How Fractional CFOs Promote Financial Literacy With Chris Hartshorn

Join Mat Zalk in today’s episode of The Same Day Podcast as he welcomes fractional CFO Chris Hartshorn to the show for a conversation about budget structuring and business financials. Chris details the differences between a C corp and an S corp, his financial literacy techniques, and how CFOs help businesses raise equity.

How Fractional CFOs Promote Financial Literacy

Chris Hartshorn is a management consultant who partners with companies to resolve siloed growth by implementing alternative approaches. He performs consulting services for a Tulsa-based venture capital firm, where he focuses on increasing investment value through direct on-site engagement with the management team. As an Ernst & Young-trained CPA, Chris built and sold a tech company before becoming a fractional CFO.

Here’s a glimpse of what you’ll learn:

• Chris Hartshorn’s background as a CPA — and how he became a CFO
• How did college athletics prepare Chris for the corporate world?
• Advising visionary professionals on budget structures — and the benefits of budgeting
• A CFO’s role in helping businesses raise equity
• The difference between a C corp and an S corp
• Chris shares his techniques for financial literacy
• How Chris transitioned from a full-time employee to an entrepreneur

In this episode…

Visionary entrepreneurs and CEOs often lack an adequate understanding of business financials, developing innovative ideas without considering the underlying costs. Fractional CFOs are trained professionals who create budgets and implement cost-saving strategies to help growing companies capitalize on their visions. What are the advantages of a CFO, and how can they streamline growth for your business?

As a CPA turned fractional CFO, Chris Hartshorn assesses organizations’ operational expenses, growth objectives, and projected ROI to structure an ideal budget. Budgeting promotes accountability and helps you identify key revenue generators and profit inhibitors. By having visibility into your financial structures, you can compare and prioritize investments and make informed decisions about profitable opportunities. Additionally, CFOs can equip entrepreneurs and other leaders with financial literacy. This allows you to raise capital by effectively communicating financial statements to potential investors.

Resources mentioned in this episode:

• Mat Zalk on LinkedIn
• Keyrenter Property Management
• Keyrenter Property Management Tulsa
• Keyrenter Property Management Oklahoma City 
• Keyrenter Property Management Arkansas
• Keyrenter Property Management email address: [email protected]
• Chris Lile State Farm 
• Chris Lile’s phone number: 918-878-7771
• Chris Hartshorn on LinkedIn
• The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries 
• The Founders podcast

Sponsor for this episode…

Chris Lile at State Farm Insurance:

This episode is brought to you by Chris Lile at State Farm Insurance.

Chris Lile at State Farm helps you protect your most precious assets and investments, including home and auto.

To learn more about how you can save double digits on all your insurance needs, visit dialliale.com or call Chris’ office at 918-878-7771.

Keyrenter Property Management:

This episode is also brought to you by Keyrenter Property Management.

Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.

The team helps clients build wealth while taking the headache out of property management.

That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.

To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].

Episode Transcript

Intro 0:05

Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.

Mat Zalk 0:20

Mat Zalk Here I’m the host of The Same Day Podcast where I connect with top business experts and real estate leaders. Some past guests on our show have been Brook Reutter talking about contract for deed versus lease to own options and Scott Reeves of Chickasaw Community Bank talking about commercial banking options are especially important in today’s world where interest rates have taken so many consecutive hikes. Today’s episode is brought to you by Chris Lile State Farm Chris Lile State Farm helps you protect your most precious assets and investments. Whether it’s your home and auto investment rental properties or other valuables called Chris Lile State Farm for a quick and painless phone call to potentially save you double digits on all of your insurance needs. Visit diallile.com That’s diallile.com. Or call his office at 918787771 got great folks at that office that will help you out. Today’s episode is also brought to you by Keyrenter Property Management at Keyrenter Property Management. We are a full service property management company helping our clients buy renovate and operate real estate assets. We help our clients build wealth while taking the headache out of real estate ownership. No matter what rental you have single family homes, condos, townhomes apartments, we have the management solutions that you need, go to que Renner pmc.com or email us at info at keyrenterpmc.com. Today’s guest is Chris Hartshorn Chris is an Ernst and Young train CPA. He was also built and sold a tech company. He worked as the CEO and then the CEO at sale of that business. He’s been serving as a fractional CFO for 18 months. He focuses on early stage and venture backed organizations and his passion is the sport of business. He thrives on helping entrepreneurs realize their dreams, you can find Chris on LinkedIn and connect with him there in case you’re interested in learning more about his fractional CFO services. Chris Hartshorn you’re welcome to the show.

