Effective Communication Between Finance and Non-Finance Teams

Megan - 00:00:37: Today, my guest is Karl Maier. Karl is the founder of Abunden a company dedicated to helping businesses protect cashflow, secure funding, and boost profits. Particularly in today's challenging economy with inflation, labor shortages, and supply chain disruptions. As an experienced CFO and business advisor, Karl has played a key role in doubling sales at five companies in just two years. His expertise spans expanding credit lines, leading multi-million dollar acquisitions, and enhancing profitability through innovative pricing, systems, and financial strategies. Karl, thank you very much for being my guest on today's episode of CFO Weekly.

Karl - 00:01:48: My pleasure.

Megan - 00:01:49: Today, we're going to be talking about your journey and the insights you've learned along the way regarding building value through financial analysis. And I'm super excited to learn about you and your thoughts and experiences with this topic. So let's get started.

Karl - 00:02:04: Sounds great.

Megan - 00:02:04: So you've had a very diverse career that's now spanned over three decades in financial leadership and consulting. So what was it that initially drew you to the field of finance and how has your passion for the industry evolved over the years?

Karl - 00:02:19: I guess my passion for finance really started with my, during my MBA coursework at Rice. I had started in the kind of with a systems focus, information systems focus. And I took an entrepreneurship course that really kind of gave me some insight, deeper insight into financing. And it was particularly focused on little lower middle market companies in the entrepreneurial class. One class was about buying a company. And so that was really fascinating to me. And I ended up kind of going into the corporate world and doing that for a number of years before my family kind of twisted my arm to come back to the lower middle market and help with the family business. And so helped set up accounting systems and ERP system and help the company grow. We grew like five X in three years. And really. Really increased the line of credit with the bank and dealt with all the issues of collections, inventory management, multiple locations, all kinds of fun stuff. So I think that's really that process is where it really came from.

Megan - 00:03:34: And today you're the founder of Abunden. Am I pronouncing that correctly?

Karl - 00:03:41: Yes, yes, Abunden. I kind of wanted to find a URL that was tied to Abundance, like making the pie bigger for us. And then I came to find out that it's also a form of the verb Abundance in Spanish. So Abunden is the name.

Megan - 00:04:00: And at Abunden, you focus on helping private companies enhance their financial strategies. So can you share a specific success story from your time at Abunden that maybe you're particularly proud of?

Karl - 00:04:13: Absolutely. Absolutely. There was a company that started buying laundromats and converting them from just a laundromat. I guess they're no longer coin-operated. You've got all the digital payments. But added on a pickup and delivery wash and fold service. And so that really was an interesting kind of journey for the entrepreneurs. It was a group of four entrepreneurs that invested together and initially ran the company. And so part of the journey was helping them understand their business model, helping them understand the financing. Then building a management team together. They were kind of all friends, but they really had never worked together. Hadn't really been managers before at that level. And then eventually helped them with acquisition strategy, financing, and then preparing for exit. And they were able to exit successfully to a venture-backed. Larger venture-backed firm in the industry. And one of the managers continued on, got a package and continued on with that venture-backed company. So a good success for the investors as well as for all the founders.

Megan - 00:05:40: Yeah. On a side note, I'm curious, are laundromats profitable?

Karl - 00:05:44: They are. There's a YouTube and kind of social media promoter, Cody Sanchez. Really encourages people who are looking at entrepreneurial type activities to look at things like laundromats and car washes and kind of some of the overlooked businesses that have a lot of cash flow and can be really good small businesses.

Megan - 00:06:08: Yeah, always looking for side investments.

Karl - 00:06:12: Right, exactly, exactly.

Megan - 00:06:14: And you have a lot of experience helping companies build value through financial analysis. So can you share a key lesson that you've learned about financial leadership and how that lesson has consistently guided your approach throughout your career?

Karl - 00:06:29: Well, I would say working with my family actually brought a few lessons.

Megan - 00:06:34: Good and bad.

Karl - 00:06:36: Good and bad. A number of those were interpersonal, but one of them was really about how to kind of sell, if you will, financial management and responsibility in a business. And so one of the things, my dad was a really good salesperson, just fantastic at sales. But financial management wasn't his, let's say it wasn't his passion, right? And so one of the things, as a salesperson, he always wanted to have more inventory to be able to say, oh, yeah, we've got that in stock. And so that's great, but helping him understand the importance of inventory turnover and getting value from your inventory asset as opposed to just having it as an enhanced brochure, really expensive brochure for your sales efforts. And that was quite a challenge, quite a challenge for me. And so I really, but I did learn a lot in trying to explain that situation to him. And so helping non-financial. Business owners to understand some of the financial impacts of their decisions. A similar one was a sporting goods distribution company. They'd import sporting goods. They'd do some light manufacturing as well. But the founder, again, was a salesperson and, again, very strong salesperson. But he wanted to, well, actually, he went out and bought like this ad in this industry magazine. And for a surprisingly large amount of money. And so it was kind of after the fact trying to explain to him how many dollars he'd have to sell to be able to make that investment in advertising pay off. And I think he was more than a little surprised at that. But trying to do that in a way that doesn't alienate the owner. Helps motivate them and change their behavior for the future. That's definitely been a big learning experience for me.

