Summary
In this episode of The Ecommerce Finance Podcast, Stephen Brown and Mark Lupton discuss the intricacies of strategic finance in the ecommerce sector. They explore the importance of understanding exit strategies, aligning founder goals with business strategies, and the significance of long-term and medium-term planning.
The conversation delves into the common pitfalls in strategic finance, the role of intuition in decision-making, and the necessity of financial planning and budgeting. Mark emphasizes the importance of identifying blind spots and bottlenecks in business operations and the need for continuous learning and adaptation in financial strategies.
Takeaways
- Understanding what you want from your business is crucial.
- Aligning personal goals with business strategy prevents tension.
- Long-term vision should consider life stages and personal fulfillment.
- Medium-term planning focuses on enterprise value drivers.
- Prioritization is key in strategic planning for growth.
- Intuition plays a significant role in decision-making.
- Identifying blind spots can prevent costly mistakes.
- Financial planning should extend beyond the P&L to the balance sheet.
- Learning from budgeting helps improve future decisions.
- Smaller businesses can benefit from strategic finance practices.
What We Cover:
- 00:00 Introduction to Strategic Finance
- 02:51 Understanding Exit Strategies
- 05:23 Aligning Business Goals with Personal Vision
- 08:02 Long-Term Planning and Vision
- 10:40 Medium-Term Planning and Strategic Finance
- 13:27 Prioritizing Business Growth
- 16:17 The Importance of Strategic Thinking
- 18:45 Avoiding Common Thinking Pitfalls
- 21:38 Navigating Growth and Leadership Challenges
- 26:37 Understanding Founders’ Strengths and Weaknesses
- 28:44 The Importance of Measuring Progress
- 30:27 Bottlenecks and Strategic Planning
- 32:17 Annual Planning and Budgeting Essentials
- 35:46 Strategic Finance Beyond the P&L
- 38:27 Debt Strategies and Cash Flow Management
- 41:13 Learning from Budgeting and Forecasting
- 43:50 Applying Strategic Finance to Smaller Businesses
- 46:23 Common Pitfalls in Strategic Finance
Guest Information
Mark Lupton founded Greenhouse CFO in 2021 to empower founders to grow their companies well. He leads a team of consumer brand-focused CFOs who provide strategic financial leadership to 8-figures consumer brands by bringing financial clarity, improving operational efficiency, and implementing the right financial processes for healthy growth. Mark also works directly with founders to navigate the financial complexities of scaling. Notably, he has served as CFO of Carnivore Snax for 3 years on their journey from $2 million to over $30 million. Additionally, he serves as a strategic advisor to DTC fintech companies, leveraging his operational CFO experience to help develop solutions for emerging brands.
Prior to Greenhouse, Mark was a partner at a consulting firm providing fractional CFO services, FP&A analysis, and executive advisory across multiple industries. He supported several clients in securing multi-million dollar raises.
Mark holds an MBA with distinction (entrepreneurship and finance) and a BS in Engineering. He began his career as an engineer at a Global Fortune 300 company.
Work with LedgerGurus
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Transcript
Stephen Brown (00:00)
Welcome to the Ecommerce Finance Podcast. I’m Stephen Brown with LedgerGurus. Today I have Mark Lupton, who is the founder, director and a CFO, a fractional CFO with Greenhouse Business Advisors. Mark, thanks for joining me today.
Mark Lupton (00:15)
Glad to be here, Stephen. Thanks so much for having me.
Stephen Brown (00:18)
So Mark, we’ve gotten to know each other. We have some mutual customers and we’ve had some great conversations. Before we dive in, we’re going to talk about strategic finance today. But before we dive in. Tell us a little bit about how your background and how you got into ecommerce.
Mark Lupton (00:34)
Yeah, absolutely. So a Greenhouse Business Advisors got started four and a half years ago. But before that, I was working as ⁓ as an analyst in a fractional CFO firm. And I learned a lot about the ins and outs of ecommerce, the ins and outs of consumer brands and what to look for, what drives growth, what drives ⁓ success, what drives failure oftentimes too.
And through a course of a few years, I ended up becoming a partner in that firm and then broke off and started Greenhouse myself. And that was four and a half years ago, like I said. And so over the last over that period of time. We have grown to serve over 30 different clients. And we have a team of about four CFOs. Some are joining the team now and even ⁓ in the process of hiring another right now. And so that’s sort of the foray into
ecommerce and a little bit about Greenhouse.
Stephen Brown (01:33)
Awesome. We want to talk about strategic finance. And when we were preparing for this, we decided let’s talk about kind of a long vision. And one of the hardest questions to ask any owner What is your exit strategy? What is your plan? Tell me, why do you start there?
Mark Lupton (01:36)
Mm-hmm.
The most important thing a owner to understand is what they want from the business. Oftentimes they think about what they want for the business and that is most pressing and very clear in everyday operations.
You want the business to grow. You want the business to become larger in size. You want it to have a larger impact. You want to have more sales. You want to hire more people, et cetera. But the question that I often see ⁓ missed is what do you want from the business? What lifestyle do you want from this thing? What’s the dream that you have for yourself in 10 years, 15 years, 20 years? And so The answer to that question may be very different than what the business is trying to become.
And if there’s a big difference between those two things, it creates a level of tension, a lack of clarity for the organization, a tension internal tension for the founder. And ultimately what the founder wants from the business drives strategy. It is the end game. And, ⁓ And so that’s why I start there is because I’ve seen it really create an untenable tension,
inside of a founder and create a lot of lack of clarity, a lot of ⁓ decisions that are not aligned with a consistent set of values and direction. And as a fractional CFO, if I don’t know clearly where the company’s trying to go, then I can’t serve the business as well as I need to. And so that’s the biggest reason why I’d say.
Stephen Brown (03:24)
It’s a hard question to answer. you know what you’re, what you want from the business with Greenhouse? If I were to ask you that question, do you have an answer? ⁓
Mark Lupton (03:31)
Yeah, I do.
