Here is the situation…

You want to offer CFO services to a prospective client, and they have revenue but NO PROFIT.

The first thing we have to ask ourselves is WHY do they have $0 profit. 

There are most likely multiple reasons why and that’s your role as their CFO…


The most important thing you can offer them today in order to get them to sign up with you and work for you is answering the question WHY.

“Why is this happening? What is the reason?”

It’s your job as the CFO to understand this better than them.

And you might not be an expert in their specific niche, but here’s the good news…

There are very few reasons why this could be a problem and they’re limited to specific issues on the P&L statement.

And so we can ask very similar questions:

“Is it a problem with revenue?”

“Is it a problem with pricing?”

“Is it a problem with the volume?”

For example, if a company has $1.5 million in sales, it’s clearly not a massive volume issue.

But based on the company’s pricing, should they have higher pricing? 

Are their pricing problems relative to competitors? 

Have they made the decision that they’re just going to price as low as possible so they make it up on volume?  

Those are some questions, but I always start with the top of the P&L statement.

So if I’m going to be work as a CFO with them and I’m going to help them increase profitability (which is really the main outcome of why they’re going to work with a CFO)…

Revenue is the very first thing we have to focus on. 

And I’m really thinking about price and volume. 

Then I’m thinking about the cost of sales.

Is it higher than it should be? Is it in line? Is it structurally high? 

Is this something that we cannot change because it is based on negotiation with vendors, spoilage, etc.

Which then leads me to GROSS PROFIT. 

And I’m going to compare this with the industry average in mind.

And I’m also going to compare this with industry potential, which is way more important. 

If you’ve met one company that you know has been selling a similar product or the same competitive product that has a higher gross profit margin than them, instantly you know it’s possible to do better. 

And you have to understand WHY. 

And the good news is there are very few reasons related to revenue and cost of sales. 

And then we’re also going to look at opex (operating expense). 

And with opex we’re going to look at salaries, headcount, personal expenses, etc. 

We’re also going to look at tax, post-tax, & net profit. 

So the main value you can figure out for them is…

“Hey, this is your current situation. And right now, this is where you’re at. WHY IS THAT THE CASE & HOW CAN WE CHANGE IT?” 

And once you understand why that’s the case, the people you’re going to be able to help the most are the ones that have a CURRENT SITUATION, and then they have a DESIRED SITUATION.

And it has to be a desired situation that is also POSSIBLE. 

So it’s got to be a desired situation that’s within their realm of belief.

But you want to stretch their belief a little bit so that they feel challenged while still being able to see it happen. 

You want to be on the borderline of something that’s actually possible in your mind and that you can transfer into their mind. 

Now we have to ask…

Can we increase revenue? Is there something we can do? 

And here’s the key thing…This is where a lot of people get hung up on the CFO services. 

Note: You are not responsible for increasing revenue, increasing volume, or increasing price. 

Cost to sales. Can we decrease that? Is there a way to do it? 

Gross profit. Are we going to be able to increase that? 

It is possible to decrease opex? 

And we’re going to look at each of these and hopefully, we’ll have multiple on the tax side. Especially as the company grows because they don’t have a lot of profit right now. 

But obviously this is A LOT of work and this is their business, so they have to take responsibility for this part.

But what exactly are they paying you for then?

They’re paying you to MAKE THE PLAN. 

And then they’re also going to be paying you to go through and HOLD THEM ACCOUNTABLE. 

So for example, that feeling that a lot of these business owners get when they think about going to talk to their CFO is like when you have to visit the dentist…

You don’t want to do it, but you don’t want to look like the Grim Reaper either. 

And so you’re helping them make the plan on this call and then you’re going to help hold them accountable every single month. 

You’re also going to give them the information they need so that they can UNDERSTAND RESULTS, INTERPRET THEM, & MAKE A PLAN OF ACTION TO GET IT DONE.

But guess what…

None of this is going to sell them. 

The only thing that is going to sell them, and the reason I’m telling you all this is because you have to have CONVICTION IN YOURSELF that this is what you’re going to do and that you can honestly pull it off.

Because the only thing that is going to sell them and get them to pay you is talking about their CURRENT SITUATION and how you can solve their current problems.

You have to say to them, “You’re running a business that SHOULD be doing $XXX,XXX in profit, but you’re only doing $XX,XXX.”

This is the work you do as the CFO. 

And the greater the gap in what they are currently profiting versus what they should be profiting, the greater your fee should be.

This is how your mind should be thinking because, to be honest, you are not going to be able to charge your client to send out some reports from Futrli if you’re not going to help them make more money. 

And so you might not be at the stage where you know how to do this for somebody. 

And that’s totally okay!

The thing you’ve got to understand is that this whole method here is probably 80% behavior and 20% accounting.

Most of it is about BEHAVIOR that is leading them to these margins. 

Now there may be some structural things with some businesses or maybe they are just selling a bad product. 

But you want to ask them about the things that they need to get more information on and the things they need to know in order to make better decisions so that their business will grow and become more profitable.

And after you go through all of the things that make people insecure on the call…

You end with…

“Based on everything we’ve talked about today, when we went through and talked about the pricing that you guys are doing relative to competitors, how you organize the cost of sales, and about hiring your broke brother-in-law…all of these things we would have fixed if we were working together…

Do you believe you can go from $XX,XXX to $XXX,XXX? If not, we shouldn’t work together. 

So if you don’t think it’s possible, no need to work with me as a CFO. 

But if you think it’s possible based on what we’ve talked about today and you want to partner with me to go through that process, I’d love to be there to support you.”

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