Chris Hartshorn 2:12

Mat great to see you happy to be here,

Mat Zalk 2:15

just bringing the fire out of the gate. I just like to yell at people in the show. Chris Hartshorn fractional CFO, let’s talk about how you got started in this business. Give us a little bit of your history.

Chris Hartshorn 2:27

Yeah, real quick on that. I’ll try to be as brief as I can. But I have in my career really two distinct backgrounds. One is as a CPA from big for public accounting, but train CPA. Second background that was about 10 years of my career was working at a technology company on the operation side, building that company up for an eventual private equity sale as their CEO. And spent the last two years what I say is like those two backgrounds kind of had a baby where I’m a CFO, typically for early stage tech companies where I’ve got this sort of domain experience on the finance accounting side. But I’ve also led an organization from the ops side grown a company so I understand all the pressures that go into that side of the house. So those two, like I said, those two backgrounds kind of melded together to come up with the current offering, which is fractional CFO to early stage companies, typically, they don’t have a huge budget. So we’re looking at working with those companies, anywhere from four to five hours a week, maybe a little bit more, but it’s definitely budget friendly. It works for me at scale, when I’ve got call it seven or eight of those that work for the company or for the investor groups. It’s just a win, win, win, win win.

Mat Zalk 3:47

But let’s take it back even a step further. When I was at McKinsey, we love to hire college athletes here at Ernst and Young. I bet they love that you’re a college athlete, why? Why do big consulting and accounting firms and I’m sure investment banks also love to just hire college athletes. What about being a college athlete? What did you learn in being a college athlete that was applicable to anything later in your life?

Chris Hartshorn 4:13

I would say time management overall, where I’m juggling Division One athletics, what I call a, you know, serious degree, which was accounting and then I will go into just kind of being a student and enjoying that side of the house as well. But I felt like those three areas really kept me on track and kept me focused and leave me a lot of time to get distracted. But you really have to have your stuff together in order to make it through through the gauntlet there. And at least from my perspective, they throw you into 60 hour weeks immediately. And for some people this is very hard for me and I’m not I say this in the nicest possible way. It’s it wasn’t the hardest thing I’ve ever done. I had been doing hard already for for a while they’re in college. So to me it was it was a transition in a smoother transition, I would say, you know than most but that at that college athletics experience was absolutely essential in terms of preparing me for that.

Mat Zalk 5:19

Oh my god. So first two things they say if you want something done, give it to the busiest person in the room. But for me, I transitioned out of college into three years teaching scuba diving, traveling the world being on the beach forever, came back, went to school, again did a master’s, even then it’s like a master’s. This is not that hard. I was learning how to fly a plane on the side doing all sorts of boats, and then boom, hit with the McKinsey train, like 80 hour workweeks right out of a gate, it was just that was that was a brutal transition from, from player life into real life. So I, on one hand, I am envious, that you had an easier transition. But on the other hand, you had a lot of work going up to that. Let’s talk for a second. We were chatting before the show, you know, in our business, I’m the visionary and Robert is the integrator. And he’s great at doing that. And he keeps me in line and he says that’s out of whack. That’s a crazy idea. This one’s implementable? Let’s do it. Your role or some of your role is to speak truth to power to, you know, bring visions down to earth. So sometimes tell people that I guess maybe they don’t have the budget to do it, they don’t have the growth numbers to do it. What’s the what’s the what’s one of the greatest fights? Or what are some of the, I guess, themes for the greatest fights that you have with entrepreneurs in your business, as a fractional CFO,

