Keeping yourself healthy is definitely worth the investment and in order to do that, your financial health has to be in tip top shape as well. The financial health doctor and CEO of SIF Industries, Jill James, joins this episode to share her knowledge about financial health. She goes into the details of what financial check ups can do for your business and what are at stake if you decide not to have your finances checked. In addition to this, she gives some amazing tips on how to pitch and get funding for a VC. On this topic, she also talks about having an exit strategy and what you need to prepare in order to justify a VC. In addition, she touches on how to be successful in a small business as she emphasizes the importance of knowing and understanding the economics of your business.
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Financial Health Doctor For Female Founders with Jill James
Our guest is Jill James. She’s the CEO and Founder of SIF Industries, which is a consulting and coaching firm that puts women on the fast track from founder to CEO. She started her career in banking with JP Morgan but she got the startup bug while in the Chicago Booth for her MBA. She’s had roles in product management, marketing, sales, and C-level leadership at six VC backed startups with four exits. She holds a BA with Honors in Political Science and an MBA in Strategy, Entrepreneurship, and Marketing from the University of Chicago. She’s an advisor to Boutique Box and is on the board of many programs and she lives in Los Angeles where I am from. Welcome to the show, Jill.
Thank you, John. It’s great to be here.
Let’s dive into your own story of origin and bring that little intro to life. You can go back to childhood, college, high school, or wherever you want. You had some interest in entrepreneurship and marketing. You had that little a-ha moment that I talked about while you’re at Chicago Booth but if you want to go further back than that, feel free.
I’m originally from a small town in Wisconsin and when I say small town, I mean a small town with 1,000 people with no stoplights. We had a stoplight one summer. It was exciting. Everybody wanted to drive across the bridge and drive in the stoplight. I was there my whole life until I was eighteen and both of my grandparents had small businesses. I grew up going to Northern Wisconsin in the summer and working in my grandparent’s old-fashioned soda shop. From the time I was six years old, I would pull the candy. I love to make the hot fudge sundaes and we made sodas from scratch with the old-fashioned pump and the soda machine.
I grew up doing that and my other grandparents had a trucking business. I didn’t realize it until later in life, but it was interesting to see one that was a true family-owned small business and one that had a little bit more scale. It became a major employer in our area because of the scale of the trucking business. Foundationally, I think of myself being raised by teachers, but I do have a lot of small businesses in my family and a lot of my aunts and uncles have large families. A lot of them have their own businesses. It’s certainly something that was always around me, even though I was much more on academic, go to college, and gets a job track.
I didn’t know what I wanted to do going to college, but I had a chance to explore things at Chicago and I was lucky that I got some great internships and I accidentally applied for a banking job. I thought it was a consulting job. I don’t know how that happened but I ended up working at a bank. I took the job that was the most interesting to me. I got exposed to a wide array of how stuff works but also being from a small town, I had some personal challenges with the idea that the budget of my town was a rounding error for the people I was working with. That was hard for me. I thought we could put that money to better work in the world.
That was the start of my path to going smaller. I got in the tech boom. I went to a couple of tech startups and that was the first exit. We built a trading platform for domain names back when that was the start of that thing with the first opening of ICANN and that’s how I got out of banking. When that all crashed, I did operate back in banking again. That’s how I went banking but that time I went back and I was a financial advisor to individuals with small businesses.
That’s probably the most instructive in my career of learning how the tax system works, learning how personal finance works because as a banker, you don’t know any of that. You know how to make a lot of money on a large scale, but I would work with people who are doing that. They had no idea how the personal finance system worked and they had no idea how small businesses worked. That has been the best job I’ve had for my whole career because I had to learn to sell and I also learned how you make money and how being a small business owner can help you make more money than you may get in a job.
I know that the readers are going to be interested in the fact that you have been involved with six startups that are VC backed. Rarely do I see somebody who’s had that many. I can hear the audience going, “Please ask her what’s the secret to pitching to a VC to get funding?” Did you learn any tricks or tips that you could see that when we say this, they open their pocketbook? One of my sound bites is when you tug at people’s heartstrings, they open their purse strings. A lot of investors I’ve interviewed talk about, “We’re more interested in the team and the idea,” and things like that, but I’m sure you must have some insights.
