all right welcome back to the daily mastermind george wright the third with your daily dose of inspiration motivation and education and we're going to get real strategic today i've got a great guest his name is michael barbarita michael welcome to the show thanks very much george thanks for having me listen we've had a chance to talk i think people are going to be really excited because Generally, when I bring up financial and business, people are like, okay, what is the topic? But you have some intense background and strategy. So I'm going to give a little intro for those of you listening. Michael's the founder of Next Step CFO. It's a strategic financial advisory firm serving entrepreneurs, business owners. And he's been doing this for 40 years. I mean, he's been across retail, manufacturing, service-based companies. He's the former CEO of Ski Town USA, grew that thing to $8 million in under five years. but he also co-authored a book, Powerful Business Strategies. And that's what we're going to talk about today because it's not just about finance, but strategies. So Michael, I'm really glad you're here with us. I would love for you to do me a favor. Now, I don't like to get into tons of background, but you have such a diverse background. I want people to understand what's shaped you and what's shaped how you approach leadership. So give us a two minute on where you come from and how you've built and grown into this place you're at now. Well, one of the, thank you, George. Thank you for having me. And so one of the strange things with me is I did successful things and then I did stupid things. And let me explain what, and let me explain what I mean. So back, back in 99, I just sold my second successfully. My first business grew, as you mentioned, from two and a half million to a million in five years. And what was interesting is that I always implemented business and financial strategies that my competition wasn't doing in the successful businesses I own. In 1999, after I sold my second business successfully, I had this huge head and that I could do anything. I thought I had the keys to the business kingdom. And so I started an outpatient rehabilitation facility called Freedom Therapy Center. and I did exactly what my competition was. And after five years, I fell on my face completely. I had to close it out, pay off all the liabilities and, uh, and move on. And, you know, and what was interesting is that I, I did exactly what my competition was doing. I, I marketed the same way. I used what I call, I hope so marketing. I had the same protocols, the same exact thing. I marketed to doctors, all that stuff. Everybody and everybody was doing same exact thing. And as a result, I got nowhere. I didn't implement any of the strategies that I will have an opportunity to talk about some of them today, but I didn't implement any of those. And I fell on my face. And one of the things I found is that the toughest thing about when you fall on your face is to take that next step, the step after the fall. And so 30 days after I closed Freedom Therapy Center, Next Step CFO was born, where we do not just fractional CFO services, but we also what I call strategic implementation. So we combine the financial with the strategic. Yeah, and I feel like that came from this idea that, look, early in your career, you just very quickly shifted from financial analyst to operator to CEO to growing a business, which probably changed the way you viewed money. And is that the reason you realized that it wasn't just about money, but also the strategies tied to the money that was going to make the biggest difference? Right, but it took me to fall on my face to figure that out. I didn't figure that out before that. Yeah, the biggest lessons we learn are from our failures, right? So you just keep succeeding. And you made an interesting point. Most people are doing what is working or what their competitors are doing or what the strategies are that everybody's using. And so at a bare minimum, they might be getting some success, but a lot of businesses fail because of that. And what you're saying is when you do different strategies, core strategies, and I know you have a formula for doing some things, that's when you see a difference, right? So you believe there are some core principles and strategies that you have to implement in addition to your financial planning, even though you are focused as a fractional CFO, correct? Right. Absolutely. And, you know, just to give an example of a strategy that we use that our competition wasn't doing when I was in the ski business. I can also give you one when I was in the frozen cookie dough business. But when I was in the ski business, the problem the customer had, and I always go there, the problem the customer had is they really never knew if the ski they were being sold by some hotshot ski salesperson that was flexing the ski in their face was the right ski for them until they got it up on the mountain and tried it out. so back in this is back in the 80s and uh you know as the audience probably knows once a ski gets skied on it depreciates substantially so what I what we did is we implemented a ski guarantee ski the ski three times you don't like it bring it back for a brand new pair and keep bringing it back until we get it right and my managers and employees thought I was out of my mind because they had visions of thousands of pair of skis coming back and us losing a ton of money my mindset was a little different. All the customer really wanted was a great ski experience. That's all a skier really wants. And they'll do anything for that. And the other thing I knew was my competition wouldn't do it in a million years. And they didn't even copy it once it was successful. We sold 8,000 pairs of skis the first year we implemented it. A 25% increase. Only