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July 20, 2022

Sabir x Chris Arndt

TL; DR

Chris Arndt describes himself as the entrepreneur’s CFO. His financial experience has helped countless companies to grow and has allowed entrepreneurs to meet their full potential. He provides entrepreneurs with what he calls a “foundation for awesome” supplying them with the tools and resources they need to realize their potential and meet their goals.

His words can help all entrepreneurs and business owners and include an array of tips and insights aimed at scaling businesses quickly, profitably, and properly, including:

  • Upgrade Your Systems: Your technological infrastructure must grow with your brand. If you leave it behind, you’ll end up with systems that aren’t properly integrated and don’t work as effectively or efficiently as they should. In this day and age, tech is very important and should play an integral role in the growth of your business.
  • Monitor and Track Data: Understand every single metric and data point and monitor how these change over time. Arndt recommends doing this at least once a quarter so that you can stay on top of price increases and market volatility, as we have seen recently with the cost of fuel and the difficulties associated with international shipping.
  • Raise Capital the Right Way: There are many ways to raise capital but there is no one-size-fits-all solution. You could consider selling a share of your business or acquiring personal debt, but these options come with a number of downsides and should be considered closely before you make a decision.
  • Continue to Deliver Value: Many businesses struggle to offer their customers value as they scale. They lose touch with the USPs that allowed them to grow in the first place. If you want to keep those customers and maintain your brand identity, it’s important to focus on delivering value and not just increasing your profits.
  • Don’t Hire a CFO Until You Need One: A CFO can make a massive difference to your business, but they are also expensive and aren’t suitable for everyone. Chris Arndt recommends considering a CFO when you have at least $5 million in revenue, though others suggest a figure closer to $50 million. There are also options for brands generating much lower amounts.

Last but not least, I asked Chris for his best piece of advice, an insight that could deliver over $100,000 in value for everyone watching the video and reading this accompanying guide.

To see what he had to say, just scroll down and take a look for yourself. It’s advice that you can’t afford to miss if you’re trying to scale your business.

How To Successfully Scale Your Business

Chris Arndt is a growth specialist. For over 15 years, he has been sharing his experience and knowledge to help businesses scale profitably.

In this guide, I’ll go over some of the tips, techniques, and invaluable insights offered by Arndt during the latest episode of This Week With Sabir.

This information is geared toward businesses generating between $5 million and $50 million in annual turnover. However, it’s advice that all business owners should heed.

If you’re thinking about scaling your business—whether it’s a digital agency, accounting business, ecommerce brand, or B2B—the following insights will help.

Learn And Track All Important Metrics

A few years ago, I spoke with a new business owner about scaling their business. I asked them some basic questions about their profit and expenses and they gave me some very vague answers.

It was a new business. It was small. And it seemed profitable, so they assumed that they were on to a good thing.

The business involved buying, formulating, and then packing items. They paid around $5 per item and sold them for $15.

On the surface, it seemed great.

When I dug deeper, I discovered that they were spending approximately $2 on packaging and another few bucks on shipping. They also had staff costs, storage costs, merchant fees, and advertising fees.

They also dished out stacks of coupons and promoted regular discounts.

What initially seemed like a profitable business was actually losing money with every sale. Not only was it proof that a major overhaul was needed, but it suggested that the owners had some huge blind spots.

As a business owner, you must understand every single metric and data point.

What do your products cost? How much are you spending on marketing? And, more importantly, how likely are those things to change?

In the last few years, we’ve seen the price of shipping increase by over 1,000% in some areas. The pandemic—along with the issues caused by the war in Ukraine and resulting fuel shortages—have caused some products and processors to double in price in just a few weeks.

Arndt recommends checking at least once every quarter. That should be enough to react to any major price fluctuations.

How To Raise Capital To Scale Your Business

Raising capital is a key part of scaling your business and an obstacle that few entrepreneurs clear.

So, how can you raise capital to grow your business?

