Intro
Hey and welcome to the Wine After Work podcast, bringing you the perfect balance between unwinding from a hectic day and exploring the captivating world of careers and entrepreneurship. Hosted by Bryce Watts, co-CEO of Career Collective, a seven-figure AEC recruiting and coaching firm here to share exciting stories, expert tips, and intriguing conversations with industry professionals. So grab your favorite glass, kick back, and join us on this delightful journey. We’re glad you’re here. Cheers.

Bryce (host):
Kathy Svetina helps small businesses with $3 million plus in annual revenue build financially healthy and sustainable businesses. She’s the founder of NewCastle Finance, a company offering fractional CFO services to growing small businesses, and the host of the “Help! My Business is Growing” podcast. For nearly 14 years, she did senior-level Financial Planning and Analysis for Fortune 500 companies. She saw firsthand how big companies use financial information to drive their business forward, and she shows small businesses how they can use the same strategies to create thriving businesses. I had a lovely conversation with Kathy. If you are a business owner or know someone who is, I think this will be a really informational podcast episode for you. I hope you enjoy it and share it with a friend. Thanks. Hey, Kathy, welcome to the Wine After Work podcast.

Kathy (guest):
Thanks so much for having me on, Bryce. Super excited to be here.

Bryce (host):
Yeah, same. So excited to get to know you better and for our listeners to hear your story. You started off in senior-level Financial Planning and Analysis for Fortune 500 companies, so I think you’ve got a really unique perspective on business growth. How did that experience in the corporate world inspire you to pivot towards helping small businesses with their financial strategies?

Kathy (guest):
One of the things that always bothered me in big business is that there’s like an army of people taking care of their finances. They have people that take care of financial planning and the future, like myself. There are people that take care of their money, like the Treasury people. There are people that take care of their tax. There are accountants. I mean, you go into any Fortune 500 corporation, and you’re gonna see there are departments of people. The problem is that when you go into a small business, although obviously you don’t need that army of people, you need these different expertise and different finance and accounting departments, right? So when you go into a small business, you basically have a bookkeeper, an accountant, someone that takes care of all the daily accounting operations and takes care of the taxes, but who is there to really plan for the future? Sometimes that falls on the owner. Sometimes the bookkeeper tries to do it, but they’re not really trained in that. So there’s this piece that’s missing. And that really bothered me, that that’s the piece that’s missing. And the second piece was that I come from a family of entrepreneurs, and I’ve seen them struggle with this all the time because they just did not have that type of expertise. So when I left my last corporate job about five years ago, I said, I’m gonna try to put this in place for small businesses, and I’ve been doing this ever since.

Bryce (host):
I love that. I feel like we would be one of your ideal customers. Career Collective, my business partner and I started it like two and a half years ago. We’re kind of in that financial realm of what you provided in your bio, we’re sitting around that number. And I had no idea when we started that we would need a bookkeeper, potentially a CFO, a person to do our taxes. And then I’m going to a mastermind, which has been incredible. And they’re like, you need an estate planner or state tax planner. I’m like, “How many people do I have to hire?” Yeah, we did hire a fractional CFO. And like you said, knowing the projections for the future has been so helpful. Like, when can we hire? How long are we going to be sitting at an uncomfortable number if we do and just things like that, you know, can we sign for a larger space? So it’s so nice to have that peace of mind. As the founder of NewCastle Finance, your company, I know you offer fractional CFO services. You help small businesses. What are some of those financial challenges that small businesses often face? And then, how do you tailor your needs to those?