Chris Hartshorn 6:32

the themes are different versions of kind of the same story all the time as they want to pursue Avenue A or B or C. And the conversations are always very theoretical, until you get down to the brass tacks are the numbers or the budget. And I find that that’s the easiest way to get up to speed with a given company is to say, you have these initial conversations, you understand generally what the goals are, what they’re wanting to do. And those are all fine. And well, you sit down and start looking at the numbers and take, say what has happened, is that an accurate representation of what will happen and then are these outcomes or numbers, things that we’re excited about things we like things we don’t like, and we rewind from there and understand what behaviors or inputs lead to those things. And now you’ve really broken down what otherwise is just like a theoretical cool conversation that have plausible if you will, now saying hey, are you actually doing the right things that will lead you to this outcome that you’re speaking to me about? And oftentimes it’s, it’s not always yes or no, it’s really kind of a gray area? Or maybe or hey, I don’t really like what’s going on over here. This isn’t the best use of our money over here. And this then leads to, to the strategy discussion, why are we doing A or B or C now, reality has been brought to the door, the front door of this entrepreneur that otherwise was kind of maybe running off gut feel, or whatever you have, but now we’re bringing sort of real life to to the situation and now they’re making decisions based on their realities.

Mat Zalk 8:18

You do a budgeting exercise with every, every company that you work with.

Chris Hartshorn 8:23

I do that’s, I would say that that is not knowing exactly where any of them are at, it’s the first way for me to have a working session with that CEO with that visionary is to say, Hey, this is how we’ve been operating right here. Here are the results. Talk to me about is this the path you’re wanting to go down? Is it not? What do we want to change? And very quickly, you’re you’re kind of setting new strategy, as it oftentimes is never like, Oh, this is 100% Exactly what we’re wanting to do. It’s, it’s going to need to deviate a bit. Or maybe the conversation is, we like what we’re doing. But we’re running out of cash a little quicker than we thought we were going to. So maybe that changes our strategy or that changes how we’re going to communicate to third parties like investors about what we’re doing. It really leads to a host of of different potential actions based on on what happens at that initial kind of meeting slash exercise

Mat Zalk 9:26

and do owners, your business owners or CEOs ever say, budgeting is worthless. I don’t need to budget. There’s nothing I can do from a budget. It’s always going to be wrong by definition. Why am I doing this?

Chris Hartshorn 9:39

I would say no, because at this point I’ve been hired and I’ve already stepped through what I’m going to be doing with these individuals. Maybe as a separate conversation or question if I’m in a sales process with somebody that might be trying to convince could use my services and I know they can maybe based on results Sir, other things I’m hearing about their business, I might get that question from an individual like that, but not subsequently to being hired.

Mat Zalk 10:09

So in our business, we I’ve always pushed back on doing budgeting. And we’ve never actually created a budget. Because if you start with the top of the budget, it says revenue, how can you predict what your revenue is in our business, I can say I’ll add a certain number of doors per month. But if I go out and blast as much marketing dollar as possible, out into the world, and there’s just not investors out looking for our services, we will hit our revenue will we will not hit we will miss our revenue numbers. If on the country, its COVID, and everybody’s buying rental houses, we had no idea going into 2020, had we been doing a budgeting exercise that we’d add, you know, three times the number of properties that we would have budgeted for had we budgeted. And then everything cascades down from there, if our costs are our property managers, and we’ve got to scale them faster, or whatever else, I just thought it doesn’t make sense to budget because it doesn’t matter how much money I throw at marketing, I’m never going to be able to predict how many doors are going to come in in a given month, or quarter or year. So I’ve always pushed back on that. And I wonder how many other people suffer from similar situations where if they can, they can always like on Google, I can’t spend any more money on tapped out, you cannot get 100% Share of Voice on Google search. And it doesn’t matter how much money I spend, if I open the coffers all the way and I’m willing to spend a million dollars a year, there are just not that many people searching Property Management search terms on Google to eat up all that spend. What do you what would you say to a company that kind of fundamentally says, you know, the revenue numbers are always going to be nonsense.