Megan - 00:08:45: Yeah. I mean, I always hear lately the term storyteller associated with the CFO and just being able to explain things to different stakeholders and always be telling the story.

Karl - 00:08:58: Absolutely. So true. Yeah. Stories are so powerful. It's amazing.

Megan - 00:09:03: And who are your key, like who are your ideal clients?

Karl - 00:09:08: Well, I've got experience working with everything from startups to being in large corporations. And recently I've done some work with a private equity group. But most of the companies I really end up working with are smaller companies, typically a million, two million, a few million in revenue that are looking to grow to be a 10 or 20 million dollar company. And I've found ways to cost effectively help those companies with their financials, financial management, and helping guide them to bring in the appropriate resources from other areas, whether it's sales or marketing or systems or whatever it might be. And so those are really probably my ideal.

Megan - 00:10:00: And what common financial pitfalls do you see your clients fall into, particularly during times of rapid growth or maybe when they're needing to restructure?

Karl - 00:10:13: Well, one of my inspirations is a gentleman named Jerry Finger. He's since passed away, but he had a saying that cash flow is more important than your mother, which is, of course, a bit of hyperbole. But it really, really, resonates with me because so many times I'm working with, when I'm meeting companies, they really don't spend enough effort on understanding their cash flow, projecting their cash flow and managing their short term cash flow. And so I'd say that's the number one issue that I run across. And particularly when you're growing rapidly, if you're in a business to business setting where you're sending invoices and trying to collect on those invoices, obviously the financial folks listening will obviously understand that the faster you grow, the more your accounts receivable is and your cash is actually, cash flow is being strained dramatically. So that is the thing that is usually the first kind of point of education that really comes up.

Megan - 00:11:22: And speaking of cash flows, you have a remarkable track record for identifying cash flow improvements and profit increases. So what methodologies or frameworks do you use to analyze financial data and uncover these opportunities?

Karl - 00:11:37: Well, I've got some really good modern cash flow projection tools that I use. I've got a software that I use that ties into a number of the most of the accounting systems. So it kind of automates that process. So that's something I really find extremely valuable to be able to turn around those projections quickly and cost effectively. So that's the first thing. The second thing that I do is business valuation. In the past, one point I actually did business valuations for clients, whether they were SBA loans or other valuation needs. But at this point, I really like to use valuation as a like a quarterly KPI, as a metric. And it really it's something that the business owners I find can really understand, relate to and kind of care about. I talk about a debt to equity ratio. They see the eyes glaze over pretty quickly. But if I talk about valuation, I seem to keep people's attention a lot more. So and that makes it easy to do all sorts of other ratio and time series analysis to help identify issues as well. So those are a couple of the key things that I really like to do.

Megan - 00:12:54: And you focus heavily on pricing strategies. So what factors should CFOs consider when they're developing their own pricing strategies?

Karl - 00:13:03: Well, I think with the things we're seeing in the economy right now, high interest rates, inflation, supply chain disruptions, laborers, tight labor markets, that's kind of changing the way that I look at the economy compared to just say 5 or even 10, 20 years ago, that for a long time. Been in a period of low inflation, low interest rates, stable economic environment. And so I think really one of the big things is planning for price increases on a regular basis. And that's particularly important if you've got a long-term contract, a multi-year contract that you're negotiating with a customer. I think if you're not planning for regular inflation adjustments, whether that's an index or some other method, I think that's a big issue. From a more strategic point of view, looking at pricing as an opportunity to differentiate yourself, focus on the value provided as opposed to just the costs whenever possible. In some cases, there are some markets where the price is what it is and you just got to keep your costs down. But for a lot of companies, there are so many creative ways to offer or bring a higher price to the market. For example, that laundry company, when I was working with them, when I asked them, well, how do you see yourself in the market? They tell me that we're a premium offering. We do this and that to be a better service than our competitors. I said, okay, well, where do you stand in pricing in the market? No, well, we're about in the middle. I was like, well, maybe we need to change that a little bit. And then they're extremely hesitant. We ended up taking some very small steps initially to raise the price and see what happened. But eventually, we were able to raise the price and become one of the higher priced services in the market, which obviously had a huge impact on their profits.

Megan - 00:15:11: Why do you think so many people sell themselves short, like their hesitation to raise the price? Any thoughts on why people are regularly selling themselves short?