Kathy (guest):
Like you’ve said, a lot of times when businesses come to me and they say, “I already have all these people, but they are not doing what I need them to do,” and that is essentially an indication that you have people that are doing the job that they’re supposed to be doing, you know, making sure that your vendors are paid, that your accounts receivable is done, all that good stuff that needs to happen to get the money in and take care of your obligations to your vendors. But there’s more than that, and they’re frustrated because they’re like, “Well, but they’re not really giving me advice, like, they’re not really telling me when should I hire people. How should I do this? I’m trying to launch this service or this product, and I need to figure out how much should I price it. Should I do this? When should I do it?” And that is a clear indication that you need someone who is more strategic. You need someone who’s more than what you currently have. And I always say, you know, you need a bookkeeper. You need a good bookkeeper. You need a good accountant, tax accountant in your business. But when you have those challenges, don’t be frustrated with them. Go and find someone who is more strategic, like a fractional CFO, like you, Bryce, said that you found a good one. So I do want to ask you, what were some of the challenges that you found that you were facing when you were trying to figure out, like, how do I fix this? And how did you figure out that you needed a fractional CFO?

Bryce (host):
Yeah, you know, I think there’s a lot of emotion tied up with money. And my business partner and I work really well together. We have the same ideals, but when we would see the finances, and I have huge dreams for what I want for this business and where I want it to go. So I can be overly optimistic, and I’m like this in my marriage too. And so I find my business partner and my husband are the ones that are like, “Okay, but this is what the numbers show.” So I think it was super helpful to have a third party map it all out, because he and I are really great at sales. We’re great on the phone. We have a big, you know, like a CEO vision, but details we’re terrible with. And we’ll be the first to tell you, we like to move too fast. We’re impatient. We don’t like the details. So having someone who can map out the details and say, “Great, you know, if you’re bringing in, if you’re invoicing this much out and you’re bringing in this much money, and this stays consistent based on what we’ve seen in the past, then you can do these things, and this will be your take home at the end of the year.” If you don’t, you know, we can play with the numbers in the spreadsheet, and we can see if your receivables go down. You know, if you hire three people, what that will do to your bottom line? And so I think that’s pretty incredible.

Kathy (guest):
And that’s really good, because the spreadsheet gives you that safety and security where you can play with the numbers in real time and figure out, if I tweak this, how is this going to affect the finances down the road? And it might not be that it’s going to affect them, like in the next month or two, but it could be in the next six months, one year. So it’s really good to have those projections so that you can see you have a full picture, versus just in the next couple of, you know, weeks or what.

Bryce (host):
Yeah, it’s nice to kind of get a screenshot of the entire year. Now, if we had this much revenue in 2022 and or 23 and this is our goal for 24, then how do we make that happen with the people that we have? How many more do we need to hire? What does that look like?

Kathy (guest):
Yep, exactly.

Bryce (host):
So I know you have a podcast as well. “Help! My Business is Growing” – have to read it with the exclamation there – and you provide guidance to businesses experiencing growth. What inspired you to launch this platform?

Kathy (guest):
So the whole reason of “Help! My Business is Growing” podcast was because everything that you essentially do in your business is eventually going to end up in your finances. Whatever you do in your operations, who you’re hiring, how your sales are structured, how the marketing is going, every single thing is going to eventually end up in the finances. So I can help businesses with the finances and figure out what needs to happen and how it’s going to be down in the future. But if there are issues in operations which can put significant pressure on your finances, I can see issues brewing. The problem is, I’m not an operations expert. I don’t know how to fix that, but I can have experts to help businesses fix that, and when I work with businesses, there are all sorts of issues that happen. And I figured, you know, if they have those types of issues, if they have those types of questions, like, for example, you know which is in your wheelhouse, like, how do we hire the right people? How do we make sure that our business is not a revolving door of people? Because we keep hiring the wrong people, and that is going to put significant pressure on our expenses, because now we have to keep onboarding them. There are customer service issues that you might get into. That is going to affect the money. How do we fix that? I don’t know how to fix that. I have people that can, and that’s what we talk about on this podcast, because I want to give those resources to the business owners so that they can understand, what are the consequences, and how do we actually fix those issues?

Bryce (host):
Yeah, do you find that you have companies who may have, you know, it’s not a revenue problem, but it’s really a spending problem, and they don’t even know what they’re necessarily spending? Or do you find that most small companies track it pretty well?