Chris Hartshorn 11:40

So just taking a step back on that question, to me, the number one benefit of budgeting is accountability. And so we can we can step through this on the revenue side. On the expense side, let’s start with with revenue, right where you’re saying, some of this is just a guess there’s a lot of different ways to look at this a goal, if you will, like you might say, we want to grow at X percent, you don’t exactly know how you’re going to get there. But you just want to see what it looks like and you pick you’re trying to achieve it, that kind of thing. You may have more inputs into what you’re doing. You’ve spoken a little bit about, you know, search engine marketing, or dollars we’re putting in that we think will translate to revenue, how are we measuring our return on investment to the extent that we’re losing margin or are completely on the negative side, we’re going to stop those types of activities, right, where like, that just doesn’t seem to be as beneficial, as it once was, yeah. And then moving down into the just what I call operating expenses, or what some might say, overhead, or, Hey, to incur these costs to run a business, we’ve got salaries and wages for the people that we employ, that maybe aren’t directly revenue generators, but you need them because they’re going to straight up people, they, they, they support you and your efforts and ability to go out and run the business, you pay rent, you pay utilities, you have some, you know, insurance, other things that might be a little bit more variable. But if you don’t understand what these are the expectations of what they should be, they may increase on you and you wouldn’t necessarily know something’s wrong, or you wouldn’t necessarily know why. Right. And you may, it may not be your specific situation. But if you if you miss on one, or multiple or significantly on one of those, this could put you into a cash management issue position where you’re now having to make a decision based on distress, which you wouldn’t otherwise do if you hit properly plan, and done a budget and either one understood that you did need to get additional financing at some point or now you’re having to get financing, but you didn’t think that you were going to so now you may have to take on terms that you wouldn’t otherwise have wanted. It’s there’s a lot of benefit. But I would say in summary, it’s really that accountability piece.

Mat Zalk 14:09

It’s a good point, though, if you’re gonna go out and raise debt from a bank or go to investors and raise raise equity and raise an equity round from investors who want to be doing that well in advance of the actual need for it.

Chris Hartshorn 14:21

And even there, if you read the fine print, and most all of those agreements, you have to produce financials and an annual budget. They they want that they want to know what to expect for a number of different reasons. I would say from that investor’s perspective, they want to know that you have a handle on your business. You tell me your best guess of what how you think things are going to shake out over the next year. And I want to see what you’re actually maybe stress testing are what variables you’re putting into this thing that you’re guessing at that you think could maybe go completely wrong. It could be average, or it could go really well what are you thinking are the drivers of your business? As that could move the needle, I want to know that you have a pulse on your business and that you understand your business

Mat Zalk 15:06

at an intimate level, what’s the what is the most significant role that you play, when one of your clients say a startup business goes out to raise an equity round,

Chris Hartshorn 15:22

I am the bridge between a board of directors or investors and that client. So let’s just a little bit about the profile of what a client typically looks like for me is that if I’m an accounting finance person, they’re the complete opposite of that. So when they’re speaking to sophisticated individuals, accredited investors, they are able to speak about their product to their technology, whatever their special secret sauce is, they’re very good at articulating that what they’re not good at is understanding what’s being said back to them, when it starts getting into that accounting, finance world of the valuation of their company, the financial statements and what means what they maybe answer things in a way where they’re interpreting something but not getting it correct. And then the board or the other side is hearing something that they’re taking for being correct, and it’s not and then all of a sudden, you’re you’re kind of the trains off the tracks. And I’ve seen that happen quickly, where I’m going to step in here, I’m going to be that person that’s kind of directing traffic and making sure that nothing’s lost in translation. And also letting that my client, the entrepreneur, focus on their highest and best use, which is often building their business, figuring out who their customer is, who their market is. And these things are crucial for them to, for one to stay in business to have viability long term, certainly, what my domain expertise for them, it’s just not their highest and best use, they’re not good at it, they could maybe figure it out, but it’s not worth their time. And their time is money.

Mat Zalk 17:05

How many of your clients do you go deep into the personal side with so the businesses may be an LLC? And it passes through on a god no schedule C or Schedule E or whatever? The heck that is, all the income from the business passes through them directly? Do you get involved in understanding their personal financials and what they’re doing with their money, how they’re investing it outside of the business to make sure that they’ve got a, I guess, a diversification of that of the wealth that they’re generating?

Chris Hartshorn 17:38

I am doing that with one specific client. I wouldn’t say that that’s the profile, the client that I’ve been speaking about here today, but I do have one, a client that is a physician, entrepreneur and multiple entities. And we’ve spoken at length about why they’ve chosen to select certain entities for for their business, in what purpose and ultimately how that translates into cash for in their pockets. And then also, to your point, what what else we can do with someone like that to diversify their current revenue streams are future revenue streams, and what investments they might be able to make where they can, at one point retired and not rely upon the revenue they’re currently making back providing the service that they’re providing, but that they can set themselves up to have sort of this annuity, if you will, of stream of cash in the future when they decide that they no longer want to do

Mat Zalk 18:40

what they’re in, in that capacity or in the capacity of advising being a fractional CFO for tech businesses. Do you get involved in the selection of S corp versus C Corp structures for the businesses?

