How To Sell Your Business for More Money With Anthony Nitsos, B2B SaaS Expert. (#99) — Transcript
Updated: Oct 26
THE PICTURE OF WEALTH · EPISODE 99
Dustin Serviss and B2B SaaS specialist Anthony Nitsos discuss recurring revenue, customer demand and the financial foundations of a valuable software business. They explore what can make a company more attractive to a buyer.
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This transcript was generated from the episode audio and lightly edited for readability. It may contain transcription or speaker-attribution errors. Refer to the recording for exact wording.
Chapters
[00:00:00] From nice-to-have to must-have software
[00:03:45] Marketing and profitability
[00:08:19] Recurring revenue and valuation
[00:13:08] Default alive versus default dead
[00:17:54] The venture-capital growth model
[00:21:58] Metrics that drive SaaS value
[00:26:35] A product customers need
[00:31:06] Anthony’s route from medicine to finance
[00:36:02] Automating financial operations
[00:40:25] Determination and knowing your limits
Guest & resources
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Transcript
[00:00:00] Anthony Nitsos: Things can start off as nice to have and become have to have. But that's really what you're looking for is, do I have a software product, and it's software, that people really want? And once they have it, they don't wanna let go of it. That's just as true with consumers as it is with business.
[00:00:19] Dustin Serviss: Welcome to the picture of wealth or TPOW as we call it. I am your host, Dustin Service. Anthony, thanks a lot for coming on the show today. I'm excited to talk everything SaaS, And, you know, I know you're gonna unpack that for anyone who doesn't know what that is. It's not, short for SaaS y. It is, definitely a business tech term. And I think the application that you apply to the the SaaS business model is, is applicable to a number of other businesses. And, you know, listener, if you do not own a tech business, this podcast is still for you. You're gonna learn a number of good nuggets off the air. Anthony just shared a ton of, of of...
[00:00:55] Dustin Serviss: I couldn't hit record fast enough. So, Anthony, thanks a lot for being on the show.
[00:00:58] Anthony Nitsos: Oh, thank you so much. This is, this great pleasure, and I appreciate the opportunity.
[00:01:03] Dustin Serviss: Anthony, I think we... I I I have... You know, I was thinking about it today. I wanted to get right into, you know, sort of the weeds of of things and how to make SaaS business models better, but back us up. What is SaaS? What what is this thing?
[00:01:17] Anthony Nitsos: You know, it's software as a subscription or software as a service. It really depends on where you're reading it. But in the end, it's the stuff that you don't download your... To your computer anymore. It's the stuff that you rent. Right? And it's all the software. You know? You can think of Netflix as SaaS. You can think of as Microsoft three sixty five as SaaS. You know, you've got LastPass. There's just so many examples of things now where we don't own it anymore. We rent it. And when we're done with it, we say goodbye.
[00:01:48] Dustin Serviss: I love it. And I know that, there's a number of things that we all have on our visas that are recurring, that are probably from some of these companies. Is is there any sort of industry... And I'm... I... Listener, you're already you already probably know this, and you're you're smart enough. But is there any industry that is more laced with SaaS than, than others, or is it all over the map now with the way the world is going?
[00:02:12] Anthony Nitsos: You know, when it comes to subscription based revenue, right, let's look at it just that way. You know, I was reading in the in the newspaper. Yes. Those things still exist. They're, of course, all on my phone. They're not actually physical newspapers anymore, but I do read the news, and I do read many of them. You know, bicycle as a service. Right? You know, you're familiar with Uber. Right? That's, you know, kind of car as a service. So everybody's coming up with some new way, AAS, right, with a prefix of some letter to come up with some way in order to get a recurring revenue stream. So when I when I say I'm a SaaS expert, I happen to be
[00:02:49] Anthony Nitsos: working in software a lot. But, you know, frankly, I have clients that are membership organizations. I have clients that are service organizations as well. They're all trying to come up with a way to recur the revenue. That's the recurring piece. And the reason for that is investors are very interested in being able to predict what your future revenue is gonna be. Because when they invest in you, they wanna make sure that they're getting their cash back plus a multiple. And so if you can, what we say is annuitize your revenue. So it's not just these one offs. Right? It's recurring. Heck, even Amazon's doing it right now.
[00:03:27] Anthony Nitsos: You can get you can get underwear as a subscription. I mean, that's... You can get T shirts as a subscription. It's like, really? You know, you get vitamins as a subscription. Right? So it's it's permeating really the entire world at this point, this whole subscription based model of, you know, making money.
