In this episode, join host Jason Phillips as he delves into the world of financial management in supporting small businesses.

Our special guest, Annie Newton, hailing from Walla Walla, Washington, brings her expertise as a fractional CFO to the table. Together, Jason and Annie explore the various indicators or pain points that small business owners often encounter. They discuss crucial aspects such as budgeting, financial forecasting, and making strategic financial decisions, highlighting the significance of looking beyond basic bookkeeping and embracing the predictive side of financial management & Navigating through challenges of hiring new employees and determining the financial implications involved.

Jason shares his logical approach to evaluating the cost of hiring and how it directly impacts revenue and net profit, providing viewers with valuable insights into effective decision-making. Annie's expertise and experience add a unique perspective in offering practical advice and actionable strategies

Hit the like button and share this video with others who can benefit from this valuable information. Get ready to unlock your business's financial potential with this enlightening Podcast!

As the owner of a multi million dollar home improvement company and certified human behavior consultant, I'll be sharing with you skills for life, love, leadership, and business. I'll also be connecting you with experts that can help you So if you want to build the business and the life of your dreams, then you are in the right place.

Let's go!

Annie Newton: Ah, I was so delighted to get the invite. So

Jason Phillips: tell me you're in town, what are you in town for?

Annie Newton: I came down for the CFO conference that was being hosted in downtown

Jason Phillips: Dallas CFO conference. We're gonna have to chat about that here in a few minutes.

Annie Newton: It sounds super. I

important in,

Jason Phillips: I, I bet it is.

I'm sure. I'm sure that it's important. You're a woman in the paint business?

Annie Newton: Yes, I am.

Jason Phillips: And which is becoming a more of a normal thing these days.

Annie Newton: Isn't it so awesome to see?

Jason Phillips: It is. It is really awesome to see, actually. For me it's awesome on a personal level because I have four daughters and um, Three of my daughters have already worked for the company.

One's about to retire, one already left me. But yeah so not necessarily painting, but

Annie Newton: Sure.

Jason Phillips: In in sales.

Annie Newton: Love it.

But I'm super glad you're here. You, you and I have been, friends for, I don't remember when we met. Do you remember when we met?

Annie Newton: It's filling about 10 years ago.

Jason Phillips: Yeah.

Annie Newton: And I believe it was probably a pca.

Jason Phillips: PCA thing. Yeah, I think it was, yeah. How did you get in the painting business?

So I joined at that time and I needed to be rescued. I was in a really tough place. we'd just lost our son. Nolan had just died and, two weeks later I had another child. But, the reason to get out of bed and go do the things, the life was really challenged. It was really a God event.

attention on, the, it was a paint company. I didn't know anything about painting. I didn't know anything about running a company or financials and just dove in and it became a welcome distraction.

Jason Phillips:

Wow. That is an amazing story.

What an opportunity to refocus your time. Yeah. At a difficult time in your life. I think I know the answer to this, but have you ever been a painter?

Annie Newton: I have not.

Jason Phillips: You have not been a painter. Okay. Me either. I have not. Me either. Yeah. So you came in really specifically working on the business end of it with the paperwork and

such.

Annie Newton: With an operations focus. An operations focus. Have always loved scaling. I actually had a robotics background and so those two don't really mesh together. Now we know it's becoming a thing, right? But the love of systems and the love of leverage and scaling and it was just a gift to be able to work alongside with my brother looking back became Four Seasons U University.

Jason Phillips: It sounds to me like you took, what you were really good at and paired it with what he was really good at. Yes. And together you guys were, were like a dynamic duo.

Yeah. Yeah.

So that's, one of the things I'm passionate about is having a well-rounded team.

Annie Newton: Yes.

Jason Phillips: And sounds, sounds like your brother very, and you very shortly connected and figured that out pretty quickly. And I didn't figure that out quite so quickly.

Annie Newton: I think we probably had an advantage.

We spoke. A similar language. Were two of 10 kids. Were Irish twins, just 11 months between us. And so in the middle of the Klan, I was number four, he was number five. I'm the big, bigger sister. It just, we could communicate by just looking in each other's eyes and go, okay, yep, this one's going south.

