Build a Business Growth Strategy That Stands Out

Hey, this is Loral. Welcome back to Loral's

Real Money Talks, and it's a podcast where we join once a

week and we talk about money. How do you make it? How do you

keep it? How do you invest it? And why you need an integrated

team? It's the most vital part of the financial services

industry because most of the financial services experts are

segregated intentionally for fees and commission, not on your

behalf and not on your family's legacy or any generational

wealth. So, any comments, any questions, you can always head

over to Ask Loral A S K L O R A L. Ask a question, make a

request, and I would love to come back with guests in those

areas or topics myself to deliver you to and through a

podcast today, I have someone with me who's made a lot of

money into different areas, and I think it's going to be really

fun for a lot of you. Do you want to get a pen and paper? I

have Michael Barbareta with me, and he is in. I'm going to say

the Boston area. You'll hear it come out in his little accent.

Start in the financial services space, and I actually want to

start your story with the financial services part of the

story, just because we make fun of it because it's so segregated

and there's just no learning. I always call it park and pray.

People can park their money with Financial Planner and pray to

God something happens with it. So talk a little bit about you

starting in the traditional, and then how you actually moved to

fractional CFO and the amazing work you're doing today with

small businesses. Great,

thank you, thank you. Thanks for having me

too, Larry. So, yeah,

thank you. Yeah,

so so I started out in my career in

private industry, but wanted to wanted to own a business and and

be in business for myself. I I didn't want to. I didn't like

the politics in corporate America, and I just wasn't built

for it. So I I myself and some partners bought a specialty ski

retail store, one single store called Ski Town USA. We were in

the Boston area, and we grew the company from two and a half

million to 8 million in five years by utilizing business

strategies that our competition wasn't doing. For for a quick

example, one of the strategies that we employed was what's

called what I call a risk reversal, where the seller in

the transaction takes most or all the risk. So the problem the

customer had in the ski industry, is they really didn't

know if the ski they were being sold by some hotshot ski

salesperson that was flexing the ski in their face was the right

ski for them until they got up in the mountain and tried it

out. So we had what we call the ski guarantee: ski the ski three

times, don't like it, bring it back for a brand new pair, and

keep bringing it back until we get it right. And my employees

thought I was crazy. No one was doing this, and my employees

thought I was crazy. And one of the reasons why no one was doing

it is because once a ski gets skied on, it's like driving a

car out of a showroom. It depreciates dramatically.

So I know that well. Yes.

So, but and my and my employees had visions

of 1000s of pair of skis coming back and us losing a ton of

money, but my my view was is that all the skier really

wanted, because I understood the skier, was a great ski

experience. That's all they wanted, because nothing ruins

their day more than a rotten, stinking ski experience. And so

all they wanted was a great experience. So we sold 8000 pair

of skis the first year we implemented this risk reversal,

a 25% increase from the previous year. Only eight came back. Next

year we sold 11,000 pair. 14 came back. So that's how that

you know, and by implementing strategies that our competition

wasn't doing was was the the key to success in building that

business. Then I went I went into the frozen cookie dough

business. Afterwards, I bought some recipes from a husband and

wife team, and

love that one.

And and and grew that company, and then

finally sold it to a frozen desserts distributor in the

Boston area. And then I took stupid pills. I must have taken

stupid pills because all the things that I did by doing what

the competition wasn't doing, in when I entered the medical

business because I wanted to serve the aging population. When

I went into the medical business, I did exactly what my

competition was doing, everything from soup to nuts,

protocols, everything you could think of, and it and it cost me

dearly. I totally fell on my face, went right out of

business, and so after that, 30 days after that, I started Next

Step CFO because I learned so much from my experiences in

success and in failure, that I wanted to share it with other

small business owners and help help guide them through some of

the turbulent occurrences that can happen in business today.

So go back to the so those first two, which

are my two favorite logs, because I don't know if you knew

I. A huge ski family here in Lake Tahoe area. Skied my whole

life, still ski, and then cookie dough, my favorite junk food. So

I love that your two favorite things are things I love, and

you know them well. But when you said you took a stupid pill,

what did you leave behind in strategy? What did you like? Not

remember that you had just done in two very different

industries. I mean, the food industry and the skiing industry

have not a lot in common besides there's a customer.

