Jeffrey Feldberg: Okay. So it sounds like you're looking at the big picture. Hey, Jeffrey, we have these areas here. We either, we're going to find someone who outside of us can do that, or we have those resources here. We're going to put that on just to help get you out there. How am I doing with that?

John Hannum: That's perfect. Yeah. We try and capitalize on anything that's going to help the business grow. Probably not going to advise as closely on sales and marketing as a sales and marketing person, but even then, we can do reporting on sales and marketing, help people understand what the trends and patterns are.

We really touch all of the different spaces and, you don't want your CFO preparing reports and doing that kind of thing. There has to be some level of support for that. So, we kind of offer that support. in addition to the CFO service as necessary. It's not a huge component to what we do.

The CFO is the, the kind of the crowning achievement of the firm, but still CFO needs resources and an average finance department, I've had [00:31:00] finance departments up to a couple hundred people reporting in and offshoring transactional functions and rooms full of analysts looking at who in the world knows what And then, the private equity company has a whole other room full of analysts looking at our who knows what and asking us questions about the who knows what, and we have to be able to explain business to other people that are looking at it.

So you can have a huge staff of analysts here, we just, you Do some basic reporting and try and tie the business success to whatever the the numbers we should be looking at.

Jeffrey Feldberg: And somewhat of a loaded question, I'll ask you anyway. So when I'm out there in the marketplace and, okay, John, you've sold me on a fractional CFO and I'm doing my diligence. I'm speaking to other CFOs and fractional CFO services. What would be some things I definitely want to see in a fractional CFO service and some things that would be red flags?

John Hannum: Sure. So, there's a lot of different models out there. Some firms operate on the subscription model like mine does a lot of operate on the consulting model. Most [00:32:00] are CPA firms that have added that, service as a, an extra service in addition to the bookkeeping, they'll also do some CFO work for you.

So there's a lot of different models and I think finding the model that works for you is good. if you just want a little extra reporting, your CPA might be an interesting place to get that because they're going to give you the financial acumen, but they don't have the kind of operational CFO experience.

So choosing the type of firm would be the first step. And then I would. Focus on industry experience. So, somebody that has experience within your industry in my firm, we specialize because all the CFOs so far that we have working are in the construction, manufacturing home services, those types of spaces.

So, we don't do things like aerospace and film and television, healthcare, hospitality so far. Although I'm working on hiring a hospitality CFO right now. So, my plan is to grow those verticals and try and match the experienced CFO with the right industry. And therefore we do all the industries.

That's a little bit different than some of my competition that [00:33:00] is looking at only focusing on one type of industry and therefore, really specializing in that industry. I think the CFO should have that experience and be matched to that industry. The most important thing though, once you decide whether the firm, what type of firm you want, that they have the experience, is whether you know, like, and trust that person.

When you interview them, you should ask questions and get to know them a little bit. If that person doesn't know you, Inspire you to want to talk to them. It's probably not going to be the best relationship. You should build that relationship over time, but you have to be honest with this person.

This person's going to be very close to you and involved in things that most other people in your life are not going to know about you, your finances. So, you have to really know, like, and trust that person for it to be successful. And if you just don't like them, It's a bad idea.

Jeffrey Feldberg: Okay. And so for some clarity here with. Your experience, what you've seen, where you've been, for a fractional CFO, if they have industry experience, if they don't have industry experience. [00:34:00] Does that make a difference? Is that something I should be looking for?

John Hannum: I, I believe it's very important. There are things in the accounting for each industry that are super important to know. So, I wouldn't necessarily be able to think about those things. It's certainly accounting concepts. I could learn how to do things outside the industries I know, and that's how I learned originally the industries I do know.

But When you have an experienced CFO, they already have those concepts and they've been able to implement those concepts across other companies. So I think it's super important when you have a generic finance person, something like your CPA, that's adding that CFO service. They may have seen the tax returns books and records of a bunch of companies.

