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In this episode of The Business Owner's Journey, Nick Berry sits down with Brooke Lively, founder of CathCap, to dive into fractional CFO services and the essential financial metrics to run a small business by the numbers. Brooke discusses her recovery after firing a major client representing 94% of her revenue, the six key numbers every business should track, and the transformative power of EOS in driving business growth. The conversation offers valuable insights for entrepreneurs on managing business finances effectively and scaling operations.
Brooke shares the pivotal moment when she fired a client responsible for 94% of her revenue because of a misalignment in values. She highlights the struggles that followed, including managing payroll and cash flow during a challenging 26-month recovery period. Brooke explains how this decision ultimately aligned her business with its true purpose, leading to growth and long-term stability.
Brooke introduces her Rule of Thirds approach: allocate one-third of income to personnel, one-third to overhead (including marketing), and the final third to profit. This method helps businesses balance expenses, avoid overspending, and ensure profitability, making it a foundational strategy for small business financial management.
Brooke details the six key numbers that every business owner should use to manage their finances effectively. These include cash flow forecasts, work-in-progress (WIP), and budget vs. actual reports. Each number serves as a crucial diagnostic tool to anticipate challenges and align business strategies for growth.
Brooke highlights how the Entrepreneurial Operating System (EOS) was instrumental in helping her clients achieve “hockey stick” growth. She explains that EOS provides structure and accountability, enabling businesses to identify bottlenecks, set priorities, and execute on strategies efficiently. Her experience as an EOS implementer brings firsthand insights into the system’s transformative impact.
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The Business Owner's Journey Podcast host: Nick Berry
Production Company: FCG
Brooke Lively (00:00)
Have you ever noticed that when you have to make a really big decision, you tend to kind of screw a whole bunch of other things up at the same time?
So not only was I making this decision about firing this big client, I managed to piss off almost all my other clients. So I was left basically with one client and I had an assistant. had two CFOs. had, I had people, I had payroll and
Everybody had non-competes, so they could not go work for anybody else.
Nick Berry (00:33)
The Business Owner's Journey. I'm Nick Berry and I've got real business owners telling their real stories, sharing their real lessons and strategies so you don't have to figure it all out on your
Nick Berry (00:45)
Brooke Lively is the founder of the fractional CFO company, CathCap. And I wanted to have Brooke on because I wanted her to share two things. The six numbers that founders need to know to be able to run their business off of, which is what she wrote her book about. And the story about her firing her client who made up 94 % of her business because they weren't a core values fit. then going into the red for two years.
and her journey back from that. Then we got into talking about EOS, Profit First, a bunch of other things. It's a great episode. If you find it valuable, please make sure that you subscribe, share, and like. Here you go.
Nick Berry (01:23)
is. Yes, so you've you've done this before.
Brooke Lively (01:23)
firing my biggest client.
Everybody wants to hear about that. And I've learned that talking about it is important.
Nick Berry (01:35)
Yeah. Okay. Let us have it.
Brooke Lively (01:37)
did I fire the client that was 94.3 % of my business? He was not a core values match. And I was spending all my time, like standing between him and my team, doing everything I could to make sure he was not having any contact with my team. So we were white labeling for him.
We were providing CFO services to his clients under his brand. And we didn't love what his brand was representing and didn't like, I didn't like the way he treated my team. And it was really stressful. you know, was funny because my team made comments like, I don't know.
what happens between the two of you, but it must be really stressful for you.
Nick Berry (02:31)
There's your sign right when your team is saying I don't know if you're like, okay something's wrong
Brooke Lively (02:32)
Hahaha
Yeah, and So I, you know, I fire all my business, right? I'm down to like, well, Nick, I don't know. Have you ever noticed that when you have to make a really big decision, you tend to kind of screw a whole bunch of other things up at the same time?
Nick Berry (02:52)
Yeah, I've seen that happen. Mm-hmm. In other people.
Brooke Lively (02:53)
Yeah, maybe occasionally. So not only was I making this decision about firing this big client, I managed to piss off almost all my other clients. So I was left basically with one client and I had an assistant. had two CFOs. had, I had people, I had payroll and
Everybody had non-competes, so they could not go work for anybody else.
And that big client was like, well, I'm just going to ask your people to work for me. Legally, they can't, but I didn't want to stop them from making a living, because I didn't know if they would be able to survive if they stayed with me. Everybody stayed with me.
And what was amazing was that client kept offering them more and more and more money. And they kept saying no. And he finally asked me at one point, he's like, why won't they come work for me? I said, it's not always about the money. Very often it's about the culture.
Nick Berry (04:01)
Probably a question you had to be careful with how you answered. Even if you didn't want to be.
Brooke Lively (04:08)
Right, was a, we did have a clause where we couldn't say anything not very nice about each other.