Kathy (guest):
It depends. There’s all sorts. I mean, there’s some… I had a conversation with someone who had this, like, humongous spreadsheet and everything was on it. And then I have another conversation with a business owner where they basically had nothing. Like, the accountant and bookkeeper were giving them reports. And then, like, “I don’t know how to read this. I don’t know what this… I have a stack of reports. They tell me nothing, so I’m just not going to look at them.” It really depends on the business and where they are and what type of maturity stage they’re in. So anything that’s between one to 3 million, they’re still in those very early stages that they can kind of get by. But anything that’s above 5 million, that’s when you really need to start focusing on how you’re using the numbers. The type of issues that you have in the business are gonna basically stem from if there’s a lot of chaos happening in the business, especially if you’re growing fast. And you know, 10 million and plus, 10 million and plus is really when you need to start. It’s the last train to start doing the financial planning. If you don’t have that in place, it’s going to be really, really hard, and you can get into a situation, you know, when you have 5 million in revenue, but your expenses are 5,000,001 and you’re not going to have any money left.

Bryce (host):
Yeah, exactly. Small businesses often struggle with keeping their finances in order while focusing on growth. Can you share some practical tips or insights on how businesses can strike that balance between the two?

Kathy (guest):
It really comes down to planning and making sure that whatever reports you’re getting, you’re actually using them. So if your bookkeeper, if your accountant are not giving you the reports that you need to see to actually make decisions about your business, then the reports are practically useless. So first we have to figure out the reporting, and then obviously, behind the reporting is the data. So if your profit and loss statement looks like a roller coaster, if you’re in a type of business where you’re bringing a lot of money upfront, like if you’re a project-based business, and you’re not using the right type of accounting, you’re going to see that you’re going to have months, for example, where you have a lot of revenue coming in, it’s going to be a lot of profit. Everyone’s happy opening up the champagne, but then the costs might come later on in the future. So if you’re not putting the right accounting in place to fix that, that is going to be very hard to figure out heads and tails what’s going on in your finances. So that’s the number one thing that we really need to fix in small businesses, that type of system. It’s called accrual accounting. So if you have conversations with your bookkeeper or your accountant, that is what you would ask them, “Am I truly on accrual accounting, because this doesn’t make sense to me,” and you can have that conversation with them. So that’s number one.

Bryce (host):
I do know we’re accrual. I know this. Good. That’s great.

Kathy (guest):
And then the second thing is, once you have that in place, then we can start putting the budgets and the forecast together. And a lot of people ask me, “Well, what’s the difference between a budget and a forecast?” And the way I like to explain it is, if you go on a road trip and you put in the destination, I’m in Chicago, you’re in North Carolina, for example, if I want to come and visit you, I’m going to put it in my GPS. This is how I get to Bryce, and it’s going to give me a route, right? Where do I need to go? What highways I need to take? However, if there’s construction on the road, it’s going to give me a detour. And this is essentially what the difference between a budget and a forecast is. A budget is when you’re putting a plan together, where do I want to be? How do I get there? But things are going to happen. You might find out that the employee that you hired three months ago is not really working out, or you might have a lot of business come in and you need more support. You need more customer support, so you have to hire another person. So you’re going to reforecast. You’re going to relocate those numbers and make new numbers, and that is what a forecast is. So a lot of businesses struggle with that because they have a financial plan and they think it’s set in stone, but it’s not. Things are always changing, so you’re gonna be updating that.

Bryce (host):
Yeah, that’s what ours has taught us as well. You know, we’ve got this spreadsheet, but everything is fluid, and it’s all an estimate. Best guess, and if we’re not communicating with her, then she can’t update the spreadsheet accordingly. So I’m curious. I know you’ve got 14 years of experience. How long has NewCastle Finance been in business?

Kathy (guest):
So NewCastle Finance just passed five years in business.

Bryce (host):
That’s incredible. Congratulations.

Kathy (guest):
Thank you.

Bryce (host):
They say the first five is the toughest. So I’m sure you’ve seen changes from the beginning to now, but I think you know you probably have to have those clients who are really aligned, who will allow you to look behind the scenes and be willing to have those tough conversations. But kind of tell me, like, who is your ideal client, and maybe give us a success story, or even a challenging story.