Chris Hartshorn 18:57

In the in the in that world? Typically, those structures are C corpse. And that’s for for the purposes of protecting the investors, they then they like to invest in this type of structure and keeping that separation between the personal conduit side and in the business so that you’ll often already see that in place that you’ll see that as being often a requirement to take on what we call institutional money.

Mat Zalk 19:26

And is that like a Dell? Is that where you hear like the it’s a Delaware corporation or something? Is that going to be a C Corp when and when a venture company is raising money?

Chris Hartshorn 19:35

Yes, often they will incorporate in Delaware which doesn’t necessarily that doesn’t mean that they’re headquartered there doesn’t mean that that’s where they do business you can incorporate wherever you like, in a succinct way as I can possibly say the laws in Delaware are friendly to the employer, which is why you see a lot of employers incorporate there is just kind of a General precaution is that the laws that are typically favor employers.

Mat Zalk 20:05

So at a high level, what’s the difference between a C Corp and an S corp, you alluded to the fact that C Corp wouldn’t generally be the structure, if you had a bunch of investors, when would somebody use an S corp.

Chris Hartshorn 20:18

So the difference between a C Corp and an S Corp is the C Corp is taxed at that taxable entity level. Whereas an S Corp is what we call a conduit or a pass through or the net income or bottom line in that particular entity flows through onto your personal tax return. And you’re taxed at the personal level, on that S corp on the Escort basis. And then just to pivot back to the C Corp as it relates to that tax piece, what’s happening is that you’re not only then taxed at the income that’s made at the entity level, but if you were to then distribute those funds to yourself personally as say, maybe a dividend, you’re now actually paying tax on that as well as an individual. So this is called this double taxation effect when you’re when you’re in the C Corp, but

Mat Zalk 21:10

so that all your investors, if you had a bunch of investors, the corporation is paying tax, then the the investment distributes income to the investors, and then the investors also pay tax on it. Why wouldn’t an investor want that double taxation? They don’t. For what,

Chris Hartshorn 21:28

for what you’ve mentioned, there, you’ve listed you know, if you’re talking about a pros and cons list, you’ve kind of listed one of the cons there. However, a lot of times investors are not necessarily taking distributions, they’re leaving everything in the company, they’re gonna sell it, or consolidated or do something else, at some point down the future. So when you like, okay, there are pros, there are cons, which way we want to go, a decision needs to be made. But what we’ve kind of spoken about here would definitely be on the cons list in terms of cashflow side that the tax payments side,

Mat Zalk 22:04

but then even if there are a bunch of investors say you had 50 investors in a in a venture back business, and it was a an S corp, sorry, the net profit at the end of the year would actually technically flow through to them even if it wasn’t distributed. Is that right? I mean, they say that the government would say, here are the profits. Here’s your share, you own Mr. Mrs. investor, you own 10%. Therefore, you must put this on your on your on your personal tax return as a 10% gain, is that right?

Chris Hartshorn 22:37

I’m gonna throw the flag on you and honor something you just said there because an S corp cannot be owned by other corporations. So this is another kind of Galletti an S corp has to be owned by individuals. Okay, so yeah, that wouldn’t necessarily be possible for other corporations to own

Mat Zalk 22:55

an escort. Okay, so as soon as you get into a place where there’s an you’re taking on money from an institutional investor, from CalPERS, or something like that, you’re you’re automatically going to be in the C Corp realm, because they won’t invest in you if you’re an S corp anyways.

Chris Hartshorn 23:09

And that’s a good way to summarize it without getting too far into, into into things where you’re having that legal separation, we’re often like the entity you mentioned, right, there is highly incentivized to keep all their business dealings very compartmentalized and separated. If something were to happen on one side of their business, it would negatively affect other things they have going on.

Mat Zalk 23:34

What are some tools and techniques that you use to kind of bring, bring more financial literacy to entrepreneurs that are out there? Just hustling? I mean, you’ve talked about the budget, we’ve talked about a couple of other things. But like, in practice, when an entrepreneur is just running gun, and they’re a visionary, they don’t see numbers. And since they want their business to succeed, how do you bring them back down to the real world? And I can think of, you know, a ton of people that I know that are just ideas, people, they love ideas they’re they’re passionate about, about building businesses and generating ideas and new new avenues for their businesses. How do you how do you bring them back down to earth?

