No profits, no growth. It's a business reality applicable to all companies. Without profits, there is no way to invest in innovation and operations expansion, or attract top talent. In this episode of CFO Weekly, Manny Skevofilax joins Megan Weis to share how to maximize profits while growing your business.
Manny is the Principal at PORTAL CFO Consulting. His role is to serve business owners as their navigators to business growth and making more money. Along the journey, Manny helps clients gain a better understanding of their business's financial health so they can make more informed business decisions.
Megan - 00:00:18: Today, my guest is Manny Skevofilax. Manny is a consultant and speaker that helps business owners to make more money by successfully navigating the challenges of growing their businesses profitably. Since 2003, Manny achieves extraordinary outcomes for his clients by using his experience in strategic planning, financial statement analysis, operations, organizational development, and team building. A Baltimore, Maryland native, Manny earned a Bachelor of Science in Business and a Master of Science in Finance from the Merrick School of Business at the University of Baltimore. Prior to starting his career as a consultant, Manny's background includes formal bank credit training and service as a Vice President with Comerica Bank, a US-based commercial lending institution. He has corporate lending experience in the continental US and European markets with specialties in commercial business finance, real estate finance, and large corporate syndicated lending for mergers and acquisitions. Manny grew up in the restaurant business and made a career change to corporate banking at age 29. When he's not helping business owners, Manny can be found exploring the ancient ruins on the island of Karpathos, where his parents were born. Manny, thank you very much for being my guest on today's episode of CFO Weekly.
Manny - 00:02:07: And Megan, thank you for having me.
Megan - 00:02:09: Yeah, growth and profitability are both achievable and shouldn't come at the cost of each other. Today's topic is maximizing profitability while you grow your business. And I'm excited to learn about you and your experience with this topic. We've got a lot to cover, so let's jump right in.
Megan – 00:02:27: Excellent.
Megan – 00:02:28: So Manny, in your own words, can you talk us through your career to date and how you got to where you are today?
Manny - 00:02:36: Sure. My parents were born in Greece on an island and they immigrated to the United States after World War II. And back then in that era, a lot of people were getting into the restaurant business because they wanted to do their own thing and they had kind of grown tired of working in coal mines. And a lot of Greek people gravitated towards the restaurant business. I grew up in it. And as I moved through, my parents always stressed the value of education because they were not able to complete their education due to the war. And I kept working and along the way got a degree. My bachelor's actually. I liked working in the restaurant business because I could come home with cash every day from work, which was plus. You didn't have to wait to get paid every two weeks. And then I started thinking about making a career change. And after a lot of indecision, hemming and hawing, I decided to give it a try. So I went back to school and got a master's in finance and I started my career change at age 29, where my advisor in grad school told me to go get a job in a bank, in a commercial lending training program because they were getting cut for cost reasons. And I followed her advice. I worked in the bank for 10 years in this training program where they move you around in a bank so you can understand how to lend to a small business, a middle market company, specialty lending. And I had a lot of great teachers and mentors. And then I came to the point where I wanted to do something different. And consulting appealed to me. I wanted to give it a try. And I hung my shingle out as a consultant 20 years ago, figuring if I failed, I could always go back to banking. And I've been very blessed. And I've been working continuously since then as a consultant.
Megan - 00:04:26: That's a great story and what a remarkable career. So as you mentioned, you used to work in the restaurant business. You took yourself to university and now you're principal with your company, which is PORTAL CFO Consulting. So what lessons about business that you learned during your restaurant era do you still carry with you? I always think restaurants are a great place to start.
Manny - 00:04:52: That's a great question. And I think they are also, I concur. It's a great place. Two things, focus on your customers and your costs. And it's kind of hammered into your head all the time. Every single day, you got to focus on the customer because if you don't, someone else will. And then you got to focus on the cost because if you don't maintain profitability, unfortunately, in a restaurant, unfortunately, you're going to go out of business because it is really difficult to get financing if you own a restaurant. It's not the type of business that financing sources are jumping up and down to lend money to.
Megan - 00:05:30: Two very important lessons. Yeah, I always think restaurants and the hospitality industry in general, there's no better way to learn about customer service than in that industry.
Manny - 00:05:41: Definitely.
Megan - 00:05:43: So talk us through a client story that you're particularly proud of the way you were able to assist them.
Manny - 00:05:49: I don't have one particular one. I'd like to say that I'm really proud overall of all the clients that I've worked with, both past and present, in that I gave them a unique perspective on the pros and cons of borrowing money from a bank, Megan. They were able to become more disciplined because I came at it from a different angle where I grew up in a restaurant business where it was tough to borrow money. Then I went and got trained as a corporate banker and I learned the ins and outs. And I said, look, try to be really careful when you borrow. There's nothing wrong with borrowing. Just make sure that you're doing it for a good reason. And I'm very proud because I had to convert just about every client. To being more judicious with borrowed funds.