eight came back. The next year We sold 11,000, pay a 14,000, came back. So that strategy is called a risk reversal. And it helps tremendously in differentiating you. But remember, I started with the problem the customer had. Yeah. It's interesting the way you think because, and I find this about a lot of high-level authority individuals, is they think differently. So here you are. Most people would think you're a financial analyst and a fractional CFO. And yeah, you know, you believe in forecasting versus reacting and actually gaining clarity through financials. But you talked to me earlier about this conversion formula that you use. And so maybe we ought to cover that and you could give some value to our listeners. Talk a little bit about your conversion formula that you have, which, by the way, just so that people understand, comes from financial as well as operator experience. So tell me what you teach your clients with the conversion formula. Right. So the conversion formula is designed to convert prospecting either into your sales process or actually to an ultimate ultimate customer. And it's four parts. And when I was doing research for my book, I was trying to figure out what I call keys to successful marketing. And so I had to go all the way back to 1931 of all of all things. And I found that the key to successful marketing is centered around a couple of things Essentially getting into the mind of the prospect Okay but how do you do that We not mind readers So I came up with this concept called the conversion formula And because to me, getting into the mind of the prospect is identifying the problem they have, they don't want, with the solution they want, they can't find. And so I created this thing called the conversion formula. It's a four-step formula. It needs to be done in the right order. Otherwise, it's not as successful. And that order is what the first step of the formula is what we call captivate. And what captivate is, is a headline or the first thing that you say when you interact with a prospect. And that's the problem the customer has and doesn't want. And what does that all mean? Well, you have to dig deep into your industry because there's a lot of problems and perceptions of problems that customers have with an industry. And so if you look deep into your industry, like, for example, just to give you a quick example, like the construction industry or the trades, you know, the problem customers have is that people don't return phone calls or they leave a mess after the job or they never show up on the day that they say they're going to start. These are the types of things. And that's just one industry. So it's identifying that problem they have. And then that's the captivate. That's the first step. The second step is fascinate, which is the solution they want, they can't find. So it captivates the problem, fascinates the solution. These are the emotional hot buttons. These are the, this gets into the mind of the prospect in an emotional way. The third step is called educate, where we educate the customer. Now that we have their attention with the problem and solution, We now educate the customer on how our solution is superior to the competition. And then finally, we have to close them. And we have to close them with a compelling offer, which there are five components to a compelling offer, which I'll be happy to go through as well. Because I can't just say close them with a compelling offer. What does that mean? So there are five components to make an offer compelling. and it's very important. You can use one or more at the same time. The more, the merrier, as they say. But just to finalize the loop on the conversion formula, it's captivate the problem, fascinate the solution, educate, and close. And by the way, it also follows the way people buy. Why is that? Well, because prospects buy based on emotion and then back up that emotion logically. the captivate and fascinate are the emotional components the educate is the logical and then finally close yeah i love the i love the formula and it's so true i can tell you from you know now now 30 plus years in the business of sales and marketing and you know finding that problem and it's interesting you said something i really liked you said they got to be in this order and i think that is a huge point see most people go out and they try to just educate they're doing it backwards They try to educate or they're talking about their solution, but they really haven't captured the mind of the prospect. There's so many people I've had over the years kind of work with and speak for me and things. And at the end of the day, you've got to be in the mind of the consumer. So you have to start with the problem they're thinking about. And I think that when you said in that order, you hit it dead on. And I'll tell you, transitioning a bit, I think it's very interesting, unique, and amazing that you think this way because the goal is tying it to driving revenue, which is the finances of your business. So I'm curious, what made you decide to get deep into the conversion formula from the financial aspect? Why is it that you've really pushed into this conversion formula and tied it to finances when your core business is finances? Right. Well, the way I look at it is if you're a CFO in the Fortune 500, and by the way, I don't deal with clients anywhere close to that. My ideal clients are doing anywhere between 500,000 in sales to 2 million is where we start, and then we grow from there. But if you're looking for a job, if you're a CFO and you're looking for a job in the Fortune 500, better know not only for financial, but you better know the strategic as well. Otherwise, you don't get the job. And what I noticed in the marketplace is that the fractional CFOs out there are great with the numbers. They can do the