And well, I will say I have an answer, but I do think that the most important part about that question is not having the right answer, but having an answer at any given time so that you know what you’re aiming for and that it’s not subconsciously driving you, but it’s driving you consciously. It’s in the foreground. And so for Greenhouse, what I want from Greenhouse personally is
Stephen Brown (03:44)
Hmm.
Mark Lupton (03:59)
not some big exit to PE necessarily. There’s nothing wrong with that. I think that’s a fantastic thing. ⁓ Truthfully, it’s not even financial. It’s financial in so much that I can provide a good lifestyle for my family and provide for my family’s future. That’s what I want from Greenhouse financially. But really what I want from Greenhouse is something that it can’t fully give, which is some level of fulfillment what I’m doing.
I want to do meaningful work that has a meaningful impact on the business owners and those in their care and under their That is what I want from it. I want it to bring me a level of purpose fulfillment that only type of work can bring. And are of course other things that bring purpose and fulfillment that are far beyond work, but that is certainly a key part of it.
Stephen Brown (04:50)
Give me an example that you’ve seen where there’s a disconnect between what business owner wants from their business and they’re operating. Like, do you have a tangible, I mean, obviously we want to anonymize, but give me example where that disconnect has caused issues.
Mark Lupton (05:02)
You
Yeah. So was working with, well, I guess we’re still working with them, but I was working with a founder of a consumer goods CPG particular company that had a strong Amazon presence and wanted to get into retail.
With this idea that this is a retail product. This is what the thinking was. This is a retail product. And so we really need to get into a lot of doors. We need to get into a lot of doors across as many regions and chains as we And we can do that relatively quickly well, there’s competition that’s gonna you know fight against us. And so we need to expand quickly. And the way that they wanted to do that was going to require quite a bit of outside capital.
Quite a bit of ⁓ necessary loss of control and less, yeah, a lessening of their ability to steer the direction of the company. And, once you get on the venture capital treadmill, it’s very hard to get off. so that is, that was a pitched strategy, an operating strategy in mind. When I asked about what the business owner
pictured for himself in 10 years for the company and what he wanted from it. The answer was a lot different than that strategy, which was, I’d like to create a legacy business that I can see my kids working in.
Stephen Brown (06:17)
Hmm.
Mark Lupton (06:18)
There’s a natural difference between those two. One requires a level of control and a growth strategy that enables that to happen. Another one requires a loss of control for the sake of large financial growth. Neither are inherently better than the other, for instance, right? But they’re competing.
Stephen Brown (06:20)
Yeah.
Mm-hmm.
Gotcha! That’s great example. Now let’s say you know what you want long-term personally as an owner. What other long-term do you ask a customer?
Mark Lupton (06:48)
Hmm. I’ll ask about, gonna keep going into the, through the founder’s lens, okay? So I’ll ask about where they envision themselves. Sounds kind of odd for a fractional CFO to ask these things. I think it’s directly tied to financial strategy and that’s why we’re talking about it here, right?
Stephen Brown (07:06)
Yeah.
Mark Lupton (07:07)
Close your eyes and picture the desk that you’re sitting at, the people that you’re walking around, the activities of your five years from now. Do you picture yourself in a corner office of a building with a bunch of people? Do you picture yourself at your desk in your room? Do you picture that you’re making phone calls? Do you picture that you’re in spreadsheets? What do you picture for your life during that time? And you can actually, when you really parse that out.
You can hear a lot of assumptions, a lot of structural assumptions around the businesses, what the business would have to be like in order to support that. And so I’ll ask that. That’s another more personal question. ⁓ Other things I’ll ask, and again, we’re shifting from the what do you want from the business to what do you want for? So what do you want from? Those are the types of questions. What do you want for the business? It’s a different question.
There are a lot of things that dictate enterprise value growth. A lot of things. ⁓ and it’s not just the financial statements and what they Buffett talks about the moat. Everybody’s heard about this before, right? It’s not just the financial statements that generate that value. And so we want to think about all the different parts of the business that need to be strong in order to raise that overall enterprise value. And enterprise value really just is a
proxy for health in many senses. think in the best senses, that can be argued, but in the best senses, it should be a proxy for the health of the business. And so we’ll think about things about ⁓ competition. We’ll talk about go-to-market strategy with different products. We’ll talk about what channels, lines, talk about…
the types of margins they’d like to see things along these lines as what do you want for the business?
Stephen Brown (08:51)
Okay, so that you say long term, what do you think about 10 years, 20 years, 30 years?
Mark Lupton (08:54)
Mm-hmm.
I think about generally 10 years is where I think for long term. And this is not a ⁓ standard that I’m saying you should have. But I do think about 10 years because it’s, it’s another life stage. Five years feels like you could live in the same life stage and be five, you know, five years from now, depending on your life stage. But 10 years is like a jump in life stage. So generally people are thinking about, ⁓ that’s a far enough distance of time away to where I’m thinking about.
Am I happy doing this then in a new life stage? So that’s what I’m normally thinking about. And again, I’m operating a lot in the question that is, what do you want from the business as a founder?
Stephen Brown (09:38)
I agree with you. I think 10 use EOS, entrepreneurial operating system here at LedgerGurus, and they talk about a 10 year vision. And sometimes I’ll ask people, Hey, where do you want to be individually 10 years? It’s kind of hard to wrap yourself around 10 years, let alone 20 or 30. I think that’s probably a good time horizon. Plus you think about things, how much change can happen in 10 years, know, 10 years ago, just looking at ecommerce.
it was really entering this.
This era of, would say it’s ecommerce 2.0 where Shopify and Amazon sellers, like I think those technologies have been around a little bit longer, but really kind of hitting that, sweet spot. And, and think about, you know, we had this huge ramp and then the last couple of years has been really hard. And then 10 years before that 2005, or even, you know, you were still building, there was some platforms.
