I'm Sari Kimbell and I've done just about everything in the food industry. I have helped hundreds of packaged food business entrepreneurs and now I want to help you make your delicious dream a reality. Whether you want to be successful at farmers markets, online, or wholesale on the store shelves, Food Business Success is your secret ingredient. I will show you how to avoid an expensive hobby, and instead run a profitable food business. Now let's jump in. Welcome back everyone to the podcast of this, we are continuing continuing our money series. And I'm really excited to welcome Lorne Noble today. And Lorne is a finance whiz who loves playing with Excel sheets after my own heart. He's spent 12 years in London has a great accent. And as he spent 12 years in London as an investment analyst before making the jump to Boulder, Colorado. He acts as a finance mentor to high impact companies and ultimately, co founding Simple Startup. And simple startup helps entrepreneurs to simplify their finances, truly understand their numbers, and make smart informed business decisions. So welcome, Lorne, I'm really grateful for you to be here. You're gonna have so much great stuff for for the listeners.
Lorne Noble 1:28
Great. Well, sorry. Thank you very much for having me. It's a pleasure to be here.
Yeah. So um, we were just talking about Simple Startup. So just very quickly, like, you know, I explained who my listeners are, but what level of businesses do you serve in Simple Startup?
Lorne Noble 1:48
Yeah, absolutely. So I think quickly, just going to give an idea of Simple Startup, we have three core pillars to our business. And so we have tax support, tax filing support, which everyone's going through right now, one of those things is death, death and taxes, the only two certainties in life, right. And then we have finance supports are helping helping clients look forward with their numbers and accounting support, which is really collection and organization of the past. Those are our three core pillars. And we really help companies that are eating a growth stage trying to grow their businesses. But once they've released and validated their product, once they kind of got a proof of market, product, market fit, etc. And maybe they're doing, you know, anything's of 100,000 or so in annual revenues, we support them all the way through to 10 million plus in annual revenues when they start taking a lot of their accounting, finance and tax support in house.
Yeah, perfect. You are definitely the right person for this episode. So let's jump in. We have so many great topics I want to talk about. But let's just talk kind of that general startup financial strategy. So important. Money's not the easiest thing for people to talk about. And you know, a lot of people are very idealistic, very passionate about their product, but now we got to deal with money, finances, being a real business. So what are some tips you have for building a sustainable business model? And and going forward in that?
Lorne Noble 3:13
Yeah, great question. And it's a difficult one to answer because I mean, everyone has a slightly different opinion. But for me, I think it comes down to simple economics, and everyone's gonna gasp or do you mean economics? I don't like economics. Don't answer a question with an answer, you know, with economics in it. But basically speaking, it all comes down to supply and demand, right. So every business has supply, and every business has demand. And and that's really the core of every business. So supply is not without its complexities and challenges. But usually demand is the harder one to predict. And so for, like for a company starting out, demand is really hard. So the ethos of what I'm trying to say here is, don't build a product that nobody wants to buy. Don't create a product that nobody wants to buy. The biggest issue with small businesses in my experience is that they think, because they're passionate about their own problem and solution that many, many others will be. So my conclusion to this would be like, focus on the problem specific, not product specific. So if you focus on the problem, the better solution will appear. If you focus on the solution, you'll likely never get the buy in that you're looking for. And then the final dynamic that I would add there is the customer centric. So problem specific and customer centric. That's what I believe creates a really good sustainable business model.
I love that. I mean, I thought we're gonna talk about money, but we're talking about like, I mean, we're talking about validating your problem not being so locked into your one product, but really like what is the market need? How can I best serve and show up with the best product and being willing to use that, you know, somewhat overused term of pivoting right and like how can I cause certainly be serving my clients the best?
Lorne Noble 5:03
Yeah, I would say constantly innovating.
Yeah. I love that. Okay, so what? What do what misconceptions about finances do? Do people in early stage startups have when they get going?
Lorne Noble 5:18
So I think it's very similar to that previous, previous in the question that the answer I was giving was, the misconceptions that I find that they have is, you know, the build it and they will come. And and yeah, that's just evidence and what I was saying earlier is like, that's, that's usually the problem. And the misconceptions also is that, I will be able to build my business and support all of the costs that that business may need. And usually what happens is that people predict project, more income, and under project the expense. And so and so the reality is, you know, then you have this struggling to the cash flow scenarios. So always ensure that when you look at trying to build and forecast your business and suggest that this is a great business model to, to create, really try and focus in on the numbers. The passion behind the product is always there for every entrepreneur, but from my perspective, ensure that that's grounded on a good understanding of the numbers and how many products you have to sell to actually breakeven.
