In this proficient episode, John Hannum, President and CEO of PPS Solutions, shares how he brings together all business cycle functions to solve business problems.
You will discover:
– How to know when it’s time to hire a fractional CFO
– What can you expect a fractional CFO to do for you
– What common mistakes you don’t have to make
Episode Transcript
Scott Ritzheimer
Hello, hello and welcome. Welcome once again to the secrets of the high demand coach, and I am here with yet another high demand coach, I would say we’re going to be generous with the word coach, but every bit as applicable with someone who’s just going to have a profound impact on your journey as a founder and entrepreneur, it is the one the only John Hannum. Now, John is the founder and CEO of PPS solutions PC, which provides fractional CFO services and full service accounting and finance services to growing businesses. With a 25 plus year background in the corporate finance world, as well as CFO of companies with phenomenal growth trajectories, he now focuses by bringing the financial firepower that’s commonly employed by large successful companies and making it available to smaller growing businesses that need it most. He is skilled in using financial data to drive process efficiency throughout the organization, and designing and implementing financial reporting and highlighting areas that need focus. Well, John, is so excited to have you here. excited to have you on the show, I’ve got so many questions, I don’t know that we’re gonna get to half of them. But before we jump into any of that, I’d love to hear a little bit. How do you go from being in kind of the corporate world to diving into the world of entrepreneurs?
John Hannum
That’s a great question, Scott, thanks for having me. First of all, it’s kind of an accident for me, you know, I had always kind of considered that I would would go and do some challenge and build some company into his next stage of growth, and then go on to the next one. And, and, you know, do something similar and just keep having one company at a time, I had never really considered working for smaller entities and early 2020 wasn’t really the time to find a new job, I had had left a construction company that we had taken public a little bit earlier and, and thought, dozen options out there for for new companies, but I’m gonna hold for a couple weeks and see what this COVID thing when that blows over. During that time, I kind of said yes to a couple of friends who had businesses and needed some help and kind of quickly realize that there’s a huge piece missing in most smaller companies, growing companies, entrepreneurial companies. You know, people make decisions as entrepreneurs make decisions that aren’t really in their best interest, no reasonable CFO of a larger company would allow some of that craziness. And while you know, gut instinct, and and good decision making is key, I really wanted to bring that financial aspect to that. So we were making good solid decisions based on solid data. So I just decided to start working for two or three companies at the same time rather than that one, and that, that spawned into the idea of doing this as a fractional CFO and dividing my time among many companies a little bit different than consulting for my taste. You know, we don’t use the C word at at PPS. But we do kind of act as the CFO for those multiple companies, which I think makes us ingrained in the team and really part of that coaching atmosphere within the company.
Scott Ritzheimer
Yeah. Now, you mentioned that was one of the things I saw as I was doing some research for the episode is you make a distinction between fractional CFOs, and consultants. And so you mentioned the C word there, what’s the big difference between the way that you approach your work as a fractional CFO and a more traditional consulting approach?
John Hannum
There are I mean, consultants are really valuable tools that you can kind of unleash on different different spaces, different ideas, when you need a consultant to come in and kind of advise you on something that’s great. To me, a consultant is somebody that comes in and tells you what to do, and you have to go do it. A fractional, which is the word that we use doesn’t necessarily do that we just do the job. You know, a CFO might come in and tell you, you should make some recommendations, and then leave, that’s a consultant. We’re very cautious of the language we use in our firm as well. We use we, when we talked about both our team and the CFO is embedded within the organization, who is officially a client, but always we were just very cautious with that and trying to be part of that team.
Scott Ritzheimer
And that’s such a big, big deal, because I found bringing that CFO role into an organization, even if it is someone on the team, there’s a natural gap between the way that CFOs think and the way that entrepreneurs think right and typically the people that an entrepreneur has has surrounded themselves by and so I think what you’re doing there and I think is was really important for anyone trying to step into that role is bridging that gap. Have you seen the same thing? And what are some other ways of so that you’ve that you find yourself bridging the gap between the kind of the entrepreneurial mindset and the skills needed from a CFO?