Are you gonna be good cop or bad cop roll? And we could tell each other that just with our eyes as we had, Things come up and auditors who walk into your office and, all the things that happen over 18 years of a painting

company.

Jason Phillips: So you did it for 18 years.

Annie Newton: Yeah.

Jason Phillips: Right?

Annie Newton: About a wild journey, right? I believe I was the only one in the room without the letters, three letters, either CPR or CMA or, one of those things behind my name. I have fallen in love with numbers and the art of running a business by being in a small business.

I think there's tremendous opportunity in the service business as we see the challenges. A lot of companies were, there were SaaS and e-commerce and other things. And there is fear on their face. The market is uncertain and we get to instead have such controls that they're jealous of. Private equity is own, is eyeing everything we're doing cuz we're such a sweet spot.

More and more important to have a really good cash flow. Forecast, what are you looking out for? Money to be able to communicate in the language of financials. It's not just giving the bank your financials. You've got to invite them into the story of why they bank on you.

Wow.

Whether or not you use that line of credit you need it there, you need it as a safety net.

Yeah, it was just fun for the first time to be amongst peers. It's a relatively new thing to be a fractional cfo, so instead of hiring a full-time cfo, Perhaps you're just getting a couple hours a week you're getting guidance on running the business. And someone brought up a really good point and it just really resonated with me.

So it's an interesting dynamic, but it also means the bank is increasing their demands. Your bonding. Now they have different requirements. If you're about five mil and you touch commercial, they say give me a whip report. So the requirements in a, so a small business is increasing.

Jason Phillips:

You're making me think about this old formula of how life survives is l has to be greater than C, which I didn't even know this in school. I guess it's a, I don't know if it's a biology term or what it is, but your rate of learning has to be greater than the rate of change that's happening around you.

Annie Newton: It really is.

Jason Phillips: And so as business owners, we need to be not just running our business, we need to be constantly learning new things.

So that's, man, that's a really, that's a really a great point. And I'm thinking about our, I'm thinking about our listeners, of course the ones that are listening to podcasts like this they're already gonna be growth mindset. Yes. People, right? Or if they're not, they soon will be.

Wow. That's amazing. Okay, so help me understand, or help us understand, in a few hours a week, As a fractional cfo, what are, first of all, what are the indicators, the pain points that, if I'm a small business person let's just say I'm the new guy.

I don't know what a CF Sure, fractional CFO is. What are the pain points that I'm experiencing? That a fractional CFO could solve for me.

Some are, I'm at three, I'm five, I'm 10. We the business is gonna have a variety of needs and in our world, sometimes there is a need so much for a fractional cfo. As there is of controllership services and there's a difference between the two, but our industry knows it, that we're gonna give it a name and the name is cfo.

If you hold a budget, if you don't have a budget for your business, sometimes that's hard to do. That may be an indicator that you need more than bookkeeping. So bookkeeping is in the rear view mirror. How did you do it? And it's historical. If you find yourself asking, I wonder how much money I might need.

A good set of books is super important. You find your, you're looking out the front windshield. That's when we need to be talking about the predictive we need to live at. And I think as owners of businesses, I think an indicator of a good owner outside of financials even is those who live in the predictive.

Jason Phillips: Okay. So you're making me think of, a question. I get a asked fairly often. Hey Jason, I I need to hire a project manager or a salesperson. How am I gonna pay for that person? I give them my logic on how to make that decision. Is that a situation you run into fairly often on?

How do I pay for this new employee?

Annie Newton: Or how much work do I have to do so I can then have that be true? And usually that's not a single answer. It becomes like an agreement. If they're going to bring X. Then this is where you hit break even and the requirement should be this.

Jason Phillips: Yes.

Annie Newton: And that, and it's a valid fear

Jason Phillips: you can be as critical as you want here. I'm gonna tell you back in the day, the logic that I would use when I was, when I was spread too thin.

