Episode 30- Empowering Small Businesses with Kyle Smith

 In this episode of "Small Business, Big Moves,". Thomas Bennett is joined by guest Kyle Smith to explore creative strategies and innovative approaches that have propelled small businesses to new heights. Discover the steps to empowering small businesses.

Connect with us on social media:
- Facebook: Thomas Bennett
- Instagram: @Thomas.mbennett
-YouTube:@SmallBusinessMoneyConnector
- LinkedIn: Thomas Bennett

Subscribe to "Small Business, Big Moves" on Your Favorite Podcast Platform for more inspiring episodes on innovation and entrepreneurship.

Small Business Big Moves is a podcast where innovation meets entrepreneurship. Join Tom Bennett as he explores all things  business growth! From business funding and business tax credits to conversations with leaders who have grown successful and innovative businesses! 

Transcript

Speaker: 0:03

Welcome to Small Business, Big Moves, the podcast where innovation needs entrepreneurship. I'm your host, Tom Bennett, and we'll explore all things business growth from business funding and business tax credits to conversations with leaders who have grown successful and innovative businesses. Welcome to the show. Today's guest will be Kyle Smith. Kyle, I'll let you introduce yourself.

Speaker 2: 0:27

Hey, Tom. Nice to meet you. Good to be on. Absolutely. You as well.

Speaker: 0:33

Yeah. If you wanted to just kind of give a quick background about yourself. I know there's a lot of value that I think you'll be able to provide to some of our listeners out there.

Speaker 2: 0:44

Oh, absolutely. So I I, there's a, I don't know. You can see there's a Longhorn clock behind me. I'm a big Longhorn fan. I went to UT I'm based here in Austin, Texas. And when I was a senior in college, I was at the business school and wasn't really sure what I wanted to do. So I kind of had two paths coming out of college. My dad started a franchise. Restaurant hospitality group here in Austin, and so I thought I could kind of go into that and work with what I learned on the finance side. And kind of cut my teeth there and definitely got a crash course in finance accounting in the real world. Because, you know, obviously it's different than when you're going to school. So that was the one track. And then the other track is I thought I was going to be a professional poker player. So I was moonlighting as a professional poker player using my finance skills there. And, you know, a year down the line realized that, you know, You know, playing poker. If I win, someone else has to lose or if they win, I have to lose. It's not a not a game where you know, multiple people can win. I can help people where I can win and they can win as well. And not to say that business isn't competitive and we're not competing with each other. But I really like the aspect of working as CFO of Okay. Of the group that my dad started and that, you know, if I, the help that I did help the business grow and everybody could win. So I thought that Is going to be my track and that's what I'd like to do in the future is help businesses out and kind of gave up my poker dream. And by the way, it was not nearly good enough to be a professional as well. So I don't want to put that out there, but it was, it was meant to be because then that started me on the track of learning as much as I could about small business in the hospitality space and then moving over to the consumer package space. So it was director of finance at a brewery. For a few years and then wanted to kind of expand my skill set. So I moved to a company called scale factor here in Austin. That was industry agnostic. And was head of an implementation team and got to see tons of different industries all at once as we were onboarding 20 to 30 clients a week for a while there. So I got to see a lot of different small businesses, a lot of different business models, what worked, what didn't, what phases we're in and that was really, really helpful for me. And scale factor was trying to make software and made a lot of progress, but didn't end up working out. And so we got to take the relationships, me and my two other amazing co founders of Stratocloud, the company we have now Dietz and Hunter we were able to use our relationships that we gained working at ScaleFactor to start to start our company in 2020 with the goal of helping businesses grow. And we've been helping businesses grow and growing ourselves ever since.

Speaker: 3:35

I love it. That's that's exciting. I love the I love the story and I love the The vision you guys have because it's just the same thing that that I focus on too, right? It's just helping Small businesses grow and expand and I love hearing other people do the same thing. So I appreciate you sharing that the other thing too, I I see. I know you mentioned UT in the, in the Longhorns. I I'm out here in the Boston area. So we we can compete professionally, but I've never really had a good college team outside of like hockey to, to root on. So I can't relate to the whole big football team, but it's been been pretty good for you guys over the years.