Nick Berry (04:18)
So what did it do? I'm sure it was, did a lot for you morale wise at that point for your team. was kind of a humongous vote in your favor.
Brooke Lively (04:28)
Absolutely. They were, they're like, we're in. And I did everything I could. I lost money for 26 months in a row. But, you know, I knew that this was coming because I gave him notice and I gave him three months notice. I gave him four months notice, actually. I gave him four months notice and that would have gone through January. And he said, no, no, no, let's just end December 31st.
I'm like, okay, that's fine. End of the year, very clean. Great. Then he couldn't find any CFOs. So he said, well, this is hard. It's harder to find CFOs than I thought. I'm like, just wait till you get to train them. And so I ended up staying through January. And then at the end of January, like halfway through January, two thirds of the way through January, he calls me. He's like, yeah, I still haven't found anybody.
Can you stay through February? So I had been hoarding money. I had set up lines of credit. I had done all the prep necessary to lose money for 26 months. So.
Nick Berry (05:43)
how many more months did you have? like you didn't know the number, right? When you started.
Brooke Lively (05:48)
Not a lot.
Yeah, I did not know it was going to be 26 months and it was it was it was really hard and you know, I remember applying for that last credit card and and I got it It had a whopping $3,000 limit and I waited for it to come every single day and It finally came and I so grateful that it had come
And I waited until like 10 or 11 at night and I went to an ATM on the other side of town because I was so embarrassed about what I was about to do. And I took a cash advance for every penny I could get on that credit card. And then the next morning, as soon as the bank opened, there I was sliding that stack of $20 bills across the counter to deposit them so that I could make payroll the next day.
Nick Berry (06:49)
Probably didn't sleep the entire night.
Brooke Lively (06:52)
Yeah, it was close and it was tight and that was, yeah, I wasn't hanging, I wasn't at the end of the rope. It was no longer a rope. had frayed down to a very, very, very thin thread.
Nick Berry (07:11)
Yeah. So then what's the turning point? Because we're here. And that was when? 2015? So nine years.
Brooke Lively (07:20)
That was 2015, so I started making money in 2017. yeah, was, what turned? I figured out how to sell better.
I knew how to price what we did and I knew how to give great service. knew how to, our clients loved what we did for them. I just didn't know how to get them in the door. So I worked on learning how to sell and I learned that you have to raise your hand and say, we're really good at what we do.
Nick Berry (07:56)
What made your label come on and realize that you needed to learn to sell? Was it like you finally just got back completely against the wall or did you figure it out somewhere before that and it just took a little while, you still had to like fully go into the trough.
Brooke Lively (08:13)
maybe I was having an alcoholic moment where I had to really hit rock bottom. because you know, I'm the type of person that thinks if I have a fabulous product, everyone is going to just fly. Yeah. Don't we all resemble that remark? You know, people are just going to flock to you naturally. They'll just find you. Yeah, they don't.
And I tried different things. It took me a while to figure out where my clients were. And Nick, that's something that doesn't stop. We're still doing that. My COO does all the sales now. We were hiring a salesperson and ultimately after searching for almost a year decided not to do that. And my COO now does all the sales.
And she went through a sales program to learn how to sell. And she is amazing. So wish that I had found this program 10 years ago, because I would have had a very different business. Yeah, it's called Forest Performance Group and their website is fpg.com.
Nick Berry (09:26)
Do you mind sharing what the program is?
Brooke Lively (09:37)
Forest Performance Group. And they're just amazing at training you. And they say you've got leashes. There are leashes that are holding you back. And it's all about learning how to remove those leashes. And once you do that, you can sell. And all those beliefs that are holding you back. Because, you know, where is the sale getting killed?
Nick Berry (09:56)
But beliefs.
Brooke Lively (10:06)
The client's not killing it, we're killing it in this one square foot of real estate in between our ears.
So I think with sales, it's always an evolution. We're always trying new marketing things. We're always refining who our client is. We're always refining where to find them. We're always trying new ways to find them.
Nick Berry (10:28)
Mm-hmm.
Brooke Lively (10:29)
And at the same time, we're on the back end looking at our product. How can we improve it? How can we give clients a more individualized experience, a more customized experience? How can we give them a better experience? How can we help them execute better? What needs to be improved? Yeah.
Nick Berry (10:52)
Mm-hmm. Create more value. How can we get more mileage out of what we do for them?
Brooke Lively (10:57)
Exactly.
Nick Berry (10:59)
Yeah. So you said it was your COO that's doing the sales now.
Is this somebody that went out there being responsible for making it rain? Or is this somebody who's going to, if I try to put them out there, their heart has got them focused on the product. They're not really cut out for it. Is your COO made for that type of thing?