Right. I couldn't agree more. I mean, I work with people in Food Business Success, as well as their cost of goods sold, doing some initial like, how much is this actually going to cost me to get started? And then of course, some forecasting, which, you know, like you said, we typically overestimate how much revenue, underestimate how much it's going to cost, that supply and demand piece. But I guess, maybe just explain what what is a financial model? Like, let's just go way, way back to the like, because a lot of my folks don't have any business experience whatsoever, like they've never been an entrepreneur.
Lorne Noble 7:06
Yeah, so to me, a financial model is actually quite simple. It scared the term scares a lot of people. But really all it is, is your best guess, of what's going to happen tomorrow. And trying to put some numbers to those best guesses. So a financial model- and that's really what it is at its core- but the financial model, as you start to build it out, you suddenly realize that it is purely assumptions based on assumptions based on assumptions. Right. And the only way to know if those assumptions are true, and or valid, is to actually get out there into the marketplace and experiment in real time. So the expression, I believe, from the book, what it was it called, The SIM, the lean startup, I think it's called, is great as the whole validation loop of getting out of the building, to validate or perhaps invalidate the assumptions that you've created in your financial projections. And that is the goal. Once you create these projections, the goal is to go out there and to prove them right, or prove them wrong. Neither is better or worse than each other. You're getting out there improving it quickly. And what does that allow you to do that allows you to modify your business, optimize your business, and then better meet the needs of your customers.
Yeah, take action and fail quickly. Fail fast, right?
Lorne Noble 8:35
That way, you can go back and tweak and reorganize. I either get people who like head in the sand, like do not want to talk about money, like I kind of penciled it out on paper and it works. Or they like over indulge, but they don't take action. Right. And so you need a little both.
Lorne Noble 8:57
Exactly, it's a blend and depending on the stage of the business, there will be a different blend as well based on the needs of the business and the the complexity of the business and therefore the sophistication of the accounting and or finances required.
All right. Wow. That's a great segue. Let's get into accounting What, yeah. The real nitty gritty, the least sexy part, you know, business but the most required. So how can people set up a great accounting foundation? I have people that either just work in spreadsheets, or maybe don't do anything at all, or, you know, try their hand at QuickBooks. But pretty novice. So where do they where do people start? Where do you recommend.
Lorne Noble 9:46
Great, great question. Well, I think always start that's the point. Don't bury your head in the sand like something is better than nothing. And and so I think the real kind of answer to this question is like the why behind sound accounting foundations and why that's that sort of integral to kind of achieving sustainable growth. So, you know, Simple Startup, we we truly believe that the role of numbers in your business is like the core component to making better management decisions. And so the reality is you cannot make these decisions without organizing your numbers again, in some way, something is better than nothing. So organize your numbers in some way. And that is what accounting is at its core. So if you're super, super early stage, that could just be the case of keeping a track of something on an Excel spreadsheet. However, a more sophisticated and accompany and an entrepreneur and a leader who's wanting to grow that business will use an accounting system to help them collect and organize all of those accounting records, and I highly encourage is not super expensive. With cloud computing these days. You've got companies like Zero and QuickBooks, all of them, you know, okay, yes, and maybe $50 to $100 a month or so it's not super expensive, but it does become the place upon which you can collect your accounting records, you can report out of, and you could actually make better management decisions.
Yeah, 100%. I mean, between doing cash flow, and then weekly, you know, transaction reconciliation, like that's how we make better decisions. That's how we decide when we can buy that packaging, when we should do that launch, when we should make that run through the co-packer. And when we don't use those numbers, we're really setting ourselves up for it, it's just kind of this nebulous thing. And we feel really, I think it leads to just feeling really out of control. And
Lorne Noble 11:49
Absolutely, absolutely. And so like, to that point is not only as of the organization of your records, but it it helps to relieve anxiety, because you know that it's there's an element of control there. And so like accounting, and I also hasten to add that good quality accounting is, is the foundation upon which you can see trends. You can analyze deficiencies, you can spot problems, and hence you can grow your business and the the age old expression is that numbers don't lie.
Yeah. I like to say, let's, let's take the drama out of it. And just numbers are math, right? They give you information, they give you data, and then we can make decisions. But I think we wrap up a lot of drama into our into those numbers. But let's take a drama out. So what is the difference from between bookkeeping, and accounting? And are there ones that you should outsource versus in? You know, keep in house? Or how do you recommend people set that up?
Lorne Noble 12:51
Yeah, and it's a, it's a great question. And so very, very quick answer is yes, there is a large difference between bookkeeping and accounting, in my opinion. To do accounting, clearly, there needs to be bookkeeping performed. But the difference between bookkeeping and accounting is quite large. So for me, a bookkeeper keeps the simplistic records in a general ledger on your of your financial tractions transactions. And, and it is often without the support of an accountant. An accountant in theory as a higher level, more sophisticated person with deeper level of knowledge and understanding. So, so basically, what is bookkeeping, it is the art, or the act of recording and classifying those transactions through what's called like, double entry kind of accounting, and provides information from which those accounts are prepared. The difference between that and accountants or bookkeepers and accountants is really the accountants are bookkeepers on steroids. So they apply a wider, more sophisticated concept to the simple components of bookkeeping. So they understand the correct rules, the regulations of accounting, you know, think about how your financial information is tied to your taxes and viewed by your investors and or your auditors, for instance, especially as you grow as an organization. So accountants better understand that the importance of workflows, consistency and reporting, creating a level of predictability, financial security, all of those sorts of things is where an accountant brings more skill set and understanding versus a bookkeeper.