They haven't helped run those companies really make those business decisions. CPA is not necessarily somebody you call in on, most business decisions on a daily basis. So, they really only see the result of that within the books and records and tax returns. So, to me, experience is the number one thing that you should look for in a [00:35:00] CFO, in addition to being liked.

Jeffrey Feldberg: Okay. And Deep Wealth Nation, with what John was saying about being liked, absolutely true, John. Actually, one of the questions that we have people asking, Deep Wealth Mastery, before you hire an advisor, do a thought experiment. If you're on an airplane and it gets delayed, I'm giving you the abbreviated version, the airplane gets delayed and you're on the tarmac, you can't go back to the gate, you can't go back to the gate.

You're next to this advisor for nine hours. Are you crawling out of your skin after the first five minutes or the nine hours pass? You know, it wasn't so bad. Could have been worse, could have been better, but it was a pleasant experience and that's absolutely true. So my takeaway is finding a fractional CFO who knows my industry would be preferable to one who's more general and who doesn't, correct?

John Hannum: That's definitely correct.

Jeffrey Feldberg: Okay. Got that. Okay. So some words for the wise on that. And then timing wise, John, to get my company in decent shape. For an exit, how long do you think you would need? Okay,

John Hannum: You can do it in a short period of time, as long as you can get in and clean the books up and [00:36:00] paint the picture the longer road you have, though the better result you can get.

Jeffrey Feldberg: fair enough. I would say the same thing. Preparation is the gift that keeps on giving. And before we're going to wrap up, Mojan, I'm curious. Artificial intelligence, it's making headlines every single day. It's changing business as we know it. When it comes to fractional CFO services, where does AI play a role?

Where doesn't it?

John Hannum: Well, AI is a machine, so, it can do machine things, and it can actually be a really powerful tool for things like accounting for things like, Report preparation, trend analysis. I think that CFOs will use it to do some of the heavy lifting and work that honestly take a lot of effort and energy sometimes, especially back in the day.

What it doesn't can read, it can summarize, and it can give you back information about what other people have said before, but it can't tell you what to do, and it can't tell you what it thinks might happen if you do one thing or the other, because it doesn't have that experience. It has data.

And so what a CFO brings, hopefully [00:37:00] they can use the mastery of using those AI tools to make their lives easier and to make everyone's lives easier, but they still bring that idea of, Have you tried this? What about that? It's I, AI is probably going to replace the idea of the doctor in the end, but I'm still going to go to the doctor and ask, their opinion as well.

If I feed the symptoms in and get a diagnosis out, it's probably, it's probably I'm going to be relatively correct in the same way that if I feed all the accounting in and get a solution out, it's probably going to be correct. But the doctor knows, hey, last time I prescribed this in a patient, they died.

Hopefully the CFO is bringing that experience as well and saying, have you considered these other things based on their experience?

Jeffrey Feldberg: Got that. Okay. Fair enough. And before we go into wrap up mode, John, I know there's so many questions I could have asked. I did not have the chance to ask. Is there a particular question you want to highlight? Is there a topic, a message, a theme that we haven't covered yet that you want to share with the Deep Wealth Nation before we go into wrap up mode?

John Hannum: And I think we've really covered quite a bit. The thing I'd like to reiterate, [00:38:00] just is the prevalence of the industry fact that a CFO can help. you have a business and you don't think the CFO can help, you literally aren't thinking about how they can. So, I recommend Every business who doesn't have somebody really competent in the finance chair, actually just reach out talk to a fractional CFO, whether it's me or not, and just understand what it is that we do and how that impacts your business.

I guarantee that most businesses out there that are doing something exciting, something other than just Repeating the numbers every year, fractional CFO can definitely help. So, I think that's the message I'd like to leave everybody with and give them the opportunity to seek that out.