Brooke Lively (11:18)
Pam's a unicorn, and in fact, we have sent her unicorn things in the past. She is, when we do testing, and we've done all the tests, we've done disc, we've done Colby, we've done, I mean, you name it, we've done it. The six working geniuses, yeah, yeah, yeah, we've done them all. And we test very, very similar.
Nick Berry (11:36)
Yeah, I love them.
Brooke Lively (11:47)
except for one thing and we were doing a culture index. And culture index measures something that says how long you can work outside of your natural tendencies.
I can't work outside of my natural tendencies all that long. It really drains me to do that. Pam can do it almost forever. So we talk about her rubber band. She can stretch. So while naturally, if you look at disc, she's an I with a sided D, right? So she's that extrovert and she's gonna talk to anybody.
And she's got those, that, powerful D kind of drive and, and impact. And yet she can go, I can't remember what the blue one is, but she can see, yeah, she can go into C and be very detail oriented and really work on the product and really make sure that we're doing things in the right order. and, and
Nick Berry (12:47)
Let's see.
Brooke Lively (13:00)
create a structure out of chaos, which is great. I'm so grateful I have her.
Nick Berry (13:05)
Yeah, so...
Yeah, like that's that person. I could see that being like the perfect recipe for somebody who you want them to be your, your front person, your network or getting out there and like spread the word and be the ambassador. And they can also go into analytical mode enough to be able to speak the language of the service. Cause you, don't know how well you can, you can want it, but I don't know how far it's going to get you to try to sell a CFO service. If you just like.
I can't get into the details. I don't know if that fits in the profile.
Brooke Lively (13:43)
And that was part of the problem we had when we were looking for a salesperson. Because the question was, do we hire someone who doesn't know how to be a CFO and teach them what they need to know to be able to sell it? Or do we find someone who's a CFO and teach them how to sell?
And a lot of people who are CFOs, I mean, think about accountants. I was told that I should be a accountant. When I went to grad school, I took every test no demand. And they came back and they're like, you should be an accountant. And my response was, I am way too fun and entertaining to be an accountant.
And now I own a CFO company. So.
Nick Berry (14:26)
Funny how those things come about.
Brooke Lively (14:27)
They were annoyingly right. But, you know, it's hard to find that combo, which is why we ultimately went with Pam, because she has the ability to do that. She started with me as a CFO, as a part-time CFO.
Nick Berry (14:45)
So when was that?
Brooke Lively (14:47)
my gosh, when was that? 2019, 2020?
Nick Berry (14:52)
Okay, so make sure I've got my other time on right. So 15 was kind of rock bottom or 15 is when you fired the client, 17 ish is rock bottom. And then like you started the upward trajectory and stumbled around a little bit trying to get, figure out the sales formula for you. And then you got Pam, believe you said her name was, and then you found the methodology that you really like the training and.
onward and upwards instead.
Brooke Lively (15:23)
Yeah. And you know, if you think about it, there's in your business, there are always going to be constriction points. And the trick is finding the constriction point and fixing it. What's what's broken? What's not working properly? And for a long time, it was sales. You know, right now we have fixed the sales issue.
Now we just need to shove more people, PAMs, away. So we're like, OK, marketing, kick it into gear. Because we've got all the CFOs set up. They're trained. We figured out how to onboard better. We've done that work.
Nick Berry (15:51)
Mm-hmm. Yeah
Yeah, we've got the machine built now. let's let's go.
Brooke Lively (16:03)
The machine?
And as soon as we get marketing fixed, there will be a new constriction point somewhere. And it's just anticipating where that's going to be.
Nick Berry (16:13)
So when you're talking about, first anticipating where it's gonna be and what's broken, where are the bottlenecks? my diagnostic is always gonna be in the numbers, which I know that's your thing. So you have your methodology, I think it's your six numbers, right? And did you have that at the time
Brooke Lively (16:27)
Six
Nick Berry (16:29)
when you were kind of coming out of rock bottom and started trend upward, is that how it came about?
Brooke Lively (16:35)
Yeah, I've I have had my six key numbers methodology and my rule of thirds since I started the company. And that that has always been part of it. So I believe you should run a company based on the rule of thirds. One third of gross income goes to the people doing the work. One third goes to overhead. That includes marketing.
and one third goes to profit.
You know, if you're an owner and you are still actively working in the business, if you're still manufacturing the product or delivering the product, then yeah, your salary falls under people.
Nick Berry (17:14)
Mm-hmm.
Brooke Lively (17:14)
As you grow, as you pass that one or two million dollar mark, you're going to start to get bigger. You're going to start to have a marketing person. You're going to start to have dedicated office people.
and they'll start to move to overhead. And your job will probably change and start to become much more leading and coordinating and less delivering.
