I was recently featured on Jay Kingley’s “Fractionals Unplugged” podcast, where we talk about the financial challenges that plague businesses in the $1-25 million revenue range.
As the founder of Frak Finance, I shared insights about helping SaaS companies, e-commerce businesses, wealth management firms, and what I love to call “sweaty startups” (those essential trades and home services companies) navigate their most critical financial hurdles.
We discussed everything from the dangers of rearview mirror management to building scalable financial systems that actually drive growth rather than just track it.
Table of Contents
Summary
During this conversation with Jay, we covered the critical financial challenges facing businesses in the $1-25 million range and practical solutions to overcome them.
Key Points:
- Cash Flow Crisis: Most businesses struggle with working capital management, relying on bank balances instead of understanding what’s coming in and going out
- Windshield vs. Rearview Mirror: Successful companies focus on forward-looking financial forecasting rather than just analyzing last month’s closed books
- Finance Meets Sales & Marketing: The key to growth is connecting sales/marketing KPIs with financial models to make strategic investments with guaranteed returns
- Leadership Gap: The root cause of financial struggles is poor communication between department heads and lack of transparent reporting
- Building for Scale: I shared my journey from independent fractional CFO to building a team-based model, including the challenges of “J-curving” by investing in people ahead of growth
Video Gallery
Watch the full video below, or watch it on YouTube by clicking here.
Transcript
Jay Kingley: I’m Jay Kingley, co-founder and CEO of Maven, your host of Fractionals Unplugged. I’m joined today by Tom Dillon of Frak Finance. Tom is a fractional CFO who works with SaaS, e-commerce, wealth management, and sweaty startups, from $1 to $25 million in revenue. Whoa, we gotta take a little time out here. Tom, what is a sweaty startup? I gotta tell you, it sounds like me after I come back from the gym, but I’m guessing it means something a little bit different. Please enlighten us.
Tom Dillon: Hey, Jay. Pleasure to be here. Sweaty startups are the companies that are in the trades. You could think of them as everyone that’s gonna be touching the home services that might come and fix your roof: electric, plumbing, et cetera, or commercial real estate. Those are what we define as the sweaty startups.
Jay Kingley: Well, I’m down here in the Miami, Florida area, and I will say, particularly in summertime, it is sweaty. But Tom is based in Chicago, Illinois, where it isn’t always so sunny. Welcome, Tom, to the show.
Tom Dillon: Waiting my entire life to be here. It is a pleasure.
Jay Kinglsy: Thank you, Tom. I hear that all the time.
Jay Kingley: All right, let’s get serious, Tom. When you first meet a potential prospect, it’s important for you to give them some context on you so they know how to tell you about their issues and challenges. I’m going to give you a maximum of 60 seconds to give just enough context so that our audience understands where you are coming from.
Tom Dillon: Go. So, the way to think about us are fractional CFOs or corporate finance advisory. We have three core services that you can probably identify as an SMB owner. If you’re buying a business, we’ll do the quality of earnings, the Q, that’s the financial due diligence. Make sure there’s no fraud in the company you’re buying. And then we have fractional CFO work, which, if you’re growing your business, will help you with that. And then if you’re selling a business, we have our sell-side advisory. So, we really look at the full lifecycle of an SMB owner, and we differentiate ourselves because we look at both organic and inorganic growth, meaning growth through acquisition.
Jay Kingley: So, if I think about your types of industries you work with, SaaS, e-commerce, wealth management, and those sweaty startups in the $1 to $25 million range, what are the issues, what are the challenges that you see that they struggle with?
Tom Dillon: They are really struggling with their cash flow, having an understanding of the ins and outs of that cash. And a lot of these individuals are looking at the bank account, and they use that as the proxy. But what they don’t really have an understanding of is what’s coming down the pipeline, what’s going to be coming in in order to pay what needs to go out. And so, a lot of that, what we call working capital, is a massive issue. It hurts these business owners when they don’t have an understanding of it because they really can’t budget accordingly for allocation of resources for a new hire or spending more on marketing so that they can grow faster.
Jay Kingley: Now, if you take the challenges that these companies struggle with, and if I ask you to boil it down to the one thing that you think is the most important, urgent, and valuable problem that your ideal client profiles—those industries—what is that one thing that they are most struggling to resolve?