Okay. And do you recommend like can a, can a business kind of keep their bookkeeping up like on a consistent basis and then use an accountant or do you recommend kind of both having both?
Lorne Noble 14:47
Yes, and I think, to to come on to the question is all of this really depends at what stage of business that you're at. So as you're starting out, and you're kind of hustling and you're ultimately trying to prove a product market fit you don't need to have a an a CPA overseeing very few transactions. And so don't take it all kind of it with a bit of relativity. At the beginning stages, you just want someone to be keeping a track of things in your accounting records. And there's not a lot of data maybe at that beginning stage, right. So from that beginning stage, all you really need is, is when you come around to kind of tax season, it's ready for tax purposes. But when you start to actually have a little bit more data there, and you start to see that there are transactions, you start to see patterns in your data, you start to see the ability of extracting gross margins, which is how efficient are you at delivering sales, that at that point, that's when you want to move the sophistication of your accounting and finance support into someone who can really help to organize your data in the right way, and then also help you interpret what it's saying.
Okay, so I'm going to ask you some kind of nitty gritty like, questions that I've definitely been getting. Well, things I keep seeing with clients. So first of all, is Do you have any tips for just kind of general setup, like let's say you get QuickBooks, and you've never really used an accounting tool? Now, one thing I want to keep in mind is that we're talking about a, you know, product based business. And we're not talking about t shirts, we're talking about generally, like self manufacturing. So we own all of the cost of goods, both from a individual ingredient packaging standpoint, and then they get all put into a product. Right? That's, that then sits in inventory. So I know, I get questions about like, should I use the inventory function in QuickBooks? Or just like, generally? How do I categorize things, so I don't know, if you can give us just kind of a highlight, we're not gonna get super into the weeds, but like, a high level, high level, like tips for setting up your books when you're first starting.
Lorne Noble 16:57
Yeah, and I think these, it's always painful to try and unpick something that hasn't been done right from the start. And it can become more more costly to do so. So I always say, Get get great advice and support from someone who knows what they're doing. And inventory and inventory management and inventory accounting is a complicated procedure to make sure that you're showing what should be on your balance sheet versus what should be on your income stream. But to answer your question, top tips. So you're a product company. And the assumption here is that you are not co-packing and you're not just ultimately buying your finished product from your co-packer. So So therefore, you have gone into this business, and you're actually manufacturing your products. And that's great. Now, I'm trying to bear in mind that there's, for a young company that's in their kitchen, producing their own their own food product and selling it at a local food market. There's a piece of there's top tips for that, then I'll give a top tip to someone who's a bit more advanced. Okay, so but someone there, what you want to be doing is to be collecting and understanding clearly of all of the ingredients, the ingredients costs, the amount of waste that may be going, in other words, hey, I do a production run in my kitchen, I bought $100 of this, $200 of this, $500 of this, and I do my production run. So I know my hard costs. There's a lot of soft costs that gets forget to be added to those hard costs. Such as what are the electricity, because going through my kitchen is going to go into the production of this particular product run? What is what is the time that I am taking as an owner to go into this? And take take market based salaries like if I was to employ someone else, what would it cost to get them here on an hourly basis to produce this production run? And could they do it with the same quality? So you're trying to add in all of these costs. And so what you're very, very simple mathematics is to say, what are all those costs, and how many products am I able to make? How much waste is there how much how many products I'm able to make, that becomes your ultimately standard cost for the products that you are going to go and sell for the hard costs and don't forget to capture a lot of those soft costs. Okay. And so when you have that knowledge, then what you can do when in your accounting records, what's going to happen is that all of that should get booked by a bookkeeper or an accountant into inventory on your balance sheet. Okay, all of those costs go into your balance sheet as inventory. Then the ideal is when you make the sale, you move that cost from inventory into cost of goods sold. And so a bookkeeper or an accountant is gonna know how to do that. And some systems do that process for you like QuickBooks. They have this integrated, sort of inventory system. And they would then when you make a sale, they're saying, where is this coming from? And it automatically moves it from your inventory into cost of goods sold. The challenge though now, I'm segwaying, into a slightly larger company. And the challenge here is that if you want good inventory systems, you ultimately have to pay quite a lot of money for it. And the challenges for young companies in this industry is, there's not usually the budget for that type of inventory system. Yeah. And so what we find for younger companies is we help support our younger companies with our own backup schedules that allow us to do what I just described, and to arrive at a standard cost. And that allows us to then move and help them move inventory into cost of goods sold. Yeah. So that's, that's high level. And I know that I'm getting more detailed than we need to, but that's roughly speaking out.
