Adam Torres and Brooke Lively discuss maximizing value.
Subscribe: iTunes / Spotify
Apply to be a guest on our podcast here
Show Notes:
Cathcap, is a fractional CFO company that provides strategic advice to drive profitability. They have helped 250+ law firms, including some recognized in the Inc.5000, make more money by creating clarity in their numbers. In this episode, Adam Torres and Brooke Lively, Founder and President of Cathcap, explore what it takes to maximize profitability prior to an exit.
About Cathcap, Inc.
Cathcap provides strategic financial advice to drive profit. We create customized teams of professionals to guide you through your numbers, analyze data trends, and serve as support to predictably scale your business. We specialize in law, medical, E-commerce, SaaS, advertising, and manufacturing industries. Our team of financial professionals include Strategists, CFOs, COOs, Controllers, Financial Analysts, Data Visualizers, Accountants, Bookkeepers and System Integrators that provide fractional services to coachable entrepreneurs.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest on the show, just head on over to missionmatters. com and click on be our guest to apply. All right. So today’s guest is Brooke Lively and she’s founder and president over at CathCap.
Brooke, welcome to the show. Thanks, Adam. Happy to be here. All right, Brooke. So we got a lot to talk about here today. So a lot of business owners, a lot of executives, a lot of entrepreneurs that listen to this show. And we’re going to talk a little bit about maximizing value. I know one of the things that you do over at CapCap is as a fractional CFO services, you’re helping businesses.
To get to the point at many times to where maybe if they were exiting, that they’d be able to maximize that value and have everything in order. So we’re going to get into that and we’re going to get into a whole lot more. before we do, I mean, I just like to know, where did this start for you? I mean, founder, I see the name founder here.
Were you always an entrepreneur? How, how’d they suck you in? You know, I grew up in a really entrepreneurial family. I was talking to my mother about this actually last week, and we went through the family and I have a rather large family. Mm-Hmm. , they’re, you know, over a hundred of us live in a five mile radius.
Really? And what city is this? Yeah. What city? I live in, Fort Worth, Texas. Okay, 100. That’s amazing. Go ahead. I’m from Detroit originally, and my family’s pretty big over there. And there’s got to be hundreds over there. My grandmother lived to see five generations. She’s no longer with us. She’s looking for my mom.
I’ve generation. So a lot of family. So when you say over 100 of young, like, whoa, it’s the whole, it’s the Brook live, the whole family over there. Go ahead, please. We’ve got all the generations. That’s exactly what it is. But so we went through everyone who worked and. Interestingly enough, there was , in every branch of the family, in every generation, there was the one off person who was an employee and everybody else owned their own business.
Interesting. Yeah. So it’s the exact opposite of what most families have where everyone is an employee and there’s the one on your. Yeah, that’s true. Do you remember what your first business was? Like, when did you kind of, like, start cutting your teeth in entrepreneurship? I don’t know. Were you selling candy or like, what was that?
Well, we’ve been friends in school. You sell this, I sell that. We do a barter, a partnership. I don’t know. I, you know, I think it was in about second or third grade when I got stand, which by the way, is now using it. I can’t amazing, totally serious stand and now he’s got a clients that he was, he w for that lemonade.
I know mean, this thing was awes Tray that wow. Flips down in the front so you can display all your merchandise. Mm-Hmm. . And then the sides are chalkboards so that you can put up your ever check, you know, dynamic pricing. And , it was, it was great. I love it. Yeah. Oh, wow. That’s amazing. So I guess fast forwarding just slightly here.
, so at what point did you think that you know, being a fractional CFO or going down that route and starting that business or going into that side of things, what, when did that become a reality for you? Well, I was actually working for a family business as a CFO, and I had hired someone to help with sales and marketing.
And Clients came to me and said, can you do for us what you’re doing for your family firm? And that was when I realized that so many, so many, so many entrepreneurs start their business because of a passion for a product or a skill or a service. And, and that passion is rarely ever actually business itself.