Okay. Well, first of all, I was in a little

bit of a fog in the medical business. Just just generally

speaking, it was new to me. By the way, I never skied before

before I bought the ski business, so being being new to

something wasn't really intimidating to me at all, but I

was in a little. I must have been in a little fog. I didn't

analyze this until after I failed. That in the businesses I

was successful in, I didn't. I did what my competition didn't

do. I implemented business and financial strategies that my

competition didn't didn't do. Whereas when I was in the

medical business, I did exactly what my competition was doing,

almost verbatim, in every way, from from marketing to messaging

and so forth. It it was just it was just the wrong way, wrong

approach to take to something that was you know, I'm not going

to say it was incredibly common, but it was you know fairly

fairly common facility, medical

facility.

So that that was that was it. In a nutshell,

it's no question about it, no doubt about it. That was the

reason. That was the reason why I succeeded twice and failed

once.

So talk about your conversion models a little

bit, and yeah, and you have some five compelling different

models. Yes,

yes. So let me let me explain. When I was

doing research for my book, Powerful Business Strategies, I

I determined and and found through my research that the key

to successful marketing was to get into the mind of the

prospect. Okay, how do you? But how do you do that? And so, what

as I as I did my further analysis, I discovered that

there were two major emotions: the problem the customer has

that they don't want, the solution they want they can't

find. So, based on that, I created what's called the

conversion formula, which is a formula that converts prospects

into your into your sales process, or prospects into from

your sales process into sales. And essentially, it's four.

There's four parts of the conversion formula. The first

part is captivate. Captivate is the problem that the customer

has and doesn't want. They got this problem. It's usually with

the industry, by the way. It's usually some problem that

they're stuck on. Like for example, in the trades, a lot of

people in the industry are stuck on the fact that they don't

return calls, that they don't they don't follow up. They show

up. They don't show. Well, that's right. Day one, you know,

it's a prayer. It's a novena that that they'll show up. So

those problems. So it's those types of problems that we help

the business owner identify with the industry. But that makes up

the captivate identifying that problem that they have they

don't want. Second is coming up with your unique solution. So

you captivate them with the problem. You fascinate them with

the unique solution, and then now you've got their attention.

So now you educate them, and you educate them by explaining why

your solution to that problem is superior to the competition. And

then fourth, the fourth component is offer is the offer,

and the offer has to be a compelling offer, which I'll

explain in a second. But those those are the four components of

the conversion formula. And if when we did it, for example, in

the ski business, you know the problem the customer had was

that they didn't really know if the if the ski they were being

sold was the right ski for them. Don't know the proper ski. Don't

know if the ski being sold is right for you. Our solution is,

you know, the ski guarantee. And then we went on to explain the

ski guarantee, and then we gave the offer. So let me give you

the five components of a compelling offer, so that I'm

not leaving the audience hanging because anybody can say, you

know, the the fourth component is a compelling offer that has

to be so irresistible that the customer won't turn it down.

Anybody can just say that, but here are the five components

that make up a compelling offer. The first is scarcity and

urgency. Scarcity is a limited quantity, whether it's a limited

number of meetings that you have, or a limited quantity of

of widgets doesn't matter. Whatever it is, you have a

limited quantity, whether they're widgets or whether it's

time. Urgent urgency is this offer ends on Friday, so

whatever offer. You make it ends on a certain. It only has a

certain amount of time for that offer to be active. That's

scarcity. So that's number one: scarcity and urgency. Number two

is risk reversal, like we did in the ski business, where the

customer, where the seller in the transaction takes most or

all the risks. Normally, it's in the form of a guarantee, but

doesn't quite have to be. But normally it is in the form of

some type of guarantee. And the more aggressive you can get,

like we got pretty aggressive. I mean, no one, you know, it's

funny. No one even copied it after it was working. That's how

aggressive it was perceived. And then, so that's risk reversal.

That's the second component of a Capelli office. The third is

adding more value to the product or service.