Nick Berry (17:38)
Visioning. is what I hear you saying talking about is yes the owner you're you're wearing who knows how many hats and you need to start to become more aware of it so you can begin to compartmentalize those and recognize which functions time is being spent on and and kind of allocate cost
into the appropriate third So bottom line, most small businesses, most businesses don't really run their business by the numbers. I definitely agree with that. Is this one of the big problems that the owners wearing so many hats and just like not really being able to compartmentalize?
Brooke Lively (18:13)
There are a couple of things and so bear with me because this is not going to be a speedy answer. The first part of the answer is people almost always are paying too much for their people. Sometimes it's inflated salaries. Sometimes it's a lack of expectation of production.
Sometimes it's a lack of enforcement of production expectations.
Sometimes we work with a lot of service-based industries. So sometimes it's a pricing issue. We're paying someone $100,000, we're billing them out at $50 an hour.
Do you know how many hours they're going to have to work to make that add up? And sometimes it's a collections issue. So we've got to figure that out and see which one. And usually it's a little bit of everything, and you kind of, you know, a little adjustment here and a little adjustment there. So yes, very often I see people overspending. Your question about the owner.
Owners think their time is free. And it's not.
your time. I'm going to use a lawyer as an example. If you are an attorney and you bill out at $500 an hour,
and you are sitting there balancing your checkbook or accepting transactions in QuickBooks or you're doing the filing.
Nick Berry (19:43)
taking out the trash.
Brooke Lively (19:45)
taking out the trash, going to pick up the mail, all the copies, like whatever it is that you're doing. You are spending $500 an hour to get that done. Geno Wickman's latest book is called Shine, and he has 10 things that you should start doing and stop doing. And one of the stop doing things is don't do $25 an hour work.
He has always been big on delegate and elevate. Figure out what those things are that you're not good at and as horrible as it sounds, are below your pay grade. Give that to somebody else who can do it faster, cheaper and better because it opens you up to do higher value work that brings more value to the company. You know, if I could give you,
Every client is worth, I'm gonna make it up, $50,000. And it takes you 10 hours of prospecting to get a $50,000 client. And I tell you that if you quit doing your books, which is taking you 10 hours a week,
that you could take those 10 hours and get $200,000 worth of clients a month.
How much would you pay a bookkeeper?
Are going to pay a bookkeeper $200,000 a month? No. No, are you going to pay a bookkeeper $200,000 a month? There's going to be a lot of profit there for you. So you have to look at the opportunity cost of you doing the work.
Nick Berry (21:17)
I just don't think that people tend to look at it like they have an opportunity to buy their own time. They look at it like it's money out of pocket as an expense, but really you have an opportunity to buy your own time if you're the one stuck doing those things.
Brooke Lively (21:36)
Yeah, and there, have you read the book Who Not How?
Nick Berry (21:39)
I don't think so.
Brooke Lively (21:40)
Okay, It's a great book and one of the things it says is you don't have to do everything.
You have to know who can get it done. And I know so many owners, founders, and entrepreneurs that are like, I don't want to spend exactly what you said, the out of pocket money to figure out or to hire someone to talk to someone yesterday that needs to get their SEO done.
You know, I can figure that out myself. How many hours does it take for you to do the research, to keep up with it? You had somebody on your show recently that was an SEO expert and he talked about how much time he spent trying to keep up with the Google releases and what was new and what was going on. And, if you do that,
Nick Berry (22:29)
Mm-hmm.
Brooke Lively (22:31)
That is an entire job.
Nick Berry (22:32)
Yeah.
Brooke Lively (22:33)
How much, what does the opportunity cost to you and your company of you delving into a world where really you don't have, you don't get it. That's not your magic. You're not gonna do it very well. And you're gonna do it, you're gonna spend a whole lot more time on it than an SEO company that does it all day every day.
Nick Berry (22:44)
Right. You're probably not going to do it great.
Yep. It's so it's funny you mentioned that that was Matt Diggity. And I've seen a video that he did about calculating your effective hourly rate. And he was talking having this discussion exactly and use the example of you're trying to raise your effective hourly rate.
You need to look at tasks in terms of dollars and time spent. And if you want your hourly rate to be $100 an hour, then anything below that, you need to outsource. So if you can get your lawn mowed for $25 an hour, like it doesn't matter that you could do it. You need to buy that time. And it really can be distilled down pretty close to that simple.
Brooke Lively (23:37)
Yeah. And found it.
Nick Berry (23:37)
But then we're humans and we've got these things that we just want to do. And I'm I'm very guilty of it. I'm a DIYer. I was taught to be an independent. And I've had to do all the beliefs work to be able to delegate things effectively. So understand it's not as simple as a choice.
Brooke Lively (23:55)
But Nick, sometimes those things bring you joy and you should do them. So mowing the lawn is a great example. That is how Pam gets into her zen state. She's got a couple of acres. She's got some zero turn riding lawn mower.