Speaker 2: 4:12

Definitely can't complain for UT. Yeah, for sure. I got, you know, a championship and that's all I care about.

Speaker: 4:19

Yeah, exactly. No, but I appreciate you with that, sharing that intro and a little bit about your background. I know really what I wanted to focus on today was really all around empowering small and medium sized businesses, especially to that point you mentioned with just helping them grow and scale, but wanting to, I appreciate you sharing the background. I know that that's always helpful. We hear about Like all the wins and the successes with with people online and in the social media world, but I appreciate you sharing that with some of the companies that you were with and then things didn't work out and you went on to build this strata cloud, which sounds like it's been, they're doing really well for you guys. So that's exciting. The first thing I really wanted to touch on was if you can walk through a little bit of the importance of aligning those personal goals in business vision. I know with the small business owners, a lot of times they may have those personal goals or they may have a personal or business vision. But tying them together is something that we probably don't see as often as we would like.

Speaker 2: 5:29

Absolutely. And I can give an example with a client I was working with today. They had a goal of for this year, they wanted to make 3 million in profit, bottom line profit. And so we met a couple of months ago when they joined on and we talked about personal goals. And that was one that they, a goal that they had for the business. So to me and for us, that's immediately going back to, okay, let's see what that looks like from a personal perspective, because that 3 million. to hit their personal goal. Their personal goal was saving half a 1, 000, 000 a year. And so They work hand in hand right off the bat. And then we start going backwards, working backwards from that goal with that particular business owner. And we'll say, okay, how can we make that happen? And what does that look like in terms of your time? Because I think that's a huge one that a lot of business owners myself included, I'm not saying I'm not guilty of it. You think that you can handle something or that you're going to, you know, I'll be able to take these extra hours in the meantime to be able to grow the business. And then I'll scale it back. But, you know, for me, it's really important to plan for those hours from a time perspective early on. So if you want to get to 3 million in net profit, let's see what that looks like in terms of revenue. And let's see what that looks like in terms of your team that you need to support you to be able to not spend more than X amount of hours on the business, whatever your goal is there. So it's not only defining dollar amount, it's defining your time because you know, time is money. And time with your family or time doing other things outside the business is really important. And we want to make sure that okay, if you have that goal, that's going to take 60 hours of your time. And if they say that's that's not what I wanted. Well, I want to spend 30 hours. Then let's get the personnel in place at least project that out and see what it looks like in terms of profitability to plan for that. Because then we might find that 3, 000, 000 might be a goal for next year. And in this case, it wasn't in this case. The business owners done a great job of putting a team in place to where we can hit that goal. And. They can still have their hours in the business be manageable so they can have that work life balance. But that's an example why it's so important to ask that question on the front end. Because if you don't, you might be working towards something that on the business that might even not align with what your goal is personally. And then it's never going to work because you're not going to have the passion or you're going to burn out. And, and you would have wasted a lot of time in that case.

Speaker: 7:52

100%. And it's I laugh a little bit too because I I remember when I was, when I started out my career, I was working in in corporate sales and I remember one of my general managers used to always say, why why would I work 40 hours for he was working on starting up his own business and he's always saying, why would I work 40 hours for someone else when I can work 100 on my own, right? I know that was like the old Cliche, you're going to be a business owner, you're going to work 100 plus hours a week and just burn yourself out, never see your family and just kind of be, be a be just focused on the business. And I think now we're starting to see a little more of that shift where people are starting to align those personal goals and really have that, whether it's a why or vision, but I think that's a very important piece. And like you said, it's much more than just the The money and time that goes into it. It's what what that time is going to actually do for you as well. So I appreciate you sharing that. Absolutely. I know we talked about so you have the personal goals, you align that with the business vision and then how can you use that to really hold your business accountable with, those company or business level goals once you kind of get past that personal vision? Yeah.