[00:03:45] Dustin Serviss: So let's let's unpack that for a second. This is a unsponsored plug for AG one, Athletic Greens, who's doing a ton of marketing. And I I mentioned to somebody, the other day that anyone with Athletic Greens can straighten me out if this is true or not. But they they said, you know, based on the amount of marketing, I I wonder if they're even netting a profit because there's just so much marketing being put into it. But it's... For any listener, if you don't know, it's, it's a vitamin, basically, drink. It comes in a powder. But, you know, you pay, I don't know what it is, a hundred and
[00:04:16] Dustin Serviss: twenty nine dollars a month, and a bag comes first of the month. And I usually run out a boat then. But, you know, it's... You're part of a community. It it it is because some other people take it that that I know. And so, you know, you think, oh, we're in this kinda together because you can buy vitamins a hell of a lot cheaper than what people are paying. But is there some sort of element to SaaS businesses where, you know, there is a community? Like, tech companies, I think of their offices and they, you know, the pinball machines and all the, like, the the vibe that these business...
[00:04:50] Dustin Serviss: Or is that is that more just dripped up in my head that there's...
[00:04:53] Anthony Nitsos: It was true at one time. Okay. It's not something you dreamed up. There was... You know, my first SaaS client was back in two thousand and seven. Okay? So I've been working with, you know, subscription based companies for, gosh, I don't even wanna think about fifteen years now. It seems like just yesterday.
[00:05:11] Dustin Serviss: You started when you're fifteen.
[00:05:13] Anthony Nitsos: Yeah. I think I can still do basic math. Sometimes I wonder. But even back then, you know, I I walked in. This was still in the days where you had, you know, offices. Right? Of course, COVID has changed that too. And I wanna bring that point to the forefront. But, you know, I walked in and it's like, you know, I'm in Michigan. Right? This is not like some Silicon Valley place. I'm not, you know, in San Francisco in the Bay Area. And I walk in and there's a kegerator in the corner. And I'm looking at that. I'm like, there's beer here. They said, oh, yeah. We have beer thirty every Friday. I'm like, oh, that's cool.
[00:05:47] Anthony Nitsos: And I'm thinking, how the hell do you get any work done? But that... What you just pointed out was that's true. So when I joined another... I had an actual job with a software company rather than as a consultant. And, you know, everybody had a Nerf gun. And everybody was, like, you know, ambushing everybody with Nerf's during the, you know, whatever time it was. You had to be like... It's like you're walking around in the wild west of Nerf, and you're like, okay. Who's gonna ping me in the back of the head? Right? You know, and revenge wars and all that. So, yes, there is certainly that that element was there. But COVID pretty...
[00:06:23] Anthony Nitsos: I don't wanna say destroyed it, but it's like it completely fragmented it. Of all the clients that I have right now, I think only one of them is left with a physical office. Everybody else has gone to this, you know, almost a hundred percent work... Remote workforce, and it's changed the culture. And I'm not sure it's changed it for the better. You know? So I'm not just saying that because I like sitting in an office. You know? I I like the fact that I can sit in my home and do my work. And if I wanna get up and take a break and go to my kitchen, I can do a load of laundry, whatever it is. You know? I have a long commute.
[00:06:59] Anthony Nitsos: But there's something missing about being in that physical space with a bunch of, you know, geeky people, you know, kind of just like, you know, shooting the breeze and talking about, you know, whatever, whether it's a Silicon Valley show or it's some, you know, TV program or it's something about the product or some competitor that's gone. Right? It's just not there anymore. So, you know, I understand why companies like Google wanna bring their workforce back into the office because there's a culture that was there. And I don't know if COVID has completely changed that. You know? It may have.
[00:07:39] Dustin Serviss: Yeah. We... We've brought, we've brought on a few new staff lately, and we've made it all nonremote. So we've got an office, and people go to it. And the people who are joining us want to be in an office, and they want to... We're in a tech, building. And so there's, you know, seven floors of younger people, and that's kind of... It's a lot of energy. And so I would... I'd think that we're... Maybe there's a there's a... Not a flock back, but there is an interest that may be coming back or people who are sort of been at home, that that that will maybe subside, and and leaders will wanna put that culture and that fun and that energy. Is it...
[00:08:19] Dustin Serviss: You know, after doing six, seven zooms a day, you don't have the same energy as sitting beside somebody and they say, what about... Maybe if we move this over there, that would happen. You know? Like, I'm talking about just business and and that that explosion or that collision of, of ideas. What's... One thing that's most curious on my mind, we've... We kinda touched on it, is, you know, recurring revenue, investors. Help us understand, you know, a business that is collecting recurring revenue. What are the multiples like? Like, in a common business, in a small business, you might see three times earnings.
[00:08:55] Dustin Serviss: So for business owner, you make a million dollars, you have eight hundred in expenses, you got two hundred thousand of net, times that by three, your business is six hundred in real basic math. And you can make that a millions and whatever. But in SaaS models in the tech space, why is it so much higher?
[00:09:14] Anthony Nitsos: Well, okay. Couple of things. Most of the time in the SaaS world, the multiple is not based on profit or earnings. It's based on revenue. It's based on that magical ARR, annualized recurring revenue. And the multiples on ARR, typically, I mean, until the crash recently. When I say the crash, I'm talking about the venture capital crash, which happened this summer. This being last year because we're already into twenty three now. Prior to last summer twenty
[00:09:47] Dustin Serviss: twenty two, something happened.