John Hannum
Or I think it’s easier to bridge that gap when you understand what the entrepreneur is talking about. You You know, some, some accountants, some people in that space, you know, sit in the corner and do the books and they understand the books and every time you give them a question, they’re going to think about how that goes into tax return or what the debit and credit are. And those are valuable skills, but it doesn’t necessarily get you into the trust of the CEO or entrepreneur. So for me, we talk the same language, I have to go into operations, a little bit of understanding what the company does, how it does it, how it operates. And then once I can demonstrate that, that proficiency, I think you earn the trust of somebody that you’re trying to give financial advice to. So always, in our firm, we think strategic partnership, we support the CEO and the rest of the C suite, the entire organization. But, you know, it’s really about speaking their language and coming to their terms, I can make recommendations all day, I could go and do things in the organization. But unless we really have that partnership with the CEO that allows that relationship to to be valuable, you know, you’re just the person in the corner, kind of making debits and credits.
Scott Ritzheimer
A lot of times, founders will hold their, their financial data very close to that they play their cards very close to their chest, and they don’t really let other folks into it. Maybe worried about folks knowing what other people make or how profitable they are what for whatever reason, it tends to be one of the last pieces of data that founders share. So why do you think as a fractional CEO, from your vantage point, why should founders start to open that up to someone like yourself? What are the advantages of bringing someone else into that decision making, sir?
John Hannum
Sure, I mean, most entrepreneurs do think they have to do a lot of things themselves, they have to wear the marketing hat and the finance hat and all the hats at the beginning. And no matter what hat they’re wearing, they could wear that hat work more closely and better than anybody else, because they understand their business, and they understand their vision. So bringing people into that circle really is a it’s a trust process. You know, I would say it’s not, it’s not on akin to going to the doctor, right, you can, you can talk to your doctor, very real terms, and you can kind of open, open the file and talk about the real problems, or you can lie to your doctor and probably not get the best advice. So you really want somebody in that role that you can trust with that information. And you should probably be guarded with the with a lot of the information, you don’t want all of your financial information out there in the space, right? You don’t know the public company, nobody’s going to read your Edgar. So, you know, keeping that keeping people guessing about your finances is just fine. But your CFO can’t guess they can’t give you good advice. They can’t help you grow unless they really understand where you are, and where you want to go.
Scott Ritzheimer
Yeah, that’s so good. So one of the questions that I have for you, let’s say we’ve got a new entrepreneur, their their business is growing, things are relatively good. You know, sales are coming in, they’re running all over the place trying to keep up? How do they know when it’s time to hire a fractional CFO?
John Hannum
I get this question a lot. It’s pretty much the question that and what size business do we do we operate and that’s, you know, every size, it doesn’t have a CFO, just it’s about what you want to do. So, you know, I’ve used the analogy, the, the corner store probably doesn’t need a CFO full time. But the person who wants to build an empire corner stores and kind of cashed out of a course or Empire at the end of their, their January, their their trajectory needs to be talking to somebody at store one, the slice of CFO, you need, you know, the early stages may maybe kind of episodic or light. And then obviously at some point, if we’re successful in the rational CFO world, we got to work ourselves out of a job, and it’s time to hire somebody, you know somebody full time and have a full time finance function. So job growth and trajectory, most of the companies that I work with, have done some, you know, some huge level of growth, double, triple, adding acquisitions, etc. So, I think going through those types of things without somebody who is a financial partner, really is just dangerous, you know, doing your own diligence, doing your own accounting, unless you are an accountant, obviously, then a little more, a little more safe.
Scott Ritzheimer
So one of the that brings you right to my next question, and that is what are some of the mistakes that you see made that have that wouldn’t wouldn’t be much less likely if they had a CFO with them earlier in the process?