But it was still very raw. Like the customers I’ve worked with from that era, sometimes they’re still on really old homegrown tech. And then 10 years before that, like you would have to build, you’re building servers, right? You know, it was like Amazon and eBay were ecommerce. And so, yeah, I think when you think about the, just from the business landscape, how much can change in 10 years, it’s hard to envision beyond that. right. Let’s kind of take a,
Over the past 30 years, the ecommerce landscape has evolved dramatically. Ten years ago marked the rise of ecommerce 2.0, with platforms like Shopify and Amazon empowering sellers and reaching new heights of accessibility and innovation. Prior to that, the market was still developing, and many businesses relied on homegrown technology and basic platforms. Going back another decade, ecommerce was dominated by pioneers like Amazon and eBay, with companies building their own servers just to operate online. This progression underscores how much can change in a decade, making it challenging to predict beyond the next major shift.
Mark Lupton (10:43)
Mm-hmm.
It really is.
Stephen Brown (10:56)
Take it a step closer. So let’s say you have a sense of where you want to be in 10 years. Let’s say, I want to, I want to have a, a profitable business that I could sell, you know, I want to have an exit in 10 years. And now I bring it into focus a little bit closer. Let’s talk about medium term planning. What do you think about when you’re thinking about medium term planning? Maybe like, I’m again, I’m going to lean on EOS because it’s the framework that I use. They talk about three years, right? Thinking about things and.
Mark Lupton (10:58)
Yeah.
Sure.
Mm-hmm.
Stephen Brown (11:23)
They talk about how, you know, when they talk about a three year picture, they’re having you kind of imagine qualities. And I find that people can think in three years a lot easier than they can in 10 years. yeah, three years, five years. So what do you, what do you think about when you’re talking about strategic finance in a midterm?
Mark Lupton (11:34)
There’s a lot more specificity you can have.
So first of all, I’ll just say that I think that long term is fun and imaginative and sort of engages the heart of what you’re doing. It reminds you of why you’re in it.
And so the challenge is to rewind that clarity that you have about what, know, and rewind that into the present. And so you take steps back. So you go from 10 years, maybe back to three, back to one, back to a quarter, like in the U S. And so when I’m looking at three years, I’m thinking about the broad enterprise value drivers.
and how to grow the strengths and also shore up the weaknesses. when I’m looking at a consumer goods brand, I want to look at their dependency on certain channels, dependency on certain advertising channels, their dependency on certain products, their dependency on certain suppliers, their dependency on certain people.
And those areas oftentimes will show me where there’s a level of risk or opportunity in a business. And a lot of times, properly addressing those and seeing those in a fully realized, improved state takes three years. It’s not as simple as just turn a light switch and all of a sudden you’re running on Amazon and you’ve got a fully ramped up Amazon store. It takes time.
And so if the, if our, or the other way around, if we have a level of dependency on Amazon and we’d like to transition that to having customers purchased through our website as a more dominant sales channel and owning our customers in that regard, that is a long journey. And so depending on your product and situation, et cetera, et cetera.
And so I’m looking more so at the broader enterprise value drivers and trying to understand which of those things can we see improved and make a list of them all in a relatively ideal state. And I think three years is enough time to get to that place. What about you? I’m curious what you think of when you think of three year planning.
Stephen Brown (13:41)
which of those things can we see and make a list of them in a relatively ideal state than I think three years in that class.
I think you get into more tangible outcomes. ⁓
I mean I’ve seen, I’ve done five year pro formas when I was in tech, which I thought were these wild works of fiction to a certain degree, like if A and B and C, I do think you…
do think you can think about tangible outcomes that are going to take some time. There’s a quote, I think it’s from Bill Gates that says, most people overestimate what they can do in a year and underestimate what they can do in 10 years. I agree with you. Like if we’re thinking about ecommerce, not going to launch into a channel and have a lot of success in one year. in three years, you should have some traction.
Mark Lupton (14:27)
You
Stephen Brown (14:37)
Right. You should have some, some level of results. if you don’t, maybe you need to rethink that initiative. you know, product lines, you know, product takes, it takes time, product can take years to develop chain orders. You know, you’re, you’re looking oftentimes at least a year. So I think when you’re thinking about a three year,
I think it’s good to have like a roadmap of, here are the products that I’d like to add or the channels I’d like to get into and, know, have some specific plans well as not the things you’re not going to do. So if somebody came to me and say, yeah, I’m on Shopify today and I’m going to expand into Amazon and wholesale and.
TikTok shop, in three years. I’d be like, okay, how much capital are you gonna raise?
The key to going fast is usually funds. Like money can accelerate things, but this is not an industry that has a lot of investors at this point. so you have to be, I think you have to be realistic about what you can do versus what you can’t do.
Mark Lupton (15:41)
And what you should do, what you ought to do. There’s a lot of things that sort of eye candy to the consumer goods founder.
Stephen Brown (15:43)
Yeah.
Mark Lupton (15:50)
Channels, there’s a lot of ⁓ conversations that happen across brands and across founders about what they’re doing and what they’re trying. And there’s a lot of really, really good information that you can get from being in a community of founders. ⁓ There’s nothing quite like that. And have to assess the priorities and the…
the things that will be most effective for your brand and what your brand needs the most, ⁓ independent of others. in some sense. can’t copy and paste the sort of roadmap.
You can’t copy and paste expansion strategies, product expansion strategies. not copy and pasteable. There are similar things that you can draw from very similar brands, ultimately have to look at the uniquenesses of your brand, positioning within a broader market and understand where the gaps are in your own positioning and try to fill those.
And then prioritize them. think sometimes a hang up that founders can get into in their three-year planning is essentially saying, well, I’d like to see everything be better. I’d like to look at every single part of the business and all of it be better. ⁓ But we have to ultimately prioritize and choose what are the most important pieces. And ⁓ I don’t know that…
Stephen Brown (16:49)
I think that’s the conversation gauge. And it’s essentially saying, well, I’d to see everything. I’d to see everything.