[00:09:49] Anthony Nitsos: Yeah. In in the summer of twenty two, something happened. What happened was the VC market suddenly panicked that, there was a recession coming. And of course, we've been predicting a recession in the United States now for the last three quarters, and yet it still fails to materialize. But the VC market is still acting as if it's coming. And if you take a look at all the tech layoffs, the tech companies are also kind of retrenching and doing that. Now the larger tech companies are doing that because they have earnings targets, because they are publicly traded, because they have, you know, investors and stockholders to answer to.
[00:10:26] Anthony Nitsos: The space I work in is nothing like that. It's privately held companies. It's not publicly traded. I'm not really interested in working for publicly traded companies. I'm interested in working with small start ups. And in the small start up space, your multiples are gonna be based prior to December... Prior to last summer, they were getting, like, anywhere from twelve, thirteen, fifteen times their ARR as a pre money valuation. Yeah. Wow. So now those numbers are closer to six, five, six, and seven. So it's really come down. But it's... Again, it's not based on earnings. It's based on how much recurring revenue do you have.
[00:11:07] Anthony Nitsos: So if you have, you know, six million dollars of recurring revenue, you can expect a pre money valuation from investors to be somewhere around thirty to fifty million. Now what makes that... Why is that the case? The case for... The case that's made for that is, they're after the revenue stream and the market share, and they figure the profit will eventually catch up. Once you exit, once the company is sold to somebody, and additional costs are taken out. But I don't have a single client that I could say at this point that is profitable that's in the SaaS space. The only profitable client that I have are the ones that are in professional
[00:11:51] Anthony Nitsos: services, for example, where, you know, that's... You don't get those where it's an earnings based multiple. Right? Or it could be a revenue multiple, but you're gonna get maybe one or two times your revenue, you know, not necessarily, you know, three or four times your earnings. So that said, when you're doing... That's that's why that ARR number is such an obsession, and I will put it as that for SaaS companies. And you should be obsessed about it because your valuation is going to be very much hinged on not only how much ARR you have, but how fast you got it, and how efficient you were with your capital to get it.
[00:12:29] Anthony Nitsos: So if you spent ten million dollars to get a million in ARR, that's not impressive. If you spend a million dollars to get four million in ARR, that's impressive. Right? So you're shooting for somewhere around two or two and a half of your invested capital over your ARR. So, you know, if you if you spent two to two and a half million dollars to get it to a million in ARR, that's considered fairly efficient. Below that, you're getting more efficient. Above that, you're not as efficient. So that's really one of the things that the investors are looking at. The other thing the investors are looking at now is this concept of what's
[00:13:08] Anthony Nitsos: called default live, which is if you were not to grow any further, how much cost would you have to cut in order to maintain a positive cash flow in order to keep the lights on? You know, are you default live? Right? Or you default dead? Right? So that's come up more in conversations within the last six months than it ever had before. Now this concept's been around for five or six years. It's not like it's a brand new concept. But before, it was never in the discussions. Now it's in the discussions. Why? Because I think the VCs are afraid of a recession. And, of course, if a recession hits and your software happens to be
[00:13:49] Anthony Nitsos: nonsticky, I e, people can ditch it whenever they want to, they don't have to have it, then your chances are you're going to go into a downturn. Your revenues go down. Your cash flows go down. Your burn increases. Your runway shortens. You know? Suddenly, you're closer to lights out.
[00:14:05] Dustin Serviss: Well, you bring up, an interesting... Fascinating thing. So in in my, you know, small world of, you know, start as a wealth manager, build up a few files, save enough money, pay for a website. You know, save up a few files, you know, get a better office. You know, everything was done on cash. So, yes, maybe the the runway was slower, but the the thought of going and borrowing a ton of money or raising money and letting investors kind of give me money and then put it... Was... Is very foreign. But when I see clients or, you know, I'm part of an angel forum, and we did an investment, you know, thing with, you know, thirty companies pitched,
[00:14:41] Dustin Serviss: and we've narrowed it down to one. How how normal it is to run out of money? Oh, we gotta do another raise.
[00:14:51] Anthony Nitsos: Yep.
[00:14:51] Dustin Serviss: Go go get more money. And that's gonna be the next twenty four months. And, oh, ran out of money, need to do a raise. How how is that, the... Like, what is the percentage of success en masse of the... Those... Like, in it... That could be too open end of a question. But No. I think at some point, people are getting diluted every time there's a raise, if it's Mhmm. Equity. And then if it doesn't work out, what the investor is left with is minimal.
[00:15:25] Anthony Nitsos: Nothing.
[00:15:26] Dustin Serviss: Nothing.
[00:15:27] Anthony Nitsos: Yeah. But
[00:15:28] Dustin Serviss: that's the investor profile, I guess.