Speaker 2: 9:03

Absolutely. So the, the real big strategy that I use is, you know, chop the biggest trees first or go big to little. So just to go back to that example that we had is if I'm coming in as a VCFO with a client and was working with, with a client today, or they had that 3 million a year goal. We're currently, they're currently on pace to do 2 million. So where, where can we make up the difference? We're not going to make up the difference. Cost cutting on a small cost item for instance and focusing there which you might have a tendency to do as a controller, like focus on where, where can I cut? Not to say that you need to be cost efficient. I'm not saying that at all, but I'm saying from a CFO perspective, what I'm going to look for is where's the biggest place we can affect change. And they said first. Area where they hadn't done work where they needed to was in their price. So they get reimbursed from the state the state gives them exceptions for their cost structure so they can effectively Change their the rate that they're getting for their price by like 50 percent. Working with the state, to get reimbursed and that's how they do the majority of their business So in this case, that's where they're going to be able to get the most You Bank for their buck. So if we're able to go back and reprice, what does it look like? If we put in the exceptions because if they're able, if you're able to change prices of business or you're underpriced, you're you're leaving so much money on the table because all that revenue that you gain from the price goes all the way to the bottom line. There's no associated cost. Incremental cost with pricing if it's there. So that's that's an example where we focus big to little. They were underpriced, but a large margin. If we can fix that. Okay. And show them what it looks like. That's how with their business where we're actually going to have a course to get from 2 to 3 million because we're going to focus on that reprice. And then from there, we'll focus on other items. So maybe it's a cost item at that point. That we focus on, but really, it's where can we affect change the biggest to hit the goals that we have.

Speaker: 11:04

Love that. Yeah. And I like what you mentioned there as well with I think I notice it all the time. Same thing, just trying to help small businesses grow and get to the next level, whether they're at 500, 000, trying to get to a million, if they're at a million trying to get to two, or like in this case at 2 million, trying to get to three. And I think that I'd imagine you see that all the time as well, where. It really is is, I mean, I won't say simple because it's much more than that, but at least finding out that a lot of times that issue is that the business may not just be charging enough for whatever it is. I'm sure you probably see that every day as well.

Speaker 2: 11:42

Yeah, absolutely. And it's knowing where to go to like, you know, and I'm sure you see it all the time as well. So this was pretty capped at what they could do in terms of revenue growth from where they were. So, you know, take that knowledge and see, okay, where can we go to hit the bottom line goal? Other businesses are, Hey, we need to drive revenue growth because that gets us into a different multiple for our sales, you know, our, our exit goal. And so we need to really focus there and maybe we're willing to give up some, some profitability on the bottom line, depending on the industry. Maybe it's the opposite in certain industries, but sometimes there's areas to focus. So it's, you know, taking that taking the feedback from the business owner and trying to then affect change as best we can. But it's different from business to business. In this case, it was, how do we focus on that reprice to get the profit up other times? You might have a different strategy, but it's for me, it's not ignoring the reality of the business and the situation and trying to be honest with the business owner or executive team or whatever it might be.

Speaker: 12:42

Absolutely. I like what you mentioned a little while back as well, that it's Like if they're at 2 million and they're trying to get to 3 million, right? Obviously, that's a huge increase in the business and then I'm sure eventually they want to get to 5 million and keep growing, right? Just like every business wants to keep getting to the next level. It's just figuring out how to do it. But I like what you mentioned too, where it's like, okay, so you're at 2 million this year. As long as we're going in the right direction, not the wrong direction. So you're at 2 million, you want to do 3 million. They ended up doing 2. 3, 2. 4. I'm obviously not saying ever settle for less than your goals, but at the end of the day, that is still a, still a nice win when you're still significantly increasing the revenue in the business.