So when I was in the frozen cookie dough business, the

problem the customer had-notice I always go back to that-the

problem the customer had, the problem the customer had was

they didn't want to waste valuable. They wanted to sell

cookies as an add-on sale, but they didn't want to waste

valuable oven space baking them. So what we did is, despite the

fact that our opening order averaged only $50, we gave them

a free convection oven with the with every opening order. Why?

We had we understood the long term value of a customer. Number

one.

Awesome.

Okay. And and we understood that we were

solving their problem at the same time. So, and also we

believed in our product. I should say that. That's that's a

very important point, by the way. Believing in your product.

So, so that's we did that. That opened so many doors. It's

because it solved the problem they had. Plus, they could use,

yeah. Plus, they could use the convection oven to, I don't

know, bake lima beans or whatever they did, right? So

that, so that was the, so that third component. We added more

value to our product by offering the convection oven. The fourth

component is packaging and bundling products together. When

I was in the ski business, we every Tom, Dick, and Harry,

everyone packaged skis, bindings, poles, boots, maybe

maybe boots. They'd add, but at least those three components:

skis, bindings, and poles. Everybody did that. But what we

did is we added one more thing. We what we did is we took the

most popular ski graphics went to the clothing department and

matched the Parker pant, sweater, and hat combinations

flewing out the door. They were packaged together. Once again,

packaged is a perception of value. So when you can package

things together, that's a compelling offer. So that was

the fourth one. The fifth one is being indifferent to the

outcome. That is very difficult for business owners. In other

words, you're disconnected to the sale because once you're

connected too much to the sale, the prospect picks up on it, and

it has that kind of that used car theory, the salesman theory

to it, where they're out for themselves and not really out

for the customer,

for you, right? Yeah.

And so being indifferent to the outcome is

really is really important. And the other important component of

that, kind of an offshoot, is you got to get away from the

transaction and get into the transformation that your product

has, and that your product will result in. It's important to

stay there with the transformation.

The

transaction is the dollars. All right.

Everybody wants to get into the transaction, and everybody wants

to try to object counter objections relative to the

transaction. Counter objections with the transformation that

takes place, and so that's the other component of compelling.

So when you're working with a new client, so

like think about one of your latest new clients, as as you're

coaching, mentoring, guiding, you know, the new business owner

that you have in these five, where do you find the the

hardest disconnect? Is it the indifference, or is it

definitely is it the indifference, or is it the risk

reversal? Because I could almost go both ways. I could think that

the risk reversal you could would be just as challenging.

You could. I think that that being

indifferent to the outcome is definitely the hardest that I've

found because there's just too much. I need to make a sale. I

need to make a sale. I got to make a sale. I'm making a sale.

I'm here to make a sale. That kind of thing. That's not good.

That that get the the the customer can pick up on that,

and it's difficult for business owners to to do that. That takes

practice. Yeah, you know, my my indifferent line is whether you

work with me or someone else. There are five steps that you

must take in order to be successful. There are four

actually four characteristics that you must have in order to

be successful. So that, and whether when they work with me.

Someone else, you know. That's that. That's that indifference.

So, but but risk reversal would be second. You're right. Risk

reversal would be second because it's very difficult. Everybody

thinks like my employees thought. You're out of your

mind. You're going to lose a ton of money. There's going to be a

ton of returns. Look out below.

You know, Jim Collins wrote a book called

"Good and You Know Good Enough. It's the 8020 rule. So, what's

your you also speak to that? So, speak on your perspective on the

8020, and then my yes energy. I wrote a lot about it too because

perfection's poverty is a whole chapter in one of my books,

right?

He's 80% good enough, but what's your

perspective? And I'm going to say spin on that conversation.

Yeah. So first of all, no one is ever

wrong about the 8020 rule. I just want to make that that

point. But it's you know most people, most of my clients, and

most people in business, they that the 8020 the way the 8020

rule applies to business is that 20% 80% of your sorry, 20% of

your customers make up 80% of your revenue. We have a

different spin on it, like you said. We look at it where 20% of

your activity makes up 80% 80% of your revenue is driven by 20%

of what you do every day. That's it. Okay, 20% and that 20% we've

narrowed down to seven things. So the first thing is now this

is that 20% that drives 80% of the revenue. The first is leads.