Nick Berry (24:16)
Mowing her yard is a premium experience.
Brooke Lively (24:18)
She loves to mow the lawn. Nobody else mows the lawn, she mows the lawn. that brings her happiness. she shouldn't pay someone to do that because then she loses that joy.
Nick Berry (24:31)
Agreed.
Brooke Lively (24:31)
but if it's not joyful for you.
Nick Berry (24:33)
Right. And you just need to be aware. if she chooses to do it, she's intentional about it. Right. That's the thing. You can make that decision. You just want to do it being fully aware and intentional.
Brooke Lively (24:46)
Absolutely.
Nick Berry (24:47)
do you mind going through the six numbers
Brooke Lively (24:49)
Yeah, sure. I'm happy to go through that.
The six numbers fall into categories. And you can, to some extent, if a number isn't perfect for you, you could use a slightly different one. But these are pretty universal numbers. So the first category is cash. We all know that cash is king. So the key number is your cash flow forecast.
How much cash are you going to have at the end of every week? Because Nick, you know as well as I do that you don't spend money or collect money in equal amounts all four weeks in the month, right? The first and the third week are really expensive because the first week you have rent and payroll, the third week you have payroll and...
You know, most people don't like to pay you until the fourth week, right? Because you send the bill out on the first. There's some component numbers to that. Like, you need to know what the balance is in your account, and you need to know how much AR you have and you're going to collect. You need to know what your monthly nut is. How much does it cost to open your doors? But really, that key number you're looking for is
cashflow forecast. The second category is production. And this is all about how much work you can move through your company. And I'm going to pull a term from manufacturing. It's whip, work in progress.
How many half assembled bikes do you have? How many bikes can you assemble in a month? And you need to know this because that tells you, you know, if you can only produce 100 bikes, then you're only gonna sell 100 bikes.
Nick Berry (26:45)
It tells you where you're tied up right now and what your ceiling is.
Brooke Lively (26:49)
Exactly. And it's absolutely the same with service-based businesses. So if you are a marketing company that bills by the hour, there is nothing better than looking at your WIP week over week. And there's a point. Do you know why Black Friday is called Black Friday?
Nick Berry (27:07)
I don't.
Brooke Lively (27:07)
Black Friday is traditionally about the time of the year where retail stores become profitable. It takes them 11 months to basically cover all of their overhead and their inventory costs. And then that last month is really where they make their profit.
So a service-based business, any business, has kind of a Black Friday moment in it where they have, let's go back to that marketing company, they have billed enough that if they collect it, they're gonna cover their nut for next month. So your cash balance tells you how much money you have. Your WIP tells you how much you're gonna collect next month.
so you can start to forecast. The next one we want to look at is marketing and sales. So we know how much we have now. We know how much we're going to collect next month. Now let's look further out than that. So we want to know what ultimately we're going to bring in in a few months. So we want to look at sales calls booked.
Because we know that if we book a sales call today and for every 10 sales calls that we have, we get three clients and every client is worth $50,000. That means that we'll bring $150,000 worth of new business in and it takes us two months or three months before we get paid. Now do you see how we're really starting to build our
are forecasting, like we can really tell how much we're going to collect. To be able to really look at marketing and sales and to use your sales call book effectively, you need to know your conversion cycle. So how long it takes from the time you get a client until they pay you. And you need to know your conversion rates. How many of the people that call
book a sales call, how many people that book a sales call show up for it? How many people that show up convert?
So.
The last kind of forward looking one that we're going to talk about are engagement based KPIs. if you think about any kind of engagement, it's what is the average price of whatever you're selling? How long does it take to produce or deliver that? And how much staffing or inputs does it take to produce or provide that?
And what we really want to look at is net new engagements. Because this is going to tell us where we are on capacity.
Are we over capacity or under capacity? Should we be ramping up marketing or slowing it down? Yeah. Do we need to hire more people or do we need to start laying them off because we're only running at 50 %? We're only using 50 % of our capacity.
Nick Berry (29:52)
We need to hire.
Brooke Lively (30:05)
So there are two more and these are a little different. The first one is the budget versus actual.
And this is the one, it's a standard report that comes out of QuickBooks or any accounting system. And what it does is it puts what you actually did this month next to what you planned to do this month. And you just look at it and compare. Was I over? Was I under? Was I over for a good reason? Was I over for a bad reason?
You know, office supplies were up because we bought a ton of binders. Is that good or bad? Well, if it means we got a lot of new clients because every new client gets a binder and it costs us $150 to set up every new client, then that's good.
if it was high because true story your office manager is stockpiling paper clips and staples apparently an entire closet full.
So good.
Nick Berry (31:02)
had that happen too.