Mark Lupton (17:04)
as I think about it now, I don’t know that a lot of founders even have a toolkit for prioritization of channels or prioritization of operational opportunities for so oftentimes a framework, I don’t know if you’ve heard of this before, but there’s ⁓ a framework called Porter’s Five Forces. Have you heard of this?
Stephen Brown (17:23)
Mm-hmm. Yep.
Yes, I have.
Mark Lupton (17:25)
It’s a very ⁓ common one for those in the business schoolie world, but it’s not as common in ⁓ consumer brands, but it talks about the different competitive forces ⁓ that could impact your business. And most people, when they think about those competitive forces, they think about existent rivals. They don’t think about things like the power of a supplier.
Stephen Brown (17:30)
Mm-hmm.
Mark Lupton (17:47)
If you’re overly dependent on one supplier or the power of a customer base, if you’re selling primarily into wholesale retail, ⁓ how much power does that one retailer have over you? Think about new entrants or other replacements. What are people doing instead of buying your product? They might not be buying a rival’s product. They just might be doing something that’s different. And what is that?
That’s an example of a framework that people can look through and identify help prioritize which things that they want to see grow in their business over the next few years. And I’ve seen that be relatively helpful. I’m curious. I do.
Stephen Brown (18:17)
Now I know you’ve got an MBA, right?
And I have an MBA. I got, here’s an a little aside. If I were a recommendation, I’m assuming you did case studies in MBA school. So which is really common school thing is like, let’s study this business. a podcast I got into in the last couple of years that I think is the best case study podcast. And have you listened to the acquired podcast?
Mark Lupton (18:30)
I did.
Mm-hmm.
really?
have. have.
Stephen Brown (18:45)
Like I’d be just be like,
go listen to this, pick a business you’re interested in. You know, they used to just do tech. Now they’ve branched out into just big successful companies. And I’d be like, just listen to that and think about how to think about a business because those guys dissect that they do. It’s a really cool podcast because it’s like multi hours, like buckle up. ⁓ it’s long, but it’s really interesting because they tell history.
And they’ll tell all the strategic decisions and they’ll do like that analysis at the end. I’m like, this is better than any case study that I did in business school. A lot more interesting.
Mark Lupton (19:18)
Absolutely. Yeah, you said something in there. Think about how to think about your business. Operators often out of necessity need to operate one foot in front of the other and do that really effectively for a long time, endurance and resourcefulness. But as much as MBAs and business schools get trashed on, you know, one thing that it did help me with was
Stephen Brown (19:24)
Yeah.
Mark Lupton (19:46)
making sure to see the forest through the trees, right? And so, and being able to have tools lenses or filing folders, whatever metaphor you want to use, right? To address the broader issues of the business and keep those front of mind. how do we take long-term broad enterprise value related and keep them front of mind? of what EOS tries to do. It’s part of what we’re talking about doing here.
Stephen Brown (20:09)
Yeah,
That’s what I like about EOS is like you can read the books, you know, you could really just read traction and get a lot. But if you want to go a little bit deeper, there’s a handful of books and I feel like it gives you a strategic framework those who don’t want to spend a ton of money. even MBA school, I don’t know about you, but I thought they were pretty good. I think I got more strategic experience working in tech companies.
⁓ where are we, that was where I was before this world. ⁓ I lived in enterprise software and we did strategic planning up the Yazoo. And I just, learned a lot through just doing it, you know, when you’re dealing with these product lines and big decisions, it doesn’t mean you’re to be successful. I could tell you lots of stories about failure, but I feel like there’s, there’s power in strategic thinking.
There’s also power in the intuition, which I think a lot of founders have. They’re intuitive, they’re action that’s good, you get bigger.
Mark Lupton (21:03)
Yes.
Stephen Brown (21:06)
intuition can be right, but the problem is now you’re probably trying to move a group of people, not just yourself. And you’re trying to get them on board and you’re trying to think through more complexities. How do we do this? It’s not, it’s not as easy. And so I think being strategic about and thoughtful about what it means to do, like, let’s say you’re, launching into retail and let’s just go launch into,
get into Costco or let’s get or there’s a lot of things you got to think about.
Mark Lupton (21:35)
Mm-hmm. And a lot of people to coordinate work between and to motivate, not just motivate initially for an initial push, but to motivate and keep aligned on a week to week to week to week to week basis. And makes it all the more important that you believe that you’ve made the right decision and seen it through different lenses and prioritized it amongst other things that you could be doing.
You talk about, think about thinking on the business and to grab onto that theme again, just it’s very easy to get two biases that I’ve seen, recency bias and confirmation bias. Recency bias being over indexing on things that happened within the last month. you’re saying these things that have happened within the last are
are likely to continue. And so I’m going to make a decision based off of something that’s recent, and I’m going to justify my action based off of something that’s And then confirmation bias is saying I want to confirm what I already And so I see those things happen and those ways of thinking create bad decisions. And ultimately, strategy is trying your best to make good long-term decisions and execute on them.
And so I think there’s these thinking pitfalls really what we’re talking about with strategy. How do you think about the business overall, long-term? How do you think about the business in the way that you make decisions? And where are you likely to steer the business in the direction it shouldn’t go without knowing it?
Stephen Brown (22:55)
And I think if you look at businesses as they get bigger, planning and strategic finance become more important you’re dealing with a larger organization, you’re dealing with larger resources. I think there’s a balance, right? You need, you kind of need that entrepreneurial intuitive thinking to avoid being stagnant. But
You also need to be strategic to think about, okay, well, what’s next and what’s after that and what’s after that. And I think some founders, you know, you see some people that can go the distance and you can see some people that can’t, that they’re really good at a certain level, certain size.
Mark Lupton (23:21)
Yes.
Stephen Brown (23:33)
when you can know what you’re good at, sometimes it’s like, Hey, maybe I’m not going to be good. I mean, I think about this all the time. Am I going to be good getting to the next like, you know, I’ve operating, you know, I’ve been employed in companies this size, but can I lead a company this size? Am I the right some guys here. I mean, I’m out of Utah. There’s, there’s two, two guys that I, they don’t get a lot of press. They get some.
