157. The Mistake That Almost Ended the Company

He says impossible. Every single time we buy something that we're gonna resell, I mark it up 50%. That's not how this works. I was hired at the at the IT company to be their COO. I re later took over as their CFO. And now remember getting so pissed off at the CEO one day. And I think some of you are going to be able to relate to this. Very eccentric CEO, very tech savvy kind of CEO, not great with finances.

And he was always spending money on what I thought were very frivolous things in the business. And he's never thinking about how much cash we need next week or next month. He's like, oh, we've got. forty-eight thousand dollars in the bank today. I'm gonna go I'm gonna go to Amazon and buy a toy, right? Is anybody work with clients that are like that where the CEO, they see the cash in the bank.

And then I'm over here as the COO slash CFO, not being able to sleep at night because I know we can't make payroll in four days. And so I lose it one day. Like legit lose it on the guy. So we we collect a deposit, a deposit on a project. We haven't bought the cogs yet out of the deposit. We get the money in. The next day he comes to work and he's like, bro. Check it out. I bought us a 3D printer. We don't do 3D printing. It's literally nothing we do.

And he's like, but look, look at look I made it in a little horseshoe. I just put it in the computer and it makes a horseshoe. And I'm like, you've got to be freaking kidding me. Do you not realize we've got payday in five days? We were already floating money from that deposit to cover payroll. Now we don't have enough for payroll. And so I pull out my cash flow forecast.

Which I had kept as the world's best kept secret up until that point. It was a thing that I used in my little corner over here. I showed him, I'm like, look, we had the money yesterday, but you can see next week we gotta run payroll, brother. You gotta quit doing this shit. And he's looking at the casual. He's like, this is the coolest thing I've ever seen. So, like, you can tell me today how much money we needed in April? Yes. What other cool shit you got?

I said, well, the another thing that you've got to quit doing, I said, I told you a million times. We have to have 50% gross profit margin. We have to have 50% gross profit margin. We don't. What do you mean we don't? I said, well look, we're in the 30s. He says, impossible. Every single time we buy something that we're gonna resell, I mark it up 50%. That's not how this works.

That's not how this works. Come here. And I get you guys know the dry erase board. I don't know if you guys ever seen me on I have a dry erase board. And I'm like showing him 50% markup. Thirty three percent margin. Oh. I need to mark up more than fifty percent. To get the fifty percent gross profit margin. Yes.

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87. I cannot wait to see you in May, my friend. He returned the 3D printer. Thank you, Amazon. 30-day return policy. We did make horseshoes for the whole staff with the company logo on it. So we 3D printed the horseshoes, then he returns it. But then He starts bidding projects a little bit differently. He starts coming to me before he buys. Drones and 3D printers and all the other stuff that has nothing to do with an IT company. I forgot to tell you guys this, but

This business was three years old and it had never had a profitable quarter in the three years since inception. There was a profitable month excuse me, a profitable month here and there, only due So Ben made some changes. Changed his behaviors, his actions, because he saw the cash flow forecast now. He understood just a little bit better the difference between markup and margin. In two months later, profitable month.

Another month or two after that, no more drama over payroll, over paydays. The end of the next quarter. First profitable quarter in the company's history. Up to that point, he had a wealthy grandmother that was cash flowing the business. You know, 40-year-old man having to go to grandma for money to float his business. Devastating to him. It had to be. He had his first profitable quarter. Then we had a profitable year.

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So I started looking for opportunities to do more stuff like this. How can I go back to that idea that I can make people better as a teacher through the lens of finance? So I start going to networking events, I start going to chamber of commerce events, and I'm starting to look for other business owners that are having problems. Then I realized people were willing willing to pay me for that.$50 sometimes. Then it was$100.

Then it was$100 an hour. I got some more confidence. I said, I'm gonna do a thing. I created my first business. KFE solutions. After a while I started to see maybe maybe the income from this could replace my job as a COO CFO at the IT company. So I do what every guy does. I go to the bar with my buddy Jim. Now my buddy Jim's about ten years older than me. He's got an MBA from a big school. I really looked up to him. He's he's a very senior PR guy.

a multi-billion dollar public relations or public relations got a multi-billion dollar shipbuilding company, Huntington Ingalls. And we're having a beer and I'm telling them, I'm like, man, I think I can, I think I can do this. Sounds cool, Mike. Who the hell are you to start a consulting business though? Like

Spent most of your career in the Navy cleaning oil. You've worked for a couple of companies, none of them doing CFO stuff except for that little IT company. Is that really the right move? You know you're you're in a spot where you're making a good income. Is that the right move? All right. But I'm still thinking about it. And then one day the gut punch came. I got the courage to tell my now ex wife. that I wanted to go for this thing.

This is my thing. I think I can make a run at this. I'd proven that I could bring some money in with it. Not a ton, not COO money, but I had proven that we could make a living off of it. Doing it part-time. And you know what she said? She said, this is the most irresponsible thing I could imagine you saying. This is foolish.

I cannot imagine that you would even bring this up. You have this job over here, you're doing well. There's the benefits. There's the company car. There's the the nice six figure salary that was, you know, pushing multiple six figures at this time. I'll tell you there is For me Few things harder to hear than your spouse telling you that your dream is stupid.

killed me. I got a lot of that from from honestly from my family members. You know, my mom, we came from nothing. I was making Michael P. Keaton money. She's like, Are you are you sure you want to give up Michael P. Keaton family ties money to go, the logo wasn't even good. She's you don't even have a good logo. And a lot of my friends and mentors were telling me the same thing. But there's this one one voice, there's this one guy. He's like,

I think you're on to something, man. I see how you light up when you're in these networking events and you're working with people, helping them with the cash flows. I think you're onto this.

You gotta keep pushing. That's my friend Grant Wilkinson. Grant, are you around? Back there. Grant was the guy. He was the guy the whole time telling me to keep pushing. He could see that I was on to something, but more importantly, he could see the fire, the passion that I had inside to keep doing it. So I decided to. I kept going. One voice telling me to keep going. And I kept going and I kept pushing.

All right, my friends, I hope you found this episode helpful. If you did, it would mean the world to me if you would leave a five-star review on Apple Podcasts, Google Podcasts, Spotify, wherever you're listening to this episode. In the meantime, I can't wait to see you back right here next week. I'll see you then.