Speaker 2: 13:24

That's a great point because a lot of times people set the goal and then they get discouraged if they're not getting there. And that, that's what I preach every day is we measure a goal is just to be measured against the just. You don't set the goal and then throw it away, set the goal, measure it, and then And by the end of the year, you should be knowing. That you're, you're targeting 2. 3 or 2. 4. And that's the best effort or best that your team could do that year. And you can hang your hat on that instead of being discouraged that you didn't hit the original goal.

Speaker: 13:52

Sure. Absolutely. And then kind of off topic from that a little bit, but I know where we are still on that topic of like growing and scaling a business, right? Another, another thing that I. Oftentimes see is I'm a big I'm a big fan of like culture and core values. And I think it's one thing that a lot of businesses preach, but aren't really living by it. So I know that that's a huge area. I wanted to have you kind of touch on that a little bit and see what, what your your opinion on that might be.

Speaker 2: 14:26

I think it's going to be very, very similar to yours. The way you phrase that question, because I find the exact same thing. They have a culture of mission. They have a mission statement, but it's not being used in the business day to day at all, because they think that's a high level mission statement. You know, I'm not going to use that as if I'm, you know, at the bottom level of business, I'm not going to use the company's mission statement. And to me, it should be the exact opposite. And somebody told me along the journey. This advice that I think is huge and we use it at our company every day, the mission statement of the company you should use to make every decision that you have on a day to day basis. So we tell our team because it's the same thing where it was services business. So for scaling up, we're risking jeopardizing that quality of service. With every person that we grow every person has to believe in our mission as a service company, or we're, we're going to fail. And so if our mission is, how am I helping that? Our mission statement is. Is this helping the client or mission question, I guess it should be. And that should drive every decision that you make, because there's not going to be a playbook for all, and some, some decisions are easy because you've got a playbook. You have a job description, you have roles and responsibilities and you make the decision. But a lot of the time, if it's not clear, that's where you revert back to the, the mission question, mission statement and say, for us, is this helping the client? If the answer is yes, a lot of times you're gonna have to empower yourself and go do it. If the answer is no you know, go figure out another way to solve it. But if you're not asking yourself that question, and you're not being proactive, then there's really no point in having a company mission. Because that's what I think in the end, a company mission is meant to empower the employees.

Speaker: 16:10

Absolutely. That's spot on. I agree 100%. And it it's so true because that's where we just continue to align because back when I went back to when I was in corporate again, was that it was really all my focus was just pushed to be on, like, that whole mindset is what I'm doing, leading to my next sale or my next client. Right. And I think the biggest shift in my career was when I just shifted that to. Every day, what can I do to make a small business owner's life easier? And then when you're actually selling or positioning on value, opposed to just like trying to try to get a client in the door, I think it changes everything. And then when when your clients have the, have that same vision as well, and open to hearing how they can grow and scale their business, it just makes it easier for everyone.

Speaker 2: 17:00

I agree. It's a, it's an amazing experience when you feel that alignment with a business owner.

Speaker: 17:05

Absolutely. Yeah, no, on top of that too, right? With like you have, if you have the mission statement, you have the culture and core values and everything lined up. I know that that's not, you can't just stop there. Right. I know. And I think we're starting to hear about it more and more, but obviously like, you know, standard operating procedures SOPs and key performance indicators KPIs. I know those are probably another two, two things that you're a you're a big fan of as well. So I wanted you to kind of walk through those as well.