[00:15:31] Anthony Nitsos: And that's... That is that is how the game is played. Right? It is... Okay. I have an idea. I get to the concept of MVP, minimum viable product. I have an an MVP, and I've got some sales. So I managed to bootstrap myself, get some friends and family to throw some money at me. I have an idea for software. Let's say, okay. Anthony has an idea for software. Right? He goes and talks to some friends and say, hey. I've got the idea. Here's the market. Here's the market product fit. Here's how I think we can get to the market. Here's how much I think it's gonna take to develop the first minimal bot... You know, get to that MVP. Are you in now?
[00:16:10] Anthony Nitsos: What's the valuation? How much money am I going for? A lot of that's kind of... You know, there's a lot of conversation and some financial modeling and whatnot to figure out those numbers. But let's say you say, okay, we're gonna go raise five hundred thousand dollars. We're gonna get half a million dollars to get to our MVP in six months and get our first contract. Then what? Well, then you go out and you raise your seed round. Okay. And your seed round is what you use, maybe it's a million and a half, maybe it's two million dollars. You use that to expand the MVP into a more robust product. You get more logos on your wall as far as sales.
[00:16:45] Anthony Nitsos: You get to a certain point and say, okay. We're now at a million in ARR. It's time to go get the a round. You get your a round. Your a round could be anywhere from, you know, three to eight million, let's say. General range. Each time you're doing this, you're probably selling off a third to a quarter of yourself in these first stages. But your valuations are, of course, when you're let... Even after you're diluted, you you as the main founder investor, whatever it happens to be, you're getting more of a paper gain, if you will, because, obviously, none of this is gonna worth anything until somebody buys it from you.
[00:17:20] Anthony Nitsos: But, yes, that is what this is all about. It's about getting enough cash to get you to the... Think of climbing the Mount Everest. Right? It's enough cash to get you to the base camp. Then you gotta get to the first level, then you gotta get to the second, and then you ultimately... I don't know how many camps there are. I might say there's ten, but whatever it is, the idea is that you are raising enough cash. You're using it wisely enough, knowing that you're going to run out of it at some point. It's not like you're planning to get to a cash positive type of situation. You are going balls to the walls to get as much revenue as you
[00:17:54] Anthony Nitsos: can as quickly as you can because that's what the market is gonna reward you for. That's what the investors are going to be interested in. That's what the VCs are gonna fund. Now there's a theory out there that says that this whole model is completely non sustainable. Right? Because when you think about it, let's say I'm an investor group and I'm putting five million dollars into this company. I'm getting twenty five percent of the company as a result of it. Well, if the company is running at a loss, that means it's selling its product for less than its cost to deliver it, market it, sell it, operate it, suspend, you know, and sustain it.
[00:18:34] Anthony Nitsos: So by definition, the VCs are subsidizing the prices of all of these software companies that you and I are buying from. And when does that when does that, merry-go-round stop? When does that, you know, when does it come to an end? So at this point, this has been the model for, you know, decades. Right? I mean, when you think about it, Silicon Valley, you know, in terms of the the dot com bust as they called it, was two thousand. Right? We're now into the second or third decade of this thing, where this is the business model. You go out. You run a loss. You do it on purpose. You're using investor cash to subsidize that all in the pursuit of
[00:19:19] Anthony Nitsos: getting higher ARR with the idea that sooner or later, somebody's going to purchase you, and the investors are gonna walk away with some multiple of whatever it is that they invested. To answer your question from a while ago, how many of these actually make it? Not many.
[00:19:36] Dustin Serviss: Yeah. But when you make it it.
[00:19:37] Anthony Nitsos: Maybe one out of seven, one out of ten actually make it to a... Make it to an exit that's actually worthwhile. And the VCs factor that into their into their calculations.
[00:19:50] Dustin Serviss: And would they build up, like, almost like a diverse portfolio? You'd you'd have, like, seven or more or ten Or
[00:19:57] Anthony Nitsos: a hundred. Positions. Depending on how big the the fund is. Right? Some of these VC funds are quite large. And, yes, they have multiple multiple port... You know, companies in their portfolio, and it's a diversification strategy. They figure some of them are gonna go, most of them won't. They factor that into their, you know, investment portfolio profiles to how they do it. Now I'm not a VC. I don't sit inside of those discussions, but I can see the result, which is this client gets money, this one doesn't. What are the criteria that seem to be the ones that most indicate whether they're going to get it? How sexy is the tech?
[00:20:37] Anthony Nitsos: How good is the team? How fast have they gotten to a million in ARR or whatever it happens to be? Do they have a credible path to the next level? And how much cash are they gonna need to get there?
[00:20:50] Dustin Serviss: Is there something... So if I've got, you know, a million dollars of ARR and I have fifty paying customers versus a million dollars of four hundred people paying a smaller amount, does that impact the valuation?
[00:21:08] Anthony Nitsos: Not really. I mean, okay. As you get more and more concentrated, absolutely it does because it increases the risk. Right?
[00:21:15] Dustin Serviss: Right.
[00:21:15] Anthony Nitsos: If you have, you know, ten million of ARR and eight million of it's from one customer, you're probably not gonna get a lot of investors interested in
[00:21:23] Dustin Serviss: you Right.