One of the things that’s cool about them, they’ve been serial entrepreneurs and I’ve heard them on podcasts. They don’t do a lot, they’ll do a little. kind of know what they’re good And when they get to a certain, the ceiling of what they’re good at, they’re good at starting businesses and they take them to a certain level. And I think they get bigger with each one. They’re like, I think we can go a little bit further, but they get did what we’re good at. Time to move on to the next thing. they’ve done it over and over again.
You know, they’re not Household names. kind of have to be deep in the business and tech community here to know who they are. They’re getting a little bit older, but I don’t like that’s really cool, because I’ve heard him say take to a point, then They exit start I think one of the challenges I see founders
They’re good starters. they good at running, you know, zero dollar business is very different than a million dollar business is very different than a $10 million business. it’s different than a hundred million dollar business.
it takes a different skill set and tool set. And sometimes you think you’re going to enjoy it. And then you get to it, you’re like, oh, this is different.
Mark Lupton (24:59)
Mm-hmm. mentioned that those couple founders, they know who they are. also insinuates that they know who they’re not. And I see that founders oftentimes get in a pitfall way of thinking where they guide strategy of the business based off their strengths, which early on is necessary because you have to lean fully on yourself. But later on,
necessarily the most helpful. And so it creates these big blind spots. easy to think about and dig into great detail into what you know and what you’re good at. It’s a lot harder to do that for things you don’t know, you need it more for things you don’t know well. And so I’m talking a little bit now about the importance of
your progress and success towards goals and also talking about strategy. Because your background is in retail heavy or wholesale retail heavy CPG, but you’ve got a product that could do really well online, likely going to bring a team around you that could together a great strategy to go into retail. But you might overlook
on accident and with no bad intentions, you might overlook not give enough thought channels might be best for your product to sell through. And I see that in the time. I see that you’ll see some dashboards from built within companies where the founders put together a really robust, like marketing dashboard in a spreadsheet from their past experiences, a marketer.
And when you look at their operational KPIs ask about those, it’s someone else does that or they’re not very well put together. It’s the same way of thinking. an unfortunate way, but I’ve seen it get people into some trouble. And been helpful to ask that question. What is the case against your company? If you’re sitting on the outside of your company looking in,
Stephen Brown (26:44)
Hmm.
Mark Lupton (26:48)
What is the case against valuable or healthy? So why is it unhealthy? Why is it unvaluable? Why, where will it fail? oftentimes I that question brings out some anxiety. It brings clarity ultimately a level of relief because you can attack those things specifically if they need attention.
Stephen Brown (26:56)
Where will it fail?
Mark Lupton (27:11)
But I know that a lot of founders live in a space where those things are pushed a little bit to the side and we’re focusing in on our strengths.
Stephen Brown (27:18)
Well, when you get in
and it’s kind of the moon mentality, it’s all upside.
Mark Lupton (27:23)
Mm-hmm.
Absolutely.
Stephen Brown (27:24)
And you don’t think
you don’t think I mean, we think about the last couple of years. It’s just been one. There was there was many years of just grow Was just awesome, awesome, awesome. And Facebook algorithm changes due to Apple privacy changes that hit the algorithms, supply change channel issues, now tariffs and,
you don’t usually think There’s book, Andy Grove, who was a seminal CEO of Intel and has had a big influence in the business world, not just the tech world. He’s considered the father of OKRs. He has the book called Only the Paranoid Will Survive. And it’s really interesting because 20 years ago, who would have thought that Intel
Would be in trouble. And now here we are in 2025 and Intel’s they’re on the rocks, right? They’re really struggling as a company. the paranoid will survive. Assume crazy, assume bad stuff is going to happen and you won’t be wrong. might not know which bad stuff’s gonna happen, but you got to have kind of a balance, right? You’ve got to have an optimism for, we’re going to do this, this, and this. Now let’s talk about our weakness. Just make sure our weaknesses don’t.
Blossom.
Mark Lupton (28:37)
Yes, there’s a book behind your head on your bookshelf called The Goal by Eliyahu Goal. It’s ⁓ somewhere on my bookshelf as well. ⁓ It talks about the theory of constraints. Theory of constraints sounds super business schooly. We’re just going to talk about business schooly concepts, I guess. But it was one of the most valuable ways of thinking about business that I have ever heard. And,
Stephen Brown (28:41)
Hmm. yeah, the goals good book. Yeah read that in MBA school
Mark Lupton (29:07)
It really is the bottleneck concept. The idea that you only are able to move as fast as your slowest component. This is a manufacturing concept. So if if you have a manufacturing line and there is one bottleneck, if you’re trying to put a lot of resources to fix things that are downstream or upstream of that bottleneck, it’s going to ultimately be a waste of money. And so the idea is that you put everything into alleviating that bottleneck.
And so growth is a series of alleviating bottlenecks. And so in some way that relates to what you’re talking about with paranoia, but where are the bottlenecks in my supply chain? Where are the bottlenecks in my marketing funnel is a way of growth. Where are future potential bottlenecks? And you can take that to the broadest way of thinking about your business and strategy. And I think it’s actually a great approach to strategic thinking.
the idea of bottleneck alleviation. And if growth is a series of bottlenecks being alleviated over and over again, planning also should take that shape.
Stephen Brown (30:15)
Let’s bring it into a near term focus one year planning. Let me ask you a question.
How would you say you run into a business that has an annual plan of some sort?
Mark Lupton (30:29)
Pretty often it depends on the size of the company so, we’re oftentimes working with companies between five and 50 million in size. And the ones who are around the eight figures have some semblance of that. But the closer you get to five, the less and less and less people a real budget in place or an annual plan of sorts.
Stephen Brown (30:29)
A small business.