Brooke Lively (31:04)
But it's just that question and it gives you the chance to readjust and say, okay, if we're not getting in what we thought we were getting in, if we're not getting as many new clients, if the average value isn't as high, if we're not collecting 93 % of our AR, it gives you the ability to look at it
make adjustments to fix some things. But it also gives you the ability to react and say, OK, yeah, we're running at 50 % capacity. We can't seem to get the new clients, and we need to lay somebody off now before we run for 26 months losing money.
Nick Berry (31:48)
that's giving you what you need to be able to delegate some responsibility for purchases too, right? I mean, it
Brooke Lively (31:55)
Yeah.
Nick Berry (31:55)
Yeah, like that should give you enough a sense of control to be able to hand over some things that I think business owners typically are reluctant to hand over. that's because of what we just talked about, right? Because you don't, they're going to fill the closet up with staples and paper clips.
Brooke Lively (32:04)
Yeah, they want to hold on to them.
I what was she going to do with practically cases of paper clips? I have no idea. All right, but let's talk about the last one. And we've already talked about the category, which is the rule of thirds. But the number we want is the owner compensation.
So you know that I, when we're talking about ideal ratios and the rule of thirds, you know that I want one third going to people, one third going to overhead and one third going to profit. We need to look at how much is going to marketing. We need to know all those inputs. But at the end of the day, what really matters is between the payroll we get,
All the stuff we run through the company as the owner so that we get it pre-tax. Everybody does it. I don't care. That's between you and your accountant in the IRS, whatever. No judgment. So between your salary perks and profit, are you being compensated for the time, the energy, the effort, and the risk you're taking as the owner?
Nick Berry (33:08)
I guess not what we're not here to talk about,
the total benefit to owner.
Brooke Lively (33:25)
Total owner benefit.
Is it worth it? Are you doing all of this and taking home $27,000 a year?
That thing ought be worth it.
Are you doing all of this and taking home $270,000 a year?
that may not be worth it to you.
Nick Berry (33:40)
or are you doing all of this and you don't know exactly how much you're taking home a year?
Brooke Lively (33:45)
and that's probably more accurate.
Nick Berry (33:46)
Yeah.
That was one of the things I'm sure you're familiar. profit first, Michalowicz like that's probably the best.
Brooke Lively (33:50)
Yep, Mike Michalowicz He wrote a quote for the back of my book, actually.
Nick Berry (33:56)
Did he? That's great. I can see that it's a perfect fit. That's probably the thing that Mike did that I think was the most valuable coming out of the profit first concept was getting your head around the benefit to owner. Because, I mean, maybe other than co-mingling personal and business funds, I think is probably the most common thing that I've seen with small businesses.
Brooke Lively (34:20)
Yeah. It is amazing. know, every now and then I see studies that are published that talk about what the average small business owner makes per hour. I mean, you just want to put your head through the wall.
because it's below minimum wage.
Nick Berry (34:35)
Mm-hmm. Yeah.
Brooke Lively (34:36)
It's not worth it, guys. Go work at 7-Eleven.
Nick Berry (34:39)
And I think the whole like grind movement is not moving it in the right direction either. Right. Because it's kind of reinforces the, well, just outwork that problem. Go work more and do more. it's not, it's not a lack of effort that's causing that problem. It's the perspective.
Brooke Lively (35:00)
Yeah, the people who say sales cures everything really tick me off because I don't care how many $6 widgets you sell. If it costs me $7 to produce them, we're never going to make money.
Nick Berry (35:16)
no amount of volume.
Brooke Lively (35:18)
no amount of volume is going to make that better. In fact, the more you sell, the worse it becomes.
Nick Berry (35:25)
Mm-hmm.
Brooke Lively (35:25)
So no, sales does not cure everything. Grinding harder does not solve all problems. Let's look smarter. Where is the issue? Where is that constriction point? Where is the problem? What is it that we need to be fixing?
Nick Berry (35:33)
Mm-hmm.
So now we talked about the symptoms of things not working optimally in a business where they're not managing using the numbers. now you've got your set of KPIs that you can come in and it's a pretty powerful diagnostic tool tell me about what is it like to work with you?
your working engagement go with your clients.
Brooke Lively (36:01)
So the first thing we do is we come in and we really look at what is happening and where you are. And then we want to know where it is you want to go. Because not everything, not everybody wants the same thing. Some people want to grow in scale. Some people are perfectly happy with the size they are. They just want to be more profitable. Some people are like, I'm fine with the size. I'm fine with.
the amount of money I'm taking out, I'm just working too much. Okay, great. So we have to define profit because there are all different kinds. It is not just monetary profit. It is time profit. It's reputational profit. So what is it that you want? So we understand that, then we kind of make a plan and we look at all the different parts of your business and figure out what those constriction points are.