And so they were struggling to run that business by the numbers and I didn’t realize I was doing anything. Abnormal. And so, you know, I just, I hated to see them struggling so much. And so that’s why I started a task app. I just wanted to help people be able to make data driven decisions because it’s so much easier.
I mean, Adam, if you’re making a decision based on gut instinct, you sit there, you make that decision at two in the afternoon. And then you go home and you have dinner with your family and you think about that decision. Was it the right thing to do? Was it the wrong thing to do? And you’re distracted through dinner, making that decision a second time.
And then you wake up at 3 a. m. and you make the decision a third time. And then you go into the office the next day and you’re talking to a potential client and where you should be focused on them. You’re making the decision for the fourth time. So, Brooke, are you hold on? Are you like wired into my security camera right now?
I’m feeling a little freaked out. I know. Some of the entrepreneurs listening are like, what? She doesn’t know me. Wait a minute. Wait a minute. I know. I’ve been spying on all you entrepreneurs out there. Did I mention I grew up in an entrepreneurial family? Entrepreneurs, I understand exactly what happened.
I lived it. I lived it with both my parents and so, the things that I do naturally, because my parents and grandparents figured it out. And great.
I want to help other people do it. Everybody doesn’t have to touch the hot stove. Yeah. Yeah. Enough people have touched the stove that I can tell you that it’s hot. I know that 1 of the things. Things that you do , is you’re working with businesses and thinking about, like, and helping them maximize value before an exit or otherwise.
I know. I know you’ve worked one of your niches. I know you work with many different businesses, but one of the niches, hundreds of law firms, literally you’ve worked with. What are some of the things as a business owner? Is preparing to exit or even if that, and when I say preparing, more than a year out, I’m talking about, they’re thinking about it.
They might be thinking about legacy. They might be thinking about the next generation, like who’s going to take over their lemonade stand if they don’t have that lineage that you do and their kids want no part of it or, or otherwise, right? What are some of the things that people should be thinking about , as they’re kind of heading towards that stage of their life, when it comes to value and how they view their business?
Well, I think the first thing that everybody needs to understand is that a business that is ready to sell has, it throws off a lot of cash, so it’s profitable. It has happy clients and happy employees, and it allows the owner, , the freedom. To do what it is that they love to do, whether that is working in the business, spending time with family, whatever it is, it gives them the freedom of choice on how they spend their time.
Mm-Hmm. , that’s what makes an attractive acquisition. That’s also the company that really, ultimately we all wanna own. Yeah. So we should all be preparing for exit today because we don’t know what’s going to happen. We could all be hit by the proverbial bus tomorrow, so let’s have a company that’s, ready to be sold just in case.
But let’s also have a company that’s ready to be sold because it’s the easiest thinking company to own. Yeah, so we might as well. So, you know, when we’re looking at any company. And we’ll talk in terms of law firms here. We want one that’s profitable. So the more most important thing is, are we. Is it throwing off a lot of cash?
So, in a law firm and in any company, we’re going to say that one third of revenue, this is after cost of goods sold for any company. I don’t personally believe that law firms really have cost of goods sold. Besides, an occasional thing here or there but revenue after cost of goods sold, one third should go to pay the people doing the work.
One third should go to overhead and one third should be profit. So, are you getting that one third and that’s going to be the biggest determinant of whether or not. You’re going to sell for a good price, but whether it’s a law firm or a manufacturer or an ad agency, are you profitable?
And so looking at that if you get in there and you see that maybe something’s off on a firm or otherwise, like, the sooner they know that the, the sooner that they can start, changing things to tweak those numbers. Am I off on that? Or like, what? So you go into a firm, like, you see the numbers, maybe they’re off from where you want them, like, like, what happens next?
And I know it’s not one size fits all, but let’s, let’s play through the scenario. What happens next? It’s not one size fits all, but yeah, you’ve got to start changing the numbers if they’re overpaying in their people. If they’re spending more than one third on people, that is a hard thing to fix because yeah, I gotta tell you, your, your team is not very responsive when you walk in and say, I’m going to cut everybody’s salary because I’m paying you, Brooke said, we hired this new fraction before we realized.