Mark Lupton (30:52)
Have general ideas about what they’d like to see done, a strategy of things that they’re working on now and want to work on over the next few months. normally, it’s not a process. And that’s something that we come in and help execute is that process and build that foundational process for the clients and for those brands. But I would say the larger you get
more more processes, but in planning processes. That is to say though, doesn’t always mean that they’re good. And there is such thing as a bad budgeting and planning process.
Stephen Brown (31:28)
kind of have my processes that I’ve used. I’ve used EOS as a vehicle to improve Tell me a little bit about some of the things you feel like a business should have in an annual plan, particularly around strategic finance.
Mark Lupton (31:42)
Yeah, there are the obvious things. Sales plan, marketing spend targets, marketing efficiency ratio boundaries, these sorts of things, hiring plan, overhead expansion. you have manufacturing, know, there’s all sorts of things within that as well. If you’re doing that in-house, I should say. that I think are more interesting are what’s below the P & L. Oftentimes, the P & L is the main focus of an a operational plan.
And so when it comes to strategic finance, of course it’s important to have a P & L level plan. And what I mean by P & L level plan is I mean that you have your sales, profitability on your products. So your gross margin, um, you have your advertising expenses and other variable expenses, uh, that come out every time you sell a product, merchant fees, have your team payroll.
GNA expenses, et cetera. So that’s what’s what’s on the P &L. But that doesn’t tell you what the cash in the bank is going to be. What tells you what the cash in the bank is going to be is a forecast of your balance I see finances and financial reporting and forecast as just a story of your actions told in numbers. And so that story extends below the P & L. And that’s where strategic finance comes in. And so.
I think also about debt stack that we have, the interest that we’re paying on that, the cost of our capital. Do we in our growth plan have opportunity to get cheaper capital, to consolidate? As we expand our manufacturing, let’s say if you do self manufacturing, how are we going to finance that equipment? Do we need to finance that equipment? Can we pay that in cash? If we have a level of
Treasury built up, if we have some liquidity built up, how are we letting that money not just sit, but we’re either reinvesting in the business or making dividends on that through high yield are the sorts of things that are balance sheet related and that are not P and L necessarily. How much inventory do we wanna keep on hand? At what points in the year do we need to
build up inventory? At what points do we expect to be lighter? When is that cash outlay gonna come to purchase all that inventory versus when the sales will come in to offset it? All those are balance sheet and cashflow statement movements. And those things to me are vital from a strategic finance perspective, specifically.
Stephen Brown (34:01)
I agree 100%. The way I think about it on the balance sheet, think about, you talked about a couple different plans. I think about an inventory purchase plan. I think about a debt plan. And some people are debt adverse. And I’m like, yeah, if you’re using it to
Mark Lupton (34:12)
Mm-hmm.
Stephen Brown (34:17)
There’s a concept of the cash conversion cycle that I tell people like, hey you, you put money into buying inventory. There’s a, There’s a delay before that. you can sell that inventory before it reaches your warehouse and then you have to sell that. That money has to come from somewhere, right? You can fund it to a certain degree of profits, but there is a mathematical limit based on your profitability and your growth rate and your.
Mark Lupton (34:20)
Right.
Stephen Brown (34:43)
cash conversion cycle by which you cannot fund a business with profits alone. And so you have to think about, I don’t think what else, you talked about some sort of inventory purchase, kind of a debt plan.
I think those are the key things for a consumer product business. There can be other things. But I did an episode a couple of episodes ago Alek, the CEO of And we talked a lot about financing and you know, he, I really answered the question. He gave me good answer to the question because you always hear banks only want to lend you money when you have money. And his answer was like, it’s a risk thing.
Right? Because when you have no money, they look at you as like, well, they’re higher risk because they’re not thinking ahead. They’re not prepared to potential downfalls. And so I think it’s really good to have all those, you know, know what you’re going to need. And if you need debt capital, debt facilities, them early.
when you need them desperately, you’re less likely to get them, or you’re less likely to get the terms you want.
Mark Lupton (35:49)
Right, try and qualify to get availability early when you can so that you build relationship and trust and even getting a few reps, out a little draw on the line that you qualify for, even if it’s small and you don’t need it, paying it back, letting the lender see that, building trust over time. It really does make a difference.
Stephen Brown (36:11)
What else in in it, a one, I mean, I think we’ve talked about a lot of tools, a lot of these plans come together in a, I call it a budget. Some people call it a, what do you, what do you prefer to call it? ⁓ Projection, forecast, like when you’re looking at a future looking and loss, what do you call it?
Mark Lupton (36:28)
I think there’s a lot of ways to look at it. The way that I look at it, when I think about projections, I’m thinking about three year projections. When I’m thinking about a forecast, I’m thinking about what our latest estimates are on the future, whatever that period is. I’m thinking about a budget. I’m thinking about something that you set in stone at the beginning of the year and you stamp it.
You can adjust it, but it needs to be through a formal process in the middle of the year. But it is what we thought we were going to do at the beginning of the year. So you can see how far off you were. And you can assess, like we’ve talked about earlier, gaps in your thinking may have led to the differences from what you thought earlier in the year.
Stephen Brown (37:07)
Which I think is a really important, this kind of us to more short term strategic finance. You set a plan, you set a goes according to plan. There’s a learning opportunity there to say, why were we off? You’re either gonna be off positive or negative. Either there’s a learning there. And my experience is when you learn why you’re off,
and incorporate those learnings into the you do things better.
Mark Lupton (37:32)
Yes. And The trap that people also often fall into is that the budget is irrelevant. So we don’t look at it anymore. It’s no longer relevant, quote It’s not relevant in helping you maybe determine what year to date plus forecasts, you know, together will estimate that our that our end of year totals will be. It’s not relevant in forecasting maybe the next few months.
But it’s very relevant in teaching you lessons about how you think and how to operate the business strategically going forward. Very So I’ll see a lot of budgets get made and get thrown to the side. And instead what will come is an updated forecast every single month so that we can know and plan for next month, the following month, and the following, which is really important to do. That’s forecasting. don’t.
