Think Like A CFO With Andrew Warner

Andy Splichal 0:02

Welcome to the Make Each Click Count Podcast. This is your host, Andy Splichal. And today, we are happy to welcome a really fascinating guest to discuss a subject that we all or or at least most of us need to pay a little bit more attention to. This upcoming guest he is a virtual CFO for marketing agencies and Ecommerce stores. He possesses a unique mix of experience in both finance and marketing, allowing him to help companies get a better handle on their numbers, while not forgetting all about their marketing. Now, before we dive in to today's topic, let's meet our guest which is Andrew Warner. Hello, Andrew.

Andrew Warner 1:28

Hey, Andy. Thanks for having me.

Andy Splichal 1:30

You're welcome. Now today's topic is how to think like a CFO. But before we start getting into the nitty gritty of that, let's first hear your backstory, and what ultimately led you to doing what you are currently doing now?

Andrew Warner 1:45

Sure, so it wasn't a straightforward path. I started out in the accounting space, I'm a CPA, still, I'm a CPA, and focused on auditing businesses and kind of helping them understand their accounting and the financial side of their business. I tried to leave that world. And I actually swapped to more of a digital marketing company in focus, I had had an e commerce Store that I sold in 2017. But at that time, it was enough for me to start focusing on that full time. And then I started consulting more as like a marketing consultant, and helped companies with getting on Amazon selling through different platforms, and launching a Kickstarter. But what kept happening was that in in doing the marketing aspects of the business, I kept running into financial constraints with my clients. And I kept getting pulled back to help them with their budgeting to figure out, you know, how much should they spend on the different marketing campaigns and where was their return, and also just not running out of inventory or cash management. And after several months of just getting pulled in that direction, I eventually just accepted it, and decided to just make that my entire focus to kind of combine my marketing side of my brain with the finance and become a CFO for companies with a large amount of digital marketing.

Andy Splichal 3:07

Interesting. You know, not many accountants, typically leave accounting much less have have an experience with marketing, and specifically digital marketing. How have you been able to use that as an advantage and growing your own service?

Andrew Warner 3:25

Sure. So I think that there's a few things where it helps me. One is that there's a lot of marketers that are not as numbers focused as maybe they should be. And so I think that that's something were being able to come from that mindset, and help them help maybe apply some of the principles of accounting and finance to the marketing world. In fact, one of the things there's some cost accounting, which is almost outdated now, but in terms of it was really revolutionary for manufacturing, accounting, and I'm taking a lot of those principles and applying them to marketing companies and saying, Alright, let's, let's figure out how many dollars your increase or decrease in traffic or conversion rate, how much is that costing you? And I think that that's really the big difference is kind of helping coming at it from a numbers first mindset, rather than from a marketing strategy mindset.

Andy Splichal 4:17

You know, the subject of finance, no doubt, it's, you know, makes a lot of small business owners just shudder with fear. But given that, is there anything you can say to take away a little that fear about finance and using proper accounting?

Andrew Warner 4:31

Sure, so a lot of times people think of finance, they'll they'll think of budgeting. And budgeting just sounds very limiting. And very, it doesn't sound very fun. But at the same time budgeting is how you get what you want. And so I think that when you're thinking about finance, always remember that it's really the path to getting what you want. And keeping that goal that you're you're going for whether it's a new revenue number, or a new profit number, or whatever else. I think that keeping the At the forefront is really going to help drive the financial strategy as well as the entire rest of the business strategy as well. So I think that's an important part to keep in mind. And finance can certainly help you reach those goals.

Andy Splichal 5:16

Now, when we're talking about finance, or today's topic, which is how to think like a CFO, what size ecommerce company, do you think even needs to be concerned about this topic?

Andrew Warner 5:28

Yeah, so I think that it's important to think about this, once you have products that you're selling, if you're not selling anything, you need to be thinking about making some sales, maybe that's more than marketing side of my brain. But I think even the smallest businesses, once you've kind of solved that first problem, and you need to make sure that you're selling things profitably, at that point, I think even then you need to be able to put that CFO hat on for your brain and almost just see, like, if I scale this, if I 10x, where we are right now, is that going to be profitable, long term? Are we heading in the direction that I want to go? So I think that almost all sizes of companies need to think like that. It's just a matter of how, how much time needs to be spent there and how complex it gets, because it certainly can get complex once you're dealing with multiple employees and multiple product lines, and just several moving pieces. But I think it's definitely something everybody should be able to put on a CFO hat when needed.

Andy Splichal 6:24

Now, yeah, you had mentioned profitability. But are there specific enough numbers beyond profitability that are important to be tracked? Even for the for the small to medium sized? Ecommerce business?

Andrew Warner 6:38

Oh, sure. I mean, I think, you know, gross profitability is really important as well. Yeah, I think everybody tracks the revenue, I think that's really key. I think if you're a company that has a lot of marketing sense, this is one one thing that's really different for me, compared to other virtual CFOs, is that I really think it's important and value, the traffic and the conversion rate, and the average order value, and all that that kind of gets you to that revenue, just as much as almost any other financial metric that's out there.