forecasting. They can solve cash flow problems. They can identify the critical metrics in the business. but they don't understand the strategy that's necessary to hit the forecast goals. Yeah. Yeah. And that's, and that's, what's missing primarily. And so that's what, and you need that holistic approach, right? Like if you're going to manage your financials and get clarity, it does start with conversion or you don't have anything to manage. Right. Right. In other words, you know, they want to get to three or 4 million in sales, 2 million, whatever their objective is, how do I get there? Okay. I mean, it's the forecast. How do I get there? How do I generate the business? How do I manage the people? How do I know how many people to get? All of that is part of the strategic, and I think it's missing. Well, and you talk a lot about helping business owners, founders, entrepreneurs find financial clarity through finances, right? To navigate uncertainty, because you probably deal with all kinds of businesses right now. And you know, in the marketplace right now, there's a lot of uncertainty. There's a lot of, you know, people that feel like they can't control the direction. What do you do to help people use finances or financials to clarify and create certainty? What do you do with your clients now? What I focus on, because business owners, generally speaking, and I don't want to put them all in a box, but generally speaking, don't like the numbers and the data. It's something that they know they have to do, but it's just so hard for them to wrap their heads around and read financial statements and so forth. So I provide that support that, number one, the support where I can tell you the story that the financial statements are telling you. So you don't have to read the financial statements. But more importantly, I help you make decisions through five numbers. I call it the critical five. If you're not good at the numbers for whatever reason, or you don't like to leave it, whatever the reason. If you understand these five numbers, you can make 60 to 70% of your business decisions more accurate. Okay. And that's understanding on a weekly basis what your sales are, what your gross profit is, and the mother of all of them, in my view, the gross profit percent. Yeah. Okay. That's the mother of all. Net profit for a week. And a daily understanding of your current cash balance. If you know those five numbers you can make better business So just understand those five numbers And on a weekly basis most of them and one of them is on a daily basis You should really understand what your parent cash balance is on a daily basis. And you will make better business decisions without having to know a lot of the rest of the story. Although you should. Yeah. But you get away with those five numbers. You can make most of those businesses. better. I love the simplicity of that because, and I also now to tie this together for our listeners, this is one of the reasons why Michael's so good at what he does. If you know those five numbers, at least here's the problem. Most people aren't even completely tracking those numbers. And I love the, you know, you took it to another level with gross profit percentage and then cash flow because they don't really understand that on a daily basis. But then these are these metrics, these KPIs you're measuring, but to drive those, those levers to drive it is the sales conversion that can help to influence it, which is the stuff people get excited about. So I understand why you do that now. So I think that one of the things that's important to point out to our audience, if they're listening to this is what I said when I asked Michael this question is, how do you create clarity in uncertainty? Well, the first step is to know the numbers, right? So, Michael, you probably have people all the time that are like, you drill this into them. What would you say is one of the biggest mistakes people are making? Is it not knowing the numbers? That's one, but can I give you another one that's really, really important? And it's a toughie. It's the ability to adapt and to be flexible to change. If you don't have the ability to adapt, you're going to be doing the same thing. you're going to do that insanity thing, right? Doing the same thing over and over again and making the same mistakes because it's comfortable. Yeah. Okay. The ability to adapt and to be flexible to change, in my opinion, is the biggest and best characteristic a business owner can have in doing business in the 21st century. Well, and you have this mindset because you had the success, but you also had the failure. So when you talk about adaptability, you're saying you have to take it one level deeper for me. Is it not just resilience? Is it your adaptability to change your offers? Is it adaptability to change what you're doing? What do you mean when you say be able to adapt? Okay. Yes. It's to be flexible to change, meaning whatever you're doing now, if it's not scalable and you want to scale, you have to now Now, you have to make some kind of change. Yes. You have to make some kind of change, and change is uncomfortable. Yeah. What's the trigger for that? Is it you're monitoring these five numbers, and so those are your leading indicators for change? Or are you saying just be adaptable to change that happens to you? Or are you saying be proactive? What are some of the things that you suggest? Let's just take the conversion formula that I talked about. You know, there'll be business owners who feel that, you know, this is too big a change. It's not, it's something that I've been doing things a certain way for 10 years, 15 years, 20 years. And although it's not working now, used to work. Okay. But because they're not flexible to change, and when they hear an idea, like let's say the conversion formula, they kind