This is actually a topic that I have covered extensively in the past, including in this guide with Shark Tank guest Matt Higgins. It’s also something that I briefly discussed with Chris Arndt. The truth is that there is no one-size-fits-all solution for raising capital, but there are a few ways you can get those funds.

One of the most common solutions is to seek venture capital investment and sell some shares in your business. You could acquire the necessary capital while getting some assistance and words of advice from an experienced investor.

But this requires diluting your share of the business, thus reducing your control and your earnings. It’s no longer just your business, and that can be hard for some entrepreneurs.

If you have another business, you could consider selling it and consolidating your funds and interests. You can also sell a part of your business.

For instance, if you have a large e-commerce brand that sells tea and coffee but has also successfully branched out into honey and other sweet treats, sell the latter and use the money to fund the former.

Acquiring debt is another option. There are some clear and obvious downsides, but the upside is that you will retain control of your business.

Working capital loans, home equity loans, HELOCs, private loans, and other options can be considered.

When raising capital for your business, think about the future, as well as the present.

For instance, if you opt to dilute your share by selling part of your business, consider how this will impact you in the future if you decide to initiate another round of investment.

Many businesses go through multiple rounds of investment, and this can raise a few issues.

Firstly, your total share will be reduced to a minority, effectively putting your business in the hands of others. Secondly, how can you convince an investor to buy 10% for $5 million when you sold 30% for $300,000 during the previous year?

Consider all of your options carefully. Weigh up the pros and cons. Don’t take the next step until you’re absolutely sure that you’re making the right decision.

Consider Whether You Need A CFO

For many entrepreneurs, the point at which they consider hiring a CFO is when they have around $50 million in revenue. For Chris Arndt, it’s just $5 million.

At $5 million, a CFO could make a massive difference to your business and you should be generating enough profit to accommodate them.

Whether you can benefit from a CFO or not will depend on your current infrastructure. But it’s certainly something you should consider when you’re comfortably turning over 7-figures.

Before that point, think about bookkeeping services. They will help you with compliance and will ensure your business is operating as cleanly, professionally, and efficiently as it can.

Bookkeeping services will help you to better understand your financial situation. As you grow, you’ll need more advice, and that’s when you can advance to additional financial experts and, eventually, a CFO.

Don’t rush into this process, though, and don’t assume that you need a CFO just because you’ve reached that milestone.

I personally know many individuals who have hired a CFO very early and have lost out as a result. In many cases, a CPA would have been perfect for them but they ran before they walked and invested heavily in something they didn’t really need.

CFOs can make a huge difference to your business and outlook, but they are very expensive and you don’t always get the return that you need or expect.

Focus Less On Profit And More On Growth

Amazon is one of the biggest companies on the planet. It ships over 1.6 million packages a day and has a market capitalization on par with the entire GDP of South Korea. But despite all of that, it didn’t generate a profit for the first few years and made very little thereafter.

The goal for Amazon was not to earn a quick profit, but to grow, and that’s exactly what it did.

By investing its profits into the business, Amazon was able to become the e-commerce giant that it is today.

It’s a strategy that Chris Arndt also follows and one that he recommends for all other entrepreneurs.

If you want your business to be truly profitable, you must reinvest and focus on growth. Play the long game, as that’s where the real benefits start.

Many business owners focus on short-term gains. They see entrepreneurs flashing their cash on social media and try to emulate them. But your business is not an unlimited ATM. If you’re swapping those profits for Rolex watches and sports cars, your business will stagnate.

Those first few years are all about growth. Invest time and money now, and you can start reaping the rewards further down the line.

Chris Arndt reinvested everything he had for over 5 years and experienced rapid growth as a result. That’s why he has so many clients and generates so much money, and if you want to follow in his footsteps, you must adopt a similar attitude.

He was in the venture for many years and kept reinvesting. That’s how big businesses are made. Revenue shouldn’t always mean money in your pocket.

You can’t grow and profit, not in the early days. Focus on growth and maintain financial security, but keep investing.

Don’t Stop Delivering Value

As your business grows, you may lose touch with the customer and struggle to maintain the principles that made you popular in the first place.

