26 Aug Knowing Your Numbers: The Financial Transparency That Makes You Optional
In IT services M&A, buyers treat your monthly close as a maturity test, and they discount a firm whose real financial picture lives only in the owner’s head. This episode covers what to open up, to whom, and on what rhythm.
Most founders can quote revenue and profit from memory, and that is exactly the problem: the number is in the room only when they are. In Episode 260 of Shoot the Moon, Mike Harvath, Ryan Barnett, and Matt Lockhart work through what financial transparency actually requires in a tech enabled services firm, from the accounting foundations a buyer expects to the operating metrics that belong in front of the whole team, and the review cadence that keeps it all current without becoming a burden.
Chapters
- 0:00 – Cold open and intro
- 1:00 – Why a founder led firm concentrates risk
- 3:10 – What it costs when the numbers live with the owner
- 5:50 – The opposite failure: not knowing your own numbers
- 6:30 – What a CEO should know off the top of their head
- 7:25 – Pushing the KPIs out to the organization
- 8:40 – Cash to accrual, and what clean books require
- 11:25 – Documented policies and a regular outside review
- 12:20 – Which numbers belong in front of the team
- 12:55 – Utilization, realization, and the 2080 trap
- 16:50 – Gross margin as a worked example
- 20:30 – How visible numbers turn into enterprise value
- 23:55 – Building the rhythm: biweekly, monthly, quarterly
- 27:25 – Forecasting rigor and the wrap up
Key Takeaways
- Your close speed is the maturity test buyers actually run. Mike’s rule of thumb is that producing the month’s numbers within two weeks of close is what the market treats as timely. A two month close invites questions about governance long before anyone questions the numbers themselves.
- Not knowing your numbers reads as badly as hoarding them. Ryan has seen both failure modes on introduction calls. Outsourcing the finance function so completely that the owner cannot answer for the business is its own red flag, because a buyer is watching whether the CEO demonstrates command.
- The CEO owns the headline numbers, not the bookkeeping. Revenue and profitability for any period should be immediate recall, and reportable to a bank, an investor, or a buyer. Cash timing, collections, and close mechanics can sit with a finance team or a contract CFO.
- Accrual accounting is the step that makes books legible. Cash basis is the easy start for a smaller firm, but moving to accrual, on a standard chart of accounts with revenue lines broken out and actuals mapped against budget, is what makes a clean balance sheet and P&L possible.
- Transparency is a teaching instrument, not just disclosure. Opening the numbers up lets you show the team how the levers work, which builds trust and better decisions. Utilization and realization, recurring versus one time revenue, and margin by customer are the levers worth teaching.
- Do not game utilization. Netting out PTO and training rather than measuring against the full 2080 hour year is how firms convince themselves they are highly utilized when they are not. Buyers unpick that quickly.
- A rhythm beats a monthly scramble. Levers and pipeline every two weeks, a fuller month in review with sales and delivery leaders, and a quarterly picture against plan for everyone. Consistency is what makes the numbers a habit rather than an event.
Links & Resources
- Episode archive: Shoot the Moon series
- Valuation calculator: See what your firm could be worth
- Talk to us: Schedule a confidential conversation
- Listen on: Apple Podcasts or Spotify
About Revenue Rocket
Revenue Rocket is a sell-side and buy-side M&A advisory firm focused exclusively on IT services companies, including MSPs, cybersecurity, cloud, custom application development, and VARs. Whether you are looking to buy, sell, or grow, Revenue Rocket can help you make your next move the right one.