Megan - 00:06:37: Especially these days when capital is so expensive.
Manny - 00:06:39: Yeah, it's certainly changed over the last year, hasn't it?
Megan - 00:06:42: Absolutely. I'm ready for the good old days. So what are the most common mistakes or misconceptions about profitable growth that you have to remedy in business owners when they come to you?
Manny - 00:06:54: The main thing is my pet peeve. I have business owners that say, oh, it's okay to lose a little bit of money for a while. We'll make it up. And that's my pet peeve because I don't think that's accurate. I think you have to be profitable all the time in order to keep going. And then there's two different schools of thought here. One is if you are funded via private equity or venture capital or Angels or something, that's a different business model where losses may be acceptable for a period of time. But if you're not funded, if you're bootstrapping, you got to be profitable all the time. You're constantly at risk. So we want to shift their focus is put profit first.
Megan - 00:07:38: And when you first come into a business to help business owners, what tends to be the low hanging fruit in terms of adding value?
Manny - 00:07:48: Great question. I was taught by my teachers and mentors to analyze a financial statement. So the first thing we're going to do is make sure that you have accurate numbers in your business. And then we're going to analyze them. We're going to do some financial statement analysis. And that analysis is going to bring up some questions that are going to be very beneficial in terms of figuring out how well you're doing in your business and if you're heading towards your goals.
Megan - 00:08:18: And is it more common that you're approached by these business owners because they want to experience assistance in running a company and they might be a little bit overwhelmed? Or is there usually some sort of big expectation that you're going to deliver growth and increase profitability?
Manny - 00:08:36: Oh, that's a great question. Let's take the second half first. So in my opinion, an advisor is not going to deliver “growth and increased revenue”. So I will speak specifically for me. I am not going to go and sell anything. I cannot say that I'm going to deliver growth and increased revenue. What I'm going to do together with the business owner is, we're going to make sure that your team and your culture is solid, everyone's rowing in the right direction, and we're going to free up that owner's time to be able to manage the sales team, the other processes. And that freed up time will be able to then deliver the growth and the increased revenue. So I make that known up front. And then the first part of the question is, yes, that business owner gets to a point in their growth process where they say, this is really not my forte. I'm really good at what I do. My trade and finance is not my trade. Let me see if I can get somebody in here to help me.
Megan - 00:09:40: And I'm just curious, when you get a new client and begin a relationship, are they long term or is this something that you just come in and help a new client with for like a short period of time just to get them on the right track?
Manny - 00:09:56: That's a great question. It can be both. When I first started out, I thought it would be short-term engagements, you know, maybe three to six months. But what I found is once the cash starts showing up in their bank account, they don't want you to leave. And I've been very blessed. I've had my longest relationships now are 17 years.
Megan – 00:10:18: Wow.
Manny – 00:10:18: So I still have clients now that I was blessed to start doing business with three years in. They're long-term engagements.
Megan - 00:10:26: Yeah, that's amazing and speaks a lot to the value that you must bring to these clients and the relationship that you have with them.
Manny - 00:10:34: Yeah, thank you. I've been very blessed with great teachers and mentors, Megan.
Megan - 00:10:38: So how can you anticipate the moment where growth tips the scales from profit to losses? And if you don't have the capital to maintain proper functions and you're still trying to grow, surely that's going to lead to an unprofitable approach.
Manny - 00:10:54: Yes. Without getting too technical, you can run a projection, a financial projection. I'm keeping it really simple. And you'll know if you're in a loss-making mode, you'll know at what point of gross profit margin, what point you need to achieve a certain margin in order to break even and get the profit. You can easily calculate it in a spreadsheet. The hard part is to actually do it, to actually go bring in that revenue at that appropriate margin. And then in terms of not having capital to maintain proper functions and still trying to grow... Yes, that's an unprofitable approach. But I would like to say that if you have outside funding, that is actually kind of anticipated from the beginning. So I'd like to say that in my opinion, it's doable. But if you're not, if you're the typical average bootstrapping business owner, then that approach is not going to work. You're going to have to make changes to maintain the basics, stay profitable. And then as you retain profits, then you can start to grow a little bit.
Megan - 00:12:02: And I'm curious again, but is there a point of no return? And if so, how do you know if you've gotten there or can every business be turned around?