[00:21:24] Anthony Nitsos: Because of this thing called concentration risk. If you have, you know, a million in ARR and you use the example of four hundred customers, that's fairly spread out, which means your average sales price obviously is fairly low, compared to, you know, business to business versus business to consumer is kind of a differentiator here. I work with a lot of business to business SaaS companies, so they're selling to other, you know, businesses. They're not selling to end consumers. The end consumer market is a different dynamic, and I can't speak to it because I don't really have that expertise.
[00:21:58] Anthony Nitsos: This is a fairly niche world that I work in, which is specifically business to business SaaS companies, b to b SaaS companies. In the b to b SaaS space, you do not want to be too concentrated. You want to have nice ASPs, nice being five to six digit average sales prices of your contracts, and you want to have really aggressive growth, in your ARR. That is the... And capital efficiency. Those are kind of the the magic metrics, if you will, that will get you good valuations on the next investment round.
[00:22:32] Dustin Serviss: So what what are... Like, what is fast growth? And I'm I'm almost, like, as... Feeling a selfish question coming on of, you know, we're in the investment business. We charge, you know, recurring coaching fees, to clients. So, you know, the speed at which people are deploying capital. So is that... Is there something that seems to be working better now, like, from a growth standpoint? And is, you know, is there anything that pops into your mind of, like, well, people are, you know, Facebook ads or whatever? Or is it so different for every different business?
[00:23:08] Anthony Nitsos: I wouldn't say it's... If I understand the question correctly, it's not that it's so different. It's really about how how good are you at executing against whatever plan it is that you have. Now you asked about what's a good growth rate. Well, a good growth rate is, can you get to a million in ARR in twelve months?
[00:23:27] Dustin Serviss: Right.
[00:23:27] Anthony Nitsos: K. That's a really good growth rate. Now from that one million, can you get to three million in the next twelve? From that three million, can you get to nine million in the next twelve? That's the the the tip... The the mythical triple double double as they call it. You're tripling your revenue in the first two years, and you're doubling revenue in the next two years. If you're achieving that kind of growth, you're going to get the attention of VCs because they're gonna say, wow. You are able to do it. You're executing. Clearly, your product is good. They're gonna look at your churn rates. They're gonna look at your net retention rates.
[00:23:59] Anthony Nitsos: They're gonna look at all the, you know, under the hood as it were to make sure that this isn't, you know, something that's just a fairy tale. But in the end, it comes down to, can you get there quickly? Can you keep it once you get there? And can you keep delivering on it? And there's no magic. That's just been the formula now since I've been in this industry, is how quickly can you get to a million? And then from there, do you have a credible path to three, ten, and then twenty, and then forty, or fifty? And that takes a very well understood go to market strategy. Is there a good product market fit? Is the product market fit excellent?
[00:24:39] Anthony Nitsos: Do you have the right team to get you there? And do you show the results quarter on quarter, you know, in the past with that?
[00:24:49] Dustin Serviss: So I got a couple places I wanna go, but I I think you mentioned it before. And, you know, listener, if if you own a business, it is a lot easier to sell to existing clients or, you know, offer services and solutions to existing clients than it is. It's more cost effective than going out and trying to acquire a brand new one. So stickiness, what makes a great stickiness SaaS business or or even business in general that you see? The businesses that you are coaching or that you see and work with, what are some of the attributes of a sticky business model?
[00:25:26] Anthony Nitsos: Well, first of all, it solves a problem that nobody else is solving well. Right? So first of all, you have to have a problem. You have to have some sort of market need. And I'm speaking generally at this point, because if I knew the specific answers to your question, I'd be probably running my own software company. Right? Yeah. Now that said, I do actually have some ideas on that, but that's for another discussion. But that stickiness as you call it, that's measured by what's called the net retention rate, the NRR. That is a very much a function of, is this a product that people love so much they can't live without?
[00:26:02] Anthony Nitsos: Is it a have to have versus a nice to have? K. So that's kind of if you think about it. Is this something I have to have? Right? Now it used to be in the old days, it was nice to have a streaming video, but you could always go down to Blockbuster or whatever and get your videos. Now, of course, you have to have Netflix. Right? You have to have Disney plus. You have to have, you know, Amazon Prime, whatever it is. Believe me, I have to have it because I have two young kids, and if I didn't have it, they would be... You know, know, they'd probably... You probably wouldn't find my body. Right? It's like, dad who? Right?
[00:26:35] Anthony Nitsos: So, you know, things can start off as nice to have and become have to have. But that's really what you're looking for is, do I have a software product, and it's software, that people really want? And once they have it, they don't wanna let go of it. That's just as true with consumers as it is with businesses. You know, it could be something as mundane as, you know, we make, you know, tax filings or we make mortgage applications easier. Right? So the mortgage companies really have to have this because it improves the productivity of their client base or the tax companies, you know, that do all the
[00:27:12] Anthony Nitsos: taxes have to have it because it, you know, makes their tax filings go faster. That's nice. That's great. Does it actually get them an ROI? Yes. It does because it makes their operations more efficient. So they start looking at us, we have to have this. K? Now CRM, you know, client resource management, customer resource management software, Salesforce, HubSpot, you know, pipe drive, whatever it happens to be. Those are things that you have to have now for a company if you're gonna maintain a sales team. Right? You need to have something like that. It's not a nice to have. It's a have to have. K?