Jeffrey Feldberg: And Deep Wealth Nation, this is not gold. It's platinum. I can share with you. If you've never done an exit or a liquidity event before, I know from the outside looking in, well, maybe it's nice to have. I'm not so sure if I need it. You need it, period, full stop, end of story, you're going to have reports coming at [00:39:00] you every which way, time sensitive, they need to be accurate, and there needs to be a level of depth and experience behind that to tell the full story, to create that trust, to increase that enterprise value.

So I absolutely love, John, what you've been sharing with us. So all of that said, we're at the point now, we're going to wrap up, and it's our tradition here on the Deep Wealth Podcast, John, I have the privilege and the honor to ask every guest the same question. It's a really fun question. Let me share it with you.

When you think of the movie Back to the Future, you have that magical DeLorean car that can take you to Any point in time. So John, the fun part is it's tomorrow morning. You look outside your window and there it is. The DeLorean car is curbside. The door is open. It's waiting for you to hop on in what you do.

And you're now going to go back to any point in time, perhaps John, as a young child, a teenager, whatever point in time it would be, what would you tell your younger self in terms of life lessons or life wisdom, or, Hey John, do this, but don't do that, what would that sound like?

John Hannum: Early in my career, especially, I was very focused on, on details. I was [00:40:00] very organized into making sure that everything was perfect. And, for me, everything doesn't have to be perfect now. Everything has to be directionally correct and on the right track. And so, part of me going from, Being an accountant to being a CFO really was that journey kind of understanding that it's not just the accounting system that's important and the numbers don't have to be perfect, which may contradict everything I've just said in your podcast. But they do have to be directionally correct, and we have to really use them to understand how we're going.

That took me too long to learn, I think, and I probably would have had an even better career if I had focused on that earlier.

Jeffrey Feldberg: Hey, and so if you had to put that into a sentence. What would that sentence be for your younger self?

John Hannum: Get to the important part your job function. And stop dwelling on, the tiny minutiae of things, get to the, center of your job function and be good at that.

Jeffrey Feldberg: I love that. You know, we don't hear enough about that today. Hey, you have a craft. Honor your craft. [00:41:00] Always take it one up. Be the best in the world that you possibly can. It's some terrific advice. And John, before we officially wrap up, a listener, they have a question. They want to speak with you or the team.

They even want to become a client. Where would be the best place online for someone to reach you? Terrific.

John Hannum: At our website, it's ppsfinance. com PPS is People Process Systems because I believe that those things are required in that order for proper success, but ppsfinance. com, there's a calendar link there. I'll, Talk to a lot of people. I take a lot of meetings. I'll answer any question and whether or not you need a CFO will get you to a resource that makes sense for you.

I love helping business grow and figuring out and unlocking the potential of that. So Fractional CFO is not for everybody, but if you, you know, you want to talk about it, I'm happy to talk about it.

Jeffrey Feldberg: Well, this official. It's a wrap. Congratulations, John. You've done it. And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and safe. Thank you so much.

John Hannum: Awesome. Thank you. 

Jeffrey Feldberg: So there you have it, Deep Wealth Nation. What did you [00:42:00] think? 

So with all that said and as we wrap it up, I have another question for you.

Actually, it's more of a personal favor. 

Did you find this episode helpful? 

Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? 

And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

Are you ready for it? 

The dramatic pause. I'll just wait a moment. Drumroll, please. Subscribe. Please subscribe to the Deep Wealth podcast on your favorite podcast channel. When you subscribe to the Deep Wealth Podcast, you're saving yourself time. Every episode automatically comes to you, and I want you to know that we meticulously craft Every one of our episodes to have impactful strategies, stories, expert insights that are designed to help you grow your profits, increase the value of your business, and yes, even optimize your post exit life and your life right now, whatever you want that to look like.

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So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

And as we love to say here at Deep Wealth, may you continue to [00:44:00] thrive and prosper while you remain healthy and safe. 

Thank you so much. 

God bless.