I think it's Yeah, that's the big challenge. Well, I think that piece is what I see is one of the big challenges, things not getting set up correctly. The moving around, like between a balance sheet, and then your you know, profit and loss statement, that inventory that we're just holding. And then I think what I often see is like the tangled mess of what, what they've tried to, you know, they've tried to figure it out and then untangling it. And I always say like, I am not an accountant. I'm not a bookkeeper, I know QuickBooks enough to be dangerous. And, you know, I always say like, you gotta go get somebody to help you untangle this, but we need clean numbers, right? Like, it's really important to have.
Lorne Noble 21:41
Exactly, you need clean numbers, because that key number, those key numbers is the foundation in my opinion of your business. And without an understanding of the numbers without an understanding of your margins on a per product basis, you really don't know which ones you should be focusing on to build your business. And really, that is like, you know, driving a car blind, and we all know how that's going to end up.
Well, and we have this great tool, but then it's not getting used. And then because they're like, yeah, it's not correct, there's been double entry or like, I have stuff from three years ago, that still sitting on books and, and it's like, you're paying money for this tool that can be super valuable, but we can't, we can't even use it. So we'll talk more about how you can help people get set up. But I think getting help getting set up correctly as an investment well worth making, if you're going to, like, really take this to be a bigger business beyond a hobby.
Lorne Noble 22:38
Absolutely. And one of the things that that I have noticed in the years of supporting young companies is the the the leaders and the business owners, or serial entrepreneurs clearly are the best people to work with, because they've been through it all. But the first time entrepreneurs, those that understand the extent of their abilities, and know therefore where there are gaps in knowledge are, are the ones who go out to seek the best possible support to fill their lacks in lacking knowledge and understanding. And those are the ones who usually are most successful.
Yep 100%. They go and find people like me and by people like you to help fill in those those knowledge gaps. So Exactly. Yeah. All right. Well, let's segue into just overall like financial health, health and habits. I've been talking a lot about rituals and and those piece those things that we do in our business weekly or daily to set us up for success. Whether that be things like, you know, journal writing or going to bed earlier, but rituals that, you know, filling our brains with great positivity, and then we got to deal with money. And that's definitely a ritual in itself. But, you know, successful business owners need to make part of their, their daily weekly habit. So tell us about common challenges and pitfalls that you see people making falling into around financial health?
Lorne Noble 24:15
Yeah, I think when I say the the most important area for me there, I think, is that you've got to the most common challenges is, you're the owner of your own business. Now, there are common common standards in terms of creation of appropriate financial management, but you're ultimately the owner of your own business, and so it's got to work for you. So what I mean by that is, there's no point in hiring someone to put in place these fantastic routine and regimen if you don't understand it. So the first piece I'd say there is you have to make sure that whatever you adopt as a regimen and routine that you understand that this is most important, if you don't understand that, you'll never use it, you'll never believe it. And you'll likely never make good decisions from it. So that's kind of the one thing is make it super easy for you to understand you are the owner of your business, you get to make these decisions. Now, if you're hearing people say things over and over again to you, and the same things, then it's probably a good idea to listen. There's something called mentor whiplash that we experienced and entrepreneurs will experience where one one mentor will say one thing another mentor will say something else like, Hey, who do I listen to? All I would say all I would say what I mentor companies is that what I could tell you is complete and utter crap. Right, because you know your business better than I do. However, if you start hearing other people saying the same thing as I do, then you may want to be listening, you may want to listen. So in terms of the structure, the routine in the accountability, I would say like building an exercise plan, right. So you know how many people have started an exercise plan and only given up on it shortly after? Right? The chances are that you haven't implemented the correct structure, routine and accountability. So when you are on an exercise plan, you know, you take a picture of yourself at the beginning, you take subsequent pictures of yourself each month, no sooner no later, because then you can see the progress you're making. And that progress allow gives you the incentive to continue and carry on. So the same thing applies, in my view, with a financial plan. And so here would be my recommendations to anyone building a financial plan for routine structure, and accountability. So first of all, build a budget. If you don't know where you go, if you don't know where you've been, it's difficult to know where you're going. If you don't know where you're going, you'll never get there. So build the budget for the year ahead. Again, start simple, it doesn't have to be complex, just make it appropriate for you and that you understand. So from from that, that kind of one month plan is going to tell you what the financial or the plan are going to tell you what the financial year ahead looks like for you. Then I would say, take that first three months of this budget, don't just throw that budget in the bin and say I've done my plan and we're done. You know, I'm done.
Put it up on the shelf.