Manny - 00:12:15: That's a good question. It depends. It depends. In my experience, as human beings, we don't want to immediately reach out for help if we have a problem in our business. What I found is that certain business owners started sustaining losses for whatever reason. They can be completely, like, let's say COVID, it came out of the blue. And all of a sudden, the government was making decisions on whose business was essential and whose wasn't and forcing you to close. So if you are able to spot a negative trend, before it really takes root, then you can turn that business around. Unfortunately, if you go past that point where you're getting some serious constraints on your cash to answer your question directly, you're not going to be able to turn it around. So my point is you got to take action early.
Megan - 00:13:08: Don't be afraid to reach out for help. I know it is hard for a lot of us to admit that we need it.
Manny - 00:13:13: Yes, as human beings, you know, we try to, we got it this far, we can get it the rest of the way.
Megan - 00:13:19: And I expect that many people see growth as automatically being a good thing. But as we've just discussed, you can overstretch yourself. So what other strategies do you advocate for that can extract the most profit possible out of growth?
Manny - 00:13:35: Oh, that's a great question. I always start with, you have a business here and everything's great. Let's see how we can tweak what you have. And what I was taught was to mine, M-I-N-E, mine the hidden gold inside of that business. So look around. Are you, you can, you know, look at it from the cost structure. Every expense that you're incurring, is that leading to revenue? And if so, is it reasonable? Are you making the bang for the buck? And then you look at your clients the same way. I have certain clients perhaps that I'm making more money on than others. So you can take that approach. And look internally first.
Megan - 00:14:17: And we might have already covered the answers to this and what you just said, or maybe in the question I had about the low hanging fruit. But what are some of the most frequently missed opportunities by business owners? What do you see that they don't see as far as growing their business and creating profits?
Manny - 00:14:36: The business center is under so much risk, Megan, that they don't want to change. There's a lot of pressure. You've got all your employees, your most valuable asset to take care of. You have the rule of thumb that for every employee on your team, 10 people rely on that employee. That can be a pretty big, turn into a pretty big number, a lot of pressure. You have your own family that you have to take care of. And in my experience, it's been that, hey, this is the way we've always done it. So let's not change. We're not interested in taking a different perspective, taking a different look. And if you can get in there and help the business owners to understand, you know what? Just take a look. I have an interesting story. So years ago, I was referred into a client and this person got their business 90% from the Yellow Pages and 10% from referrals. And it was a significant expense every year. And I looked at his financials and I said, you know what? You're not getting the bang for the buck. And oh, by the way, if I was at my parents' house and they said that they needed your service, I would whip out my phone, go to the internet and find the nearest person and start making some calls, get my three estimates. I said, if indeed they had the Yellow Pages inside the house, nobody would look at them anymore. And the customer was astonished. And it took a while to convince him that he could get 10 times more return on that expenditure while at the same time spending 10 times less. So...
Megan - 00:16:13: So I'm sure you must kind of, I don't want to say fight, but I guess sort of fight your clients to change their ways. How is it that you go about getting them to trust you and ultimately to make these changes that are required?
Manny - 00:16:30: One of my dearest friends calls it a spirited debate. So yes, there are a lot of spirited debates and it just takes time to be able to get there. Like I said, the first few recommendations as they show up as cash in the bank account. So suddenly you show up on the scene and a few months later, the cash balance is higher. Then you start building some trust. And then you have to gently, it's not easy, first of all, because you have to go in there and tell somebody something about their baby. They're like, hey, I've been in this business for 20 years. Who are you? Where did you come from? I've done just fine without you. So if you can build the trust early, then that'll lead to the opportunity to have some spirited debates, Megan.
Megan - 00:17:22: I like that. I like that term. So efficiency of business operations, that's usually a good way to increase margins. How useful do you find tools like automation and AI in that regard? Is that something you preach to your clients or?
Manny - 00:17:39: I love efficiency of business operations. It's in terms of using it to increase the margin. I absolutely love that. I preach it every day. The part that I don't know anything about yet is the AI piece.
Megan – 00:17:52: Yeah, me neither.
Manny – 00:17:53: So for example, in my career, when I started, I used to have to take these cards that I was punching out of the computer and take them over to get compiled in a mainframe. That's how it used to work when I was in school. And I've been able to watch all these changes in my career. And I really think that, again, AI is really excellent at writing blogs. And apparently, I was just talking to some of my younger relatives that are in college. And apparently, professors are, there's other tools that a professor uses to make sure that Manny didn't use AI to cheat on an exam, which I didn't know until two days ago, right? So I found that interesting. So I really don't know, but it sounds promising. And I really feel in my gut that this might be the most dramatic impact of all the tools, email, video conferencing. It might be the most dramatic tool that we've ever had.