[00:27:49] Anthony Nitsos: Those are the kinds of things that you're looking to create are those types of solutions that people really need, and there's nobody else doing it, or you do it better than anybody else. You know, AI is coming in. You know, obviously, the whole chat GPT thing, and it's all in the news right now. AI is starting... Everybody's like, oh, AI is taking by storm. I said, no. AI has been in the background for many years. You've just been unaware of the fact that it's been below the surface and operating. But that said, that's now becoming something that people are gonna have to have. Right?
[00:28:25] Dustin Serviss: What is chat ABT? Yeah. What what is...
[00:28:28] Anthony Nitsos: Chat GPT. It's in the news. It's basically a it's a chat... It's a program where you can give it a prompt. So for example, I did... I I checked it out the other day. I said, okay. You are the... You are in the role of a human resources director for a software company or place yourself as in the role of a human resources director for a software company. You need to hire a senior director of finance and accounting. These are gonna be the responsibilities and jobs. Create a job description and a set of questions to ask on an interview. And in a matter of seconds, it came back with a pretty credible job description, responsibilities,
[00:29:13] Anthony Nitsos: experience requirements, and a set of questions to ask the interviewer. Are they for the interview to ask the interviewee, I should say.
[00:29:19] Dustin Serviss: Right.
[00:29:20] Anthony Nitsos: And I was like, now that would have taken me... I'm I'm an expert in hiring finance people. Right? So, you know, kind of think of this as an area of my expertise. It probably would have taken me, I don't know, an hour or two to put something like that together. This thing got eighty, ninety percent of the way there in seconds.
[00:29:39] Dustin Serviss: Right.
[00:29:39] Anthony Nitsos: I'm now looking at this thing as something that I have to have. Because there are all sorts of things that I might, you know, a, I I love speaking. I hate writing. Okay? It's a painful process for me. But in this day and age, you have to write. You know, I'd be great if I could say, put yourself in the role of a fractional CFO. You need to write an email to a client explaining to them, you know, what's gonna happen if they don't manage their cash better. I don't know. I'm just making something up. Right? But I can see now where this chat GPT thing could become a really useful tool for those of us that don't like writing, but have to do it.
[00:30:19] Anthony Nitsos: Mhmm. It'd be great to just give it to an AI and have it write it for me, and then I just edit it and boom, it's gone. Well, that's coming. It's here. I mean, this thing is passing exams. This thing is, you know, passing job interviews. This thing is, you know, out there pretending to be humans and getting, you know, results as if the... If as if it were a human. This is just the beginning.
[00:30:41] Dustin Serviss: Yeah. Well, thanks for that, just sample because I'm... My brain is going into all different places with that, that technology. But give us give us a... What what is your background? What what led to this? Are you are you, you know, were you in this space and then all of a sudden you just wanted to help people or bring... Get us up to speed?
[00:31:06] Anthony Nitsos: Well, I did not come to the CFO position by what's considered a... Anywhere near a normal route. I actually started off in medicine. I was a medical student at the University of Michigan many, many years ago, and I got into that thinking that that was the thing for me. And when I got into it and started realizing what it was all about, I'm like, this is a mistake. I do not wanna be a doctor. It's not in my DNA to do this. I thought it was. I love helping people, but... So I quit. I I like to joke around that Michael Crichton of Jurassic Park fame and I have something in common.
[00:31:44] Anthony Nitsos: We're both med school dropouts, but he clearly made a lot more money doing what he's doing than I am. So what do you do with a medical... What do you do with a part of a medical degree? Right? So being in Michigan and looking around, it's like, well, manufacturing is nearby. They both share an m. I might as well go work for a company. Right? And what I found was that I was really good at diagnosing, systemic problems in manufacturing companies and figuring out how to cure root cause problems. And suddenly, I became a manufacturing and logistics expert and process reengineering expert.
[00:32:22] Anthony Nitsos: And that's really kind of where my career started was, you know, in that space working for manufacturing companies. From there, I made a transition. At that point, MRP systems were becoming the thing. You know, material resource planning material resource planning for manufacturing companies in particular. So, you know, a very wise person who I was working for at that time, he said, you know, these computer systems are gonna take over. You really should become an expert in those because, you know, what we're doing is material planning was through, you know, Excel spreadsheets. Excel did exist back then.