Speaker 2: 17:36

Oh, absolutely. And KPIs can get super technical and you know, it's key performance indicator, like you said, so it's, To me, it's in the, in the frame of talking with the business owner, it's something that we measure against and, and that's it. And if it's useful for us, we use it. If it's not, we don't. But I found with a lot of businesses, you know, big to small, we focus on five. Coming out of the gate with whoever we're working with at strata that are super valuable. And they're all basically on the profit and loss statement and they're all super simple that everybody knows about. They probably wouldn't even consider them KPIs. I think there's some of the best that you can measure though. And that's revenue, gross profit percentage, net income, net income percentage, and and net cashflow, which isn't technically on the profit and loss statement, but they're related. And the example that I just gave a couple of minutes ago with that client, Where they were underpriced. That's looking at revenue. A very simple top line metric and saying, Hey, we're underpriced here. Is there a way an area where we can affect change in revenue? How is that going to affect the rest of the profitability of the company? And in their particular case, revenue was the most important. API to measure because then we were able to back into the pricing issue and try to resolve it. So to me, you don't have to have 300 metrics. Sometimes it does pay to get really in depth. A lot of the time it does. But sometimes you need to start with the basics because a lot of times people get overwhelmed. And that's what we find a lot to his businesses kind of throw up their hands. And say I don't have time to measure any of this stuff, and so I'm not going to do it. But if you're focusing on those five metrics that I talked about, that at least focuses your company on. Are we getting good numbers? Accurate numbers one, which is super important to make decisions and then two, you can go through those numbers and at least start asking questions. Which is the key thing like with with that revenue. I keep going back to asking the question of are we underpriced and is it worth focusing on? That just takes you can go through all five of the metrics. I mentioned in 30 minutes a month, even if you're not a CFO or financial person, you can go through them and start asking questions work towards getting numbers work towards answering those questions that will affect change in the biggest way and then you don't have to be overwhelmed and do it consistently from month to month.

Speaker: 20:09

Love it. Keep it simple in it. It's so overlooking there. There was so much value in that right there. I say that because I work with small business owners all day. And a lot of them sadly, aren't really even aware of their PNLs and balance sheets. And I love what you just said with that PNL and those five, like there's your KPIs right there, right? Those five areas you can focus on. You don't need to overcomplicate it. And then like you said, 30 minutes a month. And I think that would, I would say that would improve just about any business out there. So that's that's huge. I appreciate you sharing that. Absolutely. I agree with you a hundred percent. And then another thing I wanted to jump into because we're I know we're throwing a lot at him, but what do you, what is your give us some of your value on cash flow and really how that can truly be the key to financial modeling and growing a business.

Speaker 2: 21:09

Yeah, this, this one, you know, if it's not your core competency, looking at a cashflow statement and I found. Even accountants are scared of a cash flow statement, and I understand it's a scary statement, but you have to, at a bare minimum you have to look at the difference between your net income and your net cash. So that's why I have those. Two KPIs as the, as the bottom two, because the difference there is so telling so many examples, but I'll give one and I'm, and I'm going in my head because I've got one from today, but I don't know how long it'll be to explain. So I'll keep it short with another one that is really telling. We were working with a company, they had. Consistent cash balance. So the cash in their bank was pretty consistent. They didn't know a lot about their before we jumped in with them. And so they, they thought they were doing okay on profit because their cash balance was okay. They went to the bank to get a loan to open, expand the business, open another location. And the bank came back and said we're not going to give you this money because you're not profitable and you're owing your vendors more and more and more every month. Your eight, your accounts payable balance is growing month over month over month, and they were pretty stunned and had to go back to the drawing board and we had to work with them to get that accounts payable balance handled, which means they had to get a plan with their vendors. They had to work on their profitability of their business. And they were probably 18 months behind in that case of when they could have been to get an expansion on A new location that then would be gender revenue for them. So that's a huge snowball effect where if they were looking at the numbers, they would have seen. Hey, my net income is negative, but my net cash is maybe break even or positive. What's the difference? Oh, because I'm not paying my vendors. And so if they would have just made that simple connection. They don't have to look at the cash flow statement. Just look at the bottom numbers. They could have seen. Okay. We need some things that we need to address right now before we're going to be ready to expand. And it could have saved them, you know, like I said, 18 months of time where they could have been building the new location and getting revenue much earlier than they ended up doing.

Speaker: 23:18

Absolutely. I mean, cash flows, another, another area that's often missed out or not focused on enough, but like you just said, delaying things around 18 months is obviously unfortunate, but it sounds like you're you're getting them back on the right track. So that's good. Yeah, absolutely. And another thing I wanted to touch on was your thoughts or feedback on the on the powerful research and development tax credit.