Chris Hartshorn 24:14

Well, so it starts with what they have going on today. Right? We’re we want to make sure that we have a handle on that piece, right? Because if you’re, you’re trying to make decisions about go or no go about any future potential opportunity, really that one of those factors is is how staple is my footing today. Right? If you don’t understand that you could make a decision that’s potentially not one you would make otherwise. So, you know, we’ve already kind of at length spoken about what are we doing today? How’s the business going today? What are the inputs or outputs to those produced? Do we have that under control? Do we have a plan? Okay, let’s assume that answer is yes. If someone’s seriously considering other potential investments or opportunities, we’re going to look at those Maybe from a modeling perspective and look at those from a worst case, most likely case or best case, and then understand whether that’s a good use of money, if it’s, if we’re comparing that to other investments that we’d otherwise use that cash for is that we have a better return on say investment B versus investment A, and then oh, here’s investments, see, let’s look at worst best, whatever case scenarios, and see what that looks like. And that’s just the straight financial side. But it may be like, Oh, is this other opportunity, a complementary to our existing business and could enhance what we’re doing, or we get some other sort of cost optimization or some other benefit that is, in bringing these two businesses together? Okay, well, let’s look at that, where we’re not getting that with, say investment, B, or C, where that’s maybe unrelated or something totally different. We’re looking at all the moving parts there to understand again, if decisions should be made, not made. And all the while, you know, to your point, I’m, I’m speaking to this person at a level that they’re willing to be to meet me, I’m not speaking to this person in a way that I’m trying to sound smarter go over their head, because that doesn’t, that doesn’t help them. Right. I’m reading the room, I’m understanding this person. And we may be talking very, in very simple terms about these things.

Mat Zalk 26:29

I mean, so I mean, so much of what you’re saying is what a on the consulting side, what Ernst and Young would do what McKinsey would do. I mean, it’s, you have this, you have this little honeypot here, it’s a business doing well, maybe it’s not. But let’s assume for a second, it’s doing well, and we want to go into a different market. We sell cars, we want to know if changing oil is good ancillary business, whether selling tires is a good ancillary business, talking about total addressable market, we talked about what share we can get, how much of that market we can get, I should say, how much it would cost us to get into that market, and then what the returns would be so you take a it’s a it’s like a full consulting suite of services. So if you’re the CFO, perhaps driving it, the fractional CFO driving it, but it sounds like you offer a whole host of consulting services, and maybe you’re not doing it, maybe you’re leading through the team and you’re saying player, a player B player, see on your team, Mr. Entrepreneur, Mrs. Entrepreneur, they’re the right ones to do this. Why don’t they get this together? And let’s sit back down for a meeting and discuss it and put it all together and see if this is a good move. Does that sound right? Yeah,

Chris Hartshorn 27:27

I would say just to, you know, just specifically based on what you just said, there, I wouldn’t be the one that is creating this, let’s just call it this deck that you mentioned, where you’re, what does this market look like? How many people are in it? How much can we cover? How much do we think we can sell? Well, what I am doing is I’m looking at an entrepreneur’s deck who just created what you mentioned. And I have an outsider’s perspective where I’m saying, hey, all fine, and well, but maybe think about these problems in this area, or this kind of looks a little funny, we may want to revisit that, or hey, this is super risky, like I would consider pumping the brakes on something like this. And I’m providing that kind of objectivity that these people have been maybe, to use analogy, they’re in the forest, and they can’t see the trees, they’ve been in there so long. If they can’t, they don’t, they don’t know what they’re looking at any longer. And I’m coming in and saying Hold on a second, like some of this just flat out doesn’t make sense. Or, hey, this angle certainly does make sense and is maybe a little bit more lucrative, like highly considered doing that. Or that may be an avenue to allow you to unlock option B or C or D, let’s pursue option A, the risk the whole situation and live to fight another day for option B, C, D, which may be more, say on the growth side or expansion side.