[00:32:55] Anthony Nitsos: You know, getting on the phone and faxing and doing all this other stuff. Right? And so I took that process reengineering expertise and all that medical training and systems and diagnosis, and I went to work for an IT implementer implementing ERP systems. And this was before the whole y two k, the year two thousand, where everybody was panicking that their code was gonna blow up as soon as the year two thousand came by. So all these major corporations were buying these enterprise resource planning, ERP as it's called, systems and slamming them in as fast as they could. So what they needed were people who understood manufacturing, understood
[00:33:33] Anthony Nitsos: IT, and had at least a basic knowledge of accounting, which I had, for some reason, been picking up some accounting stuff, you know, on the side just because it looked interesting. And so I became an IT enterprise resource planning implementation expert after having been a process reengineer. And then in the year nineteen ninety nine, everybody stopped buying ERP systems because back then, you had to spend millions of dollars on computers to put them in your, you know, factory, to install this software, to configure it, to get everybody to use it, configure all that. These were...
[00:34:09] Anthony Nitsos: You're talking, like, you know, eighteen to thirty six month projects. Right? So if you didn't already have your ERP project running and up, you know, going in the year nineteen ninety nine, you were screwed. So everybody stopped buying it. And so at the end of nineteen ninety nine, the year two thousand comes along, I can remember it was Thanksgiving... Two days before Thanksgiving of nineteen ninety nine when I got the call to say your services will no longer be required in our company. You know, pack your bags at the end of the year because there was, you know, there was no work. I'm like, well, great. Thanks. Yeah.
[00:34:45] Anthony Nitsos: I really appreciate the Christmas present. From there, what had happened is on the side, I was looking at, you know, this accounting thing. Yeah. Everybody really understand... The people who understand the accounting, they know everything that's going on inside the company. Of course, they can't talk about it. Right? But when you know the numbers of a company, you really understand what's going on. And I took that to heart. And that's my next job, strangely enough, was as a controller or a Japanese corporation because I speak some Japanese, and I had lived in the country. And so I became a controller of a Japanese company.
[00:35:23] Anthony Nitsos: And this was my first experience at rapid scaling. This company grew ten times revenue in three years. And I was put in charge of all of the back office systems to scale it so that I was... The mission I was given... Of course, this is manufacturing where margins are paper thin. I was given the mission of you have three people working with you now, you get to keep those same three people and add no more, and we're gonna grow from five to fifty million in the next three years. Figure out how to do it. I'm like, okay. Let's get to work. And I did it. Right? So three years later, we were at fifty million, and I was running
[00:36:02] Anthony Nitsos: the entire financial planning, accounting, and all the financial operations on a team of the same team of four people that I had when I started. And I was bored. Just completely bored. There was nothing for me to do because I had automated things so well, designed them, you know, very well so that if I frankly had a day's worth of work in a week, that was a busy week. Because it was really all just data was flowing through the system exactly the way we wanted it to. Reports were being generated exactly the way we wanted to. There's really very little need for the human intervention.
[00:36:36] Anthony Nitsos: We just needed to keep an eye on things so that the wheels didn't come off. So I decided, you know what? It's time for a change. And I do this every five or ten years. I just get tired of doing something. It's time for a change. I'm I'm a serial career changer, I guess. There are serial entrepreneurs out there. I'm a serial career changer. And I said, well, you know, medicine didn't work out for me. Manufacturing, processing engineering, I took that to the max. ERP systems, controller. You know these finance guys? They seem to have fun. Right? They make a lot of money.
[00:37:08] Anthony Nitsos: And rather than keeping score, which is what accounting is, the finance guys, these are the ones that actually play the game. And so that's... I went... Took a sabbatical as it was called back then. Nobody called it that. Took a year off, went and got a degree, finance... Masters of finance. Came back and partnered up with somebody. And ever since then, I have been doing this kind of work, which is providing, you know, startups with scaling strategies, making sure they have all the right numbers, making sure their systems and processes are as automated as possible, as efficient as possible.
[00:37:42] Anthony Nitsos: And that's really what our special sauce is, is we're not just fractional CFOs as it were. We're also process reengineering experts. So whenever I go into a company, the first thing I'm doing is I'm starting to tinker with processes to make them move faster. In the end, it saves cash. It allows the companies to scale better. And in the process, you know, we give them good advice on, you know, how to, you know, plan for the future, how not to run out of cash, and how to help them, you know, point out where their sales are not growing, at least to say, hey. You know, your sales team isn't really performing.
[00:38:13] Anthony Nitsos: You might wanna consider changing them or whatever it happens to be. Since that time, I've worked for two unicorns, both of which... One exited for two and a half billion, the other one exited for a billion and a half, both here in Ann Arbor. So I was lucky to to work on those projects. After those projects, which were full time salary positions, I was not the CFO. I worked for the CFO. I decided, you know what? I'd rather be the CEO of my own consulting company and providing CFO services for tech start... Startups that really need it. So that's kind of where long story short, medicine to manufacturing to IT to accounting to finance.
[00:38:54] Dustin Serviss: So in in your... In all those times, like, do you have stories and without breaching confidentiality of, like, you know, like, I'm thinking of Clint Eastwood, the good, the bad, the ugly of, you know, like, you know, the success, you've seen that. And then with the ones that didn't work or or, you know, potential scenarios you've seen that didn't work, was there... Was it the burn rate was too fast or... And you got in there too late? Or is there a commonality with with things that that blow up?
