Series Kickoff And New Format

SPEAKER_01 0:00

Welcome to the Financial Operating System series on the Empowering Healthy Business Podcast. Identify your why. Chapter one. I'm Lindsay, and this is a bit of a different episode than usual. Instead of a guest, we're going straight to the source. We're kicking off a new series where we go chapter by chapter through Calvin's book, The Financial Operating System, and I get to ask him all the questions I think you'd want answered. Calvin, so excited to have you on your own show.

SPEAKER_00 0:25

Thanks, Lindsay. Feels a little strange, but I like it.

SPEAKER_01 0:28

So we're starting right at the beginning. Chapter one, step one of the system.

Why Purpose Comes Before Numbers

SPEAKER_01 0:33

Identify your why. And honestly, when I first read this chapter, I expected spreadsheets. It's not that at all. It's almost more like a therapy session.

SPEAKER_00 0:43

That's a fair way to put it. I know people pick up a book called The Financial Operating System, expecting me to jump straight into metrics and accounting, but I intentionally start somewhere else because I've sat across the table from hundreds of business owners over 20 plus years, and the ones who struggle most aren't struggling with math. They're struggling because they never actually decided what they want out of the business in the first place.

SPEAKER_01 1:04

Okay, I love that. Let's start there. Why are most people even in business? Because I'm guessing it's not always some grand strategic plan.

SPEAKER_00 1:12

Almost never, honestly. In the book, I lay out a handful of real patterns I see over and over. Someone gets laid off, can't find another job fast enough, picks up a client or two, and five years later they've accidentally built a company. Or someone's moonlighting on nights and weekends, word of mouth kicks in, and suddenly they quit their day job. Some people just can't stand having a boss anymore and want control. And some people do see a real market opportunity and build toward it on purpose. All of those are valid ways to end up owning a business. The problem isn't how you got here. So what is the problem? The problem is a lot of owners never go back and ask themselves, on purpose, okay, now that I'm here, why am I still doing this? And what do I actually want it to give me? If you've been running the business a few years, your reasons have probably changed. Maybe you started it out of necessity and now you're actually good at it and enjoy it, or maybe the opposite, the passion that got you started has faded, and it just feels like a job now. Either way, if you haven't checked in on that, you're flying without a destination.

SPEAKER_01 2:10

Ooh, flying without a destination, I I like that. What actually goes wrong, practically speaking, if an owner skips this step?

SPEAKER_00 2:18

You have nothing to manage toward. You can still make decisions every day, sure, reasonable ones even, but you have no way of knowing if those decisions are actually moving you toward what you want, because you never defined what you want. And here's the part that really gets people. If you don't know your own goals, there's no way your team does either. You can't expect employees to help you hit a target that was never set.

Set Clear Financial Goals

SPEAKER_01 2:38

You give some really specific examples in the book of what a real financial objective sounds like, not just make more money, but actual numbers. Can you share a couple with us?

SPEAKER_00 2:46

Sure. Things like I want to take home $250,000 a year after tax to cover living expenses and start paying my daughter's college bills. Or I want to build something I can sell for $10 million within eight years so I can travel and focus on charity work, or even something quieter. I want to keep my current income but cut back to twenty hours a week so I have more time with my family. None of those are wrong. They're just very different businesses to build.

SPEAKER_01 3:14

Honestly, I don't think I've ever heard anyone put a goal that specifically before. I'd guess a lot of our listeners haven't either.

SPEAKER_00 3:21

Most haven't. And that's genuinely fine as a starting point. Like you don't need to have it perfectly worded. But you do need to get honest with yourself about it because it changes everything downstream. It changes how you price things, how you hire, how much risk you're willing to take on.

SPEAKER_01 3:38

Now here's a tension I noticed in the chapter. You also warn owners about setting goals that aren't grounded in reality. What does that look like?

Ambition Versus Reality Check

SPEAKER_00 3:46

This one comes up constantly. I'll have an owner tell me their goal is 25% annual growth, and then I look at their financials and they've grown 5% a year for the last decade, or they want 20% profit margins and they've been breaking even. It's not that those bigger goals are impossible. Sometimes radical turnarounds do happen, but they take real work and a real change in mindset and often in the business model itself. Usually what's actually going on is one of three things. The owner hasn't truly committed to doing what it takes, doesn't know how to get there, or doesn't have a business model capable of producing that result as it's currently built.

SPEAKER_01 4:22

So what do you tell someone in that position?

SPEAKER_00 4:25

I tell them they've basically got two honest options. Either change the goal so it's aligned with what you're actually willing to do and capable of doing with the resources you have, or change the business itself, the team, the culture, the model so it becomes capable of hitting the bigger goal. What you can't do is keep the mismatch and just hope it resolves itself.

SPEAKER_01 4:43

I want to gently push back on something, though. Some listeners might hear, get grounded, be realistic, and think you're telling them to play small.

SPEAKER_00 4:52

Not at all. And I actually address that directly in the book. There's nothing wrong with wanting a stable, steady, profitable business that just pays you a good salary and consistent dividends year after year. That can sound like a modest goal next to double the business in three years, but honestly, it's harder to achieve than people think, and plenty of businesses never even get there. On the flip side, if you do want to chase aggressive growth, that's valid too. Or you're basically acting as your own venture capitalist, betting your time and money on a bigger return. Just know that comes with real risk, especially around cash flow, and that's exactly what the rest of the financial operating system is built to help you manage.

Define Your Business Model

SPEAKER_01 5:31

Let's talk about the other big piece of this chapter, business model. How do you define that for someone who's never really thought about it in formal terms?

SPEAKER_00 5:38

I think about it as the place where your strategy and your day-to-day operations actually meet, and you get at it by answering a set of pretty concrete questions. Do you have recurring revenue or do you have to go find new revenue every single month? Do customers come back, or is every sale a one-off? Who, specifically, is your ideal customer? Are you selling a high volume of lower margin work or a small number of big high margin engagements? And are you competing on being basically the same as everyone else, or are you offering something differentiated that lets you charge a premium?

SPEAKER_01 6:14

Okay, those questions alone could keep someone up at night.

SPEAKER_00 6:16

They probably should a little, but I always tell people, you don't need to have perfect permanent answers before you move forward. The financial operating system is iterative by design. You come back and revisit your why and your business model over time as you learn more. The goal of this first step isn't to have it all figured out forever, it's just to stop running the business on autopilot.

Four Questions Homework And Next Step

SPEAKER_01 6:40

So if someone's listening right now and realizes they've never actually done this exercise, what's the one thing you'd want them to do this week?

SPEAKER_00 6:47

Literally just sit down, alone, no distractions, and write out honest answers to four questions. Why are you in business? What do you want financially from it? How committed are you really to doing what it takes? And what is your business model in plain language? That's it. You don't need a consultant for that part. You just need to be honest with yourself.

SPEAKER_01 7:07

I love that as homework. Calvin, thank you so much for letting me put you in the guest chair for once.

SPEAKER_00 7:12

Anytime, Lindsay. It was different, but I liked it.

SPEAKER_01 7:15

Next time we move into step two assessing where your business actually stands financially today. Until then, thanks for listening to the Financial Operating System Podcast.