Tom Dillon: Top-line growth is really where a lot of the struggles we see, and when there becomes a focus on the sales and marketing aspects of the business with financial responsibility, we can’t just be throwing money out and hoping that we get a return. We need to track and actually methodically have a plan in place that’s going to absolutely guarantee that return.
Jay Kingley: So, what surprises me a little bit is I think most business owners, when they think of revenue, are thinking about sales and marketing. I’m not sure that finance is a top-of-mind thing when it comes to revenue. So, can you elaborate a little bit more about what the role of finance is? To make sure that the sales and marketing team is optimizing their efforts.
Tom Dillon: What they should be doing is tying in what their sales and marketing KPIs, which are key performance indicators. These are the metrics that you really base your performance. Are we headed in the right direction or the wrong direction? They’re your barometer of success and building out a forecast model with those items in mind. And that is what’s going to really allow these business owners to be able to invest more in their people, invest more in their businesses for them to grow faster. And so, without having those indications on the sales and marketing side of where are we at? Do I have a finger on the pulse of the health of my business? Then you really don’t have a good way of determining how successful you’re going to be in the next three, six months. And so, we see a lot of these business owners not do that, and that’s what they should be doing.
Jay Kingley: There’s that old trite saying, “You can’t manage what you don’t measure.” And I think everyone nods their head. But where companies struggle is how do I take that high-level statement and translate it and execute it so we can get the results that you are talking about. Now, I call this the most important, urgent, and valuable problem that your clients tend to have. Why is this the critical thing that they need to figure out how they are going to resolve? In other words, what outcomes do they want but they can’t get because they’ve yet to resolve this issue?
Tom Dillon: Jay, have you ever driven your car looking in the rearview mirror unless you’re going backward?
Jay Kingley: Backwards, well said.
Tom Dillon: Which in business we don’t want to do. We want to grow and go forward. And so that’s the critical component. It’s looking through the windshield and seeing what’s coming at you and getting these business owners that do it successfully and what they should be doing is looking through the windshield and thinking about what’s going to be coming down the road. And so that all is encompassing of not only cost and resource allocation of the cash coming in. Who can I hire so that we can alleviate part of our team member to go take on another task or help our company grow in that capacity? And that is going to be requiring having an understanding of how those top-of-funnel KPIs are going to flow down through the rest of your P&L, your income statement. And so within all that, it’s the week to week because most people get their bookkeeping, they close their books, and they get their statements, and they go, “Okay, we did pretty good last month.” But if you said, “How are we going to pan out this month?” “Well, Tim and Sally said that we were going to be doing pretty good.” What does “pretty good” mean? That could be very, very broad to a lot of different people, probably different between Tim and Sally. And so when you’re measuring those aspects, you can get a better grasp on your cash flow and you’ll know exactly where you’re going to come in for that next month, and you’re going to be able to invest that money that you know is coming in, or maybe sometimes it’s not. There are tight crunches at times where we have to prepare accordingly. Maybe there’s a line of credit that needs to be in place with certain businesses where they need a little sway in how they operate so they can make payroll perfectly fine as long as it’s done in a responsible way. But we need to make sure that we can go and take those dollars and wisely invest them back in the business and say, “What’s the return on those dollars going to look like? How does that help us as an organization, pay our people more or invest back into the growth of the company so that we can continue to expand our team?”
Jay Kingley: Well, we know that what Tim and Sally normally mean when they say “pretty good” is that you’re going to keep us on the payroll for another month. And that’s probably not what the CEO is thinking about when he wants to drive the business in the right way. Now, as I like to call this, this is the important, urgent, and valuable problem. The urgency part says they are trying to figure this out. They are trying to resolve this key issue. But what you and I know is that whatever they’re doing, it isn’t working. So, what are the things that you typically see companies doing in an attempt to resolve this problem? And why don’t these things typically work?