[00:39:30] Anthony Nitsos: The commonality is the team. Right? You could have great product market fit. But if you don't have the team to actually scale it, commercialize it, can't do it.
[00:39:44] Dustin Serviss: Are you talking about right roles or, like, the attitude of the team?
[00:39:48] Anthony Nitsos: It's both. Okay? So the attitude is, first of all, you... If you're looking for an easy sleep at night, don't do this. Right? This is not the, you know, this is not the kind of industry that's for the faint of heart, and I don't mean that tongue in cheek. You know, there are a lot of times where clients are up at night pinging me like, oh my god. We're gonna run out of me. You know? What's it gonna... Or this investor didn't do this or whatever it happened to be. And it's like, look. You have to be bulletproof, and you have to love thriving on adrenaline to work in the tech startup space because it is high risk. K?
[00:40:25] Anthony Nitsos: These companies mostly fail. So one, it's an attitude towards nothing is gonna get in my way. Right? I'm going to achieve my goal. I don't care what it takes, how much work I have to put into it. I'm gonna do it. I have passion for this. I wanna do it. So that's the attitude. The other thing is is, especially for the founder and CEO, is you are not an EOE, which means an expert on everything. It doesn't mean equal opportunity employer. You do not know everything. You may know your product. You may know your market. You may know human resources. I don't know whatever your expertise is, But you can't know everything.
[00:41:02] Anthony Nitsos: You're one single human being. And if you go into this thinking that you're gonna do it all yourself, you will fail because I've seen that. The micromanagers are the ones that die because they die a death of a thousand cuts. The ones that recognize early on what their strengths are and they hire the experts around them to fill in all the other areas that that they need, those are the ones that succeed. So if you have a deep understanding of your market, you know your customer, you know how to get to them, you know what their pains are, you know that your solution is the one to do it, you need to surround
[00:41:40] Anthony Nitsos: yourself with a team that can help you get there. The ones that are solo cowboy, run it myself, I'm the best baddest, I know it all, I can give you several cases where those CEOs were removed from their positions by their boards of directors because in the end they were running the company into the ground, and either a fire sale occurs just for the technology or they bring in another CEO to try and turn it around. But by then, the damage may already have been done. So it really is you need to know what you don't know, and you need to hire the right people to help you. That's my one message.
[00:42:18] Dustin Serviss: I think that's a great bookend for, for listener. I've learned a ton today. Anthony, is there anything else that's, new and exciting that, you're you're passionate about or a book you've read or something that you've realized in this last six months that you just wanna share that... That's really been a c... You know, a secret? An, Anthony, secret.
[00:42:42] Anthony Nitsos: You know, I think it really comes down to take care of your people. Right? We get into this mode of I've got to grow my business, but you're doing it on the backs of people. Right? And it's a team. And it's the companies that really take care of their people. They're the ones that pull together when the stuff hits the fan, as it were. And if there's a message that I can give out there to a CEO or a founder that's listening, it's like, don't lose sight of the fact that you are a human being and you're dealing with other... This is my medical training. You're a human being dealing with other human beings.
[00:43:18] Anthony Nitsos: We have our weaknesses, our frailties, our physical and our mental, you know, issues. You gotta be able to treat your people right because then they will stand by you when there's a crisis. You don't? They won't stand by you when there's a crisis. They'll bolt for the doors, then you're left with nothing.
[00:43:35] Dustin Serviss: Very powerful message, Anthony. Where can people find you?
[00:43:39] Anthony Nitsos: You can find me on LinkedIn, Anthony. I have this strange last name, n I t s o s, Nancy, I, t like Thomas, s o s like the distress signal. There are not very many people out there with that last name. I know because I Google it all the time. Anthony Nitzos on LinkedIn. You can find my website, s a a s, dash gurus dot com. Saz gurus dot com. That's our website. You can contact me there. Those are the two best ways to get ahold of me. I pride myself on being responsive. If you send me a message, I will get back to you quickly.
[00:44:14] Dustin Serviss: Anthony, thanks a lot for being on the show. Picture Wealth today. Thank you.
[00:44:17] Anthony Nitsos: Thank you.
[00:44:20] Dustin Serviss: Thank you for tuning into this episode. If you enjoyed the show, please like and rate the show, share with a friend, or use your new knowledge in your next conversation. If during the show something gave you a pang of inspiration, motivation, or sense of uncertainty, act on it now. Get the clarity you're looking for. Find the permission you seek. Go to service wealth dot com to discover how others are learning how to take Fridays off or buying a recreation property or spending more money. If you're an organizer of an event where you believe my philosophy on finance
[00:44:47] Dustin Serviss: and lifestyle design would be applicable, go to service wealth dot com and book me as a speaker at your next event. If you want a copy of our new book coming out soon, send me a message on Instagram or Facebook, and we will be sure to get you a first copy.