Yep, put it up on the shelf and forget about it. Take those first three months of that budget, and track your results against that budget. What do we say we were going to do? How are we performed about what we said we're going to do? While we're up here, we're down here, why we are why we done. And so that process is called what's like a bunch of review, a budget versus actuals, or a variance analysis. Okay, so they're all pretty much saying the same thing. But that's what they mean. And the objective here is not to point fingers, but to learn. Learn about your business, modify your business, if you need to pivot pivot if you need to optimize, optimize. So what you learn in that first month, what you learn in the second month, and what you learn on the third month, will tell you a good trend of what's happening in your business. And then at the end of that first quarter, sit down, look at your budget and say Do we need to reforecast? Have we learned something that over these three months that has resulted in us re forecasting our income, or reforecasting our expenses? We've learned something new about our product development, and maybe there are additional costs. And so that is a great process to do each quarter, a great financial plan to carry out each quarter. And it's relatively simple to do. But it just allows you to then reforecast and change your assumptions at the end of each quarter. And that creates this cadence of an annual plan, tracking that plan against actuals each month, and then reforecasting each quarter based on what you're learning. And as Peter Drucker with everyone knows Peter Drucker but as Peter Drucker Drucker puts it, what gets measured, gets managed.
Yep. Yeah, cuz I think a lot of people are like, okay, even if they if they do a budget, they're like, yep, done. And then they just do whatever they want. And then
Lorne Noble 29:14
All the good, all the good work has gone to waste. It's hard.
But this doesn't have to take I think sometimes we hear like a budget reconciliation or, you know, checking in and we're like, oh, my gosh, this is hours and hours. I mean, I like to say, you know, same thing with cash flow, like, every Monday, you're gonna look at your cash flow for 30 minutes. Like if you stay up on it, it doesn't take that long. Would you say the same about what you're talking about there?
Lorne Noble 29:43
Absolutely. And so, for a lot of our clients at Simple Startup, we have a cash management services, for instance, and each week, we would sit down, we do this ourselves, we would sit down with our clients, and update our cash management forecast. And so what's really important especially for young companies without a lot of predictability, you can you can use that cash management, we do have an academy as well, where cash management is one of our academies. So if anyone wants to have a look at our website, look at our academy, we have cash management is one of these items. And that follows a weekly regimen. 30 minutes each week, sit down, updat it, pull some reports from QuickBooks and say, when are we going to get money from this customer? When are we going to pay this particular bill? Who Have we got on payroll? What are our recurring expenses, what's our recurring income, etc. And what does the next 90 days of cash look like? And so that, that that routine is great, because it gives you a gives you time to take action. If you're seeing a trend in your cash flow going in a certain direction, it gives you time to raise capital, it gives you time to go to the bank and ask for loan, it gives you time to change your expenses and or chase on customers for collection of cash.
Yeah, and maybe it's you know, even if you're doing farmers markets or something, it's like, let me go find another market to do or or let me reprice my product, or I mean, it just gives you so much more information at every stage to make decisions, like we talked about. So can you give us some examples of businesses CPG brands, learning from from these financial models and making decisions or making no pivots? So can you share some examples of how a CPG business might learn from building and using a financial model? In the real world?
Lorne Noble 31:37
Yeah, in the real world? It's a great question. And we built many, many, many financial models from very, very basic ones all the way through to advanced financial models. What I'd say is, the more advanced the financial model, the more features and functionality, you have to play with it. So I'm gonna give an example here where we've worked with clients who, who built their own financial model. And what they realized at the end of that is a great, this is my vision, this is what I think I can do an income is what I think is going to happen with expenses. And I'm building the company tomorrow today. So ultimately, I need cash flow in this business. And so they Hey, I've worked out that I need a million dollars. And they go out, and they then try and raise a million dollars from equity investors to help them achieve that vision. The reality is that most of those companies that do that, don't need to. So with a good financial model, and with a good person supporting you, they can say do you actually need a million dollars? Or are there things that we can do to change your business model, that will have a significant impact on cash, and mean that you don't need to raise as much? And if you don't need to raise as much, you can spend less time going and, you know, brushing shoulders with investors, and you can spend more time building your business. And as a result, there will be less dilution in your business, there'll be more ownership in your company for yourself.
Yeah, you're not giving away as much.
Lorne Noble 33:10
Exactly, you're not giving away as much. And so really, what we do with many, many of our clients is to say ask that question, is there anything we can do for your business model before we just go inadvertently go out and try and you know, raise investor capital with you? And so what we've seen there is that company that was looking to raise approximately a million dollars, we actually found out that if we were to change some of their vendor terms and change some of their customer terms, where, where they are not out of money so much. And if we were to go in and actually say, well, maybe we should finance some of your receivables. So what does that mean? That means filling some of your invoices. And maybe we should also try and get some vendor financing from your suppliers, for instance, or change the terms with your supplier. Yeah, all of those conversations resulted in this company not needing a million dollars, but actually needing close to a quarter of a million dollars. And so without without that level of understanding and changing some of their business model, they would have gone out raise investor money, which is very expensive, by the way, because investors will ultimately price their money at 30% per annum sort of things. It's more expensive than a credit card. If your company is doing well. Clearly, if your company doesn't do well, it's very cheap, but but it is expensive capital. So you always, always think about that. And then make sure that you are financing your company in the right way, based on the circumstances in your company.