John Hannum
So I think one of the big ones that that might be germane to your audience specifically is kind of that cash out perspective. So, you know, at some point, you’re going to want to do something with your business. Besides just run it forever. You’ll want to retire you want to sell you want to give your children whatever it is And, and, you know, ultimately there’s a lot of companies out, there’s a lot of coaches, a lot of people out there that will help you take that, that last step. So, you know, 1218 months in advance of that you want to kind of polish it off and make it nice. I believe that having somebody on the finance side, throughout that one 200 years of running the company, though, makes an entirely different effort into that last, that last space, somebody that’s been looking at sales, you know, for those, those 2530 years, whatever it is that you run in your company, somebody that’s actually helping you build a budget every year holding you accountable strategic thinking, all of the things that we would do every single year of that of that 25 or 30 years, make that company, much more valuable than than just running it under the without finance help, and then trying to cash out at the last minute.
Scott Ritzheimer
So you actually listed a couple of things in there. And I’m wondering if you could dive in or just kind of summarize it for us, but what what should an entrepreneur expect from their CFO?
John Hannum
In particular, great question. And the good news is they should expect the same thing from their regular CFO. You know, in my opinion, there’s no difference between doing this fractionally and doing it. You know, wholeheartedly, I guess, what, what would the right word be? Full time. Yeah, that’s, that’s a good word. The what they should accept expect is a partner, where they can discuss financial things, you know, you wouldn’t call that person whenever you’re thinking about making a decision, you want to involve them within the executive kind of level function, strategy, meetings, etc. Yeah, that person is going to be their partner, what they should expect from an operational perspective is that they understand the business and can do the the proper accounting, build systems, all of the things that they have to keep that finance department running, you know, but the two end of the two main functions are to run the finance department. And to bring that finance perspective into the C suite and teach coach educate people on what finance is within that, within that C suite group.
Scott Ritzheimer
Yeah. And on the flip side of that, what are some things that you shouldn’t expect to see a CFO to do?
John Hannum
Part of what what happens in smaller businesses is that the CFO, or the bringing in the CFO, and they have to do kind of menial tasks or transactional work in order to fill their time, it’s one of the reasons that our industry I think, exists in this fractional space. Because we can supervise that and spend less hours. A you shouldn’t expect your your CFO to do things without you, right. This is a partner that’s going to talk to you about things making decisions together, I don’t think you can just pass the potato and just have that person kind of operate without your input. So it just has to be a partnership. And then I you know, I would expect that people would want to hire a CFO to do CFO stuff and not, you know, talk about things. You one of our clients specifically just enjoys talking about these little tiny, tiny transactions, you know, why did we put this into that expense versus this expense? And, to me, we operate as far from that decimal place as possible. We’re trying to get big decisions made and understand what that is. We have bookkeeping questions. You know, let’s look here.
Scott Ritzheimer
Very good. So, here’s a question for you. I like to ask all my guests, and it’s this what is the biggest secret you wish wasn’t a secret at all? What’s that one thing that you wish every founder, entrepreneur or leader out there listening today knew?
John Hannum
I think, ultimately, in the US, especially, our industry isn’t entirely entirely a secret. So I wish people really knew that the service existed. I’ve said it before, I’ve never received a call literally never received a call from an entrepreneur that said, I was thinking of hiring a fractional CFO. And I wanted to talk to you about that. It’s it’s really, I have received calls from recruiters, banks, insurance people, other CPAs that don’t have the fractional CFO service. And they say I have a client that’s in trouble. And that’s how I get introduced to that. It’s usually a mess. You know, there’s, there’s a, there’s a reason that they’ve had to come to the service. But I wish people knew that it was available that you could have somebody part time to really be a strategic partner.