Karl - 00:15:23: Well, I know early in my career, that is well, so I think fear of loss. We're all just more afraid of losing something than we are at some level excited to gain something new. It's like, but I don't want to lose that one customer. If they really think about it and look at the numbers, well, maybe that customer, you may not be making any money on that customer. Yeah, but I still hate to lose him. How hard I worked to get that customer. I know. So I really think that's a big, big part of it is the idea of losing a customer is just, well, such a concept for an entrepreneur, a business owner to wrap their mind around.

Megan - 00:16:06: Yeah. And you guided companies through significant transitions, including M&A and bankruptcy recovery. So what unique challenges do you encounter in these types of scenarios and how can leaders effectively navigate them?

Karl - 00:16:21: Yeah, there's a lot of challenges that are involved in those types situations. I've been involved with a number of kind of might call them early stage turnarounds where it's just your experiencing low profits and you're not actually in a bankruptcy situation, legal bankruptcy situation, but those are situatons where you really need to move quickly to identfy the root cause what's really driving? This is it, is it a procing issue, is it cost issues, overhead issue, financing issue, and it varies. I worked with a staffing company, and just by changing their financing, they were able to increase their margins and also, well, not their margin, but reduce their cost of capital, which... Them to have more cash flow to the bottom line and also have a bigger facility to be able to finance their growth more quickly. And those weren't the only things, but that changing that financing helped them. I mean, it was part of what it took to help them double their sales in two years. But the first thing is kind of the triage, the going in and quickly assessing what the real problem is and focusing on those one or two problems, whatever the biggest things are. So that's the core of the approach for turnaround type situations. Acquisitions, potentially, acquisitions are challenging. They're not at all successful. Even if you do successfully acquire a company, then the integration with the existing company can have a lot of the similar characteristics to a turnaround of, can we get the new people to stay on board? How do we change procedures? So it's all kinds of fun stuff, right?

Megan - 00:18:18: It's life interesting, for sure.

Karl - 00:18:21: Definitely.

Megan - 00:18:22: And in your opinion, what are the essential qualities of a successful financial leader in today's business environment? I mean, the roles within finance are evolving. We have AI playing a part. So what do you think that the financial leaders of the future, what qualities do you think they need to possess?

Karl - 00:18:41: Yeah, that's a good question. And I think what you brought up earlier about the storyteller communication is so important. We've got 80,000 different ways to do text messaging videos and all sorts of communication, but that doesn't necessarily mean communication is actually happening, that people are actually really understanding each other, that we're motivating people to change. A CFO type of role, even a controller, a lot of it's about helping the company to change behavior, which means changing people's behavior. So at a certain level, there's an element of sales. It's not cold calling, but it's helping people change their behavior within the company. To me, that's the number one thing that I see. And I think the second part is a challenge of developing younger team members. We have a shortage of people coming into the accounting profession. With all the AI and automation, it's probably a little bit more difficult for people to kind of move their career up through the ranks. With the remote working, it's also harder to mentor and train people. So I think developing your staff, your team, is probably the second thing that I really see.

Megan - 00:20:06: And you've successfully scaled multiple organizations to prepare them for sales. So what specific financial practices or metrics do you believe are crucial for monitoring progress and ensuring that sustained growth?

Karl - 00:20:22: Well, I'm certainly going to do the ratio analysis and time series analysis, as well as, as I mentioned earlier, look at valuation and then carefully keep track of cash flow. So, I think those are, of course, all important. I would also really think about, there's so many numbers we can generate. It's setting up kind of a priority of what we're focusing on at any given point in time. So making sort of something of a scorecard or dashboard, I think is extremely valuable for focusing the sales and operating and management team on specific, numbers so that they actually pay attention to them and not overwhelm them with too many numbers and then they don't pay attention to any.

Megan - 00:21:12: And how do you prepare, like, what do you do to help these companies scale and grow? I mean, you can't just wave a magic wand and hope that you double in size. So what is it that you're doing to help them get there?

Karl - 00:21:28: Right. Yeah. Because, yeah, my magic wand broke a while back.

Megan - 00:21:34: I often wish I had one. It would be really cool.

Karl - 00:21:37: That would be good. That would be good. So I think, well, there was a company that I was working with that, and I guess that was the staffing company I mentioned earlier. And I worked with them. They have been, they sales had been flat for three years in a row, and they wanted to grow. And they had a strong market, every reason to believe they could grow. And I started working with them, and it's like I said, okay, let's focus on X, which whatever the particular task was. And so for this month, all I really want to focus on is this one task. Okay, and so we do that for like three or four months. And they're like, Carlos, just seems like it's going really slow. Is this going to work? We've been at this for three or four months, and we haven't really seen any change in the sales or the profits or aren't that much better. Is this really going to work? And I said, well, think of it this way. If we can tackle one thing per month, that'd be 12 things in the course of a year. And even if we don't achieve all 12, if we get eight of them, how much of an impact is that going to be after a year? The owner's like, well, yeah, that's a good point. That would if we can do eight of these 12 things on the list, that would be that'd be really good. And it's like, and we can only we're a small organization. We can only focus on one thing at a time. So that's let's just do that. And it took about six months before sales started to move. And but starting in like month seven, sales started to creep up. And by the end of year two, they had literally doubled their sales. So there's no silver bullet. Like you say, there's no magic wand that, you know, okay. This is the one thing you do. Most smaller organizations, the kind that I work with, even at 10 or 20 million, they've got a number of things that need improving. But it's not a Fortune 500 organization with huge teams that can attack multiple initiatives at the same time. These are smaller organizations where let's focus on one thing at a time, knock that out, then move to the next one. To me, that's just the single most important thing.