Yeah. Well in a financial model, I mean, it is a gas I mean, it's our best educated guess but then you can you can take one model and save it and then start a new one and say, Okay, well what if we added this new sales channel or we added a farmers market? Well, there's costs involved with the upfront Cost with that market. But then what does that look like? And again, we got to test it and then come back and measure it. Because these are all just guesses.
Lorne Noble 35:10
Yeah, absolutely. And that, and that is we were talking about this earlier, where we were mentioning that the power is going out to validate or invalidate your assumptions. We all know that these assumptions are our best guesses. And that shouldn't stop you from making an assumption. We know that it could be right and it could be wrong and a lot of people, entrepreneurs are usually a little more confident. But generally speaking, a lot of people are afraid of being wrong. And that is a hugely debilitating kind of like, mindset to get into, and that will hinder your growth. So don't be afraid of being wrong. Right? You will always be wrong in your entrepreneurial journey to some degree or another. All that we're saying that you should be trying to implement is learn when you were not correct. And learn what therefore may be a more correct next assumption.
Yeah. Jim Collins talks about the cannon versus the bullet effect. So go and test in little ways, right? Shoot the the one bullet and shoot another bullet into another bullet before you watch the big cannon. If you only have a limited amount of firepower, limited amount of cash, right? Yep, go and test in a small way. And then you know where to put the big, the big push at. But it's great.
Lorne Noble 36:35
Yeah. And I would say that there's, there's ultimately, something very inspiring about young entrepreneurs, because they get out there and they hustle. And they can do so many things that a an incumbent cannot, they can move much faster. They are the nimble Gazelle, where you can go off the line. And I think the analogy is, look, no matter whether you're this large incumbents, and you're this big company, you're the you're the lion on the African plains, for instance, versus the gazelle, right, both when the gazelle gets up in the morning, and it has to run faster than the lion. The lion gets up in the morning, and it has to run as fast as if not faster than the gazelle. Either. If neither of them do that, one of them will die. Yes. Or both of them will die rather.
So um, what about fire? I guess where do people? At what point do you recommend starting to raise money or versus like being self funded for as long as possible? Is there kind of a magic number? Is it really just based on the unique business model?
Lorne Noble 37:40
Yeah, and I think is always very unique. But I think the one defining factor is, are we going to run out of capital? And is our plan again, making sure that everyone has a plan? Does that plan mean that we need to raise capital? And so when do you need to raise it? Ultimately, that plan is helping to inform an answer to that question. Your cash management that you do on a weekly basis is helping to inform an answer to that question. The the the core thing here, though, is how long does it take to raise capital? So if you can see that your projection is saying you're going to be out of capital in three months, is three months actually enough to raise capital? And again, that's somewhat dependent on what's you know how much you're trying to raise? Sorry, and from who. But let's say that you're saying I need to raise half a million dollars in three months, the chances are slim of you receiving all of those investor checks then. So the one defining factor clearly is what your cash forecast and your is suggesting. And the other one is competitive landscape. And if you're doing something that is significant, and has a first mover advantage, for instance, you could continue to actually be operating profitably as a small business delivering on this, however, is there a greater opportunity out there for you as a firm? is there is there a Is there a potential competitor landscape arriving you first to market here and if you're first to market, there is a potentially greater need for you to raise capital sooner that you can generate market share before others come in and steal that market share?
Yeah. And that's really where you need that, that guide and mentor who understands I mean, you work in the CPG industry, I work in the CPG industry, like because we can we know some of those things that to anticipate. I mean, I have people come to me and say I'm gonna, you know, I'm going to create this product, I'm going to be in Walmart or you know, national Kroger in in three months. So let me give you a taste of like the truth, right. And so I'm sure you you've seen you see these things All the time. And so you have a lot more perspective than people just in their first business. Right?
Lorne Noble 40:07
Exactly. And I and I would say, again, a lot of this comes back to having a financial plan, because the timeframe is part of that financial plan, getting advice from people who've been through it a number of times, you can say, oh, that assumption feels really off. Yeah, I don't think that that's going to be possible. Those are great pieces of feedback to modify and improve your financial plan again, before you go out and raise capital, with with with someone who's then going to say, I'm not going to give you money, because you clearly don't understand. So gain, gain as much networking, right? speak to people in the industry. It's amazing. You know, in Colorado, and across the startup community as a whole, how many people are willing to just impart their knowledge and help support you in your journey? So if you don't ask you don't get?