We're CFOs. We start looking at the numbers and then we dig from there. The numbers tell us where to look. The numbers, like your balance sheet and your PNL, tell us where to start digging. And then we dig deeper into data from there. And we look at every part of your business that touches the money. And Nick, if you can tell me a part of the business that doesn't touch the money,
You're gonna get the big prize. No one's won it yet.
So we look at everything. We look at your people. We look at your products. We look at your marketing. We look at your sales. We look at your internal operations. How are we doing things? How can we do them better? And in what order should we be attacking them? So we prioritize it. We reset our priorities every quarter. And you usually talk to your CFO about twice a month.
We can.
Nick Berry (37:43)
And that would that be you or is it someone on your team? Could be either. Okay.
Brooke Lively (37:47)
Somebody on my team. Yeah. So every client gets a CFO and an analyst. The analyst is the one that's going through all your software and digging up all that data and putting it in a format so that you and the CFO can look at it so that the CFO can come to you and say, OK, here's what the data says. We have option A, option B, option C.
Based on my experience and my knowledge, think you should do option B. But it's your choice. What do you want to do? You want to do option C? OK, great. Go execute C.
and then come back together two weeks later and say, OK, have you executed option C because we've now moved on to this project, and this is the next thing we need to be looking at.
Nick Berry (38:29)
That seems like a pretty speedy and efficient way, a way that would probably be a relief to the owner. Like I think that's probably one of your big obstacles would be getting the owner to kind of look beyond whatever the cost of setup is, you know, that time and effort.
Hey, we'll make this easy on you, but just get out of our way. We got it.
Brooke Lively (38:49)
I think our biggest issue is owners that don't execute. tried to understand, we went through, I mean, we're data-driven girls, right? So we dig in the data. And a couple of years ago we went, we dug through all the data and we kind of separated our clients into buckets. And we had the bucket of people who were just kind of doing okay. We weren't seeing a ton of improvement.
when they were working with us. We saw the people that were making, you know, good, steady progress. And then there was this category, this group of people that had like hockey stick improvement, like just up into the right. And we're like, okay, what are we doing with that third category that we're not doing with the other two? And so we started digging and it turns out that it wasn't what we were doing.
It was what they were doing. They were executing. And we dug further and discovered that every single one of them, but one, was running on EOS.
Nick Berry (39:55)
I was just about to ask you that.
Brooke Lively (39:57)
So yeah, so EOS became our number one outgoing referral, which didn't surprise us because we'd been running on EOS for years. And we were like, that makes total sense because we execute. We're like,
Nick Berry (40:10)
Mm-hmm. So you probably walk into a new client and if you see signs of EOS, you're like, okay. I know what to do here. Yeah.
Brooke Lively (40:17)
Yeah, this is going to work. And eventually, we run on EOS. Pam is my COO. She's really my integrator. I've worked myself out of a job. And as I was doing that, Pam and I were talking. And what are you going to do? Because I don't have day-to-day responsibilities in the company anymore. So I became an EOS implementer, because I love it. Because I've
done it and I've seen what it's like and I've seen the difference it makes, both for me personally and for the hundreds of companies we've worked with that use it.
Nick Berry (40:45)
Absolutely.
Yeah, I agree. We we've used EOS. We started using EOS in 2014. Like Gino did the workshop that sold me in. There were like, there were like four implementers at the time.
Brooke Lively (41:03)
That's awesome.
Nick Berry (41:07)
way back then. But yeah, it's one of those things you can, you're so familiar with the terminology and the behaviors that you do recognize the signs and you're like, okay, I can diagnose quicker. I can solve quicker. I was going to ask you though, what's the ratio of clientele who are coming to you?
who are on EOS versus those who are not.
Brooke Lively (41:27)
I have not gone and counted recently, so I don't know that. But what is interesting is that we run our clients on a loose type of EOS because we set quarterly rocks. We have to do's. Every time you meet with your CFO, we're not running an L10.
meeting exactly, but we're running something pretty similar to it. And there's a section for IDS and there's, we've got all of that. And so when we do bring on a client that is running on EOS, we're like, okay, awesome. Do you want us in your quarterlies? Do you want us sitting in on your weekly L10s? put us in touch with your implementer.
so we can make sure that we are all rowing in the same direction so that we understand the vision. Where's your VTO?
Nick Berry (42:15)
Yeah, hand it over. I know how to read it.
Brooke Lively (42:18)
Yeah, give me the talk.
Nick Berry (42:20)
And I can tell you enjoy it. it tees things up for you, right? It gives you a common language and a set of behaviors that there's so many of the little fires and things that can just be cleaned up just through a simple operating routine. And then it clears the way for you to focus on the big harder problems.
Brooke Lively (42:40)
And what's amazing is how it becomes so second nature. And then you walk into a meeting where they're not running EOS and you're like, my God, you people are shit show.
