Rene Schexnaildre, the CEO and founder of Schexnaildre Consulting, which provides part-time CFO services to businesses in a variety of industries, doesn’t typically get called into an organization when it’s running smoothly.
“I’m the repair guy,” he says.
Schexnaildre has leveraged his extensive experience with accounting and operations to help clients across multiple industries achieve repetitive profitability and strong positive cash flow.
“My job now is to take owners and operators and teach them how to operate the financial side of their business,” Schexnaildre says. “There are some things that you need to know, but they’re not really extensive. You need to do about three or four things really well, and you need to do them repetitively over and over again as long as you own and operate that business.”
Schexnaildre recently spoke at a Tech Park Academy event at the Louisiana Technology Park, where he shared a wealth of tactics and strategies that companies can use to become more profitable and financially sound. Read on for an overview of what he shared.
The First Question to Ask
Schexnaildre says business owners need to first ask what they want their business to accomplish financially to meet their goals.
“I think you have to be specific,” he says. “Don’t say, ‘I want a lot’ or ‘I want to be a millionaire.’ You have to identify the specific output that you want that financial machine to generate. If you don’t do that, you’re not going to get what you’re looking for.”
He also says it’s important for business owners to fully commit to their company and its impact on their personal financial success, rather than treating it as something separate from their lives. “I think it’s disastrous for business owners that look at their businesses as separate and apart from themselves,” he says.
The Most Important Number on Your Financial Statement
While metrics such as net income, cash and revenue can be important, Schexnaildre says they should not be the primary focus for any business.
“Your gross profit percentage, properly calculated, is the most important statistic in the world,” he says. “It’s much more important than your net income because if I don’t make it at the gross profit line, I won’t have any net income to worry about.”
He says gross profit margin is a direct reflection of how you price your products or services — and too many companies price incorrectly. Schexnaildre says many people in business mistakenly price using a markup formula that relies on a multiple of the costs to produce a product or service.
“Don’t use markup to price things,” he says. “It’s misleading. It’s very dangerous. The gross profit percentage that you will actually achieve from using a markup percentage is always less.”
Determining Financial Targets
Schexnaildre says once a company learns a few simple formulas and formats and practices them, they will become both intuitive and embedded in your business operation because of the value they provide.
He says that to accurately determine your gross profit percentage, you have to develop the clearest metric of cost-to-goods-sold that is possible. “You cannot understand your cost to provide a product or service too well,” he says. “That’s impossible. If you don’t understand that, you’re going to fail.”
He says by definition, a company’s overhead should not have any significant spikes in it. If it jumps up or drops too low over a month or year, there is some element that should be in the cost of goods sold. “You’re not doing a good job accounting-wise,” he says.
Schexnaildre also says cutting overhead to save a struggling business is not a realistic strategy because the vast majority of money is in the cost of goods sold, not overhead. “That’s where you need to focus your time, your analysis and your energy,” he says. “Please discard the notion that if my business gets into financial trouble I can cut enough overhead expenses to make it work. That’s mathematically impossible.”