Scott Ritzheimer
Yeah. One of the things that I love about the role, at least most of the folks I’ve seen that have done a great job with the role and I hear this and so what you’re saying is, you don’t necessarily have to wait until everything’s great to get the benefit from a CFO. It’s, you know, if anything you want to start before it becomes a problem but one If there’s a problem, don’t let that delay the decision further. Bring them in as soon as you can bring someone in to help clean up and correct things before it gets too ugly. I have seen so many founders who, who have gotten into that mode, thought about it a little bit like oh, no, you know, either it’ll go away, or it’ll get better or, or something will magically correct itself. And I’ve seen him get into some pretty big trouble doing it that way. So I would agree, I think it’s a fantastic service, especially with folks who, who know how to get the most out of that time and those roles and and can follow along in the guy that you laid out for so far today. One more question for you here. And I’m gonna turn things around a little bit, you’ve been in the the fractional CFO role here for a little while, wants you to take that hat off, put on your CEO hat and in touches, what’s the next stage of growth look like for you and your business.
John Hannum
So it’s been interesting, it’s been four years or so now, almost four years of being out. And I literally up until last September, so six, seven months ago, had not done any marketing at all, I literally everything came through referral. And we’re just kind of going crazy, because there was so much so much work to do from just a few of us. So adding more infrastructure, I’ve actually built out kind of a marketing function and inflammation function for entrepreneurs, YouTube channel, all that that type of structure to try and educate people on the need for it. But for me, it really is just about scaling that. So adding CFOs experienced CFOs, specifically, and adding clients within that proportion so that we continue to service those those clients is about Michael King, one of the coaches within our space, kind of toss out some numbers the other day that I think I agree with, I said about 11,000, current, inactive, fractional CFO firms or fractional CFOs in the United States. And there’s about 33 million businesses that he estimates don’t have CFOs or finance. So there is a little bit nuts. Most of those people within that space are CPAs, who are getting into that space, because they have the financial acumen to provide those services. I have a little bit of a different take on that. I want to have experienced CFOs who have run companies who are operational in nature, you know, who’ve been in that C suite and can make those executive decisions. One of the things I say all the time is, comme si never made a good captain. So I want somebody that’s been through a few storms before and understands. So that when that entrepreneur says, you know, we’ve got this problem or that problem, yeah, there’s, there’s no problem. We we’ve been through that before. And here’s here’s what we do, and we learn together, how to steer into that storm.
Scott Ritzheimer
Yeah, yeah, that’s powerful. Well, John, thank you so much for being here. Before I let you go, gotta know how can folks get in touch with you and learn more about your services?
John Hannum
Well the website is always the best way. It’s ppsfinance.com. And my email is [email protected] So super easy. Fantastic.
Scott Ritzheimer
All right. Well, you heard it. If you are one of the what would that be? 32,899,000 or whatever that is 89,000, who does not have a fractional CFO, you can see what a competitive advantage this is. It may not be your first item of strategies, but having been around companies who’ve been able to take advantage of a fractional CFO, it is a game changer for sure. So I’d highly recommend it. Head on over to PPS Finance. Give us that URL one more time. Yeah, ppsfinance.com Excellent. Meet with John and his team. You’re gonna find a ton of great resources there and a ton of help when where you need it most. John, thanks so much for being here. It’s a pleasure having you and for everyone watching you’re listening. You know your time and attention mean the world to us. I hope you got as much out of this conversation as I know I did, and I cannot wait to see you next time. Take care.
Contact John Hannum
John is the founder and CEO of PPS Solutions PC, which provides fractional CFO services and full-service accounting and finance services to growing businesses. With a 25+ year background in corporate finance and as CFO of companies with phenomenal growth trajectories, he now focuses on bringing the Financial Firepower commonly employed by large, successful companies to the smaller, growing businesses that need it most. He is skilled at using financial data to drive process efficiency throughout the organization, designing and implementing financial reporting, and highlighting areas needing focus.
Want to learn more about John Hannum’s work at PPS Solutions? Check out his website at https://www.ppsfinance.com/
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