Don’t be so quick to crumple up your budget and toss it in the trash it has a lot of value for teaching you how to strategically run your organization. It’s amazing to me. Yeah, I’ll just say it’s amazing to me how far off you can be from a and how hard it is to sometimes stare at that, swallow it, swallow that finding that you’re so far off and then action.
Stephen Brown (38:29)
to your point.
Well, and to your point, like when you learn from my recommendation when people are thinking about budgeting is you just start. And you’re going to be off. You might be wildly off. Even when you’re good, you could be wildly off. There’s going to be to be market changes and you weren’t planning on them and that’s, that’s okay. But you’ve thought of, you know, the process of planning and budgeting you to think about your business very closely.
Mark Lupton (38:57)
Right.
Stephen Brown (39:09)
And when you run into those issues, have a better understanding of how you can adjust. That’s the one way I think about it. The other point you brought up, and this is something that I do in our businesses, almost always a mid-year adjustment. We got off, we thought it was going to be A, ended up being B. a tweak. I rarely do more than one adjustment a year because it can be a lot of work to make those adjustments.
Mark Lupton (39:31)
Mm-hmm.
Stephen Brown (39:31)
So you do mid-year adjustment, like, oh, we must missed hard or boy, we underestimated demand, holy cow. But I also see when you build these models, have an ability to adjust because your revenue plan, you know, a lot of times your marketing plan drives your revenue then determines your inventory purchase plan, which then is going to dictate your debt strategy.
And so they cascade. if you model these things nicely, can make adjustments and say, oh, we’re going to go get some more credit guys. We’re riding it, riding the wave but we don’t have the credit to keep riding it oh man, we missed. Let’s, let’s scale back our inventory or next order. So we don’t have all our cash locked up in inventory or those hires we thought we were going to do mid Maybe we shouldn’t do it.
Mark Lupton (40:04)
Mm-hmm.
Stephen Brown (40:23)
My last company was a private equity ⁓ software business, enterprise software. And lots of finance people, private equity loves to do and finance. And it was very simple. Like when we were off, got cut. we’re missing our missing our targets, cut back on spending, no additional hires, right? They’d rein it in and just…
Same thing I experienced in public companies. When things are good, go hire more people. When they were bad, no travel. They they rein it in. So I see these tools as something you can use during the, even if you’re off, make the changes and see what the adjustments tell you. And then you’re like, okay, what decisions do I need to make?
Mark Lupton (40:56)
Right?
Absolutely. I was gonna ask you if you see that those things are applicable to smaller businesses.
Stephen Brown (41:13)
Yes, absolutely. I, that one of the first things I brought into LedgerGurus when I came was strategic planning budgeting because that’s what I was used to. like, this is what we do. Right. This is what we, businesses do. Was some you just get better at it. But like I really, you know, and there’s been years we’ve been off. We’ve been way above plan. We’ve been under plan.
But I think when you force yourself to ask the question, why were we off of our plan? you’re never, let’s just talk about both directions. If the opportunity is there, you’re usually like, yeah, let’s go for it. Let’s get as much as we can. And if you’re under plan, you know, there’s, there’s ways you can adjust, but ultimately you want to say, what did I did I do wrong? How can I learn from this? And
when you do that, you make better decisions in the future. You’re just like, Hey, do you remember that? You know, we got off or you’re, you’re more thoughtful about how you approach things. And I like to, I like to think of, you know, this is what we think. if you want to get really hardcore, had a business I had to kind of alive and I did multiple scenarios. was kind of my
My baptism by fire, I took over a small business and that was running out of money. And I did multiple scenarios and every month I’d update my scenarios. I would put what happened and a lot of work, but it kind of helped me see outcomes for the upside and the downside. would just tell people have a plan when you’re off the plan, learn and adjust so you can make better decisions.
Mark Lupton (42:44)
Absolutely. I was before I went to business school, I was working in ⁓ a large fortune 500 company, and there was a lot of time spent on forecasting and planning. And it was a large part of our job. And we had a whole other job to do, which was actually deliver on that. But a lot of it was focused on forecasting and planning. And it was nauseam. was felt like it was overbearing and too much. In some senses, it was. But
it enabled us to see deviations and to operate versus ⁓ our really fine tuned expectations on a daily basis. And I do think that that does that same concept applies. But oftentimes, I don’t think that businesses get to it because the urgent always overtakes the important at an early stage. And then that way becomes a habit of working and living and
the bigger your business gets, you maintain these habits for, yeah, I think the business grows faster than our ability to build good habits and build, we need to proactively build habits in the same way we’re proactively planning. And that’s a hard, hard thing to do when the urgent is very loud. And it also is a hard thing to do if you’re not certain that you want to be the CEO, if you just want to be in it for a few years, this is just for a few years, for your sprint, then
You may not think it necessary or worth your time to learn how to become the leader of the next phase of your business now. But it’s very important.
Stephen Brown (44:14)
And I think every industry has and key levers. And in consumer products, it’s inventory, inventory versus cash. How much of your cash is going to be tied up in inventory? I think it’s understanding different profit margins, your your contribution margins.
How many dollars are left over after cost of goods sold and your variable sales And then being tight with your OPEX, know, don’t run a lifestyle business. seen things are good, you see a lot of, think a lot of big offices and of extra extravagant.
unnecessary expenses in a business. You see, you see that’s more common.
Running a tight operating expenses is empowers you to do more.
Mark Lupton (45:02)
Absolutely. Freeze you up to invest in the next phase of the business.
Stephen Brown (45:06)
So we’ve been talking a little bit about how the one-year plan transitions into the ongoing. What are some of the other short-term execution things, maybe quarterly, maybe monthly, that you think are really critical around strategic finance?
Mark Lupton (45:19)
Yeah, well, the first rhythm that I want to call out is another EOS rhythm and we keep, we should, you know, I don’t know if you’re sponsored by EOS yet, but it’s getting to that point in this episode, you know.