Oh, snap. Oh, you’re getting the people that listen to this. If they’re not a CEO or entrepreneur, you’re getting zero referrals from the employees. That’s for sure. Go ahead. Yeah, that doesn’t do a whole lot for morale. So I’m gonna tell you, there are little things you can do. You can change comp structures.
To a little bit more incentive based so they could make more money if they have a higher performance level and you lower the salary. But ultimately, you, create a plan where they have the potential to make more money. The attrition really is your best friends in those kinds of cases. Like, yeah, there is natural turnover and employees.
And that’s really, really important. The thing that’s going to save you so fixing your people problem takes a long time. We’re working with a group out of the Midwest and we redid their comp plan. I think 3 or 4 times over as many years. To try to get it sort of where we wanted it. And in the meantime, as people quit and new people were hired, we hired them with the comp plan.
We ultimately wanted everybody on. So it was a multi year process to get that fixed. Now, if you’re over in your overhead, that is so much easier to fix. We can. Almost always get out of the lease and find somewhere cheaper. You can find another service provider. You can change software. So changing software always comes with its own set of expensive problems.
Yeah. You know, your marketing is in this. Are we spending money in places and marketing where we’re getting a really good return for every dollar we spend? Are we getting at least ten dollars of sales? So, those problems are much easier to fix. You’re going to see a much faster turnaround than you will in people.
That you’ve got to turn both of them around. Yeah, that, that, that makes a lot of sense. And what I like about this too, though, is that when you talk about running the number, running the business by the numbers and getting all your numbers in line and all this, now you can make different decisions that they may be painful in the beginning when you’re making them, or some of them may even just Be like, Hey, did we need that software?
Did we need this? Some of them might just be, I’m sure you find just like lost money. That’s just being blown. And it’s like, well, what were you paying for this? Why are we paying for this? And nobody can answer, right? I’m sure that’s happening. Like, and how long have we been paying for this and all these things?
Like, so once you start going down that, that area and getting closer to where you’re at, I mean, just ultimately, I feel like the business owners are happier. Yeah. Yeah, and Adam, it happens in every single company. It happened in my company. We hadn’t done that in a while and we went through recently and my C.
O. O. is sending me messages on teams going. What is this software? I’m like, I don’t know what that is. She’s like, well, we’re paying it 400 a year for it. I’m like, don’t need it. Can we not do that anymore? At some point? Yeah, we needed it for something and we got it and then forgot about it and aren’t using it.
So even with the CFO company, it happens. So you do have to go in and look at those things periodically because it just, it happens. It’s human. Yeah, and that’s okay. Be aware of it. That’s fair. Well, Brooke, I have to tell you I know you got my wheels spinning and you got me thinking about ways to wait, what will we need to do as a deep dive?
And now I’m gonna be looking at my personal finances to like, who am I paying for? What? What kind of subscription did somebody sign me up for at some point that I don’t remember? I mean, I’m sure there’s lost. You’re gonna find that Jim membership from 2017. Oh, my gosh. No, you’re probably right.
That might be true. And if anybody has a, and if anybody has a, a charge commission matters for a product that you’re not using anymore, keep paying for it. It’s okay. Other than us can’t do all the rest. It’s fine. No, I’m just playing. We don’t even have anything like that. I’m just. way. But brook, seriously this has been a lot of fun having you on.
If somebody wants to continue the conversation, learn more about the CFO services that your team offers and just connect in general, how do they do that? I think the easiest way to get in touch with us is our website. It’s calf cap dot com C A T H C A P dot com. Fantastic. And for everybody listening, just so you know, we’ll put the links to that in the show notes that you can just click on the link and head right on over.
And speaking of the audience, if this is your first time with Mission Matters and you haven’t done it yet, hit that subscribe or follow button. We have many more mission based individuals coming up on the line and we don’t want you to miss a thing. And Brooke, again, thank you so much for coming on.
Thanks for having me, Adam.