Mat Zalk 28:48

How did you transition out of so let’s just say Ernst and Young CPA, that’s generally speaking, personality wise, the most risk averse portion of our of our society into being a CEO of a business that ultimately sold into private equity seems riskier in terms of personality type that would be attracted to that role into pure entrepreneur. How did you transition? How did you find the transition from kind of paycheck through to entrepreneurship? To me,

Chris Hartshorn 29:22

I was I knew going into Ernst and Young that I was not going to be on what they call this partner route or this true accounting route. I was in Ernst and Young for what they call a finishing school, which is basically to say, No, it’s not a grad degree, but it is a big name on a resume and what did it allow me to get my CPA, my work experience and it’s, quite frankly, a name that I drop once or twice or three times a week, and I have my my whole career and kind of carries its own way. But to me that that traditional world of CPA auditing or what I call backwards looking, is was always a means to an end which was I want to use this knowledge At some point to be forward looking or focused on growing businesses and understand what where we’ve been to understand more about where we’re going, or what I call or like to refer to as the sport of business. So the exciting part, which was like, Okay, this is gonna be my springboard to do something else. And the operation side for me was an opportunity to see a different function within a business and grow within a sock was a software as a service, SaaS type business and understand what it was like to serve customers to, to run people that are producing the product and manage those groups, service delivery, excetera, and ultimately graduating up to the to the head seat there. So to me, it was like an opportunity to become more well rounded for whatever the future was going at going to bring me.

Mat Zalk 30:53

And what’s the greatest challenge of entrepreneurship in your mind?

Chris Hartshorn 31:00

I would say it’s deciding which strategy or path to take, where I see very, it’s very common that there’s there’s a lot of conversations about what should be done. And all of them are plausible. And all of them maybe, are good ideas. But in what order? What timing, what comes first, what comes fifth? What is a non starter? If you don’t do something beforehand? Those are conversations that I have every day, which is, is this the best use of our time? Is it what should we should be doing today? Is it what we should be doing in the next week, next month? And that’s where the, there is no right answer, necessarily, where I have my thoughts. And my understanding, again, is kind of an outsider to the business in this perspective, but it is a challenge, because I can tell you that you may not know it at the time. But if those decisions are made poorly could have ramifications, which could ultimately lead to the end of your business.

Mat Zalk 32:07

How long does it generally take you once you’re inside a business to get to grasp the like, tougher nuances of the business, the the trade off between two potential opportunities, the synergies between the opportunities, maybe even some of the more things, the more complex things that I can’t think of now, that are really the nuances that make it challenging.

Chris Hartshorn 32:32

I’d say one to three months, depending on the complexity of that business, and the the identification part, right is one thing, and then it’s your communicating and then whether that is is acted upon whether that is something else is done is totally different. And that’s not something you can necessarily control. But again, instead of benefit of that outsider’s perspective to say, hey, maybe I’ve seen this before, I’ve seen things like this, or I see symptoms of something that could end up being bad, doesn’t necessarily mean that will happen. But hey, let me let me just explain to this entrepreneur potentially, that is driving down this bumpy country road that, hey, I’ve been down this bumpy country road. I know there’s potholes over here on the left side. So you might want to stay over here on the right side. And some of this advice can be taken some of it maybe not so much. But that is not ultimately, you know, up to me, but I would say for the most part, if they listen to you more than they don’t, you’re probably doing a good job.

Mat Zalk 33:38

Are you would you say you’re a student of business? Yes. Who are some of your greatest mentors, role models, business, maybe famous business people? Let me see here. I would say,

Chris Hartshorn 33:59

see me on the spot here a little bit. But as it relates to what I’m doing now, which is, you know, is more startup business like I would say a gentleman that wrote The Lean Startup, I believe his name was Eric Ries is something that I that I’m kind of constantly either directly quoting or somebody that I often just kind of generally referring to, when it comes to the validated learning process within startups and how important it is to understand that what you’re what you’re doing today is not necessarily what you’re going to be doing tomorrow. But ultimately, if you’re executing a validated learning process, you’re going to, you’re going to come to that answer a lot quicker than you would if you did.