Speaker 2: 23:45

Yeah, absolutely. And I'll say, first of all, that is where my technical expertise ends in the sense that I leave it to experts like you, Tom, and your company to crushing on that, and I will say the value is insane. And the people that are competent aren't realizing it is also huge in the sense that you should be looking at it, even if you don't think you're eligible. So, an example I can give is we work with a brewery work with a couple breweries right now, and we've worked with more over the years. A lot of breweries don't know that their recipe, Builds and costs can be part of R and D and they can realize a credit for that in the long run. So if you're growing and you're growing brewery, you're doing research on like different higher and different recipe experimentation. That could be a a source of R and D tax credit right there. So that that's just one that. I didn't even know about before a couple of years ago, and business owners certainly don't. So there's so many avenues where, you know, someone like you can affect change in a business if we're talking about going to big to little that I see. So, all businesses that we work with, we encourage looking at doing an R& D study to see if they're eligible because it's a one to one And once again, you can correct me if I'm wrong, but it's a one to one credit. So it's, it's straight up dollars that get offset against payroll tax or dollars back in the business's pockets. So it's pretty much a no brainer for us to suggest that and get that study going. In a lot of cases, they can get big savings.

Speaker: 25:16

No, you said it perfectly. Right. And I'd say I love the the bird examples because we we work with them all day most of them have no idea they qualify and I think it often times as silly as it sounds, I think it is the name of the credit, the research and development credit. I think comes off intimidating to a small business owner, right? They, they oftentimes think white lab codes or creating the next Amazon or software breakout. But I, I try to explain it as like the new process or new development credit, right? Because anything new or innovative in a business is typically qualifying. I went to a brewery conference actually in Vermont, where just kind of explaining that explaining the credit and, I would say 9 out of 10 breweries are going to qualify for the credit because just about everything they do is research and development. And then like you said to that point pretty much any business out there that's done, obviously a lot of businesses don't qualify. I don't want to make it sound like every small business can qualify. But if you're, if you have done something new or innovative in the business, I would definitely look into that credit.

Speaker 2: 26:28

And I would add one thing is that at least the tax CPAs that we work with, and we work with some great ones, they're really not touching that piece with what they're doing when they're, even if they're doing strategy with you and tax compliance work Don't expect them necessarily. If don't expect your tech professional to necessarily bring it up to, so I would say is some might, some might not, but, but to your point, there's a lot of tech professionals that are kind of uncomfortable with looking at it as well and may not bring it up. So it's, but it is worth it. I've seen it. I've seen it be very worth it to businesses time and again.

Speaker: 27:03

Absolutely. And to that point, it is, it's a very complex and nuanced credit, right? I know there's like 5, 000 tax credits out there, obviously no matter how successful you are as a CPA firm, you can't stay on top of on top of every credit and the successful client, the successful companies have more than enough on their plate, so they can't be focusing on trying to do a R and D study by themselves. But I know we just do it a lot of value out of today. I know you and I could probably talk about small business value all day. Anything that we might've left out or didn't cover up cover on that you wanted to leave the listeners with today?

Speaker 2: 27:45

No, except to say that I really appreciated the discussion on the mission, mission and value. Cause I think that's so important. If I was going to restart the business. I would, that's what I would tell myself to focus most on is get your mission defined first and then everything falls from that. So I'm glad we got to touch on that.

Speaker: 28:05

Absolutely. No, I, I agree 100%. I mean, it it took me a lot longer in my career than I, than I would have liked, you know, to take to realize that. But, but I think we're both on the same page now. So that's what matters. Yes, absolutely. Absolutely, Kyle. That was a that's going to be a wrap for this episode of Small Business, Big Moves. If you got some value out of this episode or know someone in bite, what we ask is that you share this with them and like, or leave us a review. And in the meantime, you can find us and find me all over social media at Thomas Bennett, and we look forward to seeing you on the next episode.