Andy Splichal 7:11

Okay, now I was in a debate the other day might be kind of boring. But ROAS versus ROI. ROAS said return on adspend versus rate on adspend versus return of investment or return? Well, you explain it, and what are the difference? And what what's more important?

Andrew Warner 7:34

And to be honest, I'm really not a, I don't have a whole lot of preferences between the different metrics. I mean, I think that they're, they're all useful to some regard. But I think it's much more important to almost track the trends. And seeing, you know, the, if you're consistently using one versus the other, for me, most of the time I do or refer on ROAS for some, some companies, and then ROI for others. And I normally just go based on what is easiest for my client to understand, as opposed to looking at it. It's not like there's an objective measure. It's kind of a subjective decision, in my opinion.

Andy Splichal 8:12

Not not a particular metric, just that it's improving?

Andrew Warner 8:16

Right. Yeah, I think I think people get a little too, to focus on that sometimes trying to choose the right metric, almost like it's a shiny object. But I think kind of seeing the trends and finding those constraints is much more important than focusing on over focusing on one particular metric.

Andy Splichal 8:31

Sure, that makes sense. Now, you offer a service for companies as a virtual CFO, through your company, marketing company, CFO, what kind of demand Have you found for this service?

Andrew Warner 8:45

Yeah, I've found a lot of demand does seem like there's a lot of companies out there that have a lot of issues with their marketing campaigns and rentman growing their marketing business, whether they're a marketing agency or an Ecommerce company. And it's tough to find people with a finance background and finance skill set that can also understand the marketing. And so I found a lot of demand. From that standpoint, I also think that there's a lot of opportunities if you're looking for kind of an easy way to optimize your business. If you haven't focused on the finance side yet. A lot of times there can be some easy gains just from putting in some basic goal setting and budgets and different things like that in place. So I found that to be a really great opportunity for some ROI for a lot of businesses.

Andy Splichal 9:38

Okay. Now, when somebody started working with a company, are there any usual trends that you've been able to identify with your work with Ecommerce companies or mistakes that are being made or, or what are you looking at first thing when you jump in?

Andrew Warner 9:55

Yeah, I think the number one thing that I see is that people get confused in terms of cash flow and profitability, you know that some people will manage their business based on the cash that's in the bank, and they judge their happiness and their feeling of success in the business based on the cash that they're able to pay themselves. And I think that with an understanding of Yes, cash is extremely important, maybe even the most important aspect of the business. But that doesn't necessarily mean that you're not profitable or not heading in the correct direction, maybe you just have a cash flow problem. And there's other ways to solve that problem. But that is something that I've seen a lot of times where somebody feels like they're running a bad business, when really, they just need to get some cash flow optimization, so that they can continue to scale and continue to, you know, especially with Ecommerce, in particular with having to purchase inventory, that can be a particular issue.

So is that something you work with companies on figuring out the cash flow issues if they have some?

Yes, trying to predict, it's almost like a three body problem, which if you study physics, they say it's almost impossible to calculate, you know, if there's three planets, the exact impact all three would have on each other. But for Ecommerce, I tried to do that with the three, but I call the three body problem of profitability. And so you know, looking for the next three years and trying to determine what your profitability is going to be, but then also looking at the inventory that you're going to have on hand for the next two to three years. And then also taking into account your cash flow and your cash on hand for the next two to three years. And a lot of times, we'll do different scenario planning to say, Okay, if we if everything sells really well, are we going to run out of inventory? Are we prepared for that scenario? And then another scenario saying, you know, what, if demand crashes are good, it goes down by 20%? Can we handle the cash flow constraints? And will we need to make some adjustments so that we can handle each one of these scenarios, but that's an example of that seems to be common across all ecommerce, that they're all trying to optimize for those three different things at once. And they kind of conflict to some extent.

Wow. And that seems pretty far out three years. Is that how, when you are projecting that far out? How does that able to react to different trendsor? You know, let's say, you know, out of the blue off the top of my mind, let's say, pandemic hits, how does every, how does everything change? I mean, how, how do you plan out that far, and still remain flexible with your planning?

Right. So you definitely want to be flexible, you never want to be trapped in a position where you're, you know, this is the budget, we've got to hit the budget, and we're sticking to the budget, that's something you always want to avoid. In some industries, you get away with it. But in marketing, you really can't. But I think, you know, for the pandemic planning, I had a lot of clients where we were looking in 2019. And we had plans for what if demand went down by 30%, which was kind of the worst case scenario. And the best case scenario was, what if we increase the business by 50%? And what actually happened? What has the business doubled, you know, you might have thought, Oh, the, you know, the pandemic could have caused the business to crash, but they actually doubled because of so much of the their sale, so much of the online. So much of commerce in general, swapped online. And we were able to be more prepared for that, because we had done this scenario planning. And I think we still had a few stock outs, you can't prevent everything. But by going through that, that process of planning, we were able to prevent some of that. It's kinda like what Dwight Eisenhower said that plans are worthless, but planning is essential. So that so that we we found is that understanding how everything interacts, can help you to make better decisions for multiple scenarios that could happen.

You know, I think I saw somewhere where you had said that, that accounting was broken in a way in Ecommerce. Can Can you explain a little bit on that thought?