Megan - 00:23:59: Yeah, baby steps and patience and those baby steps add up over time.

Karl - 00:24:03: And the patience, you've got to kind of sell that patience. Not every business owner buys into that.

Megan - 00:24:08: Yeah, I imagine that they don't. And you have quite a bit of experience in energy supply chain. And you referenced earlier companies that are kind of set with a price and they don't get to dictate what their pricing structure is. So how do fluctuations in market conditions impact financial strategies for those types of companies? And how can finance leaders be proactive to mitigate those risks?

Karl - 00:24:35: Right. I guess you've got situations where you're maybe if you're selling natural gas, obviously, there's not a whole lot of pricing strategy to be done there. Maybe you can hedge or some things there. But if you're selling within a energy market. I think the biggest thing and people in Houston have kind of experienced this over and over is that the market for the energy products will swing up and down. And it's beyond anybody's control and often beyond their ability to even forecast. And so it encourages you to be a little more conservative in your financial management. There's an industrial distribution company that I worked with that. Had grown very rapidly, was very reputable, had sales contacts all over the world. But they invested a lot in inventory. And when a downturn hit, they weren't able to maintain their ratios and keep up with payments for the leverage they had. And they ended up going bankrupt. They liquidated. And so if you're in the energy sector or in any energy sectors, probably one of the. More volatile major industries out there. So, yes, you really should be a little bit more conservative in your financial management.

Megan - 00:26:03: And you emphasize the importance of data driven decision making within your work. So can you discuss how integrating data analytics into financial leadership can enhance effectiveness and profitability?

Karl - 00:26:16: Absolutely. Yes. There's two pieces in my mind. One is focus. Just like we talked about. Focusing one thing at a time and presenting a limited set of data that's very relevant. I think that really makes it easier for non-financial executives and managers to pay attention to and actually understand the numbers you're presenting. So I think that's one piece of it. And the other piece is communicating, telling stories, really helping people to understand what. The impact of their decisions are. If you're like, you've got a sales manager or CEO who's saying, well, I want to ramp up advertising. Okay, great. But let's think of that as an investment. And what's a return on investment? Really helping them see a story around that, not just a percentage ROI number or something like that. So making it understandable and really communicating with people to help make. Good decisions is really where you're trying to go. And that's of course, everybody, I'm sure everybody's got that in mind, but there are certainly times when I didn't get out in front of those decisions and talk about investing in marketing or new salesperson or other ways that a owner might spend money or business manager might spend money, a full order. They made that decision. And so then I was kind of left reacting to it. So if you can. Focus, tell stories and be proactive in that. I think you'll do well.

Megan - 00:27:55: And last question, but over the years you've worked in diverse financial environments. So what advice would you give to aspiring CFOs or budding finance leaders about building a resilient and adaptive finance team that thrives in both stable and volatile conditions?

Karl - 00:28:15: Yeah, that's a challenge these days. You've got all kinds of cool tools and AI out there that can help you do that. The options for online access to data, financial systems, using the AI and tools like Power BI type of reporting tools that really can make very pretty reports very quickly. I think those are super awesome. But it's building the team and both under you to help grow the company and have all those roles in there and support you and your efforts. So you can have a cost-effective and fundamentally effective team to run that. I think that's really important. And then keeping your lines of communication open with the other parts of the organization so you hear what's going on. And as much as you're also telling them information. So business moves very quickly these days, whether it's prices or supply chain disruptions or trying to get labor. All those things are very dynamic. We're seeing so many labor union strikes and things that I haven't heard about in many, many years. So, yes, what's the saying? We have two ears to listen and one mouth to talk. So we should listen twice as much as we speak. So that's another thing to keep in mind.

Megan - 00:29:40: Karl, thank you so much for being my guest today.

Karl - 00:29:43: My pleasure. Thank you for having me.

Megan - 00:29:44: Yeah, I really enjoyed speaking with you. And thank you so much for finding the time to be here with us today to share your experience and knowledge. And I wish you an Abunden all the best. And to our listeners, please tune in next week. And until then, take care.