of tune it out. Or they might like to hear about it and understand it, and they might like it even, but they're not going to implement it because it's too difficult to implement, and it was just something they heard for 15 minutes on a show or whatever it was. But the ability to really, one, implement it and make a change is a big step for people. And business owners, the reason why they don't succeed in uncertain times is because they're not flexible to change. Yeah, and you look at the market right now with AI, with the way that, let's call it the speed at which things are changing. if you are not adaptable, if you are not flexible, you're going to get left out. You're going to get just left out. That's a great, that's a better example than what I get. Because AI, if you're not in, you're out. And that's going to be tough for a lot of business owners. Because, you know, all of a sudden now, because there's a higher being, if you will, that knows a lot more than most all of us. you know, and to be able to use that effectively is critical. And by the way, we've been using it with our clients now for the past year. Well, and you know what, you make an interesting point. And for those of you listening, one of the reasons why I wanted to have Michael on the show, because as you know, I get hundreds of requests on a weekly, is because doing the line level skills, finances, marketing, sales, those things are becoming easier and easier for someone, even that doesn't understand it because of AI, that the true authority, the true talent, the true value you get is understanding the whole game, the whole landscape. You know, like we're talking here today, guys, about, you know, numbers you need to track for KPIs, but also a conversion formula for sales and, you know, skill sets needed in your mindset for adaptability. This is why Michael with his clients puts, you know, has this bridge in a Bella. And Michael, don't you agree that it's in the weeds, it's the strategy, and it's that higher level that's going to help you become more perfective with AI and with talents and things in the future? Absolutely, because it's implementing business and financial strategies that your competition isn't doing. That's the key. Yeah. When I was at Freedom Therapy Center, I was doing my competition. When I was in the ski business and the frozen cookie dough business, I was doing everything different than my competition. And it was much more successful. It was harder to develop that mindset. Remember, my managers, houses a pair of skis. They're going to come back and we're going to lose a ton of money, right? So you're bucking the tread. You're bucking the tide. But it's the way. Yeah. Yeah, and I guess it kind of comes full circle to your book, you know, Powerful Business Strategies, because it really is about innovating. So adaptability, innovating, and, you know, utilizing these, because look, there are timeless principles, right? I talk about that on the Franklin Planner podcast. There are timeless principles of what KPIs to track right down to the daily cash flow. There's timeless principles for conversion and things like this. But innovating new strategies is really the key. So let me ask you this. Do you have, what are, what are a couple of mistakes that you see a lot of people making outside of just not tracking the numbers? What are some mistakes in the current market you feel that you're, you're noticing with your clients? Well, we're doing 90% of the time, George, they're doing the same thing that they were doing before because they're comfortable. They're doing the comfortable thing and they don't have the flexibility to adapt and to be flexible to new things. It's all about that. What's comfortable? They're doing what's comfortable. Yeah. All right. And unfortunately, in business, you have to be a little uncomfortable. Yeah Well you have to be all the time Like honestly I have told people over and over again you know all of your success lies outside your comfort zone And you know it funny because you don generally have your financial guy telling you to get outside your comfort zone You're usually the ones pulling you back into it. I love that you say that. And I wish we had more time. Actually, what I may do is, Michael, might to invite you back to our Academy Mastermind, because we can get into some deep dives. But for people that are listening to this and they're saying, look, I need to make some changes. I want to innovate. I want to be adaptable. What are some ways they can connect with you? What would you recommend? Do you have any ways somebody can connect with you if they'd like to? Yes. They can go to nextstepcfo.net. They can download a free copy of my book, Powerful Business Strategies. They can also, more importantly, business is always changing. And as a result, I'm always updating my book. For example, a year ago, who knew about the, you know, who knew about tariffs? Was that a real popular thing to talk about? Not really. So because business is always changing, I want to make sure my strategies are up to date. And so what I do is what I call a book interview. And if you go to next step CFO forward slash contact, fill out the contact form and in the message section, write the words book interview, the way the book interview works, if it's 60 minutes on Zoom, I present strategies from my book, and then I ask the business owner, I ask them, if a business owner in your industry were to implement this particular strategy that I presented, what would the impact be? And then I document it for the book. And the way it works is we're helping each other because I get information for my book and you get some strategies that your competition isn't doing. Yeah, I love that. What I'll do for those of you listening, I'll put these links in the show notes. But the reason I love