I never pitched anything that was zero revenue or pre-revenue. For me, it was always, “We have some money. We need to get to the next round. We need to offer some services. We need to accelerate or I need to get this round of funding, but I need the financials and somebody who can help me talk to that side of the business.” What I’ve seen both in terms of they want to see the team, but you also have to understand the economics of your business. That is true, whether you’re VC backed or self-funded and it’s one of the biggest holes in our knowledge as business owners of understanding our unit economics. That’s the foundation of my business.
That’s almost all I do with people, even though we have a lot of things that we call it but it’s helping people understand their unit economics and why that’s powerful. That to me is if you can show that you have the margins on the scale to justify VC, it makes it a lot easier for them to give you the money. If you have already shown that you can make sales without their help and you’re using the money to accelerate and get a better team that also de-risks by a lot. Being able to show that you already have that product market fit and preferably on something that you bootstrap especially for women where it’s harder to get funding, that goes a long way to help them say yes.
I interviewed Brian Smith, who’s the founder of Ugg, those wonderful boots. Once he got his messaging right, it was first sold to surfers. It wasn’t a fashion statement at all. It was only sold in surf shops, but then it took off and he needed all this money to scale so that’s an example of a business that had some proof like you’re talking about revenue. To scale and hit the orders that were coming in, you needed that money. I always tell people, if you want to get your startup funded, whether it’s a seed round or VC route, if you’re got revenue coming in, you need to know your story. You need to have a pitch and you need to know your numbers. One without the other is a no go.You have to understand the economics of your business. Click To Tweet
Even if you have a great pitch and great story and you don’t know your numbers, when they ask you, “What’s the cost to acquire a new customer?” you’re like a deer in headlights. If you’re only about the numbers and you don’t have a story to tell people, what problem you’re solving in a way that is unique and what your secret sauce is and all that stuff that they can then repeat and be proud that they are investing in something. The secret sauce is combining those two things. The other question I have for you, because you’ve had four exits, how important is it to have an exit strategy when you’re trying to get VCs to fund?
It’s important for you as a founder to understand how much money it’s going to take before that looks attractive and what that means for your actual earning potential. In some cases, I’ve seen slips where you’d be better off being self-funded than taking a couple of Angel investors. By the end of the amount of dilution that you accept, you have to be a massive company in order to get any money for you, let alone the people who work so hard for you and stock options. You should look at what’s the potential of the business, what’s it going to take to get there and how many rounds are you looking at before you can hit that profitability point or before the business could be self-sustaining?
Also, is there any off-ramp? Are there breakpoints where if you had to self-sustain at that level, it would be fine? That’s what people have gone through in 2020. It’s like, “There’s no more funding coming. We only have this many months of runway. We’re going to have to be self-sustaining and we were counting on two more rounds.” There hasn’t ever been a thought of, “If I had to do that, what would it look like?” It’s a different mental model of we’re going to grow as fast as we can and find this customer and we’re going to get repeat revenue, recurring revenue, and lock these people in for as long as we can.
Before we started the show, we were chatting about one of your earlier customers. She’s like, “I can sell but I’m not great at making a profit.” That is your own little story of origin of you doing a financial health checkup and it’s so odd to me that most people don’t think they need this because we all know we need to take our car in for a checkup, an oil change, or whatever. We know we need to take ourselves for checkups. If you’re a parent, you take your kids for those too and you should be doing it as an adult too. Somehow with our finances, we don’t want to look under the hood. Can you speak to what the stakes are if people don’t do a financial health checkup?
It brings up your stress and anxiety. I see many people that I start working when I say, “What do you think you’re going to make this year?” They’re like, “I don’t even know what I’m going to make next week. There’s no predictability now. There’s nothing I can count on.” Part of the financial health checkup is finding the things in your business that are profitable at the scale that you need. At this point, I primarily work with self-funded founders so we’re looking for enough margins in their business that we can drive their growth goals and mostly use debt and conventional financing techniques in order to grow their business to where they want to go.
A lot of them are in businesses where they need to prove that they can be a certain size before they could get an investment around $10 million or $20 million and they’re more $100 million to $500 million but they have that potential. We have to figure out where are those margins in your business. Also, get smart about who’s on your team, both in-house and out of house, that extended source team or a professional team of people you need who have the expertise and have an operating budget.