And I needed to put a manager in place and create a new position, not replace a manager or a position, but create a new position. The thought process that I would use is I would say what's on an annualized basis, what's that position gonna cost me? Okay, let's just use some easy numbers.

If I choose a number, 50,000, a hundred thousand, whatever it is, your market. Sure. Okay. And I say, okay if I took that money out of savings and just added it all up a hundred percent right now, and said in 12 months what would need to be true in 12 months for me to say this was a great decision.

Right to break even on the money. Technically that would make my net profit go smaller, but it could have a profound impact on my life and the time it freed me up. So that was one aspect of it. And the other one is what do I would need? What would I need for this person to add? So what would we need to produce in order to maintain or improve the net profit?

So I'd have this kinda this best and worst case scenario. And, okay, so what's the most likely scenario? And then if that made sense to me, then I would, if I had the right person, I would pull the trigger. So that was my own logic that I, nobody coached me through that. I didn't have someone like you back in the day tell me what's wrong with what I just did.

But did we take the time to say, what if I don't? What if a PM could influence the gross profit by 2%? In some cases, that's just covered their entire overhead. Yes. So if they could just influence just that small amount Could you, does it free you up to do more sales? What does this look like?

What about the team underneath them? Are you actually buy? What's the cost of not hiring? Are you potentially looking at either a sub crew or your own crews losing out because the access to you, you're trying to run everything yourself is becoming fractured. They're frustrated. They had a question on job, you couldn't get back to 'em until seven o'clock that night.

Jason Phillips: Yes.

You know that, again, you're taking me down memory lane. Wow.

Annie Newton: Not that's ever happened, that you responded to someone at 7:00 PM about a question.

Jason Phillips: Oh, never.

Annie um, the, one of the things that I realized as I started, I literally, it, it took faith Yeah. To make these decisions. Anyways I would get to this point of well, I think I can do it, and the numbers look right. But you have to take a leap of faith, right? And, And as I, as I would do this, I started realizing, wow, I was doing such a terrible job at that.

The very fact that this person, maybe they're not quite as good as me, but they have a hundred percent of their attention. They're gonna get way better than me really quick. And that situation with, with their attention is gonna be attended to way better than I was attending to. And I started to realize how spread so thin yes.

thing

Annie Newton: I do. And I also think you might also find that this resonates with you.

We suddenly find ourselves in a position where we're now becoming a leader of leaders. And it's such a different skillset. I think that is quite the jump. It's not did you need 50 K to cover that role? Even if they were, they had some bonusing out based on, co commissions tied to the gross profit.

What did it require of me as a leader? Was there clear expectations in place? Did they know what winning looked like? And sometimes that can be overwhelming.

Jason Phillips: One of the things that I've, I find in myself, and I think a lot of leaders do maybe not someone with more of a detail oriented personality like yourself.

Annie Newton: Okay.

And so something that should be so simple is not, so if we're talking about, Hey, I've got this position, how do I define what success looks like in that position? Is that something that you help people

with?

Annie Newton: Something I've done a lot.

It's not necessarily in the list of offerings, but it pops up as you're talking about money.

If money isn't performing in the way that we want, we just start peeling it back. So what might beat off? If they didn't hit that, did they know they weren't hitting it? What, how did this impact their wallet if they didn't hit it right? You just, it becomes a very organic conversation,

Jason Phillips: right?

That didn't happen overnight. And I just think what a gift to be a team member on your team. And to not, in general, we attract really hard workers and really good people. Yes, we do like it. It's the rare thing, not rare, but it's less common that we have a non-performer. In general, we have performers and really good people and I feel very passionate.

We know we can't have all the things as we, we go forward. But I also think today there's an expectation as people say yes, and they hitch their volume into ours, that they're ex expecting more from us. And that can feel like pressure. I think on the shoulder it's of the leader, 100%.

Jason Phillips: You're right.

It's do our people. It's not fair to say, Hey, it's the end of the month. Let me tell you something that happened to me one time and this, I had one of my people at the end of the month thought they hit their goal and they didn't, and it was such a demoralizing, demotivating. Air out of the balloon moment for this person because they thought they were winning and they weren't.