Kathy (guest):
So, you know, the business, my business has evolved. Originally, I really supported businesses under 10 million. Now I’m more focusing on businesses that are more than 10 million because I’ve noticed that I enjoy that more. We have a lot more resources in place so that I am not so embedded with their accountants and bookkeepers. So the business that already has 10 million in place means they already have a controller. A controller is the person that is managing all the accounting operations, all the day-to-day stuff, making sure that the reporting is done correctly, and that frees me and my space a lot to really, truly focus on strategic type of decisions and the planning and the future of the business. So before, obviously, I was working a lot with the smaller businesses, and one of the challenges that I’ve always had there was a lot of the data just wasn’t there, and the accountants just weren’t doing their jobs. And I can tell you, for example, one of the things that I always look at when I go into the business are their number people really good at what they do. Because a lot of times what happens is that they had an office manager that picked up bookkeeping responsibilities, and that bookkeeping responsibility ended up being an accounting manager as the business grows, and they just don’t have those skills, and the books are kind of a mess, unfortunately, if they haven’t been trained, because you really need to be able to do this job, you need to have the accounting experience and not just have a quick course on QuickBooks or Xero or whatever you’re using, right?

Bryce (host):
Sure, yeah.

Kathy (guest):
So I went to a client that had that particular issue, and they were really struggling with “my reports are completely a mess, and it doesn’t make sense to me what’s happening.” It was really hard. And then obviously, when I go in and I do the assessment of the whole financial system, we figure out that that’s just because the person that was doing their books wasn’t the right person. So we had to hire another person. We hired that person there. They were able to fix that, and then we were able to do all the future planning and figure out the projections for the business, because we have structured the business in a way that needed to be structured, fixing the numbers so that we were able to see where the problems were. And there were some problems in the operations, like the margins weren’t done correctly, the pricing wasn’t done right, we were able to see exactly where the issues were, so that we were able to fix that. And once you fix that, then the business grew. So the business went from, I believe they were two and a half million. It’s right at 7 million at this point.

Bryce (host):
Oh, that’s incredible. Yeah, that’s a great success story. And you just taught me something new. Because I didn’t know that businesses at that ten million level who may have a controller still need a CFO or fractional CFO to help them. I just assumed, wrong assumption, that the controller would be able to do those kinds of things.

Kathy (guest):
A controller is, if you… that is really at 10 million, and where the finance function of the company really splits, will really, truly start to split, is where you have the accounting portion and the finance portion. So the way to think about what’s the difference between accounting and finance is accounting deals with the past and the present, so making sure that the numbers are in right, as we’ve talked about, that your vendors are paid, that you have your accounts receivable done correctly, they’re using the right type of accounting, like accrual versus cash or whatever it might be. So they deal with that. They make sure that all of those numbers are in your system correctly, so that you can make those decisions. However, again, the decisions are made about the future. That is where the finance comes in. Finance deals with the future, F for future, and accounting is for the past.

Bryce (host):
All right, I like this trick of being able to remember F for future finance. Let me just pause for a moment here. If what we’re discussing today is resonating with you and you’re thinking about elevating your own professional journey, I’d love to chat with you about career coaching, whether you’re looking to pivot into something like a new business or job, or you’re simply looking to enhance your leadership skills and strategic thinking. Head to mycareercolllective.com/coaching, and let’s work together to bring your career goals to life. Again, head to mycareercolllective.com/coaching, and reach out today. I’m looking forward to connecting with you. Here’s to your professional growth. Through NewCastle Finance, you are empowering small businesses with the same financial strategies that you saw being used in big corporations. How are you implementing those strategies and getting those tangible results for your clients?