Mat Zalk 34:50

Interesting, The Lean Startup theleanstartup.com. They even have a whole website must be a whole toolkit for for kind of implementing Lean Startup principles

Chris Hartshorn 34:59

around its uses. Is the attends to offices, you’ll see about 20 copies of that on their shelves. So they’re

Mat Zalk 35:04

just from their library. Right? I love that. Any other any others historical figures, I mean, I love Henry Ford, Charlie Munger, obviously, he’s a brilliant, brilliant mind in business. They all say they’ve all got amazing quirks. And I was recently listening to the founders podcast, and he was talking about Charlie Munger discussing businesses just a series of problems that if you view the problem, as just part of business, you’re gonna solve it, move on, you’re gonna face another problem, you’re gonna solve it move on, it doesn’t matter where you are in the room on what rung of the ladder, you’re always going to have a problem. And so business is solving problems, whereas many people view the business is going in hits a problem, and that’s like a some sort of, you know, insurmountable, impossible thing. It’s like, No, that is just business. If you want to be a business person, you will always have a problem to face and a problem to solve. That’s a kind of the way Henry Ford looked at it, too, was kind of this lean operation, always, always improving. The, you know, the the Kaizen philosophy, the Japanese philosophy before it was perhaps even known to us is that but that was that was his approach. Any others that come to mind for you in terms of what’s what’s shaped your business philosophy?

Chris Hartshorn 35:08

I mean, I’ll run with that one for a second. You know, at some point, when I was going through my own personal marketing, of how I accurately describe what I do, or succinctly describe what I do if I was saying, Hey, can I simply just say that I’m a problem solver? Will that like sell my services for me? And then I think the answer to that is no. However, when I, if I had to describe in a short sense, what it is I do it is problem solving. It may be through a financial lens, or it may be through other means. But to your point, a business is nothing but a number of different problems that you solve. And then you kind of put all those solutions together ultimately, that maybe looks like what success is. But I’ve I’ve yet to come across a business that doesn’t encounter problems and doesn’t have a way of methodology to go about resolving those types of things. And I’d like to think of myself as this independent, neutral third party, not biased approach to work with these teams to say, hey, can we can we work through these issues? Can we come to a resolution, can we move on and move to that next stage of company where we’re going to encounter that next set of problems, and then we’re going to be that much better off because we understand how to work through it, and that we will work through it, we may not know exactly what we’re doing today. However, between all of us and, and how we work, at some point, we will come to a resolution that we all feel comfortable with. And then rinse, wash, repeat. So I see this,

Mat Zalk 38:07

at some point. That’s why being a business owner leaves you with impostor syndrome, it doesn’t matter what size of business and how complex, it’s like, you’re always at the edge of solving another problem. Or you’re always you saw one problem, and then you’re faced with another one. And that could come from a greater number of colleagues or employees in the business, it may come from expansion into new markets that you hadn’t previously dealt with, there’s always little issues, and it always leaves you as an entrepreneur. In my experience, it always leaves me feeling like a it’s kind of a house of cards be. I’m always, I’m always pushing myself beyond comfort levels beyond stuff I’ve already solved, etc, which is not always a comfortable situation, it can be far more comfortable to have a normal job, right? I get to the Bake Shop at five in the morning, I mix water and dough and yeast, I let it rise for an hour I put it in the oven, it comes out the same every day. You don’t have those problems. So it can be it can certainly be a challenge being an entrepreneur, because you’re always on the cutting edge,

Chris Hartshorn 39:08

so to speak. Yeah, I am not sure who quoted this. But it’s something that somebody told me once, which I think about a lot which was, the sooner you can get comfortable with being uncomfortable, the better off you’re going to be because oftentimes what that means is you’re being pushed to do something you know, you should do, you know you have to do, but it’s not your favorite thing, or you don’t know exactly how to do that. And I think to your point where you’ve, you’ve had some successes and entrepreneur is that as you encounter these problems as you overcome them as you build your confidence and know that hey, I don’t exactly know how to solve this problem. But I’ve solved a million of these like them in the past and they’ve always generally come out. Okay, that just gives you that competence to continue doing what you’re doing and understood and that this is part of the gig and that’s when you solve that one. It’s congratulations there’s there’s going to be more.

Mat Zalk 40:09

Chris Hartshorn and Ernst and Young train CPAs also built and sold a tech company worked as the CEO and then the CEO at sale. He’s served as a fractional CFO for 18 months focusing on early stage venture backed organizations. He’s got a passion for business and his passion is the sport of business. And he thrives on helping entrepreneurs realize their dreams, Chris, I appreciate you being on the show. This is fun. This was great. Thank you. Great host Thank you. See ya.

Outro 40:43

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