that is because it used to be strategies would be buy my book. Now it's like information's out there. You provide your book, they can download the book. Now you're talking about strategies you can do to collaborate and collaboration is the key. Listen, guys, you are the average of the people you surround yourself with. So, you know, I'd encourage you to check this out. I'd encourage you to go to that. I'll put the links in the show notes. Michael, do you have any last piece of advice or recommendation or direction that you would give our audience when it comes to whether it's finances, conversion, or even adaptability? What would be your final kind of advice you'd give our audience? Yeah. What we found when we wrote our book is that there's basically seven steps that you need to tell. I'll quickly go through. Oh, I love it. Yeah. You know the 80-20 rule, George? I'm sure you do. Yeah. So the way we look at the, most business owners look at the 80-20 rule is 80% of their business comes from 20% of their customers. Yeah. How we look at the 80-20 rule is 80% of your business comes from 20% of what you do every day. All right. And that means, and we broke it down into seven steps of what you should be doing every day that represents the 20% of what you do every day that drives 80% of the revenue. By the way, I'm glad you brought this up and take your time because I love this content. So let's go through those seven steps. Okay, great. So the first step is leads. Not just any lead, but you have to constantly generate quality leads. The conversion formula helps with that, obviously. and then conversions into your sales process. And by the way, you have to, here's the other thing business owners don't like to do. They have to track their metrics on this. How many leads are coming in? How many are converting into your sales process? And then the third step is closing rate. You got to know what your closing rates are and how to improve them. So you have first step is leads. Leads. Second, conversions. Third is closing. Fourth is a very neglected area. Retention. Customer retention. Everybody thinks that once they get a customer, by default, they get to keep them. Yeah. And it's much cheaper to keep a customer than get one. So it's a big one. Yeah. That's why it's in there. Right. The fifth is average dollar per sale. You always have to think about how to increase your average ticket. And then also the sixth is frequency of sale. How often can I sell to the same customer? What the customer buys from you, there's a 34% chance to buy something else. And then finally, we have to control our costs, both variable costs and fixed costs. This is where the financial component comes in. So it's leads, conversions, closing rate, client retention, average dollar for sale, frequency of sale, and finally cost. If you focus on those seven areas, you'll drive 80% of your revenue. The metrics. Yeah, the KPIs and metrics. So listen, and I'll add one comment to what he just said, because I'm a big believer and I agree with all of those steps. And if you think of it from this perspective, if you're dealing with business right now and you're trying to find ways to grow or you're stuck or you're whatever, think of these as seven levers you can pull. Because any one of these, just one, look, if you were to increase your leads or you would increase your conversion or your close rate or your retention or your average per head or your profit or your cost, any one of those, a 10% bump could completely change the game for you. So every one of these is levers. Now, don't be overwhelmed. I think the bottom line is, but when you understand this, and I like how you did this, Michael, you talk about key KPIs to track, but you've got the conversion formula, you've got these seven levers and these steps that you can do that drive through to the bottom line. I think it shows there are many, many ways to grow and expand your business. And look, your job as an entrepreneur, I'm just going to say this and you tell me if you agree with it, Michael, your job as an entrepreneur is not to know all this. It's not even to be a master at all of them. But when you know it, you can bring in, whether it's talent, strategies, resources, individuals to help you with them. But if you're unaware that all these seven levers even exist, how are you going to grow your business? So would Would you agree with that? Wholeheartedly. So this is what we're doing today, right? I would say sometimes it's education. Sometimes it's, you know, inspiration, motivation. Today you probably got all three. So I hope if you're listening to this, you will, you know, really take this to heart. And by the way, share the show. You know, we don't sell anything on this show. We do this because we want to be able to help and encourage, but share the episode. And if you can, jump in the show notes, connect with Michael. And Michael, I appreciate you being on the show today, man. This has been very, very informational, but also it's opened up my eyes to like sort of the bridge between the financial and business as well, as I'm sure for some of our listeners. Thank you. Thank you for having me. It was a lot of fun. Yeah, this is great. Okay, guys, listen up. I tell you every time, I'm going to tell you again, it's never too late to start creating that life or the business you want to do, but you've got to take action. You've got to move forward, focus on these levers. You know, hit me up on the Daily Mastermind. Let me know what you're working on, what you're struggling with. Let's celebrate some wins. Hit me up on Facebook, Instagram. Go to the show notes. Let's take it to the next level for you. And I'll look forward to talking with you again more tomorrow. This is George Wright III with Michael Barberita on The Daily Mastermind. Have a great day.