Megan - 00:18:55: Yeah, I was born in the 70s. And yeah, seeing like the technological changes during my lifetime has been, it's been dramatic. It really has. And to think where we might be in five to 10 years is almost scary.
Manny - 00:19:11: Yeah. I can't do my job. Let's say I would not be able to do my job and service the number of clients that I have and be there at the drop of the hat for them without technology. Impossible. Impossible.
Megan - 00:19:30: So you help a lot of business owners stick to a budget and grow their companies. Do you always follow your own advice or have you experienced hiccups and learning moments in growing your own business, PORTAL CFO Consulting?
Manny - 00:19:46: Yeah, I got a funny one for you. I have a customer that will not say that word. He refers to it as the B word for budget because he doesn't like to have it. He feels like it's a constraint. But speaking of the B word, for the most part, I follow my own advice. I had some really rough financial times early on, and I learned some really hard lessons. So I stick with it. And I've had some instances where things haven't gone as planned. You know, you're like, hey, that looked good on paper, right? Why didn't that work? And then you also have economic hiccups. But for the most part, if you can, what I've done is focused on profitability. That's been the most important thing. Focus on profitability and then do your best to manage your expenses. Like, don't keep trying to increase the dollar amount of your lifestyle just because you're making more money. Leave yourself a little cushion. Because sometimes, you know.
Megan - 00:20:42: It's easy to do. To kind of just expand into how much it is you make.
Manny - 00:20:46: Yeah, because it's fun, right? We like it, right?
Megan - 00:20:49: Yeah. It makes us feel good about our accomplishments. Yeah.
Manny - 00:20:53: Yeah. We need a reward. We're reward-driven. But by the same token, we don't want to have to go to bank or open up a credit card, new car or something like that if you need money. That's not fun. It's fun when you're able to do it. But in times where the economy tightens up like we're seeing now, you know, you might not have that tool available and that could cause you a lot of stress.
Megan - 00:21:17: Yeah, that's great advice. So last question, but as you look at your own business and your clients' businesses, what is it that is keeping you up at night?
Manny - 00:21:27: Oh, that's a good one. I try to get good rest. I suffer from anxiety. So I'm constantly on my toes more than the average human being. So I try to just make sure that my health comes first. And that's what I preach to my clients, that they are the asset, not their money. So you got to watch out for your health first so you can be able to come and fight it out. Make sure you have cushion. You don't want to be laying in bed with your head on the pillow and not be able to sleep because you don't have a cushion in the bank. So I'm sleeping good these days. It's not for everybody.
Megan - 00:22:04: Yeah, definitely two great pieces of advice because all the money in the world is not going to make up for poor health at the end of the day. Manny, thank you so much for being my guest today.
Manny - 00:22:15: My pleasure. Thanks for having me.
Megan - 00:22:17: Well, I really enjoyed speaking with you and thanks for finding the time to be here with us today to share all of your experience and knowledge. And I wish you all the best. And to our listeners, please tune in next week. And until then, take care.
In this episode, we discuss:
Strategies for maximizing profitability
Overcoming the challenges of business growth
Building efficiency in business operations
The role of financial discipline
Business Secrets from the Kitchen
The relentless focus on customer satisfaction and cost management is vital in business. Derived from the restaurant world, Manny believes that neglecting either aspect can be fatal. Restaurants teach a harsh but valuable lesson: prioritize your customer because someone else always will, and manage your costs.
“Every single day, you gotta focus on the customer because if you don't, someone else will.” Skevofilax said. - 04:25 - 05:41
Debunking the Myth of Early Losses
A common misconception in the business world is the idea that it's acceptable to operate at a loss, especially in the early stages. Some might argue that initial losses can be offset later. However, Manny believes it's necessary to be consistently profitable for sustained growth. Moreover, it's important to differentiate between businesses backed by external funding sources like private equity, angel investors, or venture capital and those that are bootstrapped. For the latter, operating without a safety net of external funds, maintaining profitability isn't just advisable; it's crucial for survival.
“I think you have to be profitable all the time in order to keep going.” According to Skevofilax - 06:45 - 07:35
Maximize Profits in Business While Growing
When business expansion leads to losses rather than profits, especially with limited capital, Manny opts for a pragmatic approach by using simple financial projections to determine the break-even point and the importance of achieving the right gross profit margin.
While external funding may expect a period of unprofitable growth, bootstrapped businesses must focus on maintaining core functions and profitability before considering expansion. Businesses can often be turned around if negative trends are identified quickly. But if critical financial constraints are crossed, the chances of recovery diminish significantly.
As Skevofilax said, “If you were able to spot a negative trend before it really takes root, then you can turn that business around.” - 10:45 - 13:08
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