For instance, I worked with a small company that prided itself on customer service. It was run by four co-owners who knew how to handle customers. They answered the phones, staffed the Live Chat, and responded to emails.

This  “personalized” service was one of their USPs, and they made it clear that they weren’t like the big faceless corporations who contracted all of their support to call centers.

Five years later, they had over 200 employers and had contracted their customer service to logistics firms. They no longer had the dedicated support they once had and issues began to creep in.

The bigger they got, the more disconnected they became.

It’s important to remember what made you unique and to ensure that thing remains as your business grows.

If quality service was your USP, focus on hiring the best employees, and don’t be tempted by cheap outsourcing. If it’s all about your product, find a manufacturer that can meet your quota without sacrificing quality.

These things don’t happen overnight, so plan ahead and don’t lose touch with your customers or principles.

Invest In Tech Infrastructure

According to Chris, one of the biggest mistakes that businesses make when scaling is not focusing on tech. They grow slowly and bring lots of different systems in. As a result, there is no synergy, no cohesion, and they end up with something that doesn’t work as efficiently as it could.

Always seek to upgrade and make sure your CRMs, accounting software, and everything else you use is integrated.

You need to think about these things as you scale and not afterward. If you grow too quickly and rely on outdated and poorly integrated systems, your business will suffer, you’ll encounter more issues, and you’ll eventually need a costly overhaul.

Technology moves at a frightening pace and it can be hard—and expensive—to keep track. But you don’t need to always have the best and most innovative tech.

To use an analogy we can all understand, it’s not about buying the latest iPhone every single year. It’s about making sure the iPhone you have is fully updated and capable of doing what you need it to do.

The $100,000 Question

Chris Arndt has helped many businesses to grow and works with brands generating tens of millions of dollars in revenue. As the above guide and accompanying video show, he clearly knows what he’s talking about.

So, what’s his best advice for entrepreneurs seeking to grow their businesses?

That’s the question that I put to Chris at the end of our discussion.

This is what he told me…

“Customer acquisition is the most important thing.”

It doesn’t matter what type of business you run—everything boils down to how you acquire customers and how much those acquisitions cost you.

It’s easy to get too caught up in how much products cost and how much profit they generate, but if you’re spending too much on customer acquisition, none of that matters.

The fact that customers are willing to pay $50 for products that cost you $10 means nothing if you spend $200 acquiring every single customer.

Focus on the cost of acquiring a customer and the lifetime value that they provide. Chris recommends a ratio of 3 to 1, which means you generate a return of $3 for every $1 spent.

It’s not just about the returns that you get from Facebook or Google Ads clicks, either.

If you spend $50 acquiring a customer that only spends $25, it may seem like a loss, but what if that customer returns a week later and spends another $25? What if they make the same purchase every week, sign up for a subscription service, or refer all of their friends?

It’s about lifetime value, a metric that is harder to track but means more than any other metric.

To discover what a customer is worth to your business, track the average lifetime value (including first-time orders, repeat orders, subscriptions, and more). Once you have that number, divide it by three to discover how much you should be spending to acquire each customer.

This figure will give you an idea of what your upper limit is when using platforms like Google Ads. It will also tell you how successful your offline ads, banner ads, and video ads are.

For more information on marketing, advertising platforms, and revenue generation, check out my guide to Launching an Online Business, as well as this helpful and insightful discussion with Bianca Bucaram, a PR expert who was more than happy to share her top tips on growing personal and professional brands.

ABOUT CHRIS ARNDT

Chris Arndt is the Entrepreneur’s CFO, also known as the Director of ORBA’s Cloud CFO Services, an outcome of the company he founded in 2011, Red Granite. For over 15 years, Chris has been harnessing the latest technology and sharing his accounting expertise with his clients to anticipate their needs and ensure the growth of their bottom line.

Chris specializes in financial statement analysis, systems implementation, dashboard design, business process improvement and professional development. He has a knack for quickly understanding the forest, but still having the ability to see the trees. Just as important, Chris enjoys teaching and challenging his team and others to continue their own learning, so that they can grow professionally.

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