Nick Berry (42:52)
Yeah, this is awful. Yep. And every meeting that you're a part of or that you run and someone's not familiar with EOS, they're complimenting you like, wow, you run a good meeting. Yep.
Brooke Lively (43:03)
Yeah, and you're like, keep going. You're politicking. Do you have the little animals, the EOS animals? Nick, I'll get your address and send them to you. They are awesome. There's a little elephant for the elephant in the room. There's a squirrel. So when someone goes off on a tangent, you just kind of raise the squirrel. There's a horse.
Nick Berry (43:12)
No.
Brooke Lively (43:32)
So if you're politicking, if you're beating the dead horse, like kind of, I do have some teams that chuck them at each other. Like if you're going off on a tangent, man, that squirrel's coming for your forehead.
Nick Berry (43:36)
Yeah.
Yeah, but even things like that, it kind of puts it on the table, gives everybody permission to start addressing, like helping each other become more aware. And man, it totally changed the dynamic in rooms.
Brooke Lively (43:59)
And it's not coming after them in a bad way.
Nick Berry (44:02)
So you're doing EOS separately from CathCap, right? That's not something that's rolled up as a part of your service?
Brooke Lively (44:09)
It is not part of our CFO services.
Nick Berry (44:11)
Okay. But yeah, I can see the overlap where, you're kind of running on a lot of the same principles.
Brooke Lively (44:17)
Yeah. And it's funny because we will have people come in and I'll talk to someone and I'll call Pam. I'm like, Pam, this person really needs CFO before they need EOS. Or Pam's like, no, Brooke, this person absolutely needs EOS. And then, you know, once you get them stabilized, maybe they're going to need CFO, but I don't think ultimately they are. I think they just need EOS. And that's
Nick Berry (44:43)
That probably builds a lot of confidence and trust with them when you're willing to tell them, I don't think that I'm actually what you need at the moment.
Brooke Lively (44:46)
So, yeah.
I'm not the solution. Yeah.
Nick Berry (44:54)
So tell me about your clientele. who are you guys working with? What is your market?
Brooke Lively (44:59)
So we work with entrepreneurs who are doing between $2 and $50 million who have hit a ceiling. They know they need help. They want something more out of their business. And they just don't know how to get it. So like I said earlier, whether it's more revenue, more profit, more time, they just can't quite figure out how to get to that next level. They execute.
and they're not content to stay where they are.
We're pretty industry agnostic.
Nick Berry (45:27)
Okay. Your book, The Six Key Numbers.
Brooke Lively (45:31)
I have two versions. I have from panic to profit for law firms and I have panic to profit for entrepreneurs.
Nick Berry (45:42)
Yeah, I have panic to profit. How six key numbers can make a six figure difference in your law firm with a four word by diamond Dallas page.
Brooke Lively (45:49)
Yeah.
Nick Berry (45:50)
what's
Brooke Lively (45:50)
Yeah, you didn't expect me to have a wrestling Hall of Famer riding the forward, you?
Nick Berry (45:57)
You know, I'm not going to say that. what I will say is 25 years ago when I was sitting in my college dorm room, watching professional wrestling, I don't remember anyone ever making a comment about thinking DDP is probably going to be doing an endorsement for somebody in financial industry.
Brooke Lively (46:14)
We loved working with him and he really believed in what we did. So he was happy to do that for us.
Nick Berry (46:21)
That is very cool. Are you going to write another book?
Brooke Lively (46:25)
I just wrote one, this one's also for law firms, it's called Exit on Top. And it's about how to sell your law firm to the right person at the right time for the right price.
Nick Berry (46:36)
fantastic.
Brooke Lively (46:37)
And actually the biggest secret in this book is that a company that's ready to sell is the company you want to own now. So go ahead and prep to sell now and enjoy the fruits of your labor.
Nick Berry (46:50)
So I think that we need to reconvene for a follow up on this conversation and talk about going from like where we left off to making your business the most valuable, like preparing it to sell.
Brooke Lively (47:04)
Yeah, I'd be happy to.
Nick Berry (47:06)
Brooke, this was fantastic. Thank you so much. I really appreciate it. It was a really fun conversation.
Brooke Lively (47:11)
I loved it, it was great.
Nick Berry is an accomplished entrepreneur and CEO, whose track record includes founding and leading numerous companies since 2002.
He is also a mentor and coach to other entrepreneurs and business owners who are looking for a trusted (and proven) advisor.
Among peers, colleagues, staff, and clients, Nick has been referred to as both 'The Business Guy' as well as 'The Anti-Guru', due to his pragmatic approach and principled leadership.
He shares his insights and lessons learned, along with those of his expert guests,
on his podcast, 'The Business Owner's Journey'.