Kathy (guest):
So that really comes with planning again, and I’m all focused on planning. One of my specialties really is FP&A. FP&A stands for financial planning and analysis. And in corporations, these are the people that are essentially sitting in different departments, and they’re connecting the dots with what is happening in the business and translating that into the finances. So as I’ve said, everything that you do in your business is going to eventually end up in your finances. So what I specialize in, I need to know enough about sales, marketing, operations, everything that’s happening in your business. Take all those insights, those operational insights, and move them into how is this going to affect the finances of the business? And actually plan. So it’s like, it’s like a detective connecting the dots. And that is called, in the corporate world, FP&A, which is financial planning and analysis. Unfortunately, that is not something that’s readily available to small businesses, because FP&A practitioners are kind of locked in this corporate system, because they get paid really well. They don’t want to go out on their own. So in small businesses, you don’t really get to have people that have that experience, because the only way to get that experience is to actually work in those big corporations and to have that experience. There’s no FP&A college that you can go and take a class from. Now they’re starting to have more courses, like people are starting to put courses online. But still, you know, actually knowing what you’re doing and having the experience versus just taking a course are completely two different things, right?

Bryce (host):
Okay, and I know we touched on budgets briefly earlier. Do you help your clients create a budget? And are you a fan of Profit First? Do you use that?

Kathy (guest):
No, I don’t.

Bryce (host):
Okay, we don’t use it either. It seems super complicated in the beginning, we’re like, gotta set up all these different bank accounts. And…

Kathy (guest):
What Profit First is, really it is a cash management system. And I will say this: Profit First has its place in a business that is smaller. So if you’re like a smaller business, that it’s really just working around, you know, I need to have a better cash management and this is a little bit complex. So if you’re under a million, it makes sense. If you’re in certain industries, it doesn’t. Like, for example, if you’re in the construction industry, Profit First is going to create havoc on your finances. I know they have their own construction Profit First for construction businesses. I really advise not to go down there. Find yourself a good accountant and a bookkeeper that’s going to work with you, so that you understand the numbers and which is really important, because I know that you work with construction businesses as well. Work in progress reporting. It is super, super, super, I cannot tell you how important it is to have that in your finances as a construction or remodeling business. So the reason why I don’t like Profit First is because it doesn’t teach financial savviness to business owners. It does its own thing that works only up to a certain level. But if you truly want to get your company to multiple millions of dollars, if you want to go to like, 20 million, 30 million, and if you really want to grow, you need to have that foundation. And it needs to be done well. And that’s what I teach as well. How do you do that so that the business has the foundation in finances so they can be healthy and sustainable? And essentially, you need five things. You need good accounting and bookkeeping. You need good financial systems and processes, meaning that the tools that you’re using are really serving you. You need financial analysis so that you can actually look at those numbers and get insights from them. You need good financial planning. And the fifth thing is, you need internal controls, meaning that you’re not giving one person all the keys to the kingdom in your finances so that your bookkeeper isn’t doing everything. Like you need those controls so that, for example, the person that is putting the bill in, paying it, and reconciling it, isn’t doing all those three jobs, because it’s so easy. I’m not saying that people are generally out to do this, but there’s so many times in small businesses when people are stealing from the owners, and the owners have no idea what’s happening. And this is another issue with Profit First: when you have so many accounts, it’s really hard to audit that. And on top of that, if you’re trying to get a loan, if you’re trying to get investors in the future, having those types of financials is just not going to be in your benefit. So that’s why I’m saying Profit First works for certain types of businesses, really small ones, but if you’re trying to be in the multi-millions and grow, get yourself a good financial foundation without Profit First.

Bryce (host):
Okay, very cool. Yeah. I always wondered how people were stealing from the business, and the owners didn’t know. Like, how did that happen? And you’re right, it happens all the time.

Kathy (guest):
Yeah, because someone can easily… what can happen? Someone can easily put together a fictitious vendor, and they’re paying the bill. They’re reconciling the bill, and you would never know, and like, “Okay, so there’s this vendor, ABC, we’re paying them.” All right? So, yeah, it’s pretty easy to do that if you know what you’re doing, and, you know, bookkeepers and accountants know what they’re doing. Not saying that all of them are like that. They’re definitely not. But there’s some out there that have, you know, taken a lot of money from businesses.