You got to get high quality leads, but not any lead. It's

got to be a high quality lead. Once you have leads, now you

have to work on your conversions. What is your

conversion rate into your sales process? That is, that's not

close, but then into your sales process, whatever that

is.

And then third is what your closing rates

and managing those to make them better, more effective,

increasing. The fourth one, a lot of people kind of take it

take for granted, and that's client retention. It's one of

the once again, it's one of the seven steps that business owners

should take. 20% of what they do every day that drives 80% of

their revenue. Client retention. Some many times, my clients

think that once they get a client, they get to keep them by

default. It just doesn't work that way. You have to work on

client retention. Next is increasing the average dollar

per sale of your of the of your customers. Increase your average

dollar per sale. Then you're going to increase the number of

times that they buy or frequency of sale. That's the sixth step.

And then the seventh step, you have to control costs. Now, when

as CFOs, you might think we're maniacs about controlling costs.

We we control. We want to control costs. We want to cut

unnecessary spending. Lots of business owners have all these

subscriptions that they don't even use, and they're still

paying for. I see that all the time. We we stop all that, but

you can only bring your costs down to zero. Revenue can go to

infinity, and so that's why we we focus more, and that's why

the seven steps are really about revenue generation for the most

part, except for that last step.

But like your point earlier, like I was in

corporate America for just a minute, and sounds like you were

in there for just a minute, and the biggest driving, I think,

shift is the way we were trained to be an employee for a company.

It's all about the cost, right? It's cost and budgets. Yeah.

When you drive it as an entrepreneur, it's 100% about

driving and generating revenue. Absolutely. So I love the model

and I love the the sequence of priorities.

Excellent. Yeah. Well

done. So, talk about the. I hope so marketing.

Yeah, I just think that that's actually could be a fun T-shirt.

I like that you say it that way. I've heard it. I've heard it in

that frame, but that's a that's a great way that you say it. You

didn't trademark that idea, did you? By

the chance, Laura. Because I not yet. Not yet. Pretty quick.

Complete quick to that. We better get to it first. first.

No, not that. Yeah. So I hope so. Marketing. So remember how

you know we identify the problem the customer has it doesn't want

with the solution they want they can't find. That is totally

different messaging than 95% of your competition. What 95% of

your competition is doing is what I call I hope so marketing.

Their messaging like largest selection, best service, most

convenient. Well, the customers when they hear best service,

well, I hope you have the best service. Why would I do business

with somebody who doesn't have the best service? We're the most

professional. Wait, wait, wait a minute. I hope you're the most

professional. Why would I do business with someone who's not

professional? So they're saying at the end of each of these

statements that are so commonly used, it's ridiculous. Go to any

website, go to any social media post, go to anywhere. You'll see

largest selection, lowest prices, best service, most

convenient, most professional, highest quality. We're the

fastest, the largest in the state. We're specialized. We're

insured. We're family-owned. All that is. I hope so. I hope so.

And so that's what I hope so marketing. 95% of the people who

are marketing out there, the companies that small business

owners that are marketing out there are using I hope so

marketing, and it's and it doesn't it doesn't do anything.

It's like everybody else is using it, it's jargon. So that's

what we think, and that's what we found.