And he actually was behind and he lost. How do you think he felt? How do you think that employee felt? Okay. And then how did I feel as the manager, leader, owner in my company? I felt horrible. Horrible. I made it right. It's on it. It's on me to create that clarity. And then once you do that now, okay, he can, this is a gauge he can rely on.

And it's just, man, it just it, that, that was terrible. And I'm, I am big that leaders go first, leaders lead with trust, take the risk, and it's on us to create the clarity. That's what I think is it it's pretty much what you were saying, but just talking to you. I'm so many lane you're Yeah they're typically not good memories.

Annie Newton: but I think that's the platform. You walk into the office and you see clearly like people are operating in their roles in their department and they're owning the six, the success and the metrics of each one of that. It was on the back of a lot of bad decisions, but they weren't bad enough that they took you out.

It was sometimes that momentum of that was so painful. I'm putting things into place, it will never happen again. And it's, that's a healthy thing when you're like that will never happen again.

Jason Phillips: We have that conversation around here a lot. There's a lot of profit holes in business. Yes. A lot of places that the.

The leads leak. The profits leak everywhere.

Annie Newton: It's holes in our bucket.

Jason Phillips: So what, yes, exactly. What are some common things that in the spec, specifically in the painting industry? I know you work outside the painting industry these days. Yeah. But what are some tip common threads of issues that you wish owners knew or could solve or wanna help them solve?

Jason Phillips: If we've seen an increase of 35% from last year, did this year, Have we ran the model to say, if that did it again between 23 and 24, and what happens between 24 and 25, and do we have other data out there that says this could become a reality? What impact does that, how should it influence our business model?

Annie Newton: Are we suddenly looking at it, a division of work that we may not have considered? Yeah. Yes. What's the numbers on hiring a rockstar hunter? A prospector. Suddenly we could take a piece of that budget. And if it's attached to two or three mil, and that can be turned in 12 months. Yes. What's the rate of return?

Jason Phillips: No, that was great. No, that, that's definitely relevant because when leads are slow and you're a spread too thin business owner, it's easy to swipe that credit card on Google or Facebook. Yeah. And up your spend just every other competitor contractor is doing. They're just spending more. And that's, there's no more necessarily leads there.

And she was telling me about Managing canvasing teams. Now, nobody likes to knock on doors. I say nobody, almost nobody. That's how I started my business. And I didn't like it, but I did what I had to do. So we were talking and there were a number of people at our table, and some people are, wow, really?

You're not, you canvassing, y'all got all your leads from canvassing? And she's yeah. And she said, let me tell you what I like about canvassing leads. There's never another competitor. They're exclusive leads. And again, it was throwback. I'm like, that is so true. But it took, it takes effort.

You can't swipe a credit card to do that. So how does, how should it influence our business model? I think we need to learn to generate leads and build relationships instead of just swipe credit cards for marketing. Yes. And that's one of the things we're doing at our company is reallocating some spend.

Annie Newton: for sure. I think maybe the other place I'm seeing right now is in Texas, you don't have some of the restrictions when it comes to subcontracting that we have in other parts of the country.

So where you're limited almost only to having W2 employees. As part of your staff, and we know how hard it is to hire and that labor struggle is a real thing. I think we could up our game by really breaking out by division and segment and type of work. What is the most profitable work? What's our revenue per hour?

What's our revenue per pro? Our profit, right? And so if we say yes, being careful about our yes. Nice. What I'm seeing in a lot of companies, it's not that they're lacking the sold work. They have the 15, 20, 25, 30,000 man hours sold, but looking at what type of man hours have been sold.

Jason Phillips: And so their bottleneck is on the labor end.

Annie Newton: Yeah.

Jason Phillips: So let's put the most profitable work through the

funnel.

Jason Phillips: That's a, that is a great that is a great thought.

And I'm wondering, how many guys and gals are listening to this right now? I think that's a great conversation to have. With yourself, are you measuring your profitability? I know. Most people these days are measuring your profitability per project. But how about per segment?