Bryce (host):
Yeah, that’s scary. Gosh. Well, those five things you mentioned, you know, if you’re starting a new company, how do you know when to hire each one, and is it based on different levels of revenue? Or what’s your suggestion when a company is just getting started?

Kathy (guest):
So if you’re just getting started, you’re going to need two things. You’re going to need a good bookkeeper that is actually educated in bookkeeping, that doesn’t just have a QuickBooks or a Xero course that they took over last summer. So someone that really understands accounting. And the best way to look at that is look at their profile on LinkedIn. You’re going to see all of their work experience in the past and ask them questions like, “How are we going to work together? What are your internal controls like? What are some of the things that we can do?” So that’s number one, you get yourself a good bookkeeper. And the second thing is, you get yourself a good tax accountant so that they can advise you on taxes as you’re starting to grow, and you’re going to have more questions. And some of the bookkeepers actually do cash forecasting, like basic cash forecasting. If you need that, go ask them if they can do that for you as a service. And then once you start to grow and you’re going to start feeling that you need more questions answered, that they will not be able to answer, because you’re going to ask them, and they’ll be like, “I don’t know. I don’t do this.” That is the time when you can talk to a fractional CFO. You should be able to do this up until a million dollars, and then you can start to look into a fractional CFO. And when you’re looking for a fractional CFO, just go look up their LinkedIn profile. The only reason why I like using LinkedIn is because it’s really hard to fake your experience on LinkedIn.

Bryce (host):
I love LinkedIn. I live there every day.

Kathy (guest):
Exactly. It’s because you will see what type of experience they have, who they worked with, who are their peers. But if you find someone on Facebook, you don’t know. I mean, you can fix so many things on Facebook. So if you find someone on Facebook, that’s fine, just make sure that you look at them through LinkedIn as well, and have a conversation with them and see what they can do for you, how they can help you grow the business. So if you need that type of service, just go find a fractional CFO that’s a true fractional CFO, not an accountant that’s just going to look at, you know, how much cost you have to cut and all that, versus someone who’s being really strategic and helping grow the business.

Bryce (host):
Right. Well, looking ahead, what are your goals and aspirations for NewCastle Finance, and how can we get in touch?

Kathy (guest):
So the goals are to grow the business more. And I’ve been doing a lot of speaking gigs lately, because I do want to get that word out about financial planning and analysis to small businesses, because I think this is such an important tool for businesses to use, and a lot of them just don’t know what that is. And not because it’s their fault. It’s because it’s just an unknown sector of finance, and the difference between accounting and finance. So I want to get the word out, so I’ve been doing a lot of speaking engagements on that, and again, growing NewCastle Finance, hiring some more employees. Currently, I have two, but we’re hoping to grow more. And where can people find me? Again, you can find me on LinkedIn, Kathy Svetina. I’m the only one with that name there. And you can find me on the website, newcastlefinance.us and of course, I have a podcast “Help! My Business is Growing.” You can find it anywhere, Apple, Spotify, wherever the podcasts are.

Bryce (host):
Very nice. I love the name of your podcast. That’s great.

Kathy (guest):
Thank you.

Bryce (host):
Thank you so much. I can tell you’re super passionate about this, and you’re a wealth of knowledge when it comes to finance. Hopefully, some people will be looking you up after this conversation, and I love that you’re spreading the word and trying to educate people about this need in their businesses. We need more women entrepreneurs and more that are at the, you know, eight-figure level.

Kathy (guest):
Yeah. Thank you so much, Bryce. I really appreciate this.

Bryce (host):
Okay, before we wrap up, just a quick reminder, if you’re thinking about taking your career to the next level and liked what you heard today, don’t forget to visit mycareercolllective.com/coaching. I’m here to help guide you and support you on your professional journey. Thanks for listening, and I hope to connect with you soon.

Outro:
And that concludes another engaging episode of the Wine After Work podcast. We hope you enjoyed your discussion today and learned something new. Remember, there’s always more to explore when it comes to your career. So until next time, raise your glasses high and may your evenings be filled with delightful sips and enriching conversations. Cheers and we’ll see you soon on the next episode of Wine After Work. Thank you.