And then, how do you counter that with the

conversion? Go back to the conversion. Yeah, the five

conversion formula and the five

steps to a compelling author. Good,

I like it. So, when you work with clients,

Michael, are you working with them for six months, a year? Do

you just come in and fix them? And I just want to clarify for

this is also like fractional CFO services, which

you know it's interesting because I love when financial

and money people talk like marketing people because they go

hand in hand if you're trained well. That's

right, absolutely. And so, what, what,

what, what we because we combine the financial with the

strategic, that's how we differentiate ourselves from

regular fractional CFOs. It's you know if you're going for a

job as a CFO in the Fortune 500, you if you don't know business

strategy, you don't get the job. You're not you know you don't

even you shouldn't even apply. Forget about getting a job. So,

but fractional CFOs for some reason get away with that, and

so we combine both the the CFO financial with the strategic,

and we combine them both. And when we're working with clients

in terms of longevity that you mentioned, we usually work long

term. We've we've had we've had we have several clients that

we've worked with for over 10 years. A statistic that we have

is that 53% of the clients that we work with on a monthly basis

for three years or more increase the value of their business by a

million dollars or more. So the other 47% you know, they don't

have a couple of characteristics that are necessary for business

owners to succeed, like being decisive, being an action taker,

being ready to prepare for change, knowing that, knowing

that they that in order for them to get the next level, something

has to change the ability to adapt to that comment. That's

difficult for business owners. And then finally, we have a very

easy step-by-step process. If they can follow a step-by-step

process, then that would be another way to be part of that

53%

And on the financial side, where do you

find you spend most of the time? I mean, obviously this is in the

sales and marketing category, but are you really spending time

in their accounting departments, in their you know helping them

calculate margins, profits? A lot of them don't know how to do

a lot of those things. So how much of the CFO side are you

really doing? A

lot of it. So what what we do on the CFO side

of we're all over cash flow, okay. So we we we help the

business owner. We can improve cash flow fairly quickly. We

have a program called 90 Days to Fast Cash, and it it could it it

can absolutely explode their their cash flow. That's that's

number one. In addition to cash flow, we identify the critical

metrics in the business. You mentioned gross profit; that's

one of them. We so we we identify that those critical

metrics to make sure that so because business owners don't

like to read financials, so we the metrics we

don't know how is what I find is we don't know

how right

and that's okay. But the the metrics help

them understand the financials better without going and looking

at all the numbers and trying to put piece that all together. So

the critical metrics, we tell them the story the financial

statements are telling them, so that they understand the story

that the financial statements are telling them. And of course,

we do forecasting. That's a big thing for us because what

forecasting does, Loral, is it answers the can I afford it

question because everybody has it. Can I afford a new truck?

Can I afford a new manager? Can I afford another employee? Can I

afford a new location? You know the can I afford it? And the

business and cash flow forecast that we prepare answers the cash

flow the the can I afford it question with incredible

accuracy.

I love that. Now you have a five-minute quiz

test.

What it is? Talk about yeah. So

assessment.

We like to call it a diagnostic because it

diagnoses. It's it's five minutes, and what the you you're

going to answer a few questions, and the output is six business

strategies and financial six business or finance and or

financial strategies that your competition isn't doing, you get

to pick the best one, and get a free step by step implementation

roadmap of that strategy.

I love it, and so for all of you that would

like to do that, I know personally I'm going to do it.

I'm going to tell Michael. Personal email, and he's going

to send it to me. But it'll be on the show notes below. So to

follow Michael and to be able to take that that diagnostic, I'm

calling assessment. You want to grab that in the show notes

below as well. If you ever have any questions, you go to

askloral.com. A s k l o r a l. And Michael is your book on

Amazon. Talk a little bit about your dimensions earlier.

I I I give it away. I give it away, Loral, on

my website nextstepco.net. You can download a free copy. It's

my contribution to the business world. I I I

never put

it on Amazon or anything like that.

Oh wow, interesting. All right, any last

words for those that are out there struggling? I'm going to

go for manage the cash flow and increase your cash flow. Okay,

don't

don't keep doing what your competition is

doing.

Yeah, yeah, and you know a lot of people

always looked at my career and said, you know, you you stand

alone all the time, and it's like, now I've partnered with a

lot of people and I do a lot of different joint ventures and

affiliates, but we stood in our distinction for a very long

time, and we'll still stand on it. So fantastic, Michael! I

appreciate you being here, and congratulations on your success.

Great, just I'm going to say simple, but I can see the the

layering effect of your formula. But simple for people to at

least get conceptually, and then they need to hire you and take

your firm with them on their journey back to some better cash

flow and doubling their revenues.

Thanks for having me, Loral. I appreciate

it. A lot of fun. A lot of fun.

Thank you. And all of you that are listening,

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