Let's just say interior versus exterior painting or commercial versus residential or whatever it is. Do you segment those out and measure the the profit per hour, the cost of the customer acquisition cost and all of that? Is that really the work you need to be working on? And there's times of the year where you're like, Hey, I just need to keep my guys busy.

But then I talked to, people like you up north and it's a whole different game of how you have to scale and keep busy in the winter. So could you share a moment about that? Yeah. Some strategies

for that.

Annie Newton: Yeah. It's the winter mindset. Like for some, like you pointed out, winter isn't the year around conversation, but if you're up north in, in July, you're talking about winter

Jason Phillips: in July.

Annie Newton: And sometimes as painting contractors, we have this ability where we like look at each other and we're like, what you doing right now? And we're looking at the sexy numbers of summer. Ooh. Ah, man. Crap. We just broke another barrier. And I often like to go, talk to me about your winter.

You don't have the sale yet. It's a line, it's that prospecting, but what you're doing is you're filling up your bucket. So in January you've turned on everything and you're recruiting you're recruiting leadership and painters, and you're finding people sitting on their couch.

Jason Phillips: If you're a business owner in July and you're up north, especially, you probably shouldn't be spending all your time on projects.

You need to be laying down that track for

Annie Newton: Yes.

Jason Phillips: The winter.

Annie Newton: Yes, because it's the response versus the proactive, right? You're responding to the pile leads that are coming in and your calendar for a sales rep is full, but is there any time blocking for some of those activities that are not the urgent and right in front of you?

And I just think there's such a strategic advantage with aligning yourself with work.

He would go sell his equipment to the pawn shop. Then eventually he would sell some work and then go buy his equipment outta the pawn shop. Pause, and this was a cycle over and over because he wasn't allocating his time to future things. And I know as a small business owner, if you are still like operating, maybe doing the sales, the project management, and especially if you're actually doing the, doing some of the actual service work, that's super hard to do.

It really is. It's not easy, but. But that's, if you can build a team, empower them with some simple systems you can free yourself up to, then go build a better future and make everybody's life better.

Annie Newton: For sure. I watched a situation a couple years ago where the team had pre-sold quite a bit of work.

Yes, of course the exterior isn't gonna be produced. It's going to be put on, when able to be produced is when it's going to be sold or, worked. And so not having clarity about the things that were, yeah, we're trying to fill up the bucket of hours, but was the right type of hours and wow at it was very devastating what it did to their first quarter.

And by the time they realized they had the problem, it was very hard to recover.

Jason Phillips: Wow. That is, that's a real, that's a real story right there. Yeah. I know you've got a plane to catch soon. Yeah. And I wanna be respectful of your time. Is there something that I should have asked you that I didn't ask you?

Annie Newton: I think we could chat for hours.

It's just

Jason Phillips: we definitely

could. Yeah. We'll do this again. How about that?

Annie Newton: Yeah.

Jason Phillips: I, we'll have part

two.

And I think that it, we should ever forget those struggle days. They've really served us to get us where we are. And I feel like such a need to say, if you're listening and you found yourself nodding at a couple of those talking points that we had to keep pushing on it gets better.

It's worthy of the fight. Remember what we're fighting for in our why, it's our families and its quality of life, that it's more than work that I, you got stuck in the trap for years. And I don't ever wanna forget. But I wanna really appreciate how generous you have been with your time and the vulnerability and just coming alongside you and that cheerleading what we do is hard.

Yeah, that's really

hard.

Annie Newton: Absolutely.

Jason Phillips: If so, what's the best way to get in contact

with you?

Annie Newton:

I'll just throw out my email address right now. It's Annie a nn i e@profitworksusa.com. That's p r o. F I t w o r k s usa.com.

Jason Phillips: Wonderful.

Annie Newton: Yeah.

Jason Phillips: Wonderful.

Annie Newton: Yeah.

Jason Phillips: Contractors, thank you for tuning in by the way. Don't forget to to join our Contractor Freedom Facebook group and connect up with Annie if you've got any questions.

And she's just an amazing person. I know. You'll be better off for it. So God bless you. Have a great day. Thank you.