Yeah, 100% we're, you know, we're very fortunate to have so many great organizations, but there are great organizations all over the country that help you. Yeah, find those other connections, people building a community is super important. Well, before you need money.
Lorne Noble 41:09
Yes, yes. To that point, sorry. Just to add one other thing, I think the court investors, I would always say, you know, it's a normal, again, all depends. But you should never assume that you're going to get received any capital within six months, right? Never just as a rule of thumb, never assume that you'll receive investor checks within that six months, especially if you haven't nurtured those relationships. So that's the point here is, if you do plan as an organization, and as an individual to be raising investor capital, that at some point in the future, start those relationships now. You know, have those conversations. Now, there's nothing wrong with reaching out to potential investors in the CPG space, who support companies or they'll say, Hey, thanks for thanks for communicating with me, you're super early for me. And we're not interested in you at your size at the moment. But thanks for reaching out, do keep us updated. That is the prime opportunity for you to then say wonderful, would you mind if I keep you updated on my regular like, quarterly kind of updates, and then and then we can get to keep the relationship building. That is the relationship building. So when UK comes time to actually raise that capital, you know, this person, they know you, you've delivered on what you've promised. And, and the process of the due diligence is just so much easier.
Yeah. And, you know, I always describe getting into this world of CPG as a stair step. Versus like, you know, I know in startup world, there's kind of the valley of death, and then it rises up. But it's like one nice, linear graph. But I feel like in the food industry, it's more like a stair step where we can start really small, like at a farmers market, cottage food even, and the investments really pretty small, you know, I say 500 to $1,000, even get in that space, but then you're in every time you scale up and you want to grow and you want to get more efficient, and you want to go into new markets, you have to keep going up and doing another stair step. And then you go through the same process again. And with each process is longer and longer, right? There is no overnight, half a million dollars, like you said, maybe you can get a friends and family loan for a couple 1000 or something, you know, raise some smaller money when you're on the lower rung of things. But that's where you want to really have good financial, sustainability and health at the very beginning to make your life easier as you go through that.
Lorne Noble 43:41
Yeah, and all of that comes down to visibility, visibility and transparency. Because from there, you can then own the numbers, rather than the numbers owning you.
Ah, that's really good. Great, quote. Big that's so important. Because it takes away all that anxiety and feeling like you're at the mercy of these numbers, instead saying, No, I'm making choices based on the data and I'm owning my numbers. So good. Okay, well, how I would love for you to tell us a little bit more about simple startup. And I know you have a great course we're gonna put all the links in the show notes, but do you help people with some of the setup like what is your financial modeling course all about and what you offer?
Lorne Noble 44:28
Yeah, the core, the core of our academy offering here at simple startup is, is to take our learning and apply that into a self paced course. And the reason behind that is I was I suppose, yeah, I would say that I was disgusted at the fact that only those that could afford a good CFO could gather good advice. Yeah. And that really just disgusted me like that. doesn't help our young companies grow and create great products that we're going to need tomorrow. So that's the ethos behind our academy. And so we've taken all of our CFO knowledge. And we've distilled that down into consumer packaged goods, specific financial modeling and plans. And we have a five module course. And it's called our fill in the blanks, consumer packaged goods specific industry course. And this will take you through over five weeks drip feeding information to over five weeks, you don't feel overwhelmed how to look at a financial model, given you the tool to use that I described earlier to say, you may not need a million dollars, actually, you only need 250,000. So given the ability to change these assumptions on the fly, and we take you through that course, looking at the income statements, looking at how you're driving revenue, looking at how the costs are associated to that revenue, the type of team that you need to actually deliver on that, on that particular plan. Looking at the balance sheet, and the balance sheet, often forgotten. We talked about inventory earlier today, the balance sheet is often forgotten that the balance sheet, and the profit and loss, both drive cash flow, and cash is what's super important for your business. So this model will take you through this entire five step process, five week process to truly understand your business. And I would close to say that anyone raising investor capital, like there's this rubber stamp of I need a financial model. And so people generally like that's their trigger for going out and doing this, I need this rubber stamp alone on it is part of this process, etc. But what they fail to realize, in advance of coming on this course. And what they realized shortly afterwards, is that it's not the financial model. That is the important thing. It's the evolution and process of your learning through developing that financial model that makes you a better leader.
Yep. It's, it's the journey, right? It's not it's like who you're becoming, you're becoming the business owner that knows their finance numbers that knows their, the ins and outs of their business. So I love that it's not just what you get at the end, but it's the process and the evolution along the way. That's great. So we have the The link will be in the show notes. And then you've been very generous. And there's a 10% off code, success 2021. We'll put that down there too. But I was actually just on it this morning, I was peeking around. And I mean, for the price. It's amazing because you get some time with you, right or your your group as well. So you can actually like ask, like, check your assumptions and ask these questions. Because your point earlier about like, you're just in the silo in a vacuum, and you don't understand why you're doing something, it's not going to, you're not going to make a habit out of it. It's not going to live on.