Stephen Brown (45:29)
We should, we should be, like…
Mark Lupton (45:34)
Every quarter, setting quarterly goals, the rocks, all the different terms you can use to define what you want to accomplish in a quarter and tracking on a consistent basis against that is so huge. a strategic finance perspective, what you can be doing on a quarterly basis is what you should be doing on a monthly basis with extra emphasis on the quarter end as well, which is the financial review where you’re looking at your expectations.
versus what actually happened and going line by line through those financial statements and understanding the differences. And if you forecasted your forecasted in budgeted to get our terms right, the P & L and the balance account should have an expectation and each account has an owner. Somebody in some way or another is responsible those numbers being what they are.
And so there’s deviation, there’s explanation behind that so every quarter, especially do an extra deep dive those deviations. And at the half year, the budget adjustments you need to, still don’t lose track of the reasons, the deeper, broader reasons why you may have deviated from quarterly,
the financial review becomes really vital where you’re comparing budget versus actuals and identifying line by line differences from what you expected. And biannually, I would love to see every budget be ⁓ re-vetted and re-forecasted if need be.
Stephen Brown (46:58)
What are your thoughts on like a continuous budgeting like?
12, this is something I’ve thought about doing, but I’ve never done because it’s so hard. Like you always have 12 months of budget. Have you that, done that? What are your thoughts on that?
Mark Lupton (47:12)
I have seen it. It’s not something that I’m always doing with clients.
Stephen Brown (47:16)
hard to do.
Mark Lupton (47:17)
It’s kind of comes back to the forecast budget conversation. I keep a forecast that is always pushing forward the assumptions that we put into it into a broader horizon. So you could call that a projection maybe if we’re going by my prior definitions. But I always have a financial model that is updating with actuals every single month. And then the forecast is sort of
showing the results of those actuals being played out into the future and that the assumptions adjust automatically and with some manual input. So I do have that always working for our clients so that we can run different scenarios. ⁓ But that’s different than having a budget that has been stamped. That to me goes back to more of a projection or a forecast that is
updating itself on an ongoing basis. So I see those as different things.
Stephen Brown (48:15)
All right, let’s kind of have one final topic. And we’ve talked about this along the way, common pitfalls. We’ve hit a lot of them. What are some of the pitfalls we haven’t talked about that you would like to add to the conversation?
Mark Lupton (48:21)
Mm-hmm.
Yeah. see, we talked about blind spots and I think that’s a general theme you could take the concept of blind spots and apply it to different parts of your business and blind spots and bottlenecks.
Are there bottlenecks and blind spots that you know are there that you’re not addressing in each specific part of the business? So it’s a concept of thinking. Again, strategy in large part is thinking about how to think about the business. And so some of the pitfalls that I do see when it comes to strategic finance is financing in particular. So
Oftentimes, people will go for easier forms of capital as opposed to forms of capital that are their classic example, this has been hit on all over the ⁓ ecommerce finance creation space at this point, but the whole MCA thing.
Stephen Brown (49:21)
Yeah, merchant cash advances, Shopify loans. It’s easy.
Mark Lupton (49:22)
Right. Yep, exactly. So,
and so if there’s new operators listening to this, there’s always a new batch of people who are entering in and wondering about some of these types of merchant cash advances, which is essentially very little underwriting is required, meaning application process is super smooth and easy. get fast access to capital. You don’t have to show them your financials almost at all.
And then you’re paying percentage of your revenue every period of time, depending on the term, at some very high frequency for a period of a couple of months until you pay back the entirety plus the fee. That is an unsustainable form of capital for growth. It is what I like to call a bridge. There’s a difference between a bridge and a breakthrough.
A bridge helps you go from one reality to another and the other reality, the other financial reality needs to be better than the one that you’re bridging from so that you don’t have to rely on the bridge can’t have forever bridges. can have a bridge to get us to a new solid foundation. And so.
A bridge would be like a merchant cash advance, where you’re taking some money out. It’s very easy to access. It’s incredibly expensive. ⁓ They say the fees are 17 % or whatever. ⁓ And you don’t know that that’s not actually an APR. That’s not an interest rate. That is just a fee. And you’re going to pay that back. It’s actually four times that, potentially, five times. that. And So it’s very expensive. you take that on, and you get in the cycle of
the whole merchant cash advance cycle. You’re running out, you need more, you keep going. If you see that type of loan as, if you’re thinking about that type of loan as a, working capital for growing your business or as growth capital for growing your business, that’s not, that an inaccurate way of thinking about it. Lines of credit are totally different.
So we could talk a lot about the different types of debt and healthy capital. Sometimes and family funds are very easy to like relatively easy to access. the cost of capital there may be high from a control perspective or from a personal perspective, a social perspective, relationships. And so I see from a strategic finance standpoint, people making
Stephen Brown (51:31)
A social perspective. Yeah. Yep.
Mark Lupton (51:39)
making uninformed decisions about types of capital and not knowing what a sustainable form of debt would be or a sustainable form of capital injection would be versus just what should be only a bridge. one other hang up that I see more tactically.
Stephen Brown (51:55)
Awesome. We could probably take each one of these topics and talk about them for an hour if we wanted to. There’s so much to unpack, but hopefully this has given those of you that are listening a thought process about how to think about your businesses from a financial standpoint and overall more strategically. if somebody wanted to connect with you, what’s the best way to do it?
Mark Lupton (52:16)
Absolutely. Well, my email is mark@greenhouse.business. So I love just talking directly with founders and anyone who would want to ⁓ talk shop about these types of things. we were pretty high level in some concepts today, but I’d love to get more detailed as you know, if anyone would like to. Additionally, you can go to our website, Greenhouse.business. So www.greenhouse.business and find us there as well.
Stephen Brown (52:44)
Awesome. Well, thanks for joining me today, Mark. It’s always good to talk.
Mark Lupton (52:49)
Thank you so much for having me. It’s a pleasure.