Sure. So in accounting, the marketing expense is really just something that's on the income statement. And it's, it's not much more than just the dollars out the door. And, and then also the revenue just that's at the very top of the income statement, that's where it begins. And really, nobody talks more about what led to driving that revenue, you know, to an account if the revenue came in the door. That's the beginning of the story. But I think you and I know that there's a lot more to that story in terms of how that revenue was generated. So that's a big difference for the way that I look at accounting is that I think it needs to shift to focus more on these intangibles in terms of, you know, looking at the traffic that you're generating, or if you're your businesses. More focused on email the subscribers, you know, I like to look at that as an intangible asset, even if double entry accounting doesn't look at it that way. There's just several other factors where I think when you take that marketing first approach before you get to that revenue, it really drives a lot of the decision making and gives a more accurate view of the business they and what standard finance would show.

Okay, I can see that. You know, this time in the podcast episodes, I've been playing a new game with my game tester, are you up for it? Let's do it. Alright, so it's just a word association, I think it's been really helpful and get an insight to the different guests. So give me a word and then you repeat what comes in or not repeat, you'll give me the word that comes into your mind as soon as I say it. So we'll do a couple of easy ones. And we'll jump in. I'm not there, any of them are hard, but we'll jump into some more business terms. So the first one, you're ready?

Alright, so you're gonna say one word, I have to respond with the first word that pops in my head or the first concept or the first, first first word, okay?

All right, here we go. Run

Fast, I guess.

Stop

Go

Fun

You know, that's that I can't think of anything for fun. I don't know if that's a problem. Or what I is, I guess I'm just an accountant.

Alright, let's get this more down your line. This is business term. So you're ready? That's an accountant mindset. Alright, so success.

Happiness

Email

Track

Profits

Maximize

Family

Happiness

Promote

Marketing

Gratitude

Family

Wealth

Success

Clarity

Focus

Growth

You know, this, this is this is a weird one. This is gonna sound like a really weird answer. But I just listened to a really good book on the, I think it's called, like the Handbook of Growth or something like that. And they actually said that sometimes you got to be careful with growth. Because growth without without focus, and without, like, sustainable growth is actually just cancer. And so that's actually when it first came into my head, which sounds kind of crazy. But that's something I've been thinking about for a lot of my businesses lately is you want to you want to grow in a way that's sustainable, not just grow for growth's sake. So I'm gonna give some context there before I just did the answer.

Before you said cancer to grow.

Right, exactly.

I see well, that's that's a great explanation. And last one, highperformance.

Team

Team, and that's interesting, you had the same happiness was supposed family and success, so that very enlightening. You know, we're with somebody start on making sure they're thinking like a CFO?

I think think the first part is to understand your numbers. And I think everybody knows that that's important. But I also think that it's important to think in terms of your goals, what are the numbers look like for your goals, and to start putting numbers to those, and then trying to figure out your numbers now and your numbers where you want to be, and what needs to happen to make those to make that happen. I mean, that's really what budgeting. That's what a lot of finance is designed to facilitate. But I think I think really getting a clearer picture in your head in terms of where you want to go. And getting as many numbers down as you can. I think that that's the best way to get started with finance.

Right. Now, if somebody wanted to learn more about you or your service, in working with you as a CFO for their business, a virtual CFO, where can they find more information about about you?

First, so I have a website, it's marketingcfo.com. And they could schedule a call directly with me if they want to discuss, you know, any of the things we've discussed today, I'm kind of a finance nerd and a marketing nerd. So I'm happy to go down the rabbit hole of either of those. But also, you can have a newsletter you can subscribe to if you go to the website, you should see a pop up and you can subscribe there. But yeah, I'd be happy. I mean, your your audience is definitely marketing savvy. So we love talking with other people that like discussing and things you and I have discussed today.

And who would be your ideal client, let's say of a person's out there listening. Describe them right now. So they can say, Wow, that's me, and they should reach out to you. Who's Who's the ideal client?

Sure. So I'd say it's anybody that's trying to scale a business with a significant focus on marketing. That's really where I can come in, if somebody's kind of happy with where they are now, and they're trying just to kind of squeeze out as much profit as they can. That's not as much my focus I'm more focused on the investment for marketing for growth. Gotta putting the numbers to work. I try to get to where the data can help manage the business. And so anybody where that sounds compelling, feel free to reach out.

Okay. And is there anything before we wrap it up? Is there anything I forgot to ask you that you'd like?

Oh, no, I think I think you covered it all. Yeah, I think I think that I think you did a great job.

Great. Well, thanks for joining us. And that is it for today. Remember, if you enjoyed this episode, please go to Apple podcast and leave an honest review. And if you're looking for more information regarding Andrew or how to think like a CFO, you can contact Andrew through his website, which you will find in the show notes below. In the meantime, if you're looking for more information on how to get the most from your online marketing request to join the Make Each Click Count Facebook group, then this group you can join me as well as other marketing professionals. In addition, I have some all new free live trainings that will be happening soon, so make sure you don't miss it. In the meantime, remember to stay safe keep healthy and happy marketing and I will talk to you in the next episode.