Lorne Noble 48:17
Yeah, absolutely. Sorry. Thank you for bringing that up. It's not just a self-paced online course, we don't want to leave you there. The reality is people who sign up for online courses, stop halfway through or even don't even get halfway through. Our goal is to help support you live through this five week course. And so each week, we sit down with you and with others going to going through the course and we have a q&a session. And those that q&a can can be specific on Hey, I'm learning about this particular module, how do I apply this concept to the model, right? Because you need to make it relevant for everyone. And it needs to be able to apply your business to this tool. If you don't can't apply it, you won't use the tool. So we want to make sure that we can help support you with that application. But also answer any questions of anxiety that you may have. I'm struggling on this section, or actually, I've got an investor meeting coming up and like, Am I ready to present this? Yeah, or what's what's going on here, like so we help answer all of those questions. And our core goal here I said at the beginning of this thing is to help you make better management decisions from great financial data. And if we want to empower you, empower you to have those phenomenal investor meetings, empower you to know your business inside out, and therefore empower you to drive your business to great success.
I love it. I love that you guys created that course and what you're doing what you're doing. I mean, that's the same how I structure food business success is like, I've taken plenty of online courses and never finished them. And then I was like, you got to have that one on one time or group time of talking with somebody that's what's going to help keep you moving and making sure you get questions answered. So I love that you created that. It's certainly I mean, you know, when we talk about hiring a CFO, or even just a fractional CFO, where you're just bringing in somebody for a couple hours a month or a week, it's much more expensive then then, of course, like this. And you know, when people just want to be like, I'll just have somebody else do all of it, I really do want them to learn it first. And then if they want to hand it off to a bookkeeper or staff, but like you, as the business owner really need to know this before you hand it off.
Lorne Noble 50:29
Exactly. I think that I mean, you can be a business leader that doesn't know it, but that doesn't say much for the probability of your success. Yeah. So I highly encourage like, and we, and we're very interested in our approach as well. No, no, no, there's no such thing as a stupid question. Yeah. anyone has a question that burning desire to ask something, we create a very safe environment upon which you can ask those questions. You know, especially as well, like, if there's a question that you don't feel, you can ask on the on the forum wall that we have, as well, we have a forum throughout the week that our CFOs respond to, we have the we have the end of the week, kind of CFO kind of live. But again, if there's a question that like, Hey, I don't feel comfortable asking this because I feel like I should know it, but I don't, I'm embarrassed. There's also other opportunities upon which we can ask that and then we can just bring it back to the group. This is where the value is, we bring it back to the group and in a sort of an anonymized, confidential manner. And but because if you're asking the question, the reality is eight out of 10 people have got the same question.
Yeah. So good. And you guys are on Facebook, Instagram, LinkedIn, of course, you go to your website, we'll put all of those links in the show notes. So what what's kind of your parting words of wisdom? Like, what's that last nugget?
Lorne Noble 51:54
I'm going to be very, very honest with you that the first thing that came to my mind was a warren Miller quote. And I think Warren Miller quoted this, as opposed to he didn't see this in someone else. Were we sure we all steal each other's quotes. But his his point was, if you don't do it this year, you'll be one year older when you do.
I love it. Start now. That's the that's the takeaway. Start start with those spreadsheets. start somewhere, but just start.
Lorne Noble 52:20
Alright. Well, thank you so much, Lauren, for joining me today. This is going to be so helpful. And all of the links you need are down below in the show notes to go check out Simple Startup and the Food Business Success Cashflow course, as well. So thank you for doing what you're doing. And thank you for joining me.
Lorne Noble 52:38
Thank you for having me.
Oh, my gosh, that was so good. What other questions you have about your setup some of these basic functions of running a business where your profit and your money and your cost of goods sold is concerned. Head over to the private Facebook group and leave me your questions and I will get Lorne in there to answer them for you. I'd love to know where you're getting stuck. And until next time, have an amazing week.
Are you ready to start that delicious idea that you make in your home kitchen, or grow your existing packaged food business and take it to the next level? The most successful food business entrepreneurs have support, guidance, focus and accountability to help them make it happen quickly without wasting time or money. Plus, I think starting your packaged food business should actually be fun. Food Business Success is your secret ingredient to creating your food business dream. Please don't go this alone. Check out the private free Food Business Success Facebook group to connect with other foodprenuers, get your questions answered quickly, share your wins and receive special training and tools I only share inside the private community. Just search for Food Business Success on Facebook, or get the link in the show notes. Curious about how Food Business Success can help you? Head over to Foodbizsuccess.com and fill out the application to see if you're a great fit for the program. Together let's make your food business dream a reality.
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