You would not believe how many people have no idea, even with financial statements, what they are spending on their business, and what the required things are to make their business run. In the financial health checkup, we look at how do we stack your revenue in a way that gets you to where you want to go profitably, pay you what you want to be paid, have enough money left over in the operating budget for the stuff you have to pay for, and get you the people that you need so you don’t have to work 100 hours a week.
We talked about how the riches are in the niches a lot on this show and you’re focused, and it’s a great example that you target and work with female founders, who tend to be creatives or not have a lot of managerial backgrounds. If someone is like, “I’m great about animation. I’m a photographer or anything that’s at all creative. I don’t know anything about how to manage a business, let alone scale, hire people and all that stuff.”
It’s clear and it makes it easy for people to refer you and that’s why I talked about having the importance of a great elevator pitch. You need to be able to have a soundbite and go, “Jill James, you’re a creative person and you’re a female founder. She could help you.” It makes it clear and that’s what makes everyone reading go, “Am I that clear on who I help and what problem I solve?” You’ve got that dialed in. I’m sure a lot of your business comes from referrals, is that correct?
Absolutely, and this is the first year I’ve ever done any real outbound marketing and that was only because I wanted to start an offer of a more scaled product. Part of my personal mission is each year to double the number of people that I impact. I hit a point where I could not double without offering some skilled service. That required some outbound marketing and or they define those people who are looking for more of a group planning approach, instead of my one-on-one clients, which come from great referrals from my past clients.
You’ve got some great content here about are we spending or are we investing? Can you distinguish it for us? For some people, they’re like, “I’m going to invest in myself and take this course and learn how to run ads on Facebook,” or whatever it is they’re doing. You’re like, “Are you spending money that’s not going to give you a return on investment?” How do you define the two? How does someone know whether they’re investing or spending?
Spending is the thing to have to do to run your business. Spending is taxes, keeping the lights on, and having internet. It’s those things when LA sends your nasty bill every February. Investing is about things that drive your growth forward and there are a lot of things that we do without intention that should be done with intention like our marketing budgets and investments. If we have inventory that’s an investment. Our branding is an investment and PR is an investment. Many people think of these things as cost centers, “How much is that going to cost me? I’m scared to spend it because it’s not guaranteed that you’re going to get it back.” At a certain point, you have to have a bit of faith and understanding of your business.
If you put $1 in, you can get $2, $3, or $4 out. If the spending has the potential to do that it’s investing. I tried to look at what are the things in my business that if I put $1 in, will I get more than $1 back within a certain amount of time? I make bets on those. I gradually stretch what my comfort zone is to make more and more investments in my business. What I’m going through now is a major rebrand. When I saw the cost, I had a heart attack and I was like, “How much money is this going to put me into this next tier in terms of investment?” This is the payoff over the next months. I wrote the check and I started doing it. Our spending mentality says, “This is scary. I don’t know if I should spend this money.” Our investing mentality says, “What are we going to get back and where will we go into this fuller vision?”Part of the financial health checkup is finding the things in your business that are profitable at the scale that you need. Click To Tweet
One of the things I love to do is help salespeople and we’re all selling. If we’re working for ourselves or our own business, we’re selling ourselves or selling ourselves to get hired or get clients or about getting funding. Taking what I call, boring case studies, I’m sure you have lots of those in your MBA days, banking days into case stories. Can you tell us a story, you don’t have to give the name if you don’t want to, of a client that came to you struggling? They didn’t have what you call a financial oxygen mask on first. We all know that story of putting the mask on yourself before your kid and most entrepreneurs don’t think like that. They’re like, “I’ve got to save the business and I’m not making any money. I don’t have money to pay my mortgage or whatever.” Is there a story or client that comes to mind that you could take us on this journey? The goal for every reader is, “I see myself in the story.”
Some of them I’m still working with. We’ve been working together for a few years. I met her at a conference. I sat down next to her at lunch and started asking her what her business was. She was reselling someone else’s product and I asked super financial questions off the bat. When I meet people, I’m like, “How much do you make? What is your margin?” It’s those comfortable lunchtime conversations you have when you sit down at a conference. We started to talk about this and she said, “I know my margins and they’re fine. I’m reselling somebody else’s products. There’s nowhere I can go with this.”