Tom Dillon: A lot of times, they’ll hire marketing agencies or sales agencies that they’re hoping have a silver bullet. What’s this next best ad or design copy that’s gonna win the race of beating out our competition and earning this revenue? I also see throwing more people at a problem, “But we’re just gonna hire another person that we can extrapolate these sales.” It’s not the market or our messaging. It’s really gonna be if we have more people, more phone calls going out, more ads going out, more meetings. That doesn’t translate. It needs to be a little bit more methodical. We need to get at the heart of the issue. Why isn’t this person at capacity or industry standard? Is it them? Is it us? Is it product, service? And so there’s just a little bit more meat on the bone that needs to be gnawed on and really kind of chewed and thought about rather than just trying to solve them in some of the traditional manners of what most business owners take upon themselves to do.
Jay Kingley: So, your insight into the root cause that’s driving this key problem, and it’s either typically one of two things. Sometimes it’s a combination. Sometimes clients just don’t understand what the real problem is; they see the symptom, but they don’t understand the cause. And so, they’re busy dealing with symptoms. Sometimes they think they know the cause, but they’re misinformed. So, what is it from your perspective that’s really going on?
Tom Dillon: What I think is really going on is a leadership issue among the department heads, if you will, and if there’s not department heads, and what I mean by that, let’s say there’s a head of ops, there’s a sales and marketing person. They’re not having the leadership that’s extracting the information from them to understand exactly where the business is at and having that finger on the pulse and also guiding them to it and asking them for budgets and expectations and having those recurring meetings of where we’re at and where we think we’re at relative to budget. I think it starts at, you know, the beginning of the year, but it has to be that routine hygiene within the organization.
Jay Kingley: If your ICPs—if these industries that you work with—understood this underlying cause that you’ve talked about, what are the things that they would do differently to, as I like to say, get out of Struggle City and get into Success City?
Tom Dillon: So, what I would do is day one, figure out exactly where are marketing and sales budgets, calendars, KPIs, the revenue drivers of the business. Where are those and how are we tracking them? The business owner should go and ask their department heads where—what—where is that information living if they don’t know and have a level of transparency around it, and formulate a budget and forecast around those figures. So, what’s driving our business? What’s our North Star KPI that has the biggest impact? Sure, there’s different levers within your sales and marketing funnel that are going to affect that North Star KPI, but let’s not overcomplicate it for the team and feel like they’re now being monitored to ad nauseam. Let’s just get in there, get a North Star KPI. What’s gonna move the needle? The most important figure. And start tracking those budgets. Do you have an event calendar? Are you B2B and are you out there having to go to trade shows or conferences? Do we have an event calendar that we’re absolutely all on the same page with regards to what are the expectations are and how it impacts sales? From there, I really want to talk to my department heads about resource management. If we do grow 20%, do we need any more bodies? Do we need any more heads? What’s going to break down, and building into their own kind of department-level P&Ls of understanding what those costs are associated with growth and making sure that we budget accordingly so that we can make payroll? We can make that additional investment into our marketing or our extra salesperson to grow top line but responsibly so that we don’t have any working capital cash crunch, where, “Oh my gosh, how are we gonna make payroll or pay this vendor?” And so that would be, I think the best thing they could do is really getting a grasp on having people not only put together kind of where their expectations are, what they’re tracking, but be transparent about it and report it to the appropriate person so that everyone’s on the same page and that there can be an idea of what that windshield and what’s coming down the road rather than looking in the rearview mirror at just here’s our closed financials from last month. We had a great month or maybe we didn’t do so hot. But that is going to be, I think the best thing you can do to really get a grasp on what does future cash flow look like.
Jay Kingley: Tom, very insightful, well articulated, and we are going to take a quick break and when we come back, we’re going to learn a bit more about Tom.
Jay Kingley: Welcome back. We’re talking to Tom Dillon, a fractional CFO who works with SaaS, e-commerce, wealth management, and my favorite vertical, the sweaty startups, from $1 to $25 million in revenue. Tom, let’s find out a bit more about you, and I love to start with this question: What happened in your life—be it personal or professional—that most explains why you’re doing what you do today?
Tom Dillon: That takes us all the way back to senior year of high school. So I tripped and fell on success with working for a company called Vector Marketing, which for everyone that has worked there, they know that’s Cutco Cutlery. Selling knives did really well. Probably a byproduct of my community that loved and supported me and ultimately made good money for an 18-year-old. So I was sitting on maybe $22,000 and went to my dad and said, “Hey, I want to do something with this.” He said, “All right, I might be able to set up a meeting with our wealth manager.” And at the time, it was with Citibank. His name was Chris Crawley, and he taught me the rule of 72, and that is if you divide interest rate into it, you figure out how long it takes, how many years it takes to double your money. And so right then and there, finance was, you know, absolutely where I was running towards in my life. I thought it was so fascinating, and just seeing all the tickers and everything on the screen, I knew finance definitely was the life for me. And that’s why.
Jay Kingley: So to all parents out there, if you want your child to have a career in finance, get them selling door to door right now. I love that story. Well, let’s see if you can top it with your answer to this one: What’s one thing that few people know about you that if they did know, they would be surprised?
Tom Dillon: Hey, I’m a pretty open book, so that one’s kind of tough. I don’t, I’m going to search really hard for that, I guess. And I mean, this is not that cool or fun of a story, but one of my buddies invited me to go on a hiking trip, and I decided that sounds great, get out into the woods. And it was kind of an end of COVID, need to get back out there. And I failed to read the email in detail, which is unlike me. And about a week before the trip, my friend Mario said, “Are you all ready? You’ve been training hard.” Training hard for what? I thought he was joking. I went back, I read the email as I was supposed to do, and I realized that we are about to summit a 14er, so some of the highest mountains in the world. So we went out to Estes Park, and we were set to go do Longs Peak. So the week before, I start going to the gym with a backpack on, I buy my boots. You know, I am a novice. Like I should not be out there. And, and you know, that week prep, I’m feeling decently well. I’m climbing stairs. I’m thinking this is going to be great. And so risk-averse as I am, and I’m in a profession where I talk to a lot of my clients, that might surprise people that I was that ill-prepared and taking that big of a risk. I actually tore my labrum in my hip. And so, yeah, next week we’re meeting. I am actually going to be going to PT for that still.
Jay Kingley: Wow. Yeah. Now I understand why you’ve given up mountaineering for golf. That now tells the tale. So, Tom, what’s next for you over the coming 12 months?
Tom Dillon: It’s a good question. These last six months, and maybe if I back up for a second before then. I’ve been doing this for about 11 years, and ultimately what I realized was that there’s one, a capacity issue in terms of my bandwidth, and then two, there’s certainly going to be an issue if there was any desire to sell the company. So there wasn’t a transferable asset. This is me being a 1099 and working with great clients and adding a lot of value to them. It was wonderful. It was great feeling good cash flow. But those two aspects of burnout and transferability really resonated with me, and I wanted to make sure that I was building something that potentially could secure a financial future for my family. So two years ago, we really branded the company and started working towards building out a team. And so for the last six months, we’ve been really building out the team and investing in our own sales and marketing and tracking those things accordingly. But we’ve been what we call J-curving the business model before. You’re investing in your company, your people, and it’s one of the hardest things to do in business. Hire ahead of growth. And so for the next six months, we’ll continue doing just that. Had a nice conversation with my wife about margin, and I was like, “Think cash flow. We’re going to cut that in half.” That really made her learn very quickly the different margins that I was speaking about. So that’s what we’re going to be doing the next six months. And over the next 12 months, we’re just going to continue focusing in on our clients and focusing in on building a phenomenal team. I think our big focus is really building and developing that pool of talent.
Jay Kingley: Outstanding. So, I’m sure we’ve got people in the audience who are thinking, “Tom is someone that I should be talking to.” So, what’s the best way for our audience to connect with you? [email protected], and I’ll drop that in the show notes. Make it super easy. Everyone can just copy and paste and reach out to Tom. Engage him. You will not be disappointed. Tom, I want to thank you for being a guest on our Fractionals Unplugged show. Be sure to subscribe to both our podcast on all the major platforms and our YouTube channel for our videos. Use the power of your one big idea to differentiate you from everyone else who does what you do. Enjoy a pipeline consistently filled with clients you want to work with, who value what you do. Choose the freedom, flexibility, and control that comes from having your own fractional or consulting business, and enjoy being financially secure and professionally fulfilled. Until next time.