We did a financial health checkup for her and what we realized was with the connections and the book of business, and everything that she had and what she was adding is customer service. It was super valuable for that customer. She also had relationships with producers in the space so we started looking at first more comfortably, what would we white-label? We make a white label product for somebody else. We started to go down that road and as we looked at it, she said, “I could not get this under my own name. I could sell this directly.” We switched from a resale product that, given the shenanigans the company was playing was between 15% and 20% in growth margin to a product that’s more 60% of gross margin.
We tested it out. There was no harm in floating this new brand and it turned out that her book of business was hungry for it. They jumped on it and the business has taken off over the last two years, in a way I don’t think we even anticipated. When I said, “What would be a nice size of business for you?” That’s about 1/3 of what her business is now. I find it over and over if your margin and you focus on your customer, what they value about what you do, which is sometimes not the product sometimes the customer service making their life easy. There’s a lot of value to that, especially for people in services, anybody who’s running around trying to hustle for money. If it’s time for money exchange, anything you can do to make their life easier then that’s valuable to them. She tapped into that and had a great product that was easy to say yes to but then added customer service on top of it.
It’s been an incredible growth story and having those pillars every time we get into, “The sales are overwhelming. What should we do next?” We say it like, “Does it serve the customer that you want to have? Does this feed into your customer service mentality?” We go back to those pillars and it’s like, “Do this. Don’t do that.” We can have as a foundation and it instantly makes clear, “What’s the right thing to do? Where should we put the money? How should we build this in the next stage?” I loved that we randomly met at lunch and I asked way too personal questions about her business.
One of my other guests, Judy Robinett, wrote a book called How to Be a Power Connector and she says, “Talk to strangers.” There’s a classic example of you talking to a stranger at lunch. You were randomly sat next to if you believe in random things, I don’t but I love that. There’s something else that’s important that you’re able to help your clients with is identifying who you say no to, in terms of clients. Are these the clients that are never going to be happy, want refunds, and demand more of your time than what they’re paying for? Can you speak to that a little bit?
One of the things that I believe in small business is we have to be high margin and high service. That’s the only way to be successful in a small business. When I find small business owners or potential customers who again, cannot wrap their heads around the difference between spending and investing, and what’s it all about. Their comparison point is, “What can I get on Upwork, or what can I get my cousin who’s in college to do it?” I can’t compete with that person but I also know that they have no value and expertise. The time and direct answers that I can get for you, I focus everything on my business. Let’s get to the value that you need as fast as possible and I have a price for that.
If on the first day there’s something that we can do, that’s great. I’m going to tell you. I’m not going to dance through and be like, “The punch lines coming in four weeks.” I want to work with my clients in a way that if we have a great answer, let’s go with that. Let’s do it. That’s the whole point. It’s not to do the process. I have the framework. The framework works but when you hit that moment in the framework. You take off, you run with it. There’s no reason to wait like what many consultants do have, “Let me give you the big report. Let’s get to the end of this.” I want to do everything in a way and I want to have the client and customer aligned, so the minute that we realize what the breakthrough is going to be for the business, we start doing it.
It’s almost like if someone’s going for a checkup and they’re fine but if someone’s coming into the hospital and they’re having a heart attack, nobody wants a process. They want, “Can you save my business? It’s financially running out of oxygen fast. If you see a solution, please don’t make me wait for it.” What a great takeaway. If anybody wants to reach out to you, they can go to SIFIndustries.com, or they can google you that way as well. Jill, are there any last thoughts or things you want to leave us with? A favorite quote or anything?
One of the things I like to say to my clients is, “The world is going to change no matter what. You can lead. You can follow, or you can fight for the past.”
Jill, thanks for sharing your wisdom on how we should all get financially healthy. I look forward to hearing more of your success case stories.
Thanks, John. It’s been great.In a small business you have to be high margin and high service. That's the only way to be successful in a small business. Click To Tweet
- SIF Industries
- Boutique Box
- Brian Smith – Previous Episode
- How to Be a Power Connector
- Judy Robinett – Previous Episode
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